AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 2002

                                                      REGISTRATION NO. 333-68120
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                            ------------------------

                         POST-EFFECTIVE AMENDMENT NO. 2
                                       TO
                                    FORM S-4
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------

                               USA NETWORKS, INC.
             (Exact name of Registrant as Specified in its Charter)


                                                            
           DELAWARE                           4833                          59-2712887
(State or other Jurisdiction of   (Primary Standard Industrial           (I.R.S. Employer
Incorporation or Organization)     Classification Code Number)          Identification No.)


                              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)
                            ------------------------

                                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             51 West 52nd Street         701 Fifth Avenue, Suite 5000
          Suite 2000              New York, New York 10019-6150      Seattle, Washington 98104
San Francisco, California 94104          (212) 403-1000                   (206) 623-7580
        (415) 616-1100


                            ------------------------

    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective and all other
conditions to the acquisition of a controlling interest in Expedia, Inc. by the
Registrant pursuant to the agreement and plan of recapitalization and merger
described in the joint prospectus/proxy and information statement have been
satisfied or waived.
                            ------------------------

    If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /

    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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. / /
                            ------------------------

    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, OR UNTIL THIS 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 Post-Effective Amendment to the Registration Statement includes a joint
prospectus/proxy and information statement supplement, which amends and
supplements the joint prospectus/proxy and information statement dated
November 13, 2001 of Expedia, Inc. and USA Networks, Inc. This supplement
contains information regarding the agreement between Vivendi Universal, S.A. and
USA to create a joint venture that will hold all of USA's entertainment
businesses, which we refer to throughout this supplement as the "USA
ENTERTAINMENT GROUP," as well as the businesses of Universal Studios Group.

                            [LOGO OF EXPEDIA, INC.]
                                                                January   , 2002

Dear Shareholder:

    We previously mailed to you a joint prospectus/proxy and information
statement dated November 13, 2001 relating to the annual meeting of shareholders
of Expedia, Inc. that was scheduled for December 17, 2001. One of the purposes
of that meeting was to consider and vote on a number of proposals relating to
the proposed merger of a wholly owned subsidiary of USA Networks, Inc. into
Expedia, with Expedia surviving as a public company controlled by USA. We refer
to the merger as well as the transactions contemplated in connection with the
merger collectively as the "USA/EXPEDIA MERGER."

    On December 17, 2001, prior to the time of the annual meeting, USA announced
that it had entered into an agreement with Vivendi Universal, S.A. Under that
agreement, USA agreed to contribute its entertainment businesses to a joint
venture that would also hold the businesses of Universal Studios Group. Upon
completion of the USA/Vivendi Universal transaction, which is expected to occur
following consummation of the USA/ Expedia merger, USA will be renamed "USA
Interactive" and will be focused on integrating interactive assets across
multiple lines of business. After giving effect to both transactions, USA's
businesses would consist of Expedia, 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 (Nasdaq: IBUY), and Precision Response
Corporation. Although the USA/ Vivendi Universal transaction is subject to
limited conditions and is not expected to close until spring of 2002, we
determined that the Expedia shareholders should be made aware of this
development prior to voting on the proposals related to the USA/Expedia merger.
As a result, following the election of our directors at our annual meeting on
December 17, 2001, we adjourned our annual meeting.

    The annual meeting will reconvene on          , 2002 at   a.m., local time,
at              . At the reconvened annual meeting you will be asked to consider
and vote upon all of the proposals previously described in the joint
prospectus/proxy and information statement (other than the election of
directors, which was completed on December 17, 2001). We are enclosing a
supplement to the joint prospectus/proxy and information statement, which
supplement provides important information about the USA/Vivendi Universal
transaction.

    The terms of the USA/Expedia merger remain as described in the joint
prospectus/proxy and information statement mailed to you in November 2001. You
will continue to have the choice of either (1) retaining your shares of Expedia
common stock and in addition receiving warrants to acquire Expedia common stock,
or (2) exchanging your shares of Expedia common stock for a package of USA
securities consisting of USA common stock, USA cumulative convertible preferred
stock and warrants to acquire USA common stock, subject to proration as
described in the joint prospectus/proxy and information statement previously
mailed to you. If you have not already made your election (or if you want to
change your election), you may do so by following the instructions described on
the election form and letter of transmittal included in the joint
prospectus/proxy and information statement previously mailed to you and
submitting those forms together with your certificates prior to the election
deadline, which has been extended to 5:00 p.m., eastern time, on         , 2002,
the date of the reconvened Expedia annual meeting.

    We have enclosed a proxy card with the supplement. If you have previously
voted and do not wish to change your vote, your previous proxy will be voted as
you directed. If you have not previously voted or wish to revoke or change your
vote, please complete, date, sign and return the enclosed proxy card before the
reconvened annual meeting.

    Please note that Microsoft Corporation, which beneficially owns 33,722,710
shares, or approximately 66%, of Expedia's common stock, has granted to USA or
Expedia an irrevocable proxy to vote in favor of each of the proposals relating
to the USA/Expedia merger to be presented at the reconvened annual meeting. The
vote of Microsoft's shares is sufficient to ensure approval of all these
matters.

    We thank you for your continuing support.
                                          Sincerely,

                                          /s/ Richard N. Barton

                                          Richard N. Barton
                                          CHIEF EXECUTIVE OFFICER

    NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED ANY OF THE USA SECURITIES OR EXPEDIA
SECURITIES TO BE ISSUED IN THE USA/EXPEDIA MERGER, OR DETERMINED IF THIS JOINT
PROSPECTUS/PROXY AND INFORMATION STATEMENT SUPPLEMENT IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS JOINT
PROSPECTUS/PROXY AND INFORMATION STATEMENT SUPPLEMENT 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.

    This supplement to the joint prospectus/proxy and information statement is
dated January   , 2002. It is first being mailed to Expedia shareholders on or
about January   , 2002.

                               TABLE OF CONTENTS



                                                                PAGE
                                                              --------
                                                           
Introduction................................................      1

Questions & Answers about the USA/Expedia Merger and the
  USA/Vivendi Universal Transaction.........................      1

The USA/Vivendi Universal Transaction.......................      4

Other Interests of Officers and Directors in the
  Transactions..............................................     12

Other Recent Developments...................................     12

Where You Can Find More Information.........................     12

Experts.....................................................     14

Special Note Regarding Forward-Looking Statements...........     15

Index to Financial Information..............................    F-1


                                       ii

                                  INTRODUCTION

    EXCEPT AS DESCRIBED IN THIS SUPPLEMENT, THE INFORMATION WE PROVIDED IN THE
JOINT PROSPECTUS/PROXY AND INFORMATION STATEMENT THAT WE PREVIOUSLY MAILED TO
YOU CONTINUES TO APPLY. TO THE EXTENT INFORMATION IN THIS SUPPLEMENT DIFFERS
FROM OR CONFLICTS WITH INFORMATION CONTAINED IN THE JOINT PROSPECTUS/PROXY AND
INFORMATION STATEMENT, THIS SUPPLEMENT SUPERCEDES AND REPLACES THE INFORMATION
IN THE JOINT PROSPECTUS/PROXY AND INFORMATION STATEMENT. IF YOU NEED ANOTHER
COPY OF THE JOINT PROSPECTUS/PROXY AND INFORMATION STATEMENT, PLEASE CALL OUR
PROXY SOLICITOR, MACKENZIE PARTNERS, INC. AT (800) 322-2885 (TOLL-FREE).

 QUESTIONS & ANSWERS ABOUT THE USA/EXPEDIA MERGER AND THE USA/VIVENDI UNIVERSAL
                                  TRANSACTION

Q: WHY WAS THE ANNUAL MEETING OF EXPEDIA SHAREHOLDERS ADJOURNED WITHOUT A VOTE
    OF THE EXPEDIA SHAREHOLDERS ON THE PROPOSALS RELATING TO THE USA/EXPEDIA
    MERGER?

A: On December 17, 2001, shortly before the time of the annual meeting, USA
    publicly announced its proposed transaction with Vivendi Universal. Expedia
    determined that it would be appropriate to adjourn the annual meeting's
    consideration of, and vote on, the proposals relating to the USA/Expedia
    merger to give Expedia shareholders the opportunity to receive additional
    information about and to consider this development.

Q: WHAT HAS CHANGED IN THE EXPEDIA/USA MERGER?

A: There have been no changes in the terms of the USA/Expedia merger since you
    received the joint prospectus/proxy and information statement dated
    November 13, 2001, other than the changes in timing as described in this
    supplement. You are still being asked to vote on the USA/Expedia merger and
    to make an election as to whether to exchange your shares of Expedia common
    stock for the package of USA securities or to remain as a shareholder of
    Expedia and receive warrants to acquire additional shares of Expedia common
    stock.

Q: HOW DOES THE USA/VIVENDI UNIVERSAL TRANSACTION AFFECT ME?

A: You now have until 5:00 p.m., eastern time, on          , 2002 to complete
    your election form with regard to the USA/Expedia merger.

    If you elect to receive the package of USA securities in the USA/Expedia
    merger, you will become a USA stockholder. If you continue to own USA shares
    at the time of the USA/Vivendi Universal transaction, your shares will
    effectively represent a larger equity interest in a smaller company since
    USA will have contributed all of its entertainment businesses, which we
    refer to as the "USA ENTERTAINMENT GROUP," to the joint venture with Vivendi
    Universal, and USA will have cancelled approximately 320.9 million shares of
    USANi LLC, which are exchangeable for USA common stock. Following the
    USA/Vivendi Universal transaction, USA will be a company focused on
    integrating interactive assets across multiple lines of business and its
    businesses will consist of Expedia (if the USA/Expedia merger is
    consummated), 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 (Nasdaq: IBUY) and Precision Response Corporation.

    If you do not elect to receive the package of USA securities in the
    USA/Expedia merger, you will not be affected by the USA/Vivendi Universal
    transaction. You will remain as a shareholder of Expedia and will receive
    warrants to acquire Expedia common stock in the USA/Expedia merger.

                                       1

Q: WHAT WILL HAPPEN TO MY USA SECURITIES I RECEIVE IN THE USA/EXPEDIA MERGER AS
    A RESULT OF THE USA/VIVENDI UNIVERSAL TRANSACTION?

A: Nothing will happen to the USA securities that you receive in the USA/Expedia
    merger as a result of the USA/Vivendi Universal transaction. Your shares of
    USA common stock, USA preferred stock and USA warrants outstanding
    immediately prior to the transaction will continue to remain outstanding
    following the transaction.

Q: WHAT WILL HAPPEN IF THE USA/VIVENDI UNIVERSAL TRANSACTION DOES NOT CLOSE?

A: If you elect to receive the package of USA securities and the USA/Vivendi
    Universal transaction does not close, you will continue to own USA
    securities, and USA will continue in existence in its present form, without
    regard to the changes described in this supplement.

Q: WILL USA SHAREHOLDERS HAVE THE OPPORTUNITY TO VOTE ON THE USA/VIVENDI
    UNIVERSAL TRANSACTION?

A: Yes. The affirmative vote of at least 66 2/3% of the outstanding USA voting
    stock that is not owned by Vivendi Universal, Liberty Media Corporation,
    Mr. Barry Diller or any of their affiliates will be required to approve the
    USA/Vivendi Universal transaction. Immediately following the consummation of
    the USA/Expedia merger, the former Expedia shareholders who have received
    USA securities in the merger will own between 14.5% and 15.9% of the
    outstanding USA voting stock that is not owned by Vivendi Universal, Liberty
    Media, Mr. Diller or any of their affiliates.

Q: WILL I BE ENTITLED TO VOTE ON THE USA/VIVENDI UNIVERSAL TRANSACTION?

A: If the USA/Expedia merger is consummated and you elected to receive USA
    securities in the merger and continue to hold those securities received as
    of the record date for the vote on the USA/Vivendi Universal transaction,
    you will be entitled to vote. Each share of USA common stock will be
    entitled to one vote per share and each share of USA preferred stock will be
    entitled to two votes per share. It is contemplated that USA will designate
    as the record date for the purpose of determining the USA stockholders
    entitled to vote on the USA/Vivendi Universal transaction a date following
    the anticipated date of the closing of the USA/Expedia merger.

Q: WHEN WILL THE USA/VIVENDI UNIVERSAL TRANSACTION OCCUR?

A: Because the transaction is subject to limited conditions, including USA
    stockholder approval, USA expects to complete the USA/Vivendi Universal
    transaction sometime during the spring of 2002, which is after the date we
    anticipate completing the USA/Expedia merger.

Q: IS THE RECORD DATE FOR THE RECONVENED EXPEDIA ANNUAL MEETING DIFFERENT FROM
    THE RECORD DATE FOR THE EXPEDIA ANNUAL MEETING?

A: No, the record date for the reconvened meeting continues to be October 15,
    2001.

Q: WHAT DO I NEED TO DO NOW?

A: SEND IN YOUR PROXY CARD IF YOU HAVE NOT ALREADY DONE SO: If you already have
    delivered a properly executed proxy, you do not need to do anything unless
    you wish to change your vote. If you are a registered holder as of the
    record date and you have not already delivered a properly executed proxy, or
    if you wish to change your vote, please complete, sign and date the enclosed
    proxy card and return it in the accompanying prepaid envelope to ensure that
    your shares will be represented at the reconvened annual meeting. If your
    shares are held in "street name" by your broker, and you have not already
    delivered a properly executed proxy, or wish to change your vote, you should
    instruct your broker how to vote your shares by following the directions
    your broker provides. If you do not provide instructions to your broker,
    your shares will not be voted (which will have the effect of voting against
    the USA/Expedia merger).

                                       2

    SEND IN YOUR ELECTION FORM AND LETTER OF TRANSMITTAL AND EXPEDIA STOCK
    CERTIFICATES ONLY IF YOU HAVE NOT ALREADY DONE SO AND WANT TO RECEIVE USA
    SECURITIES IN THE USA/EXPEDIA MERGER OR IF YOU WANT TO REVOKE YOUR
    PREVIOUSLY MADE ELECTION: If you hold Expedia common stock and you wish to
    receive the package of USA securities in the merger, you must elect to
    exchange some or all of your shares of Expedia common stock for shares of
    Expedia Class B common stock in the recapitalization. If you have not
    already made your election, you must complete the election form and letter
    of transmittal included in the joint prospectus/proxy and information
    statement dated November 13, 2001 and submit the election form and letter of
    transmittal with the stock certificates covered by the election by the new
    election deadline of 5:00 p.m., eastern time, on         , 2002, the date
    the Expedia annual meeting will be reconvened.

    Please note that because Expedia will only issue a maximum of 37,500,000
    shares of Expedia Class B common stock in the recapitalization, even if you
    make a valid election to receive Expedia Class B common stock, you may not
    receive shares of Expedia Class B common stock for all of the shares of
    Expedia common stock surrendered with the election form and letter of
    transmittal. You will, however, receive your proportional allocation, as
    further described in the joint prospectus/proxy and information statement
    previously mailed to you.

Q: WHAT IS THE DEADLINE FOR MAKING AN ELECTION TO EXCHANGE MY SHARES OF EXPEDIA
    COMMON STOCK FOR SHARES OF EXPEDIA CLASS B COMMON STOCK?

A: The deadline has been extended to 5:00 p.m., eastern time, on         , 2002,
    the date of the reconvened Expedia annual meeting. You can call our proxy
    solicitor, MacKenzie Partners, Inc., toll-free at (800) 322-2885, for the
    final average trading price of USA common stock during the ten-day pricing
    period that ends on the second trading day prior to the date of the
    reconvened annual meeting.

Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE AND/OR REVOKE MY ELECTION?

A: You can change your vote by delivering a later-dated, signed proxy card to
    Expedia's secretary before the Expedia annual meeting is reconvened, or by
    attending the annual meeting and voting in person. You may change your
    election by delivering a later-dated, signed election form and letter of
    transmittal (together with Expedia stock certificates, or other
    documentation, as required) to Mellon Investor Services, the exchange agent
    for the USA/Expedia merger, prior to the new election deadline. If you
    revoke an earlier made election, your Expedia stock certificates will be
    returned to you by the exchange agent. If, however, you are an Expedia
    warrantholder or optionholder, you cannot revoke your exercise of the
    warrant or option. You can only revoke your election to exchange the shares
    of Expedia common stock that you receive upon exercise of your warrant or
    option for shares of Expedia Class B common stock.

Q: WHOM CAN I CALL WITH QUESTIONS OR TO REQUEST ADDITIONAL COPIES OF DOCUMENTS?

A: If you have any questions about the USA/Expedia merger or the USA/Vivendi
    Universal transaction, or would like copies of the joint prospectus/proxy
    and information statement or any of the other documents we refer to in this
    supplement, please call MacKenzie Partners, Inc., the proxy solicitor, at
    (800) 322-2885.

                                       3

                     THE USA/VIVENDI UNIVERSAL TRANSACTION

    GENERAL

    On December 17, 2001, USA announced that it had entered into an agreement
with Vivendi Universal pursuant to which USA would contribute the USA
Entertainment Group to a joint venture with Vivendi Universal, which joint
venture would also hold all of the businesses of Universal Studios Group.
Mr. Diller would be Chairman and chief executive officer of the joint venture as
well as of USA. Upon consummation of the USA/Vivendi Universal transaction, the
joint venture would be controlled by Vivendi Universal and its subsidiaries,
with the common interests owned 93.06% by Vivendi Universal, 5.44% by USA and
its affiliates and 1.5% by Mr. Diller. In exchange for its contribution, USA
would receive:

    - approximately $1.62 billion in cash structured to be tax deferred for
      15 years;

    - a $750 million face value Class A preferred interest in the joint venture,
      accreting at an annual rate of 5.0%, which preferred interest has a
      20-year term and will be settled at maturity at its then face value for
      cash;

    - a $1.75 billion face value Class B preferred interest in the joint
      venture, accreting at an annual rate of 1.4% and providing for cumulative
      cash distributions at a rate of 3.6% per annum. The Class B preferred
      interest would be callable and puttable commencing on the 20th anniversary
      of completion of the USA/Vivendi Universal transaction for up to
      approximately 56.6 million shares of USA common stock and USA Class B
      common stock held by Vivendi Universal and its affiliates. At the election
      of Vivendi Universal, USA common stock to be received by USA pursuant to
      the put or call can be substituted with cash equal to the market value of
      such shares; and

    - a 5.44% common interest in the joint venture, which is generally callable
      by Vivendi Universal commencing on the 5th anniversary, and puttable by
      USA commencing on the eighth anniversary, of completion of the USA/Vivendi
      Universal transaction, in either case at an "appraised value" for cash or
      Vivendi Universal shares, at Vivendi Universal's election.

In addition, approximately 320.9 million shares of USANi LLC, a subsidiary of
USA (which shares are exchangeable on a one-for-one basis into shares of USA
common stock or USA Class B common stock and represent approximately 43.4% of
USA's outstanding common stock, assuming full exchange of USA Class B common
stock and exchangeable subsidiary equity, including USANi LLC), currently owned
by Vivendi Universal or Liberty Media Corporation will be cancelled in
connection with the transaction. As a result, and after giving effect to the
exchange of the remaining shares of USANi LLC held by Liberty Media into shares
of USA common stock, USANi LLC will be wholly owned by USA and its subsidiaries.
USA has also agreed to issue to Vivendi Universal at the completion of the
USA/Vivendi Universal transaction warrants to acquire 60,467,735 shares of USA
Common Stock, comprised of (a) 24,187,094 warrants at an exercise price of
$27.50, (b) 24,187,094 warrants at an exercise price of $32.50 and
(c) 12,093,547 warrants at an exercise price of $37.50. All of the warrants
would have a term of ten years and would not be exercisable during the first six
months after their issuance.

    USA AFTER THE USA/VIVENDI UNIVERSAL TRANSACTION

USA INTERACTIVE

    Upon completion of the USA/Vivendi Universal transaction, USA will be
renamed "USA Interactive" and will be a leader in integrated interactivity
focused on integrating interactive assets across multiple lines of business.
USA's businesses will consist of Home Shopping Network (including

                                       4

HSN International and HSN Interactive), Ticketmaster (Nasdaq: TMCS), which
operates Citysearch and Match.com, Hotel Reservations Network (Nasdaq: ROOM),
Electronic Commerce Solutions, Styleclick (Nasdaq: IBUY), Precision Response
Corporation, and following completion of the USA/ Expedia merger, Expedia.

    After the completion of the USA/Vivendi Universal 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 being contributed to the
joint venture. We describe these provisions in this supplement below under
"--Corporate Governance--Agreement Not to Compete with 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, as described in this
supplement, following the completion of the USA/Vivendi Universal transaction,
USA generally will no longer be required to obtain the consent of Vivendi
Universal, Liberty Media 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. As previously disclosed in the joint
prospectus/proxy and information statement, it is possible that such
transactions would involve entities that compete with the businesses of Expedia.

    Following completion of the USA/Vivendi Universal transaction, USA will
continue to be controlled by Mr. Diller, who will control between 68.1% and
68.4% of USA's voting power, including shares of USA common stock and Class B
common stock held by Vivendi Universal, Liberty Media and their affiliates.
However, there will be substantial changes to the governance and stockholders
agreements among USA, Mr. Diller, Vivendi Universal and Liberty Media, as
described below.

CORPORATE GOVERNANCE

    In connection with the USA/Vivendi Universal transaction, each of the
Governance Agreement and the Stockholders Agreement, which agreements were
entered into in 1997 in connection with USA's original acquisition of the
television production and distribution businesses and cable networks of
Universal Studios, have been amended and restated. The amended and restated
agreements will generally be effective upon the closing of the USA/Vivendi
Universal transaction. Each of the amended and restated agreements have been
filed as exhibits to USA's amended registration statement of which this
supplement is a part.

    AMENDED AND RESTATED GOVERNANCE AGREEMENT

    GENERAL.  On December 16, 2001, USA, Vivendi Universal, Universal, Liberty
Media and Mr. Diller entered into an Amended and Restated Governance Agreement
(the "AMENDED AND RESTATED GOVERNANCE AGREEMENT"). The Amended and Restated
Governance Agreement will be effective as of the completion of the USA/Vivendi
Universal transaction and sets forth restrictions on the acquisition of
additional equity securities of USA and other conduct restrictions, in each case
applicable to Vivendi Universal and its affiliates. In addition, the Amended and
Restated Governance Agreement governs Vivendi Universal's and Liberty Media's
rights of representation on USA's Board of Directors and Liberty Media's and
Mr. Diller's rights to approve certain actions by USA. If the USA/Vivendi
Universal transaction does not occur, the Governance Agreement currently in
effect will continue in place without change.

                                       5

    The Amended and Restated Governance Agreement eliminates preemptive rights
held by Universal with respect to issuances of USA stock, but retains these
rights for Liberty Media, as described in further detail below.

    RESTRICTIONS ON UNIVERSAL'S ACQUISITION OF ADDITIONAL EQUITY SECURITIES AND
OTHER CONDUCT RESTRICTIONS. Under the Amended and Restated Governance Agreement,
Vivendi Universal agrees that neither it nor its affiliates will acquire the
beneficial ownership of any additional equity securities of USA until such time
(the "TRIGGER DATE") that the equity securities beneficially owned by Vivendi
Universal and its affiliates represent less than 20% of the total equity
securities of USA. Following the Trigger Date, Vivendi Universal will not
acquire beneficial ownership of any additional equity securities of USA if
following such acquisition Vivendi Universal and its affiliates would
beneficially own equity securities that represent more than 20% of the total
equity securities of USA. Notwithstanding any of the foregoing, Vivendi
Universal and its affiliates may continue to beneficially own any shares of USA
common stock currently owned by them and any shares of USA common stock issuable
upon exercise of their USA equity securities. These restrictions will cease to
apply upon the later of (a) the "CEO Termination Date" (as defined in the
Amended and Restated Governance Agreement) or the date Mr. Diller becomes
disabled and (b) the date following which Vivendi Universal ceases to have the
right to appoint a director to the Board of Directors of USA.

    During the same period, Vivendi Universal and its affiliates have agreed not
to: (a) act, alone or in concert with others, to seek to affect or influence the
management, business or operations of USA; (b) enter into any kind of
arrangement (E.G., a voting trust) with respect to the voting of equity
securities of USA; (c) propose any merger or other business combination
involving USA, PROVIDED that discussions to that effect are not prohibited if
Mr. Diller participates; (d) make or participate in a solicitation of proxies to
vote equity securities in USA; (e) act, alone or in concert with others, for the
purpose of acquiring voting or selling equity securities in USA, or (f) request
any amendment to or waiver of any of these covenants.

    Except in connection with open market transactions, Vivendi Universal and
its affiliates are not entitled to transfer to any single third party
transferee, in the aggregate, 10% or more of the total equity securities of USA,
unless Vivendi Universal and its affiliates cause such third party transferee to
agree to the acquisition and conduct restrictions described above.

    REPRESENTATION ON THE BOARD OF DIRECTORS AND CEO.  Under the terms of the
Amended and Restated Governance Agreement, immediately following the completion
of the USA/Vivendi Universal transaction:

    - the Board of Directors of USA will include the following Liberty Media
      designees: John C. Malone, Chairman of the Board of Directors of Liberty
      Media, and Robert R. Bennett, President and Chief Executive Officer of
      Liberty Media; and the following Vivendi Universal designees: Jean-Marie
      Messier, Chairman and Chief Executive Officer of Vivendi Universal, and
      Philippe Germond, Chairman and Chief Executive Officer of Cegetel;

    - each of Liberty Media and Vivendi Universal will have the right to
      nominate up to two directors so long as the number of equity securities
      beneficially owned by it and its affiliates is at least equal to 75% of
      the number of equity securities beneficially owned by it and its
      affiliates immediately following the completion of the USA/Vivendi
      Universal transaction (so long as its and its affiliates ownership
      percentage is at least equal to the lesser of (x) 15% of the total equity
      securities of USA and (y) the percentage that is five percentage points
      less than the percentage of the total equity securities beneficially owned
      by it and its affiliates immediately following the completion of the
      USA/Vivendi Universal transaction);

    - Liberty Media and Vivendi Universal each will have the right to nominate
      one director so long as it and its affiliates beneficially own a number of
      equity securities at least equal to 50% of the

                                       6

      number of the equity securities beneficially owned by them immediately
      following the completion of the USA/Vivendi Universal transaction (so long
      as the ownership percentage of it and its affiliates is at least equal to,
      in the case of Liberty Media, 5% and, in the case of Vivendi Universal,
      10% of the total equity securities of USA); and

    - USA will use reasonable best efforts to cause one of Liberty Media's
      designees to be a member of a committee of USA's Board of Directors and,
      to the extent the person designated by Liberty Media qualifies as a member
      of the Compensation Committee of USA's Board of Directors under applicable
      tax and securities laws and regulations, USA will seek to have such person
      appointed to the Compensation Committee.

    USA has agreed to cause each director that Vivendi Universal or Liberty
Media nominates, as the case may be, to be included in the slate of nominees
recommended by the Board of Directors to USA's stockholders for election as
directors at each annual meeting of the stockholders of USA and will use all
reasonable efforts to cause the election of each such director including
soliciting proxies in favor of the election of such persons.

    CONTINGENT MATTERS.  The Amended and Restated Governance Agreement
eliminates "fundamental matters," which were a list of actions that USA could
not take without the prior written consent of Vivendi Universal, Liberty Media
and Mr. Diller. As part of the USA/Vivendi Universal transaction, Vivendi
Universal surrendered its consent right and each of Liberty Media and
Mr. Diller have agreed to a significantly limited number of actions that require
their prior consent before USA may take such action. Specifically, USA has
agreed that neither USA nor its affiliates will take the following actions
("CONTINGENT MATTERS") without the prior approval of both Liberty Media and
Mr. Diller:

    - any transaction not in the ordinary course of business, launching new or
      additional channels or engaging in any new field of business which will
      result in or is reasonably likely to result in such stockholder's being
      required under law to divest itself of all or any part of its USA
      securities, or any material assets or render any such ownership illegal or
      subject such stockholder to any fines, penalties or material additional
      restrictions or limitations, based only on the equity securities of USA or
      other material assets Liberty Media or Mr. Diller or any of their
      respective affiliates hold as of the completion of the USA/Vivendi
      Universal transaction; or

    - if USA's Total Debt Ratio (as defined in the Amended and Restated
      Governance Agreement) equals or exceeds 4:1 over a twelve-month period,
      then (and only then) the following become additional Contingent Matters
      (currently "Fundamental Matters" requiring the approval of Liberty Media,
      Vivendi Universal and Mr. Diller under all circumstances under the
      Governance Agreement as currently in effect),

       --  any combination of the following, in any case, in one transaction or
           a series of transactions during a six-month period, with a value of
           10% or more of the market value of USA's outstanding equity
           securities at the time of such transaction:

           (A) acquiring or disposing (including pledges) of any assets or
               business;

           (B) granting or issuing any debt or equity securities of USA or any
               of its subsidiaries other than as contemplated by, among other
               things, existing agreements between USA, Vivendi Universal and
               Liberty Media;

           (C) redeeming, repurchasing or reacquiring any debt or equity
               securities of USA or any of its subsidiaries other than as
               contemplated by, among other things, existing agreements between
               USA, Vivendi Universal and Liberty Media; or

           (D) incurring any indebtedness;

                                       7

       --  voluntarily commencing any liquidation, dissolution or winding up of
           USA or any material subsidiary;

       --  making any material amendments to the certificate of incorporation or
           bylaws of USA;

       --  engaging in any line of business other than media, communications and
           entertainment products, services and programming, and electronic
           retailing, or other businesses engaged in by USA as of the date of
           determination of the Total Debt Ratio;

       --  adopting any stockholder rights plan (or any other plan or
           arrangement that could reasonably be expected to disadvantage any
           stockholder on the basis of the size or voting power of its
           shareholding) that would adversely affect Liberty Media or
           Mr. Diller; or

       --  entering into any agreement with any holder of USA's equity
           securities in such stockholder's capacity as such which grants such
           stockholder with approval rights similar in type and magnitude to the
           Contingent Matters provisions of the Amended and Restated Governance
           Agreement.

    Liberty Media's right to approve Contingent Matters continues so long as
Liberty Media beneficially owns at least two-thirds of the number of equity
securities of USA beneficially owned by it immediately after the completion of
the USA/Vivendi Universal transaction. Mr. Diller's right to approve Contingent
Matters continues so long as Mr. Diller beneficially owns 20,000,000 shares of
USA common stock (including options to purchase USA common stock, whether or not
then exercisable), the CEO Termination Date has not occurred and Mr. Diller has
not become disabled.

    LIBERTY MEDIA'S PREEMPTIVE RIGHTS.  Liberty Media (but not Vivendi
Universal) will continue to have certain preemptive rights that entitle it to
purchase or cause one of its affiliates to purchase for cash a number of shares
so that Liberty Media shall maintain the identical percentage equity beneficial
ownership in USA that Liberty Media owned immediately prior to that issuance.

    REGISTRATION RIGHTS.  Vivendi Universal, Liberty Media and Mr. Diller will
continue to be entitled to customary registration rights with respect to shares
of USA common stock (and in the case of Vivendi Universal, warrants to acquire
USA common stock) owned by them as of the completion of the USA/Vivendi
Universal transaction or acquired from USA in the future. Vivendi Universal,
Liberty Media and Mr. Diller will be entitled to demand registration rights but
no more than four in the case of Vivendi Universal and its affiliates, four in
the case of Liberty Media, and three in the case of Mr. Diller. The costs of
such registration will be paid by USA. USA will not be required to register
shares if a stockholder would be permitted to sell the shares in the quantities
proposed to be sold at the time in one transaction under Rule 144 of the
Securities Act or under another comparable exemption from registration.

    TERMINATION OF AMENDED AND RESTATED GOVERNANCE AGREEMENT.  Unless otherwise
provided in the agreement, the Amended and Restated Governance Agreement
terminates:

    - as to Vivendi Universal at the time that it no longer beneficially owns at
      least 5% of the total equity securities of USA;

    - as to Liberty Media at the time that it no longer beneficially owns at
      least 5% of the total equity securities of USA; and

    - as to Mr. Diller at the time that the CEO Termination Date has occurred or
      the time he becomes disabled.

                                       8

    AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

    GENERAL.  On December 16, 2001, Vivendi Universal, Universal, Liberty Media
and Mr. Diller entered into an Amended and Restated Stockholders Agreement (the
"AMENDED AND RESTATED STOCKHOLDERS AGREEMENT"), which will become effective at
the completion of the USA/Vivendi Universal transaction and supersede the
Stockholders Agreement among Universal, Liberty Media, Mr. Diller and Seagram,
dated as of October 19, 1997. If the USA/Vivendi Universal transaction does not
occur, the Stockholders Agreement currently in effect will continue in place
without change.

    CORPORATE GOVERNANCE.   Vivendi Universal, Liberty Media and Mr. Diller each
have agreed to vote against any Contingent Matter not approved by Mr. Diller and
Liberty Media. Vivendi Universal, Liberty Media and Mr. Diller have also agreed
to vote all USA securities over which they have voting control in favor of the
respective designees of Vivendi Universal and Liberty Media to USA's Board of
Directors.

    Each of Vivendi Universal and Liberty Media will continue to grant to
Mr. Diller an irrevocable proxy with respect to all USA securities owned by
Vivendi Universal and Liberty Media for all matters, except, with respect to the
proxy granted by Liberty Media, for Contingent Matters to which Liberty Media
has not consented. The proxy will generally remain in effect until the earlier
of the CEO Termination Date (as defined in the Amended and Restated Stockholders
Agreement) or the date that Mr. Diller becomes disabled, PROVIDED that
Mr. Diller still owns at least 20,000,000 shares of USA common stock (including
options).

    RESTRICTIONS ON TRANSFERS.  Until the earlier of the CEO Termination Date or
such date that Mr. Diller becomes disabled, subject to the other provisions of
the Amended and Restated Stockholders Agreement, neither Liberty Media nor
Mr. Diller can transfer shares of USA common stock or USA Class B common stock,
other than:

    - transfers by Mr. Diller to pay taxes relating to certain USA incentive
      compensation and stock options;

    - transfers to each party's respective affiliates;

    - certain pledges relating to financings; and

    - transfers of options or USA's stock in connection with "cashless
      exercises" of Mr. Diller's options.

These restrictions are subject to a number of exceptions (which exceptions are
generally subject to the rights of first refusal as described below):

    - either stockholder may transfer shares of USA common stock or USA Class B
      common stock to an unaffiliated third party or Vivendi Universal subject
      to tag-along rights described below;

    - either stockholder may transfer USA common stock or USA Class B common
      stock so long as, in the case of Mr. Diller, he continues to beneficially
      own at least 4,400,000 shares of USA common stock or USA Class B common
      stock (including stock options) and, in the case of Liberty Media, Liberty
      Media continues to beneficially own 4,000,000 shares of USA securities,
      and in the case of a transfer of an interest in or shares of USA common
      stock or USA Class B common stock held by the BDTV entities (which are
      entities in which the economic interests are held by Liberty Media and the
      voting interests are held by Mr. Diller), after such transfer, Liberty
      Media and Mr. Diller collectively control 50.1% of the total voting power
      of USA; or

    - either stockholder may transfer USA stock so long as it complies with the
      requirements of Rule 144 or Rule 145 and, in the case of a transfer of an
      interest in or shares of USA common stock or USA Class B common stock held
      by the BDTV Entities, after such transfer, Liberty Media and Mr. Diller
      collectively control 50.1% of the total voting power of USA.

                                       9

    TAG-ALONG RIGHTS AND RIGHTS OF FIRST REFUSAL.  Mr. Diller and Liberty Media
are entitled to a right to "tag-along" (I.E., participate on a pro rata basis)
on sales of USA common stock or USA Class B common stock by the other to any
third party. Liberty Media's tag-along right will not be triggered in case of
(a) sales by Mr. Diller of an aggregate of not more than 4,000,000 USA shares
within any rolling 12-month period, (b) transfers by Mr. Diller to pay taxes
relating to certain USA incentive compensation and stock options or transfers in
connection with "cashless exercises" of Mr. Diller's options, (c) market sales
or (d) sales and transfers when Mr. Diller is no longer CEO.

    Mr. Diller has a right of first refusal with respect to sales by Universal
and its affiliates of USA shares. Such right will not be triggered in case of
(a) transfers between affiliates of Vivendi Universal, (b) market sales, in
aggregate, of not more than 1,000,000 USA shares within any rolling 12-month
period, and (c) transfers of an aggregate of not more than 4,000,000 USA shares
within any rolling 12-month period. Liberty Media also has a substantially
similar right of first refusal on the sales of USA shares by Vivendi Universal
and its affiliates, subject to Mr. Diller's right of first refusal.

    Each of Mr. Diller and Liberty Media is entitled to a right of first refusal
in the case of a transfer by the other of USA shares to a third-party unless
(a) such third-party is an affiliate of the selling stockholder, (b) not more
than 4,000,000 USA shares in aggregate are transferred within any rolling
12-month period or (c) not more than 1,000,000 USA shares are transferred within
any rolling 12-month period through market sales.

    TRANSFERS OF SHARES OF USA CLASS B COMMON STOCK.  If a party to the Amended
and Restated Stockholders Agreement proposes to transfer shares of USA Class B
Common Stock, the other parties are entitled to swap any shares of USA common
stock they own for those shares, Mr. Diller having the priority over Liberty
Media in case of transfers made by Vivendi Universal. To the extent there remain
shares of USA Class B common stock that the selling stockholder would otherwise
transfer to a third party, those shares must be converted into shares of USA
common stock prior to the transfer. This restriction does not apply to, among
other transfers, transfers among the parties and their affiliates.

    TERMINATION OF AMENDED AND RESTATED STOCKHOLDERS AGREEMENT.  Vivendi
Universal's rights and obligations under the Amended and Restated Stockholders
Agreement generally terminate at such time as Vivendi Universal no longer
beneficially owns at least 5% of the total equity securities of USA.

    Mr. Diller's and Liberty Media's rights under the Amended and Restated
Stockholders Agreement generally terminate at such time as, in the case of
Mr. Diller, he no longer beneficially owns at least 4,400,000 USA shares and, in
the case of Liberty Media, 4,000,000 USA shares. Liberty Media's tag-along
rights terminate at such time as it and its affiliates cease to beneficially own
at least 5% of the outstanding USA shares.

    Mr. Diller's rights under the Amended and Restated Stockholders Agreement
generally terminate if the CEO Termination Date has occurred or if Mr. Diller
has become disabled.

    AGREEMENT NOT TO COMPETE WITH THE JOINT VENTURE

    In connection with the USA/Vivendi Universal transaction, each of USA and
Mr. Diller agreed, following the completion of the USA/Vivendi Universal
transaction, not to compete with the joint venture on the following terms:

    - subject to certain exceptions, USA may not engage in the "Business," as
      described below, acquire any interest in any person engaged in the
      Business, solicit, recruit or hire employees of the joint venture or the
      businesses being contributed to the joint venture or solicit or encourage
      employees of the joint venture or the businesses being contributed to the
      joint venture to leave their employment, in each case, for a period
      commencing with the completion of the USA/Vivendi Universal transaction
      through the later of (1) 18 months from the completion of the USA/Vivendi
      Universal transaction and (2) six months after the date that Mr. Diller
      ceases

                                       10

      to be the chief executive officer of the joint venture; PROVIDED that the
      restrictions will cease to apply if at any time after 18 months from the
      completion of the USA/Vivendi Universal transaction Mr. Diller ceases to
      be the chief executive officer or another officer of USA but remains the
      chief executive officer of the joint venture or Mr. Diller resigns as
      chief executive officer of the joint venture for "good reason" or is
      terminated without "cause," each as defined in the transaction agreement;
      and

    - subject to certain exceptions, Mr. Diller may not engage in the Business,
      acquire any interest in any person engaged in the Business, solicit,
      recruit or hire employees of the joint venture or the businesses being
      contributed to the joint venture or solicit or encourage employees of the
      joint venture or the businesses being contributed to the joint venture to
      leave their employment, in each case, for a period commencing with the
      completion of the USA/Vivendi Universal transaction through the earlier of
      (1) the later of 18 months from the completion of the USA/Vivendi
      Universal transaction and six months after the date that Mr. Diller ceases
      to be the chief executive officer of the joint venture and (2) three years
      after the completion of the USA/Vivendi Universal transaction; PROVIDED
      that the restrictions will cease to apply if at any time after 18 months
      from the completion of the USA/Vivendi Universal transaction Mr. Diller
      resigns as chief executive officer of the joint venture for "good reason"
      or is terminated without "cause".

    For purposes of the non-compete, the "Business" is defined to mean the
operation, programming or delivery of any general or genre-based entertainment
television channel (irrespective of how such channel is delivered to the
customer, including delivery by cable, satellite, the internet or other
technologies), the production and distribution of entertainment television
programming and feature films and any other business to be contributed to the
partnership as of the completion of the USA/Vivendi Universal transaction,
including any reasonably foreseeable entertainment-focused extensions of such
businesses after the closing date that are programming or film-oriented, other
than in a transactional context. The term "Business" expressly does not include,
however, (1) television channels (irrespective of how such channel is delivered
to the customer, including delivery by cable, satellite, the internet or other
technologies) which are consumer transaction-oriented, such as Home Shopping
Network, America's Store and USA's planned travel network or which provide
informational services which lend themselves to commerce (such as Travel
Channel, Home & Garden Television, the Food Network, and Do It Yourself) or
which otherwise serve as a means of introducing, starting or promoting
transactional services, including transaction-oriented television channels whose
primary focus is the provision of electronic retailing, auction services or
gaming/gambling services or (2) electronic commerce and retailing, information
and services.

    CORPORATE OPPORTUNITIES

    The USA/Vivendi Universal transaction agreements also include provisions
relating to corporate opportunities that govern the relationship of USA and its
officers and directors, on the one hand, and the joint venture and its
affiliates, on the other hand. These corporate opportunity provisions are
substantially similar to those contained in the proposed Amended and Restated
Articles of Incorporation of Expedia, which are described under "Proposal
No. 2--Amendment and Restatement of Expedia's Articles of Incorporation--Conduct
of Certain Affairs of Expedia--Corporate Opportunity" in the joint
prospectus/proxy and information statement, except that they are subject to
USA's and Mr. Diller's agreement not to compete with the joint venture as
described immediately above.

    USA has filed the transaction agreements relating to the USA/Vivendi
Universal transaction as exhibits to its Form 8-K filed on December 18, 2001.
See "Where You Can Find More Information" to obtain copies of these agreements.

                                       11

    WE ARE NOT SOLICITING YOUR VOTE ON THE USA/VIVENDI UNIVERSAL TRANSACTION,
NOR IS THE CONSUMMATION OF THE USA/EXPEDIA MERGER CONDITIONED UPON THE
CONSUMMATION OF THE USA/VIVENDI UNIVERSAL TRANSACTION. IF THE USA/EXPEDIA MERGER
IS CONSUMMATED AND YOU ELECT TO RECEIVE THE PACKAGE OF USA SECURITIES, AND YOU
CONTINUE TO HOLD YOUR USA SHARES AS OF THE RECORD DATE TO BE ESTABLISHED IN THE
FUTURE FOR DETERMINING THE USA STOCKHOLDERS ENTITLED TO VOTE ON THE USA/VIVENDI
UNIVERSAL TRANSACTION, YOU, AS A STOCKHOLDER OF USA, WILL RECEIVE MORE DETAILED
INFORMATION, INCLUDING A PROXY STATEMENT SOLICITING YOUR VOTE, FROM USA IN ORDER
TO EVALUATE YOUR VOTING DECISION WITH RESPECT TO THE USA/VIVENDI UNIVERSAL
TRANSACTION.

         OTHER INTERESTS OF OFFICERS AND DIRECTORS IN THE TRANSACTIONS

    In addition to the interests of officers and directors described in the
joint prospectus/proxy and information statement dated November 13, 2001, since
the joint prospectus/proxy and information statement was mailed to you, the
Compensation Committee of USA granted options to acquire USA common stock, which
included grants to Expedia executives. Specifically, USA granted, effective upon
completion of the USA/Expedia merger, to Messrs. Barton, Stanger, Bishop,
Breakwell and Slyngstad options to acquire 100,000, 70,000, 30,000, 30,000 and
30,000 shares of USA common stock, respectively. USA also granted, effective
upon completion of the USA/Expedia merger, options to acquire 30,000 shares of
USA common stock to each of four other executive officers of Expedia. All of the
options will vest in four equal installments on the first four anniversaries of
the closing, and the per share exercise price of each option will be the closing
sales price of USA common stock on the last market trading day prior to
completion of the merger.

                           OTHER RECENT DEVELOPMENTS

    On December 21, 2001, Expedia and Microsoft Corporation entered into a
second amended and restated services agreement whereby Microsoft will continue
to provide Expedia with specified administrative and operational services. The
material terms of this second amended and restated services agreement are as
described in the joint prospectus/proxy and information statement dated
November 13, 2001 under "Proposal No. 4--Election of Expedia Directors."

                      WHERE YOU CAN FIND MORE INFORMATION

    USA and Expedia file annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission (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 web site at www.sec.gov.

    This joint prospectus/proxy and information statement supplement is part of
a Registration Statement on Form S-4, as amended by post-effective Amendment
No. 2, filed by USA to register with the SEC the USA common stock, USA preferred
stock and USA warrants to be issued in the merger. This joint prospectus/proxy
and information statement supplement is also part of a Registration Statement on
Form S-4, as amended by post-effective Amendment No. 1, filed by Expedia to
register with the SEC the Expedia Class B common stock to be issued in the
recapitalization and the Expedia warrants to be issued in the merger.

                                       12

    As allowed by SEC rules, this supplement does not contain all the
information you can find in the Registration Statements or the exhibits to the
Registration Statements.

    The SEC allows us to "incorporate by reference" information into this
supplement, 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 supplement, except for
any information superseded by information contained directly in this supplement.
This supplement incorporates by reference the documents set forth below that we
have previously filed with the SEC. These documents contain important
information about our companies and their financial condition.


                                            
USA SEC FILINGS
(FILE NO. 0-20570)                             PERIOD/FILING DATE

Annual Report on Form 10-K                     Year ended December 31, 2000

Quarterly Reports on Form 10-Q                 Quarters ended March 31, 2001, June 30, 2001
                                               and September 30, 2001

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

Proxy Statement                                Filed on April 9, 2001

EXPEDIA SEC FILINGS
(FILE NO. 000-27429)

Annual Report on Form 10-K and Form 10-K/A     Year ended June 30, 2001

Quarterly Reports on Form 10-Q                 Quarter ended September 30, 2001

Current Reports on Form 8-K                    Filed on July 19, 2001, July 27, 2001,
                                               October 23, 2001 and December 12, 2001


    USA and Expedia also incorporate by reference into this supplement
additional documents that may be filed with the SEC from the date of this
supplement to the date of the reconvened Expedia annual meeting. These include
period reports, such as annual reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.

    USA has supplied all information contained or incorporated by reference in
this supplement relating to USA. Expedia has supplied all such information
relating to Expedia and Microsoft has supplied all such information relating to
Microsoft.

    If you are an Expedia or USA shareholder, we may have sent you some of the
documents incorporated by reference, but you can obtain any of them through us,
the SEC or through the SEC's website as described above. Documents incorporated
by reference are available from us without charge, excluding all exhibits unless
we have specifically incorporated by reference an exhibit in this supplement.
Shareholders may obtain documents incorporated by reference in this supplement
by

                                       13

requesting them in writing or by telephone from the proxy solicitor or the
appropriate company at the following addresses:


                                            
             USA Networks, Inc.                                Expedia, Inc.
            152 West 57th Street                     13810 SE Eastgate Way, Suite 400
          New York, New York 10019                      Bellevue, Washington 98005
             Tel: (212) 314-7300                            Tel: (425) 564-7200
       Attention: Corporate Secretary                 Attention: Corporate Secretary


                       [LOGO OF MACKENZIE PARTNERS, INC.]

                                156 Fifth Avenue
                               New York, NY 10010
                            (212) 929-5500 (collect)
                           (800) 322-2885 (toll-free)

    If you would like to request documents from us, please do so by          ,
2002 to receive them before the Expedia annual meeting is reconvened.

    IF YOU ARE AN EXPEDIA SHAREHOLDER, YOU SHOULD RELY ONLY ON THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN THE JOINT PROSPECTUS/PROXY AND
INFORMATION STATEMENT AND THIS SUPPLEMENT TO VOTE ON THE USA/EXPEDIA MERGER AND
TO DECIDE WHETHER OR NOT TO MAKE AN ELECTION. INFORMATION CONTAINED ON THE
WEBSITES OF USA AND/OR EXPEDIA IS NOT INCORPORATED IN THIS SUPPLEMENT, NOR
SHOULD YOU RELY ON ANY INFORMATION CONTAINED THEREON TO DETERMINE HOW TO VOTE ON
THE USA/EXPEDIA MERGER AND/OR WHETHER OR NOT TO MAKE AN ELECTION. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS SUPPLEMENT. THIS SUPPLEMENT IS DATED JANUARY   , 2002. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS SUPPLEMENT IS ACCURATE
AS OF ANY DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS DOCUMENT TO
SHAREHOLDERS NOR THE ISSUANCE OF USA COMMON STOCK, USA PREFERRED STOCK, USA
WARRANTS, EXPEDIA CLASS B COMMON STOCK OR NEW EXPEDIA WARRANTS IN THE
RECAPITALIZATION OR THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.

                                    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
joint prospectus/proxy and information statement supplement. 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 joint prospectus/proxy and information statement
supplement 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.

                                       14

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    This joint prospectus/proxy and information statement supplement contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the financial condition, results
of operations, cash flows, dividends, financing plans, business strategies,
operating efficiencies or synergies, budgets, capital and other expenditures,
competitive positions, growth opportunities for existing products, benefits from
new technology, plans and objectives of management, markets for stock of USA and
Expedia and other matters. Statements in this document that are not historical
facts are hereby identified as "forward-looking statements" for purposes of the
safe harbor provided by Section 21E of the Exchange Act and Section 27A of the
Securities Act. Forward-looking statements, including, without limitation, those
relating to the future business prospects, revenues, working capital, liquidity,
capital needs, interest costs and income, in each case relating to USA and
Expedia, wherever they occur in this supplement, are necessarily estimates
reflecting the best judgement of the senior management of USA and Expedia, and
involve a number of risks and uncertainties that could cause actual results to
differ materially from those suggested by the forward-looking statements. These
forward-looking statements should, therefor, be considered in light of various
important factors, including those set forth in this supplement. Important
factors that could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements include without
limitation:

    - material adverse changes in economic conditions generally or in the
      markets served by our companies;

    - a significant delay in the expected closing of the transactions;

    - material changes in inflation;

    - future regulatory and legislative actions affecting our companies'
      operating areas;

    - competition from others;

    - product demand and market acceptance;

    - the ability to protect proprietary information and technology or to obtain
      necessary licenses on commercially reasonable terms;

    - the ability to expand into and successfully operate in foreign markets;
      and

    - obtaining and retaining skilled workers and key executives.

    The words "estimate," "project," "intend," "expect," "believe" and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are found at various places throughout this
supplement and other documents incorporated in this supplement by reference,
including, but not limited to, the December 31, 2000 Annual Report on Form 10-K
of USA, including any amendments, and the June 30, 2001 Annual Report on
Form 10-K of Expedia, including any amendments. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date stated, or if no date is stated, as of the date of this supplement.
Neither USA nor Expedia undertakes any obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date of this supplement or to reflect the occurrence of unanticipated
events.

                                       15

                         INDEX TO FINANCIAL INFORMATION



                                                                PAGE
                                                              --------
                                                           
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

  Selected Historical Financial Information.................     F-2

  Selected Pro Forma Combined Condensed Financial
    Information.............................................     F-5

  Unaudited Comparative Per Share Data......................     F-7

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

  Pro Forma Combined Condensed Financial Information (Giving
    Effect to the USA/Expedia Merger).......................    F-10

  Pro Forma Combined Condensed Financial Information (Giving
    Effect to the USA/Expedia Merger and the USA/Vivendi
    Universal Transaction)..................................    F-15

  Notes to Unaudited Pro Forma Combined Condensed Financial
    Statements..............................................    F-21

USA NETWORKS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
  FINANCIAL STATEMENTS AS OF AND FOR THE QUARTER ENDED
  SEPTEMBER 30, 2001

  Unaudited Condensed Consolidated Statements of
    Operations..............................................    F-23

  Unaudited Condensed Balance Sheets........................    F-24

  Unaudited Condensed Statements of Stockholders' Equity....    F-26

  Unaudited Condensed Consolidated Statements of Cash
    Flows...................................................    F-27

  Notes to Condensed Consolidated Financial Statements......    F-28

EXPEDIA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
  FINANCIAL STATEMENTS AS OF AND FOR THE QUARTER ENDED
  SEPTEMBER 30, 2001

  Unaudited Condensed Consolidated Statements of Operations
    and Comprehensive Loss..................................    F-38

  Unaudited Condensed Balance Sheets........................    F-39

  Unaudited Condensed Statements of Stockholders' Equity....    F-40

  Unaudited Condensed Consolidated Statements of Cash
    Flows...................................................    F-41

  Notes to Condensed Consolidated Financial Statements......    F-42


                                      F-1

            SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

    SELECTED HISTORICAL FINANCIAL INFORMATION

USA

    In the table below, USA provides you with selected historical consolidated
financial data of USA. USA prepared this information using the consolidated
financial statements of USA for each of the years in the five-year period ended
December 31, 2000 and for the nine-month periods ended September 30, 2001 and
2000. The financial statements for each of the five years in the period ended
December 31, 2000 have been audited by Ernst & Young LLP, independent auditors.
The financial statements for the nine-month periods ended September 30, 2001 and
2000 have not been audited. USA has not declared any cash dividends on USA
common stock.

    When you read the selected historical financial information, you should
consider reading along with it the historical financial statements and
accompanying notes that USA has included in its December 31, 2000 Annual Report
on Form 10-K. You can obtain this report by following the instructions we
provide under "Where You Can Find More Information" on page 12.

    As used in this document, the term "EBITDA" refers to net income plus
(1) extraordinary items and cumulative effect of accounting changes,
(2) provision for income taxes, (3) interest expense, (4) depreciation and
amortization, (5) minority interest and (6) amortization of non-cash
distribution and marketing expense and non-cash compensation expense. EBITDA is
presented because USA believes it is a widely accepted indicator of its ability
to service debt as well as a valuation methodology for companies in the media,
entertainment and communication industries. EBITDA should not be considered in
isolation or as a substitute for measures of financial performance or liquidity
prepared in accordance with generally accepted accounting principles. EBITDA may
not be comparable to calculations of similarly titled measures presented by
other companies.



                                                                                                               NINE MONTHS
                                                         YEARS ENDED DECEMBER 31,                          ENDED SEPTEMBER 30,
                                     ----------------------------------------------------------------   -------------------------
                                      1996(1)      1997(2)     1998(3)(4)     1999(5)       2000(6)        2000         2001(7)
                                     ----------   ----------   -----------   ----------   -----------   -----------   -----------
                                              (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                                 
STATEMENTS OF OPERATIONS DATA:
  Net revenues.....................  $   36,361   $1,377,145   $ 2,759,896   $3,371,745   $ 4,601,492   $ 3,285,634   $ 3,943,457
  Operating profit (loss)..........        (564)     105,753       249,904      269,914        56,326       162,127       195,123
  Earnings (loss) from continuing
    operations.....................      (1,572)      34,209        63,892       16,515       (88,588)      (26,291)      (68,104)
  Earnings (loss) before cumulative
    effect of accounting change....      (6,539)      13,061        76,894      (27,631)     (147,983)      (67,698)      449,743
  Net earnings (loss)..............      (6,539)      13,061        76,894      (27,631)     (147,983)      (67,698)      440,556
  Basic earnings (loss) per common
    share from continuing
    operations(8)..................       (0.04)        0.16          0.22         0.05         (0.25)        (0.07)        (0.18)
  Diluted earnings (loss) per
    common share from continuing
    operations(8)..................       (0.04)        0.15          0.19         0.04         (0.25)        (0.07)        (0.18)
  Basic earnings (loss) per common
    share before cumulative effect
    of accounting change(8)........       (0.15)        0.06          0.27        (0.08)        (0.41)        (0.19)         1.21
  Diluted earnings (loss) per
    common share before cumulative
    effect of change of accounting
    change(8)......................       (0.15)        0.06          0.21        (0.08)        (0.41)        (0.19)         0.70
  Basic net earnings (loss) per
    common share(8)................       (0.15)        0.06          0.27        (0.08)        (0.41)        (0.19)         1.18
  Diluted net earnings (loss) per
    common share(8)................       (0.15)        0.06          0.21        (0.08)        (0.41)        (0.19)         0.69
BALANCE SHEET DATA (END OF PERIOD):
  Working capital (deficit)........  $  (24,444)  $   60,941   $   443,408   $  381,046   $   602,588   $   515,666   $ 1,247,221
  Total assets.....................   2,116,232    2,670,796     8,316,190    9,233,227    10,473,870    10,611,093    11,687,907
  Long-term obligations, net of
    current maturities.............     271,430      448,346       775,683      574,979       552,501       572,449       545,584
  Minority interest................     356,136      372,223     3,633,597    4,492,066     4,817,137     4,941,036     4,943,105
  Stockholders' equity.............   1,158,749    1,447,354     2,571,405    2,769,729     3,439,871     3,501,933     3,993,871


                                      F-2




                                                                                                               NINE MONTHS
                                                         YEARS ENDED DECEMBER 31,                          ENDED SEPTEMBER 30,
                                     ----------------------------------------------------------------   -------------------------
                                      1996(1)      1997(2)     1998(3)(4)     1999(5)       2000(6)        2000         2001(7)
                                     ----------   ----------   -----------   ----------   -----------   -----------   -----------
                                              (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                                 
OTHER DATA:
Net cash provided by (used in)
  Operating activities.............  $    8,198   $   60,363   $   256,929   $  401,577   $   372,507   $   302,278   $   479,647
  Investing activities.............       1,545      (83,043)   (1,201,912)    (413,968)     (524,556)     (362,501)      163,039
  Financing activities.............      16,308      105,156     1,297,654       55,948        58,346        57,810        64,334
  Net cash used in discontinued
    operations.....................       2,585        9,041       (20,488)     (66,260)      (82,563)      (54,382)      (48,058)
  Effect of exchange rate
    changes........................          --           --        (1,501)        (123)       (2,687)       (4,133)       (3,426)
  EBITDA...........................       2,295      198,372       496,612      627,745       809,491       567,885       676,881


------------------------------

(1) The consolidated statement of operations data include the operations of
    Savoy Pictures Entertainment, Inc. and Home Shopping Network, Inc. since
    their acquisition by USA on December 19, 1996 and December 20, 1996,
    respectively. Prior to USA's acquisition of USA Networks, referred to as
    Networks, which consisted of USA Network and The Sci-Fi Channel cable
    televisions networks, and the domestic television production and
    distribution business of Universal Studios, Inc., referred to as Studios
    USA, the assets of Home Shopping Network, Inc. consisted principally of
    USA's retail sales programs, Home Shopping Network and America's Store.

(2) The consolidated statement of operations data include the operations of
    Ticketmaster since the acquisition by USA of its controlling interest in
    Ticketmaster on July 17, 1997.

(3) The consolidated statement of operations data include the operations of
    Networks and Studios USA since the acquisition by USA from Universal on
    February 12, 1998 and CitySearch since its acquisition by USA on
    September 28, 1998.

(4) Net earnings for the year ended December 31, 1998 include a pre-tax gain of
    $74.9 million related to USA's sale of its Baltimore television station
    during the first quarter of 1998 and a pre-tax gain of $109.0 million
    related to the CitySearch transaction during the fourth quarter of 1998.

(5) The consolidated statement of operations data include the operations of
    Hotel Reservation Network, referred to as Hotel Reservations, since its
    acquisition by USA on May 10, 1999 and the operations of October Films and
    the domestic film distribution and development business of Universal, which
    was previously operated by Polygram Filmed Entertainment, referred to as USA
    Films, since their acquisition by USA on May 28, 1999. Net earnings for the
    year ended December 31, 1999 includes a pre-tax gain of $89.7 million
    related to the sale of securities.

(6) Includes a pre-tax gain of $104.6 million related to the Styleclick
    transaction, a pre-tax gain of $3.7 million related to the HRN initial
    public offering, and a pre-tax charge of $145.6 million related to
    impairment of Styleclick goodwill.

(7) Includes a gain of $517.8 million related to the sale of capital stock of
    certain USA Broadcasting subsidiaries and an after-tax expense of
    $9.2 million related to the cumulative effect of adoption SOP 00-2,
    Accounting By Producers or Distributors of Films.

(8) Earnings (loss) per common share data and shares outstanding retroactively
    reflect the impact of two-for-one stock splits of USA's Common Stock and USA
    Class B common stock paid on February 24, 2000 and March 26, 1998. All share
    numbers give effect to such stock splits.

                                      F-3

EXPEDIA
    In the table below, Expedia provides you with selected historical
consolidated financial data of Expedia. Expedia prepared this information using
the consolidated financial statements of Expedia for each of the fiscal years in
the five-year period ended June 30, 2001 and for the three-month periods ended
September 30, 2001 and 2000. The financial statements for each of the fiscal
years in the five year period ended June 30, 2001 have been audited by
Deloitte & Touche LLP, independent auditors. The financial statements for the
three-month periods ended September 30, 2001 and 2000 have not been audited.
Expedia has not declared any dividends on Expedia common stock.
    When you read the selected historical financial information, you should
consider reading along with it the historical financial statements and
accompanying notes that Expedia has included in its June 30, 2001 Annual Report
on Form 10-K and the September 30, 2001 Quarterly Report on Form 10-Q. You can
obtain this report by following the instructions we provide under "Where You Can
Find More Information" on page 12.



                                                                                                                 THREE MONTHS
                                                                                                                     ENDED
                                                                      YEARS ENDED JUNE 30,                       SEPTEMBER 30
                                                      -----------------------------------------------------   -------------------
                                                        1997       1998       1999       2000        2001       2000       2001
                                                      --------   --------   --------   ---------   --------   --------   --------
                                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                      ---------------------------------------------------------------------------
                                                                                                    
STATEMENT OF OPERATIONS DATA:
  Agency revenues...................................  $  1,715   $  6,866   $ 24,677   $  59,534   $122,987   $ 21,646   $ 39,279
  Merchant revenues.................................        --         --         --      10,912     64,548     12,335     34,102
  Advertising and other revenues....................     1,027      6,961     14,022      24,185     34,685      8,124      6,097
                                                      --------   --------   --------   ---------   --------   --------   --------
  Revenues..........................................     2,742     13,827     38,699      94,631    222,220     42,105     79,478
                                                      --------   --------   --------   ---------   --------   --------   --------
  Cost of agency revenues...........................     3,176      8,996     14,548      34,136     53,427     11,882     15,977
  Cost of merchant revenues.........................                              --       3,369     17,567      3,745      9,509
  Cost of advertising and other revenues............       103        696      1,402       2,643      3,280        684        801
                                                      --------   --------   --------   ---------   --------   --------   --------
  Cost of revenues..................................     3,279      9,692     15,950      40,148     74,274     16,311     26,287
                                                      --------   --------   --------   ---------   --------   --------   --------
  Gross profit (loss)...............................      (537)     4,135     22,749      54,483    147,946     25,794     53,191
                                                      --------   --------   --------   ---------   --------   --------   --------
  Operating expenses................................    28,384     33,613     42,351      96,599    137,381     28,511     39,461
  Operating expenses--non-cash......................        --         --         --      78,552     93,209     29,149     13,468
                                                      --------   --------   --------   ---------   --------   --------   --------
  Gain (loss) from operations.......................   (28,921)   (29,478)   (19,602)   (120,668)   (82,644)   (31,866)       262
  Net interest income and other.....................        --         --         --       2,353      4,591      1,082      1,329
  USAI transaction related costs....................        --         --         --          --         --         --     (6,341)
                                                      --------   --------   --------   ---------   --------   --------   --------
  Net loss..........................................  $(28,921)  $(29,478)  $(19,602)  $(118,315)  $(78,053)  $(30,784)  $ (4,750)
                                                      ========   ========   ========   =========   ========   ========   ========
Basic and diluted net loss per share................                                               $  (1.65)  $  (0.69)  $  (0.09)
                                                                                                   ========   ========   ========
Pro forma basic and diluted net loss per share......                        $  (0.59)  $   (3.11)
                                                                            ========   =========
Weighted average shares used to compute basic and
  diluted net loss per common share.................                                                 47,210     44,849     50,319
                                                                                                   ========   ========   ========
Weighted average shares used to compute pro forma
  basic and diluted net loss per common share.......                          33,000      38,044
                                                                            ========   =========
BALANCE SHEET DATA:
  Cash and cash equivalents.........................  $     --   $     --   $     --   $  60,670   $182,161   $122,339   $197,801
  Working capital...................................       658      4,814      1,390      20,122     96,147     73,881    108,616
  Total assets......................................     1,645      8,333      5,756     273,050    389,844    319,287    369,780
  Unearned revenue..................................     2,337      7,963      6,215       9,696      1,545     24,486      1,074
  Deferred merchant bookings........................        --         --         --      14,424     80,326         --     62,457
  Long-term liabilities, net of current portion.....        --      5,820      3,851       4,557      1,303      1,560         --
  Accumulated deficit...............................   (37,684)   (67,162)   (86,764)         --         --         --         --
  Retained deficit..................................        --         --         --    (113,365)  (191,418)  (144,149)  (196,168)
  Total stockholders' equity (owner's net
    deficit)........................................      (721)       (92)    (1,675)    207,496    230,999    251,548    234,751


                                      F-4

    SELECTED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

    In the two tables below, we provide you with two sets of unaudited selected
pro forma combined condensed financial information for USA. The first set of
unaudited selected pro forma combined condensed financial information assumes
that the USA/Expedia merger had been completed on January 1, 2000 for income
statement purposes and on September 30, 2001 for balance sheet purposes and
assumes that the USA/Vivendi Universal transaction has not been completed. The
second set of unaudited selected pro forma combined condensed financial
information assumes that the transactions with Expedia and Vivendi Universal had
been completed on January 1, 2000 for income statement purposes and on
September 30, 2001 for balance sheet purposes.

    Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," provides that any goodwill resulting from a business
combination completed subsequent to June 30, 2001 will not be amortized, but
instead is required to be tested for impairment at least annually.

    USA has not declared any cash dividends on USA common stock.

    Expedia will account for the USA/Expedia merger as a recapitalization.
Accordingly, the transaction will not significantly impact Expedia's financial
information and no pro forma information for Expedia is deemed necessary.

    This unaudited selected pro forma combined condensed financial information
should be read in conjunction with the separate historical financial statements
and accompanying notes of USA and Expedia that are incorporated by reference in
this supplement. It is also important that you read the unaudited pro forma
combined condensed financial information and accompanying discussion that we
have included in this supplement starting on page F-9 under "Unaudited Pro Forma
Combined Condensed Financial Statements." You should not rely on the unaudited
selected pro forma financial information as an indication of the results of
operations or financial position that would have been achieved if the
transactions had taken place earlier or of the results of operations or
financial position of USA after the completion of the transactions.

USA/EXPEDIA



                                                                                                     PRO FORMA
                                                                                       -------------------------------------
                                                                                                             NINE MONTHS
                                                                                          YEAR ENDED            ENDED
                                                                                       DECEMBER 31, 2000  SEPTEMBER 30, 2001
                                                                                       -----------------  ------------------
                                                                                              (DOLLARS IN THOUSANDS,
                                                                                              EXCEPT PER SHARE DATA)
                                                                                                    
STATEMENT OF OPERATIONS DATA:
  Net revenues.......................................................................     $ 4,829,688        $ 4,158,631
  Operating profit (loss)............................................................        (130,817)           171,636
  Loss from continuing operations....................................................        (254,520)           (85,476)
  Earnings (loss) before cumulative effect of accounting change......................        (254,520)           432,371
  Net loss before preferred dividend.................................................        (313,915)           423,184
  Net loss available to common shareholders..........................................        (326,974)           413,389
LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS
  Basic..............................................................................           (0.65)             (0.21)
  Diluted............................................................................           (0.65)             (0.21)
EARNINGS (LOSS) PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE
  Basic..............................................................................           (0.65)              1.08
  Diluted............................................................................           (0.65)              0.66
NET EARNINGS (LOSS) PER COMMON SHARE BEFORE PREFERRED DIVIDEND EARNINGS
  Basic..............................................................................           (0.80)              1.05
  Diluted............................................................................           (0.80)              0.64
NET EARNINGS (LOSS) PER SHARE AVAILABLE TO COMMON SHAREHOLDERS
  Basic..............................................................................           (0.83)              1.03
  Diluted............................................................................           (0.83)              0.63
BALANCE SHEET DATA (END OF PERIOD)
  Working Capital....................................................................                        $ 1,345,837
  Total assets.......................................................................                         13,508,491
  Long-term obligations, net of current maturities...................................                            545,584
  Minority interest..................................................................                          5,002,410
  Stockholders' equity...............................................................                          5,610,121


                                      F-5

USA/EXPEDIA/VIVENDI UNIVERSAL



                                                                            PRO FORMA
                                                              --------------------------------------
                                                                                     NINE MONTHS
                                                                 YEAR ENDED             ENDED
                                                              DECEMBER 31, 2000   SEPTEMBER 30, 2001
                                                              -----------------   ------------------
                                                                      (DOLLARS IN THOUSANDS,
                                                                      EXCEPT PER SHARE DATA)
                                                                            
STATEMENT OF OPERATIONS
  Net Revenues..............................................      $3,192,808          $ 2,730,879
  Operating loss............................................        (536,887)            (210,420)
  Loss from continuing operations...........................        (323,965)            (176,439)
  Earnings (loss) before cumulative effect of accounting
    change..................................................        (383,360)             341,408
  Net loss before preferred dividend........................        (383,360)             341,408
  Net loss available to common shareholders.................        (396,419)             331,613

LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS
  Basic.....................................................           (0.81)               (0.43)
  Diluted...................................................           (0.81)               (0.43)

EARNINGS (LOSS) PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF
  ACCOUNTING CHANGE
  Basic.....................................................           (0.95)                0.84
  Diluted...................................................           (0.95)                0.72

NET EARNINGS (LOSS) PER COMMON SHARE BEFORE PREFERRED
  DIVIDEND EARNINGS
  Basic.....................................................           (0.95)                0.84
  Diluted...................................................           (0.95)                0.72

NET EARNINGS (LOSS) PER SHARE AVAILABLE TO COMMON
  SHAREHOLDERS
  Basic.....................................................           (0.99)                0.81
  Diluted...................................................           (0.99)                0.70

ADJUSTED NET EARNINGS (LOSS) PER SHARE AVAILABLE TO COMMON
  SHAREHOLDERS(A)
  Basic.....................................................           (1.19)                0.91
  Diluted...................................................           (1.19)                0.77

BALANCE SHEET DATA (END OF PERIOD)
  Working capital...........................................                          $ 2,850,438
  Total assets..............................................                           12,898,455
  Long-term obligations, net of current maturities..........                              545,184
  Minority interest.........................................                              972,025
  Common stock exchangeable for preferred interest..........                            1,347,646
  Stockholders' equity......................................                            7,382,974


--------------------------

(A) Adjusted net earnings per share is calculated assuming that Vivendi
    Universal's remaining 56.6 million shares following completion of the
    USA/Vivendi Universal transaction are held in treasury for the purposes of
    determining shares outstanding. USA's $1.75 billion face value Class B
    preferred interest in the new joint venture with Vivendi Universal is
    puttable and callable commencing on the 20th anniversary of the completion
    of the USA/Vivendi Universal transaction at its then accreted face value for
    up to 56.6 million USA shares held by Vivendi Universal. Upon exercise of
    the put or call, USA will cancel those shares. Note that if USA's share
    price exceeds $41 per share, less than 56.6 million shares would be
    cancelled. For instance, at a share price of $45, 51.4 million shares would
    be cancelled. At a share price of $50, 46.2 million shares would be
    cancelled. At the election of Vivendi Universal, USA common stock to be
    received by USA pursuant to the put or call can be substituted with cash
    equal to the market value of such shares. If cash was substituted, it is
    USA's intention to repurchase shares with the proceeds.

                                      F-6

    UNAUDITED COMPARATIVE PER SHARE DATA

    In the table below, we provide you with historical per share financial
information for USA as of September 30, 2001, June 30, 2001 and December 31,
2000 and for the twelve months ended December 31, 2000. We also provide you with
historical per share financial information for Expedia as of September 30, 2001,
June 30, 2001 and December 31, 2000, for the three months ended September 30,
2001 and for the twelve months ended June 30, 2001. Expedia and Vivendi
Universal/Expedia pro forma per share financial information for USA is presented
as of September 30, 2001 and for the twelve months ended December 31, 2001. The
USA pro forma financial information assumes that the respective transactions had
been completed on January 1, 2000 for income statement purposes and on
September 30, 2001 for balance sheet purposes. Expedia will account for these
transactions as a recapitalization. Accordingly, the transactions will not
significantly impact Expedia's financial information and no pro forma
information for Expedia is deemed necessary.

    Neither USA nor Expedia has declared any cash dividends during this period.

    It is important that when you read this information, you read along with it
the financial statements and accompanying notes of USA and Expedia included in
the documents described on page 12 of this supplement under "Where You Can Find
More Information." It is also important that you read the pro forma combined
financial information and accompanying discussion and notes that we have
included in this supplement starting on page F-9 under "USA Unaudited Pro Forma
Combined Condensed Financial Statements." You should not rely on the pro forma
financial information as an indication of the results of operations or financial
position that would have been achieved if the transactions had taken place
earlier or the results of USA after the completion of the transactions.



                                                    USAI
                                --------------------------------------------
                                                          VIVENDI UNIVERSAL/                  EXPEDIA      VIVENDI UNIVERSAL/
                                             EXPEDIA           EXPEDIA          EXPEDIA      EQUIVALENT    EXPEDIA EQUIVALENT
                                 ACTUAL    PRO FORMA(1)      PRO FORMA(2)      HISTORICAL   PRO FORMA(3)      PRO FORMA(3)
                                --------   ------------   ------------------   ----------   ------------   ------------------
                                                                                         
BOOK VALUE PER COMMON SHARE
Common stock and Class B
  common stock
  September 30, 2001..........   $10.59       $13.83            $17.89           $ 4.57        $ 9.17            $11.86
  June 30, 2001...............     9.43                                            4.60
  December 31, 2000...........     9.34                                            4.84

LOSS PER COMMON SHARE FROM
  CONTINUING OPERATIONS
  Basic and diluted for the
    nine months ended
    September 30, 2001........    (0.18)       (0.21)            (0.43)                         (0.14)            (0.29)
  Basic and diluted for the
    twelve months ended
    June 30, 2001.............                                                    (1.65)
  Basic and diluted for the
    twelve months ended
    December 31, 2000.........    (0.25)       (0.65)            (0.81)                         (0.43)            (0.53)


                                      F-7




                                                    USAI
                                --------------------------------------------
                                                          VIVENDI UNIVERSAL/                  EXPEDIA      VIVENDI UNIVERSAL/
                                             EXPEDIA           EXPEDIA          EXPEDIA      EQUIVALENT    EXPEDIA EQUIVALENT
                                 ACTUAL    PRO FORMA(1)      PRO FORMA(2)      HISTORICAL   PRO FORMA(3)      PRO FORMA(3)
                                --------   ------------   ------------------   ----------   ------------   ------------------
                                                                                         
EARNINGS (LOSS) PER COMMON
  SHARE BEFORE CUMULATIVE
  EFFECT OF ACCOUNTING CHANGE
  For the nine months ended
    September 30, 2001........
    Basic.....................     1.21         1.08              0.84                           0.71              0.55
    Diluted...................     0.70         0.66              0.72                           0.43              0.48
  Basic and diluted for the
    twelve months ended
    June 30, 2001.............                                                    (1.65)
  Basic and diluted for the
    twelve months ended
    December 31, 2000.........    (0.41)       (0.80)            (0.95)                         (0.53)            (0.63)

NET EARNINGS (LOSS) PER SHARE
  AVAILABLE TO COMMON
  SHAREHOLDERS
  For the nine months ended
    September 30, 2001
    Basic.....................     1.18         1.03              0.81                           0.68              0.54
    Diluted...................     0.69         0.63              0.70                           0.42              0.46
  Basic and diluted for the
    twelve months ended
    June 30, 2001.............                                                    (1.65)
  Basic and diluted for the
    twelve months ended
    December 31, 2000.........    (0.41)       (0.83)            (0.99)                         (0.55)            (0.65)


------------------------------

(1) Expedia pro forma information gives effect to the USA/Expedia merger as well
    as acquisitions made by USA and Expedia in 2000 and 2001. See "Unaudited Pro
    Forma Combined Condensed Financial Statements."

(2) Vivendi Universal/Expedia pro forma information gives effect to the
    USA/Expedia merger and the proposed transaction between USA and Vivendi
    Universal as well as acquisitions made by USA and Expedia in 2000 and 2001.
    See "Unaudited Pro Forma Combined Condensed Financial Statements."

(3) The equivalent pro forma per share data for Expedia is computed by
    multiplying USA's pro forma per share information by the mid-point of the
    range of USA common stock exchange ratios for each share of Expedia Class B
    common stock (0.663). The exchange ratio does not consider the USA preferred
    stock or USA warrants to be issued in the USA/Expedia merger.

                                      F-8

          UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

    In the tables below, we provide you with two sets of unaudited pro forma
combined condensed financial information for USA. The first set of unaudited pro
forma combined condensed financial statements has been prepared to give effect
to the USA/Expedia merger, as well as other transactions completed by USA during
the twelve months ended December 31, 2000 and during the nine months ended
September 30, 2001 and assumes that the USA/Vivendi Universal transaction has
not occurred. The second set of unaudited pro forma combined condensed financial
statements has been prepared to give effect to the USA/Expedia merger and the
USA/Vivendi Universal transaction, as well as other transactions completed by
USA during the twelve months ended December 31, 2000 and during the nine months
ended September 30, 2001. The other transactions entered into by USA in 2000 and
2001 include:

    (1) on April 5, 2000, USA acquired Precision Response Corporation ("PRC"), a
       leader in outsourced customer care for both large corporations and high
       growth internet-focused companies;

    (2) on July 27, 2000, USA and Styleclick.com Inc. completed the merger of
       Internet Shopping Network and Styleclick.com ("STYLECLICK"), forming a
       new company named Styleclick, Inc.; and

    (3) on January 31, 2001, Ticketmaster Online-Citysearch, Inc. ("TMCS") and
       Ticketmaster Corporation ("TM"), both of which are subsidiaries of USA,
       completed a transaction which combined the two companies.

    In the following pages, we refer to the three transactions described
immediately above as the "Other USA Transactions."

    Expedia will account for the USA/Expedia merger as a recapitalization.
Accordingly, the transaction will not significantly impact Expedia's financial
information and no pro forma information for Expedia is deemed necessary.

    The pro forma combined condensed financial statements of USA reflect some
assumptions regarding the transactions and are based on the historical and pro
forma financial statements of USA and Expedia. The combined condensed financial
statements of USA, including the notes accompanying them, are qualified in their
entirety by reference to, and should be read in conjunction with, USA's and
Expedia's audited and unaudited financial statements, including the notes
accompanying them, which are either included in this supplement or previously
incorporated by reference into the joint prospectus/ proxy and information
statement previously mailed to you.

    USA is in the process of evaluating the fair value of Expedia's assets
acquired and liabilities assumed in order to make a final allocation of the
excess purchase price, including allocation to intangibles other than goodwill.
Accordingly, the purchase accounting information is preliminary and has been
made solely for the purpose of developing such unaudited pro forma combined
condensed financial information. Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets," provides that goodwill
resulting from a business combination completed subsequent to June 30, 2001 will
not be amortized but instead is required to be tested for impairment at least
annually.

    THE PRO FORMA COMBINED CONDENSED BALANCE SHEET AND STATEMENTS OF OPERATIONS
ARE NOT NECESSARILY INDICATIVE OF THE RESULTS OF OPERATIONS OR FINANCIAL
POSITION, WHICH ACTUALLY WOULD HAVE BEEN REPORTED HAD THESE TRANSACTIONS
OCCURRED AS OF SEPTEMBER 30, 2001 OR AS OF JANUARY 1, 2000, NOR ARE THEY
NECESSARILY INDICATIVE OF USA'S FUTURE FINANCIAL RESULTS OF OPERATIONS.

                                      F-9

    PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(GIVING EFFECT TO THE USA/EXPEDIA MERGER)

    The pro forma combined condensed balance sheet as of September 30, 2001
gives effect to the USA/Expedia merger as if it had occurred on September 30,
2001.

    The pro forma combined condensed statement of operations for the nine months
ended September 30, 2001 reflects USA's and Expedia's unaudited statements of
operations for the nine months ended September 30, 2001, adjusted for the pro
forma effects of the USA/Expedia merger, as well as the completion of the Other
USA Transactions, as if such transactions had occurred as of January 1, 2000.

    The pro forma combined condensed statement of operations for the year ended
December 31, 2000 reflects USA's audited statements of operations for the year
ended December 31, 2000 and Expedia's results for the twelve months ended
December 31, 2000, as derived from Expedia's audited statement of operations for
the year ended June 30, 2000 and its unaudited statement of operations for the
six months ended December 31, 2000, adjusted for the pro forma effects of the
USA/Expedia merger, as well as the completion of the Other USA Transactions, as
if such transactions had occurred as of January 1, 2000.

                                      F-10

                               USA NETWORKS, INC.

              UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
                   (GIVING EFFECT TO THE USA/EXPEDIA MERGER)

                               SEPTEMBER 30, 2001
                                 (IN THOUSANDS)



                                                                                                        USA
                                                                                    PRO FORMA        PRO FORMA
                                                            USA       EXPEDIA(1)   ADJUSTMENTS       COMBINED
                                                        -----------   ----------   -----------      -----------
                                                                                        
ASSETS
Current Assets:
Cash and short-term investments.......................  $   899,759    $197,801    $       --       $ 1,097,560
Restricted cash.......................................        5,285          --            --             5,285
Marketable securities.................................      143,676          --            --           143,676
Accounts and notes receivable, net....................    1,281,711      18,425            --         1,300,136
Inventories, net......................................      445,628          --            --           445,628
Other.................................................      132,692      27,419            --           160,111
                                                        -----------    --------    ----------       -----------
    Total current assets..............................    2,908,751     243,645            --         3,152,396

Property, plant and equipment, net....................      419,825      16,120            --           435,945
Intangible assets including goodwill, net(5)..........    7,345,565     108,175     1,450,804 (2)     8,904,544
Cable distributions fees, net.........................      148,449          --            --           148,449
Long-term investments.................................      190,142          --            --           190,142
Advance to Universal..................................       39,848          --            --            39,848
Inventories, net......................................      518,545          --            --           518,545
Deferred charges and other............................      116,782       1,840            --           118,622
                                                        -----------    --------    ----------       -----------
    Total assets......................................  $11,687,907    $369,780    $1,450,804       $13,508,491
                                                        ===========    ========    ==========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt..................  $    41,772    $     --    $       --       $    41,772
Accounts payable, accrued and other current
  liabilities.........................................      254,721      71,498        10,000 (2)       336,219
Accounts payable, client accounts.....................      118,095          --            --           118,095
Obligations for program rights and film costs.........      293,004          --            --           293,004
Deferred revenue......................................      141,736       1,074            --           142,810
Cable distribution fees payable.......................       33,556          --            --            33,556
Other accrued liabilities.............................      778,646      62,457            --           841,103
                                                        -----------    --------    ----------       -----------
    Total current liabilities.........................    1,661,530     135,029        10,000         1,806,559
                                                        -----------    --------    ----------       -----------
Long-term debt........................................      545,584          --            --           545,584
Obligation for program rights and film costs..........      325,303          --            --           325,303
Other long-term liabilities...........................      218,514          --            --           218,514
Minority interest.....................................    4,943,105          --        59,305 (6)     5,002,410
Stockholders' equity..................................    3,993,871     234,751     1,616,250 (2)     5,610,121
                                                                                     (234,751)(3)
                                                        -----------    --------    ----------       -----------
    Total liabilities and stockholders' equity........  $11,687,907    $369,780    $1,450,804       $13,508,491
                                                        ===========    ========    ==========       ===========


                                      F-11

                               USA NETWORKS, INC.

         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

                   (GIVING EFFECT TO THE USA/EXPEDIA MERGER)

                     TWELVE MONTHS ENDED DECEMBER 31, 2000
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                             USA           USA                      EXPEDIA                          USA
                                            OTHER       PRO FORMA                    OTHER          PRO FORMA     PRO FORMA
                              USA      TRANSACTIONS(4)   COMBINED   EXPEDIA(1)  TRANSACTIONS(4)    ADJUSTMENTS     COMBINED
                           ----------  ---------------  ----------  ----------  ---------------  ---------------  ----------
                                                                                             
NET REVENUES:
USA ENTERTAINMENT
  Cable and studios......  $1,530,464     $     --      $1,530,464  $      --      $     --         $      --     $1,530,464
  Emerging networks......      20,332           --          20,332         --            --                --         20,332
  Filmed entertainment...      86,084           --          86,084         --            --                --         86,084

USA ELECTRONIC RETAILING
  Electronic retailing...   1,778,986           --       1,778,986         --            --                --      1,778,986

USA INFORMATION AND
  SERVICES
  Ticketing operations...     518,565           --         518,565         --            --                --        518,565
  HRN....................     327,977           --         327,977         --            --                --        327,977
  Expedia................          --           --              --    148,687         7,971                --        156,658
  Teleservices...........     212,471       69,649         282,120         --            --                --        282,120
  Match..................      29,123           --          29,123         --            --                --         29,123
  Citysearch and
    related..............      50,889           --          50,889         --            --                --         50,889
  Electronic commerce
    solutions............      24,293           --          24,293         --            --                --         24,293
  Styleclick.............      22,308        1,889          24,197         --            --                --         24,197
                           ----------     --------      ----------  ---------      --------         ---------     ----------
    Total net revenues...   4,601,492       71,538       4,673,030    148,687         7,971                --      4,829,688
                           ----------     --------      ----------  ---------      --------         ---------     ----------
OPERATING COSTS AND
  EXPENSES
  Cost of sales and
    program costs........   2,072,901       54,489       2,127,390     61,117         2,386                --      2,190,893
  Other costs............   1,730,789       18,553       1,749,342    121,065        11,030                --      1,881,437
  Amortization of cable
    distribution fees....      36,322           --          36,322         --            --                --         36,322
  Non-cash distribution
    and marketing
    expense..............      11,512           --          11,512         --            --                --         11,512
  Non-cash compensation
    expense..............          --           --                     64,204            --                --         64,204
  Depreciation and
    amortization(5)......     693,642       16,133         709,775     53,187        13,175                --        776,137
                           ----------     --------      ----------  ---------      --------         ---------     ----------
    Total operating costs
      and expenses.......   4,545,166       89,175       4,634,341    299,573        26,591                --      4,960,505
                           ----------     --------      ----------  ---------      --------         ---------     ----------
    Operating income
      (loss).............      56,326      (17,637)         38,689   (150,886)      (18,620)               --       (130,817)
  Interest income
    (expense), net.......     (34,218)        (740)        (34,958)     4,620          (159)               --        (30,497)
  Gain on sale of
    subsidiary stock.....     108,343           --         108,343         --            --                --        108,343
  Miscellaneous..........     (59,046)          (2)        (59,048)        --            --                --        (59,048)
                           ----------     --------      ----------  ---------      --------         ---------     ----------
Earnings (loss) before
  income taxes and
  minority interest......      71,405      (18,379)         53,026   (146,266)      (18,779)               --       (112,019)
Income tax (expense).....    (112,869)       9,948        (102,921)        --            --                --       (102,921)
Minority interest........     (47,124)     (34,151)        (81,275)        --            --            41,695 (6)    (39,580)
                           ----------     --------      ----------  ---------      --------         ---------     ----------
EARNINGS (LOSS) FROM
  CONTINUING
  OPERATIONS.............     (88,588)     (42,582)       (131,170)  (146,266)      (18,779)           41,695       (254,520)
Discontinued operations,
  net of tax.............     (59,395)          --         (59,395)        --            --                --        (59,395)
                           ----------     --------      ----------  ---------      --------         ---------     ----------
NET EARNINGS (LOSS)
  BEFORE PREFERRED STOCK
  DIVIDEND...............    (147,983)     (42,582)       (190,565)  (146,266)      (18,779)           41,695       (313,915)
Preferred stock
  dividends..............          --           --              --         --            --           (13,059)(7)    (13,059)
                           ----------     --------      ----------  ---------      --------         ---------     ----------
NET EARNINGS (LOSS)
  AVAILABLE TO COMMON
  SHAREHOLDERS...........  ($ 147,983)    ($42,582)     ($ 190,565) ($146,266)     ($18,779)        $  28,636     ($ 326,974)
                           ==========     ========      ==========  =========      ========         =========     ==========
Loss per common share
  from
  continuing operations
  Basic and diluted......  ($    0.25)                  ($    0.36)                                               ($    0.65)
                           ==========                   ==========                                                ==========
Net loss per common share
  before preferred stock
  dividend
  Basic and diluted......  ($    0.41)                  ($    0.52)                                               ($    0.80)
                           ==========                   ==========                                                ==========
Net loss available to
  common shareholders
  Basic and diluted......  ($    0.41)                  ($    0.52)                                               ($    0.83)
                           ==========                   ==========                                                ==========
Weighted average shares
  outstanding............     359,688                      366,045                                                   394,579
                           ==========                   ==========                                                ==========
Weighted average diluted
  shares outstanding.....     359,688                      366,045                                                   394,579
                           ==========                   ==========                                                ==========


                                      F-12

                               USA NETWORKS, INC.

         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

                   (GIVING EFFECT TO THE USA/EXPEDIA MERGER)

                      NINE MONTHS ENDED SEPTEMBER 30, 2001
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                               USA             USA                                        USA
                                                              OTHER         PRO FORMA                  PRO FORMA       PRO FORMA
                                               USA       TRANSACTIONS(4)    COMBINED     EXPEDIA(1)   ADJUSTMENTS       COMBINED
                                            ----------   ---------------   -----------   ----------   -----------      ----------
                                                                                                     
NET REVENUES:
USA ENTERTAINMENT
  Cable and studios.......................  $1,280,065      $     --       $ 1,280,065    $     --     $      --       $1,280,065
  Emerging networks.......................      18,125            --            18,125          --            --           18,125
  Filmed entertainment....................     129,562            --           129,562          --            --          129,562
USA ELECTRONIC RETAILING
  Electronic retailing....................   1,364,248            --         1,364,248          --            --        1,364,248
USA INFORMATION AND SERVICES
  Ticketing operations....................     447,904            --           447,904          --            --          447,904
  HRN.....................................     394,830            --           394,830          --            --          394,830
  Expedia.................................          --            --                --     215,174            --          215,174
  Teleservices............................     228,926            --           228,926          --            --          228,926
  Match...................................      31,686            --            31,686          --            --           31,686
  Citysearch and related..................      35,852            --            35,852          --            --           35,852
  Electronic commerce solutions...........      15,560            --            15,560          --            --           15,560
  Styleclick..............................       7,358            --             7,358          --            --            7,358
    Intersegment elimination..............     (10,659)           --           (10,659)         --            --          (10,659)
                                            ----------      --------       -----------    --------     ---------       ----------
      Total net revenues..................   3,943,457            --         3,943,457     215,174            --        4,158,631
                                            ----------      --------       -----------    --------     ---------       ----------
OPERATING COSTS AND EXPENSES
  Cost of sales and program costs.........   1,809,063            --         1,809,063      67,535            --        1,876,598
  Other costs.............................   1,457,513            --         1,457,513     108,980            --        1,566,493
  Amortization of cable distribution
    fees..................................      29,384            --            29,384          --            --           29,384
  Amortization of non-cash compensation...       5,431            --             5,431      13,980            --           19,411
  Non-cash distribution and marketing
    expense...............................      19,866            --            19,866          --            --           19,866
  Depreciation and amortization(5)........     427,077            --           427,077      48,166            --          475,243
                                            ----------      --------       -----------    --------     ---------       ----------
    Total operating costs and expenses....   3,748,334            --         3,748,334     238,661            --        3,986,995
                                            ----------      --------       -----------    --------     ---------       ----------
  Operating income (loss).................     195,123            --           195,123     (23,487)           --          171,636
  Interest income (expense), net..........     (34,462)           --           (34,462)      3,110            --          (31,352)
  Miscellaneous...........................     (33,196)           --           (33,196)         --            --          (33,196)
                                            ----------      --------       -----------    --------     ---------       ----------
Earnings (loss) before income taxes and
  minority interest.......................     127,465            --           127,465     (20,377)           --          107,088
Income tax (expense) benefit..............     (71,191)        1,005           (70,186)         --            --          (70,186)
Minority interest.........................    (124,378)       (3,148)         (127,526)         --         5,148 (6)     (122,378)
                                            ----------      --------       -----------    --------     ---------       ----------
EARNINGS (LOSS) FROM CONTINUING
  OPERATIONS..............................     (68,104)       (2,143)          (70,247)    (20,377)        5,148          (85,476)
Discontinued operations:
Gain on disposal of broadcasting stations,
  net of tax..............................     517,847            --           517,847          --            --          517,847
                                            ----------      --------       -----------    --------     ---------       ----------
  Earnings (loss) before cumulative effect
    of accounting change..................     449,743        (2,143)          447,600     (20,377)        5,148          432,371
Cumulative effect of accounting change,
  net of tax..............................      (9,187)           --            (9,187)         --            --           (9,187)
                                            ----------      --------       -----------    --------     ---------       ----------
NET EARNINGS (LOSS) BEFORE PREFERRED STOCK
  DIVIDEND................................     440,556        (2,143)          438,413     (20,377)        5,148          423,184
Preferred stock dividends.................                                                                (9,795)(7)       (9,795)
                                            ----------      --------       -----------    --------     ---------       ----------
NET EARNINGS (LOSS) AVAILABLE TO COMMON
  SHAREHOLDERS............................  $  440,556      $ (2,143)      $   438,413    $(20,377)    $  (4,647)      $  413,389
                                            ==========      ========       ===========    ========     =========       ==========


                                      F-13

                               USA NETWORKS, INC.

   UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (CONTINUED)

                   (GIVING EFFECT TO THE USA/EXPEDIA MERGER)

                      NINE MONTHS ENDED SEPTEMBER 30, 2001
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                               USA             USA                                        USA
                                                              OTHER         PRO FORMA                  PRO FORMA       PRO FORMA
                                               USA       TRANSACTIONS(4)    COMBINED     EXPEDIA(1)   ADJUSTMENTS       COMBINED
                                            ----------   ---------------   -----------   ----------   -----------      ----------
                                                                                                     
Loss per common share from continuing
  operations
  Basic...................................  $    (0.18)                    $     (0.19)                                $     (.21)
                                            ==========                     ===========                                 ==========
  Diluted.................................  $    (0.18)                    $     (0.19)                                $     (.21)
                                            ==========                     ===========                                 ==========
Earnings per common share before
  cumulative effect of accounting change
  Basic...................................  $     1.21                     $      1.20                                 $     1.08
                                            ==========                     ===========                                 ==========
  Diluted.................................  $     0.70                     $      0.70                                 $     0.66
                                            ==========                     ===========                                 ==========
Net earnings per common share before
  preferred stock dividend
  Basic...................................  $     1.18                     $      1.17                                 $     1.05
                                            ==========                     ===========                                 ==========
  Diluted.................................  $     0.69                     $      0.69                                 $     0.64
                                            ==========                     ===========                                 ==========
Net earnings available to common
  shareholders
  Basic...................................  $     1.18                     $      1.17                                 $     1.03
                                            ==========                     ===========                                 ==========
  Diluted.................................  $     0.69                     $      0.69                                 $     0.63
                                            ==========                     ===========                                 ==========
Weighted average shares outstanding.......     373,227                         373,227                                    401,761
                                            ==========                     ===========                                 ==========
Weighted average diluted shares
  outstanding.............................     759,661                         759,661                                    788,195
                                            ==========                     ===========                                 ==========


                                      F-14

    PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(GIVING EFFECT TO THE USA/EXPEDIA MERGER AND THE USA/VIVENDI UNIVERSAL
TRANSACTION)

    The pro forma combined condensed balance sheet as of September 30, 2001
gives effect to the USA/Expedia merger and the USA/Vivendi Universal transaction
as if those transactions had occurred on September 30, 2001.

    The pro forma combined condensed statement of operations for the nine months
ended September 30, 2001 reflects USA's and Expedia's unaudited statements of
operations for the nine months ended September 30, 2001, adjusted for the pro
forma effects of the USA/Expedia merger and the USA/Vivendi Universal
transaction, as well as the completion of the Other USA Transactions, as if such
transactions had occurred as of January 1, 2000.

    The pro forma combined condensed statement of operations for the year ended
December 31, 2000 reflects USA's audited statements of operations for the year
ended December 31, 2000 and Expedia's results for the twelve months ended
December 31, 2000, as derived from Expedia's audited statement of operations for
the year ended June 30, 2000 and its unaudited statement of operations for the
six months ended December 31, 2000, adjusted for the pro forma effects of the
USA/Expedia merger and the USA/Vivendi Universal transaction, as well as the
completion of the Other USA Transactions, as if all such transactions had
occurred as of January 1, 2000.

                                      F-15

                               USA NETWORKS, INC.

              UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

(GIVING EFFECT TO THE USA/EXPEDIA MERGER AND USA/VIVENDI UNIVERSAL TRANSACTION)

                               SEPTEMBER 30, 2001
                                 (IN THOUSANDS)



                                    USAI ASSETS
                                    CONTRIBUTED             VU                VU                     EXPEDIA
                                     IN THE VU           PRO FORMA         PRO FORMA                PRO FORMA       PRO FORMA
                         USAI      TRANSACTION(8)       ADJUSTMENTS        COMBINED    EXPEDIA     ADJUSTMENTS      COMBINED
                      -----------  --------------  ---------------------  -----------  --------  ----------------  -----------
                                                                                              
ASSETS
Current Assets:
  Cash and
    short-term
    investments.....  $   899,759    $    36,703        $1,618,710(9)     $2,555,172   $197,801     $       --     $ 2,752,973
  Restricted cash...        5,285             --                --             5,285         --             --           5,285
  Marketable
    securities......      143,676             --                --           143,676         --             --         143,676
  Accounts and notes
    receivable,
    net.............    1,281,711       (424,780)               --           856,931     18,425             --         875,356
  Inventories,
    net.............      445,628       (228,894)               --           216,734         --             --         216,734
  Other.............      132,692        (13,219)               --           119,473     27,419             --         146,892
                      -----------    -----------        ----------        -----------  --------     ----------     -----------
    Total current
      assets........    2,908,751       (630,190)        1,618,710         3,897,271    243,645             --       4,140,916

  Property, plant
    and equipment,
    net.............      419,825        (36,128)               --           383,697     16,120             --         399,817
  Intangible assets
    including
    goodwill, net...    7,345,565     (3,997,174)               --         3,348,391    108,175      1,450,804 (2)   4,907,370
  Cable distribution
    fees, net.......      148,449           (244)               --           148,205         --             --         148,205
  Long-term
    investments.....      190,142             --         1,750,000(9)      1,940,142         --             --       1,940,142
  Preferred interest
    exchangeable for
    common stock....           --             --         1,347,646(9)      1,347,646         --             --       1,347,646
  Advance to
    Universal.......       39,848             --                --            39,848         --             --          39,848
  Inventories,
    net.............      518,545       (518,545)               --                --         --             --              --
  Deferred charges
    and other.......      116,782       (144,111)               --           (27,329)     1,840             --         (25,489)
                      -----------    -----------        ----------        -----------  --------     ----------     -----------
    Total assets....  $11,687,907    $(5,326,392)       $4,716,356        $11,077,871  $369,780     $1,450,804     $12,898,455
                      ===========    ===========        ==========        ===========  ========     ==========     ===========

LIABILITIES AND
  STOCKHOLDERS'
  EQUITY
Current Liabilities:
  Current maturities
    of long-term
    debt............  $    41,772    $      (559)       $       --        $   41,213   $     --     $       --     $    41,213
  Accounts payable,
    accrued and
    other current
    liabilities.....      254,721        (13,357)               --           241,364     71,498         10,000 (2)     322,862
  Accounts payable,
    client
    accounts........      118,095             --                --           118,095         --             --         118,095
  Obligations for
    program rights
    and film
    costs...........      293,004       (289,097)               --             3,907         --             --           3,907
  Deferred
    revenue.........      141,736        (54,322)               --            87,414      1,074             --          88,488
  Cable distrubution
    fees payable....       33,556             --                --            33,556         --             --          33,556
  Other accrued
    liabilities.....      778,646       (158,746)               --           619,900     62,457             --         682,357
                      -----------    -----------        ----------        -----------  --------     ----------     -----------
    Total current
      liabilities...    1,661,530       (516,081)               --         1,145,449    135,029         10,000       1,290,478

  Long-term debt....      545,584           (400)               --           545,184         --             --         545,184
  Obligation for
    program rights
    and film
    costs...........      325,303       (323,801)               --             1,502         --             --           1,502
  Other long-term
    Liabilities.....      218,514        (63,643)        1,203,775 (12)    1,358,646         --             --       1,358,646
  Minority
    interest........    4,943,105     (4,030,385)               --           912,720         --         59,305 (6)     972,025
  Common stock
    exchangeable for
    preferred
    interest........           --             --         1,347,646(9)      1,347,646         --             --       1,347,646
  Stockholders'
    equity..........    3,993,871       (392,082)        2,164,935(9)(10)  5,766,724    234,751      1,616,250 (2)   7,382,974
                                                                                                      (234,751)(3)
                      -----------    -----------        ----------        -----------  --------     ----------     -----------
    Total
      liabilities
      and
      stockholders'
      equity........  $11,687,907    $(5,326,392)       $4,716,356        $11,077,871  $369,780     $1,450,804     $12,898,455
                      ===========    ===========        ==========        ===========  ========     ==========     ===========


                                      F-16

                               USA NETWORKS, INC.

         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

     (GIVING EFFECT TO THE USA/EXPEDIA MERGER AND THE USA/VIVENDI UNIVERSAL
                                  TRANSACTION)

                          YEAR ENDED DECEMBER 31, 2000
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                      USAI          USAI             VU            VU
                                         USAI       OTHER USAI     PRO FORMA       ASSETS        PRO FORMA     PRO FORMA
                                      HISTORICAL  TRANSACTIONS(3)   COMBINED   CONTRIBUTED(8)   ADJUSTMENTS     COMBINED
                                      ----------  ---------------  ----------  --------------  --------------  ----------
                                                                                             
NET REVENUES:
USA ENTERTAINMENT
  Cable and studios.................  $1,530,464     $     --      $1,530,464   $(1,530,464)      $     --     $       --
  Emerging networks.................      20,332           --          20,332       (20,332)            --             --
  Filmed entertainment..............      86,084           --          86,084       (86,084)            --             --
USA ELECTRONIC RETAILING
  Electronic retailing..............   1,778,986           --       1,778,986            --             --      1,778,986
USA INFORMATION AND SERVICES
  Ticketing operations..............     518,565           --         518,565            --             --        518,565
  HRN...............................     327,977           --         327,977            --             --        327,977
  Expedia...........................          --           --              --            --             --             --
  Teleservices......................     212,471       69,649         282,120            --             --        282,120
  Match.............................      29,123           --          29,123            --             --         29,123
  Citysearch and related............      50,889           --          50,889            --             --         50,889
  Electronic commerce solutions.....      24,293           --          24,293            --             --         24,293
  Styleclick........................      22,308        1,889          24,197            --             --         24,197
                                      ----------     --------      ----------   -----------       --------     ----------
    Total net revenues..............   4,601,492       71,538       4,673,030    (1,636,880)            --      3,036,150
                                      ----------     --------      ----------   -----------       --------     ----------
Operating costs and expenses:
  Cost of sales and program costs...   2,072,901       54,489       2,127,390      (759,864)            --      1,367,526
  Other costs.......................   1,730,789       18,553       1,749,342      (343,046)            --      1,406,296
  Amortization of cable distribution
    fees............................      36,322           --          36,322            --             --         36,322
  Non-cash distribution and
    marketing expense...............      11,512           --          11,512            --             --         11,512
  Non-cash compensation expense.....          --           --              --            --             --             --
  Depreciation and amortization.....     693,642       16,133         709,775      (127,900)            --        581,875
                                      ----------     --------      ----------   -----------       --------     ----------
    Total operating costs and
      expenses......................   4,545,166       89,175       4,634,341    (1,230,810)            --      3,403,531
                                      ----------     --------      ----------   -----------       --------     ----------
    Operating income................      56,326      (17,637)         38,689      (406,070)                     (367,381)
  Interest income (expense), net....     (34,218)        (740)        (34,958)       30,492             --         (4,466)
  Gain on sale of subsidiary
    stock...........................     108,343           --         108,343            --             --        108,343
  Miscellaneous.....................     (59,046)          (2)        (59,048)         (254)       149,500(11)     90,198
                                      ----------     --------      ----------   -----------       --------     ----------
Earnings before income taxes and
  minority interest.................      71,405      (18,379)         53,026      (375,832)       149,500       (173,306)
Income tax (expense) benefit........    (112,869)       9,948        (102,921)       14,343        (58,679)      (147,257)
Minority interest...................     (47,124)     (34,151)        (81,275)      201,223             --        119,948
                                      ----------     --------      ----------   -----------       --------     ----------
EARNINGS (LOSS) FROM CONTINUING
  OPERATIONS........................     (88,588)     (42,582)       (131,170)     (160,266)        90,821       (200,615)
Discontinued operations, net of
  tax...............................     (59,395)          --         (59,395)           --             --        (59,395)
                                      ----------     --------      ----------   -----------       --------     ----------
NET EARNINGS (LOSS) BEFORE PREFERRED
  STOCK DIVIDEND....................    (147,983)     (42,582)       (190,565)     (160,266)        90,821       (260,010)
Preferred stock dividends...........          --           --              --            --             --             --
                                      ----------     --------      ----------   -----------       --------     ----------
NET EARNINGS (LOSS) AVAILABLE TO
  COMMON SHAREHOLDERS...............  $ (147,983)    $(42,582)     $ (190,565)     (160,266)      $ 90,821     $ (260,010)
                                      ==========     ========      ==========   ===========       ========     ==========


                                                                      EXPEDIA
                                       EXPEDIA     OTHER EXPEDIA     PRO FORMA     PRO FORMA
                                      HISTORICAL  TRANSACTIONS(3)   ADJUSTMENTS     COMBINED
                                      ----------  ---------------  --------------  ----------
                                                                       
NET REVENUES:
USA ENTERTAINMENT
  Cable and studios.................  $      --      $     --         $    --      $       --
  Emerging networks.................         --            --              --              --
  Filmed entertainment..............         --            --              --              --
USA ELECTRONIC RETAILING
  Electronic retailing..............         --            --              --       1,778,986
USA INFORMATION AND SERVICES
  Ticketing operations..............         --            --              --         518,565
  HRN...............................         --            --              --         327,977
  Expedia...........................    148,687         7,971              --         156,658
  Teleservices......................         --                            --         282,120
  Match.............................         --            --              --          29,123
  Citysearch and related............         --            --              --          50,889
  Electronic commerce solutions.....         --            --              --          24,293
  Styleclick........................         --            --              --          24,197
                                      ---------      --------         -------      ----------
    Total net revenues..............    148,687         7,971              --       3,192,808
                                      ---------      --------         -------      ----------
Operating costs and expenses:
  Cost of sales and program costs...     61,117         2,386              --       1,431,029
  Other costs.......................    121,065        11,030              --       1,538,391
  Amortization of cable distribution
    fees............................         --            --              --          36,322
  Non-cash distribution and
    marketing expense...............         --            --              --          11,512
  Non-cash compensation expense.....     64,204            --              --          64,204
  Depreciation and amortization.....     53,187        13,175              -- (5)     648,237
                                      ---------      --------         -------      ----------
    Total operating costs and
      expenses......................    299,573        26,591              --       3,729,695
                                      ---------      --------         -------      ----------
    Operating income................   (150,886)      (18,620)             --        (536,887)
  Interest income (expense), net....      4,620          (159)             --              (5)
  Gain on sale of subsidiary
    stock...........................         --            --              --         108,343
  Miscellaneous.....................         --            --              --          90,198
                                      ---------      --------         -------      ----------
Earnings before income taxes and
  minority interest.................   (146,266)      (18,779)             --        (338,351)
Income tax (expense) benefit........         --            --              --        (147,257)
Minority interest...................         --            --          41,695 (6)     161,643
                                      ---------      --------         -------      ----------
EARNINGS (LOSS) FROM CONTINUING
  OPERATIONS........................   (146,266)      (18,779)         41,695        (323,965)
Discontinued operations, net of
  tax...............................         --            --              --         (59,395)
                                      ---------      --------         -------      ----------
NET EARNINGS (LOSS) BEFORE PREFERRED
  STOCK DIVIDEND....................   (146,266)      (18,779)         41,695        (383,360)
Preferred stock dividends...........         --            --         (13,059)(7)     (13,059)
                                      ---------      --------         -------      ----------
NET EARNINGS (LOSS) AVAILABLE TO
  COMMON SHAREHOLDERS...............  $(146,266)     $(18,779)        $28,636      $ (396,419)
                                      =========      ========         =======      ==========


                                      F-17

                               USA NETWORKS, INC.

   UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (CONTINUED)

     (GIVING EFFECT TO THE USA/EXPEDIA MERGER AND THE USA/VIVENDI UNIVERSAL
                                  TRANSACTION)

                          YEAR ENDED DECEMBER 31, 2000
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                       USAI         USAI          VU          VU
                                             USAI      OTHER USAI    PRO FORMA     ASSETS      PRO FORMA  PRO FORMA   EXPEDIA
                                          HISTORICAL TRANSACTIONS(3) COMBINED  CONTRIBUTED(8) ADJUSTMENTS  COMBINED  HISTORICAL
                                          ---------- --------------- --------- -------------- ----------- ---------- ----------
                                                                                                
Loss per common share from Continuing
  Operations
  Basic and diluted.....................  $    (0.25)                $  (0.36)                            $    (0.54)
                                          ==========                 ========                             ==========
Net loss per common share before
  preferred stock dividend
  Basic and diluted.....................  $    (0.41)                $  (0.52)                            $    (0.70)
                                          ==========                 ========                             ==========
Net loss available to common
  shareholders
  Basic and diluted.....................  $    (0.41)                $  (0.52)                            $    (0.70)
                                          ==========                 ========                             ==========
Weighted average shares outstanding.....     359,688                  366,045                                373,125
                                          ==========                 ========                             ==========
Weighted average diluted shares
  outstanding...........................     359,688                  366,045                                373,125
                                          ==========                 ========                             ==========


                                                            EXPEDIA
                                           OTHER EXPEDIA   PRO FORMA  PRO FORMA
                                          TRANSACTIONS(3) ADJUSTMENTS  COMBINED
                                          --------------- ----------- ----------
                                                             
Loss per common share from Continuing
  Operations
  Basic and diluted.....................                              $    (0.81)
                                                                      ==========
Net loss per common share before
  preferred stock dividend
  Basic and diluted.....................                              $    (0.95)
                                                                      ==========
Net loss available to common
  shareholders
  Basic and diluted.....................                              $    (0.99)
                                                                      ==========
Weighted average shares outstanding.....                                 401,658
                                                                      ==========
Weighted average diluted shares
  outstanding...........................                                 401,658
                                                                      ==========


                                      F-18

                               USA NETWORKS, INC.

         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

     (GIVING EFFECT TO THE USA/EXPEDIA MERGER AND THE USA/VIVENDI UNIVERSAL
                                  TRANSACTION)

                      NINE MONTHS ENDED SEPTEMBER 30, 2001
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                      USAI          USAI
                                         USAI          OTHER       PRO FORMA       ASSETS
                                      HISTORICAL  TRANSACTIONS(3)   COMBINED   CONTRIBUTED(8)
                                      ----------  ---------------  ----------  --------------
                                                                   
NET REVENUES:
  USA ENTERTAINMENT
  Cable and studios..............     $1,280,065           --      $1,280,065   $(1,280,065)
  Emerging networks..............         18,125           --          18,125       (18,125)
  Filmed entertainment...........        129,562           --         129,562      (129,562)
  USA ELECTRONIC RETAILING
  Electronic retailing...........      1,364,248           --       1,364,248            --
  USA INFORMATION AND SERVICES
  Ticketing operations...........        447,904           --         447,904            --
  HRN............................        394,830           --         394,830            --
  Expedia........................             --           --              --            --
  Teleservices...................        228,926           --         228,926            --
  Match..........................         31,686           --          31,686            --
  Citysearch and related.........         35,852           --          35,852            --
  Electronic commerce
    solutions....................         15,560           --          15,560            --
  Styleclick.....................          7,358           --           7,358            --
  Intersegment elimination.......        (10,659)          --         (10,659)           --
                                      ----------     --------      ----------   -----------
    Total net revenues...........      3,943,457           --       3,943,457    (1,427,752)
                                      ----------     --------      ----------   -----------
OPERATING COSTS AND EXPENSES
  Cost of sales and program
    costs........................      1,809,063           --       1,809,063      (690,381)
  Other costs....................      1,457,513           --       1,457,513      (254,529)
  Amortization of cable
    distribution fees............         29,384           --          29,384            --
  Amortization of non-cash
    compensation.................          5,431           --           5,431            --
  Non-cash distribution and
    marketing expense............         19,866           --          19,866            --
  Depreciation and
    amortization(5)..............        427,077           --         427,077      (100,786)
                                      ----------     --------      ----------   -----------
    Total operating costs and
      expenses...................      3,748,334           --       3,748,334    (1,045,696)
                                      ----------     --------      ----------   -----------
    Operating income (loss)......        195,123           --         195,123      (382,056)
  Interest income (expense),
    net..........................        (34,462)          --         (34,462)       24,259
  Miscellaneous..................        (33,196)          --         (33,196)        7,789
                                      ----------     --------      ----------   -----------
Earnings (loss) before income
  taxes and minority interest....        127,465           --         127,465      (350,008)
Income tax (expense) benefit.....        (71,191)       1,005         (70,186)       12,736
Minority interest................       (124,378)      (3,148)       (127,526)      178,193
                                      ----------     --------      ----------   -----------
EARNINGS (LOSS) FROM CONTINUING
  OPERATIONS.....................        (68,104)      (2,143)        (70,247)     (159,079)
Discontinued operations:
  Gain on disposal of
    broadcasting stations, net of
    tax..........................        517,847           --         517,847            --
                                      ----------     --------      ----------   -----------
Earnings (loss) before cumulative
  effect of accounting change....        449,743       (2,143)        447,600      (159,079)
Cumulative effect of accounting
  change, net of tax.............         (9,187)          --          (9,187)        9,187
                                      ----------     --------      ----------   -----------
NET EARNINGS (LOSS) BEFORE
  PREFERRED STOCK DIVIDEND.......        440,556       (2,143)        438,413      (149,892)
Preferred stock dividends........             --           --              --            --
                                      ----------     --------      ----------   -----------
NET EARNINGS (LOSS) AVAILABLE TO
  COMMON SHAREHOLDERS............     $  440,556     $ (2,143)     $  438,413   $  (149,892)
                                      ==========     ========      ==========   ===========


                                         VU             VU                        EXPEDIA
                                      PRO FORMA     PRO FORMA      EXPEDIA       PRO FORMA     PRO FORMA
                                     ADJUSTMENTS     COMBINED   HISTORICAL(3)   ADJUSTMENTS     COMBINED
                                   ---------------  ----------  -------------  --------------  ----------
                                                                                
NET REVENUES:
  USA ENTERTAINMENT
  Cable and studios..............     $      --     $       --   $       --       $     --     $       --
  Emerging networks..............            --             --           --             --             --
  Filmed entertainment...........            --             --           --             --             --
  USA ELECTRONIC RETAILING
  Electronic retailing...........            --      1,364,248           --             --      1,364,248
  USA INFORMATION AND SERVICES
  Ticketing operations...........            --        447,904           --             --        447,904
  HRN............................            --        394,830           --             --        394,830
  Expedia........................            --             --      215,174             --        215,174
  Teleservices...................            --        228,926           --             --        228,926
  Match..........................            --         31,686           --             --         31,686
  Citysearch and related.........            --         35,852           --             --         35,852
  Electronic commerce
    solutions....................            --         15,560           --             --         15,560
  Styleclick.....................            --          7,358           --             --          7,358
  Intersegment elimination.......            --        (10,659)          --             --        (10,659)
                                      ---------     ----------   ----------       --------     ----------
    Total net revenues...........            --      2,515,705      215,174             --      2,730,879
                                      ---------     ----------   ----------       --------     ----------
OPERATING COSTS AND EXPENSES
  Cost of sales and program
    costs........................            --      1,118,682       67,535             --      1,186,217
  Other costs....................            --      1,202,984      108,980             --      1,311,964
  Amortization of cable
    distribution fees............            --         29,384           --             --         29,384
  Amortization of non-cash
    compensation.................            --          5,431       13,980             --         19,411
  Non-cash distribution and
    marketing expense............            --         19,866           --             --         19,866
  Depreciation and
    amortization(5)..............            --        326,291       48,166             --        374,457
                                      ---------     ----------   ----------       --------     ----------
    Total operating costs and
      expenses...................            --      2,702,638      238,661             --      2,941,299
                                      ---------     ----------   ----------       --------     ----------
    Operating income (loss)......            --       (186,933)     (23,487)            --       (210,420)
  Interest income (expense),
    net..........................            --        (10,203)       3,110             --         (7,093)
  Miscellaneous..................       112,125(11)     86,718           --             --         86,718
                                      ---------     ----------   ----------       --------     ----------
Earnings (loss) before income
  taxes and minority interest....       112,125       (110,418)     (20,377)            --       (130,795)
Income tax (expense) benefit.....       (44,009)      (101,459)          --             --       (101,459)
Minority interest................            --         50,667           --          5,148(6)      55,815
                                      ---------     ----------   ----------       --------     ----------
EARNINGS (LOSS) FROM CONTINUING
  OPERATIONS.....................        68,116        161,210      (20,377)         5,148       (176,439)
Discontinued operations:
  Gain on disposal of
    broadcasting stations, net of
    tax..........................            --        517,847           --             --        517,847
                                      ---------     ----------   ----------       --------     ----------
Earnings (loss) before cumulative
  effect of accounting change....        68,116        356,637      (20,377)         5,148        341,408
Cumulative effect of accounting
  change, net of tax.............            --             --           --             --             --
                                      ---------     ----------   ----------       --------     ----------
NET EARNINGS (LOSS) BEFORE
  PREFERRED STOCK DIVIDEND.......        68,116        356,637      (20,377)         5,148        341,408
Preferred stock dividends........            --             --           --         (9,795)(7)     (9,795)
                                      ---------     ----------   ----------       --------     ----------
NET EARNINGS (LOSS) AVAILABLE TO
  COMMON SHAREHOLDERS............     $  68,116     $  356,637   $  (20,377)      $ (4,647)    $  331,613
                                      =========     ==========   ==========       ========     ==========


                                      F-19

                               USA NETWORKS, INC.

   UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (CONTINUED)

     (GIVING EFFECT TO THE USA/EXPEDIA MERGER AND THE USA/VIVENDI UNIVERSAL
                                  TRANSACTION)

                      NINE MONTHS ENDED SEPTEMBER 30, 2001
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                        USAI          USAI             VU
                                           USAI          OTHER       PRO FORMA       ASSETS         PRO FORMA
                                        HISTORICAL  TRANSACTIONS(3)   COMBINED   CONTRIBUTED(8)    ADJUSTMENTS
                                        ----------  ---------------  ----------  --------------  ---------------
                                                                                  
Loss per common share from
  continuing operations
  Basic............................     $    (0.18)                  $    (0.19)
                                        ==========                   ==========
  Diluted..........................     $    (0.18)                  $    (0.19)
                                        ==========                   ==========
Earnings per common share before
  cumulative effect of accounting
  change
  Basic............................     $     1.21                   $     1.20
                                        ==========                   ==========
  Diluted..........................     $     0.70                   $     0.70
                                        ==========                   ==========
Net earnings per common share
  before preferred stock dividend
  Basic............................     $     1.18                   $     1.17
                                        ==========                   ==========
  Diluted..........................     $     0.69                   $     0.69
                                        ==========                   ==========
Net earnings available to common
  shareholders
  Basic............................     $     1.18                   $     1.17
                                        ==========                   ==========
  Diluted..........................     $     0.69                   $     0.69
                                        ==========                   ==========
Weighted average shares
  outstanding......................        373,227                      373,227
                                        ==========                   ==========
Weighted average diluted shares
  outstanding......................        759,661                      759,661
                                        ==========                   ==========


                                         VU                        EXPEDIA
                                     PRO FORMA      EXPEDIA       PRO FORMA     PRO FORMA
                                      COMBINED   HISTORICAL(3)   ADJUSTMENTS     COMBINED
                                     ----------  -------------  --------------  ----------
                                                                    
Loss per common share from
  continuing operations
  Basic............................  $    (0.42)                                $    (0.43)
                                     ==========                                 ==========
  Diluted..........................  $    (0.42)                                $    (0.43)
                                     ==========                                 ==========
Earnings per common share before
  cumulative effect of accounting
  change
  Basic............................  $     0.94                                 $     0.84
                                     ==========                                 ==========
  Diluted..........................  $     0.80                                 $     0.72
                                     ==========                                 ==========
Net earnings per common share
  before preferred stock dividend
  Basic............................  $     0.94                                 $     0.84
                                     ==========                                 ==========
  Diluted..........................  $     0.80                                 $     0.72
                                     ==========                                 ==========
Net earnings available to common
  shareholders
  Basic............................  $     0.94                                 $     0.81
                                     ==========                                 ==========
  Diluted..........................  $     0.80                                 $     0.70
                                     ==========                                 ==========
Weighted average shares
  outstanding......................     380,307                                    408,840
                                     ==========                                 ==========
Weighted average diluted shares
  outstanding......................     438,804                                    467,338
                                     ==========                                 ==========


                                      F-20

    NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE DATA)

(1) Represents the financial position and results of operations for Expedia
    based on historical information of Expedia.

(2) Acquisition costs and the preliminary determination of the unallocated
    excess of the USA/Expedia merger consideration over net assets acquired are
    set forth below:


                                                           
Value of equity securities expected to be issued by USA.....  $1,596,250
Contribution in lieu of National Leisure Group, Inc. ("NLG")
  option....................................................      20,000
                                                              ----------
                                                               1,616,250
Estimated transaction costs.................................      10,000
                                                              ----------
Total acquisition costs.....................................   1,626,250
Less: majority ownership portion of net tangible assets
  acquired..................................................     175,446
                                                              ----------
Unallocated excess of merger consideration over assets
  acquired preliminarily allocated to goodwill..............  $1,450,804
                                                              ==========


    Under the terms of the definitive agreement, Expedia shareholders will have
the option, subject to proration, to elect to exchange in a tax-free merger
transaction each Expedia share for:

    - a fraction of a share of USA common stock ranging in value from $15.54 (if
      Microsoft is the only shareholder that elects to receive Expedia Class B
      common stock in the recapitalization) to $17.50 (if the maximum number of
      37,500,000 shares of Expedia Class B common stock are issued in the
      recapitalization) if the measurement period value of a share of USA common
      stock ranges from $23.00 to $31.00. If the measurement period value is
      either greater than $31.00 or less than $23.00, the exact USA common stock
      exchange ratio will be based on the fraction obtained assuming the
      measurement period value was $31.00 or $23.00, respectively. The
      measurement period value for USA common stock is the average closing price
      of USA common stock over a ten consecutive trading-day period ending on
      the second trading day prior to the date of the reconvened annual meeting;

    - a fraction of a share of USA preferred stock ranging from 0.3892 (if
      Microsoft is the only shareholder that elects to receive Expedia Class B
      common stock in the recapitalization) to 0.3500 (if the maximum number of
      37,500,000 shares of Expedia Class B common stock are issued in the
      recapitalization). Each share of USA preferred stock has a $50 face value,
      a 1.99% annual dividend, two votes per share, and is convertible at any
      time into USA common stock at a conversion price of $33.75 per USA share,
      subject to downward adjustment to the extent that the average share price
      of USA common stock over a ten trading-day period prior to conversion is
      greater than $35.10; and

    - a fraction of a USA warrant ranging from 0.3873 to 0.4524, the exact
      fractional amount to be based on a measurement period value for USA common
      stock ranging from $25.75 to $28.25 per share. The exact USA warrant
      exchange ratio will be based on the measurement period value for USA
      common stock as set forth in Annex F to the joint prospectus/proxy and
      information statement mailed in November 2001. Each USA warrant has a
      seven-year term and an exercise price of $35.10 per share of USA common
      stock.

    Expedia shareholders who do not exchange their shares for USA securities
will retain their shares of Expedia common stock and receive for each share of
Expedia common stock held 0.1920 of a new Expedia warrant with a seven-year term
and an exercise price of $52.00 per share. The amount reflects USA's
attributable share of Expedia, after giving effect to the minority interest in
Expedia.

                                      F-21

    The pro forma financial statements are prepared assuming that 37,500,000
    shares of Expedia Class B common stock are issued in the recapitalization
    resulting in the issuance of 28.5 million USA common shares, which is the
    maximum number of USA common shares issuable in the USA/ Expedia merger. As
    a result the value of the USA common stock is assumed to be $17.50 per
    Expedia share.
    The value of the newly issued preferred shares and warrants to acquire USA
    and Expedia common stock were determined based upon internal valuations. The
    amount reflects USA's attributable share of Expedia, after giving effect to
    the minority interest in Expedia.
    USA will contribute $75 million in media time over five years and an option
    to participate in USA's proposed travel channel. In addition, for purposes
    of the pro forma combined condensed financial statements, a $20 million
    contribution from USA to Expedia is reflected in the merger consideration in
    lieu of the option to acquire NLG. The media time and the option to
    participate in the proposed travel channel are not valued in the merger
    consideration and are not reflected in the pro forma combined condensed
    financial statements.
(3) Reflects the elimination of Expedia's historical equity.
(4) Reflects the pro forma results of other transactions completed by USA in
    2000 and 2001. The transactions include the acquisitions of PRC and
    Styleclick by USA and the combination of TMCS and TM. All acquisitions,
    except the TMCS/TM combination, were accounted for under the purchase method
    of accounting. The TMCS/TM combination has been accounted for as entities
    under common control in a manner similar to a pooling of interest. See USA's
    Form 10-K for the year ended December 31, 2000 and Form 10-Q for the three
    and nine months ended September 30, 2001 for more information on the USA
    transactions. The other transactions completed by Expedia in the twelve
    months ended December 31, 2000 include the acquisition of Travelscape and
    Vacation Spot on March 17, 2000. See Expedia's 10-K for the year ended
    June 30, 2001 for more information on these transactions.
(5) The unallocated excess of acquisition costs over net assets acquired has
    been preliminarily allocated to goodwill. Statement of Financial Accounting
    Standards No. 142, "Goodwill and Other Intangible Assets," provides that
    goodwill resulting from business combinations completed subsequent to
    June 30, 2001 will not be amortized but instead is required to be tested for
    impairment at least annually. In connection with finalizing the purchase
    price allocation, USA is currently evaluating the fair value of assets
    acquired and liabilities assumed in the transaction. Following the
    conclusion of the evaluation, USA will use this information to make a final
    allocation of the purchase price, including allocation to intangibles other
    than goodwill. Accordingly, the purchase accounting information is
    preliminary.
    USA recorded $568.0 million and $302.3 million of goodwill amortization
    during the year ended December 31, 2000 and the nine months ended
    September 30, 2001, respectively. Expedia recorded $16.1 million and
    $10.2 million of goodwill amortization during the year ended December 31,
    2000 and the nine months ended September 30, 2001, respectively. No periodic
    amortization of goodwill will be recorded subsequent to December 31, 2001.
(6) Represents the minority interest in the financial position and the results
    of operations of Expedia, based upon a 74.7% expected equity ownership by
    USA of Expedia.
(7) Represents the 1.99% preferred stock dividend.
(8) Reflects USA's contribution of businesses to the joint venture formed with
    Vivendi Universal.
(9) Reflects the consideration received by USA in connection with its
    contribution to the joint venture formed with Vivendi Universal. Commencing
    on the 20th anniversary of the completion of the USA/Vivendi Universal
    transaction, USA's $1.75 billion face value Class B preferred interest in
    the new joint venture with Vivendi Universal is puttable and callable at its
    then accreted face value for up to 56.6 million USA shares held by Vivendi
    Universal. At the election of Vivendi Universal, USA common stock to be
    received by USA pursuant to the put or call can be substituted with cash
    equal to the market value of such shares. If cash was substituted, it is
    USA's intention to repurchase shares with the proceeds. The pro forma
    financial statements do not reflect the application of cash proceeds
    received by USA from Vivendi Universal to reduce outstanding debt and
    associated interest expense.
(10) Reflects the estimated fair value of warrants to purchase USA common stock
    granted to Vivendi Universal.
(11) Reflects the cash and PIK dividend for the Class A and Class B preferred
    interest in the Vivendi Universal Entertainment joint venture formed with
    Vivendi Universal.
(12) Reflects the preliminary estimate of deferred taxes associated with the
    contribution of businesses to the joint venture formed with Vivendi
    Universal and the receipt of consideration from Vivendi Universal.

                                      F-22

           USA NETWORKS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS AS OF AND FOR THE QUARTER ENDED SEPTEMBER 30, 2001

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                THREE MONTHS ENDED         NINE MONTHS ENDED
                                                                   SEPTEMBER 30,             SEPTEMBER 30,
                                                              -----------------------   -----------------------
                                                                 2001         2000         2001         2000
                                                              ----------   ----------   ----------   ----------
                                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                         
NET REVENUES
    USA ENTERTAINMENT
  Cable and studios.........................................  $  398,211   $  336,047   $1,280,065   $1,105,688
  Emerging networks.........................................       5,784        8,591       18,125       12,862
  Filmed entertainment......................................      15,995       14,468      129,562       65,548
    USA ELECTRONIC RETAILING
  Electronic retailing......................................     453,447      427,058    1,364,248    1,245,323
    USA INFORMATION AND SERVICES
  Ticketing operations......................................     133,897      124,929      447,904      395,909
  Hotel reservations........................................     151,242       94,619      394,830      227,964
  Teleservices..............................................      72,610       70,162      228,926      140,374
  Match.....................................................      12,477        7,600       31,686       21,978
  Citysearch and related....................................      11,079       13,962       35,852       36,798
  Electronic commerce solutions.............................       4,817        7,174       15,560       15,634
  Styleclick................................................         901        5,147        7,358       17,556
  Intersegment elimination..................................      (4,128)          --      (10,659)          --
                                                              ----------   ----------   ----------   ----------
  Total net revenues........................................   1,256,332    1,109,757    3,943,457    3,285,634
Operating costs and expenses:
  Cost of sales.............................................     579,744      523,087    1,809,063    1,471,554
  Program costs.............................................     166,917      146,000      569,423      485,037
  Selling and marketing.....................................     169,888      135,749      468,278      389,231
  General and administrative................................     111,774      105,077      331,235      299,540
  Other operating costs.....................................      30,865       27,217       88,577       70,883
  Amortization of cable distribution fees...................       9,986        8,845       29,384       25,335
  Amortization of non-cash distribution and marketing
    expense.................................................       5,218        2,693       19,866        4,566
  Amortization of non-cash compensation expense.............       1,268        1,235        5,431        7,391
  Depreciation and amortization.............................     142,948      137,012      427,077      369,970
                                                              ----------   ----------   ----------   ----------
  Total operating costs and expenses........................   1,218,608    1,086,915    3,748,334    3,123,507
                                                              ----------   ----------   ----------   ----------
  Operating profit..........................................      37,724       22,842      195,123      162,127
Other income (expense):
  Interest income...........................................       8,658       12,163       23,850       38,051
  Interest expense..........................................     (18,789)     (20,341)     (58,312)     (62,006)
  Other, net................................................     (12,943)      69,920      (33,196)      67,360
                                                              ----------   ----------   ----------   ----------
                                                                 (23,074)      61,742      (67,658)      43,405
                                                              ----------   ----------   ----------   ----------
Earnings from continuing operations before income taxes,
  minority interest and cumulative effect of accounting
  change....................................................      14,650       84,584      127,465      205,532
Income tax expense..........................................     (21,901)     (27,452)     (71,191)     (86,524)
Minority interest...........................................     (33,192)     (63,004)    (124,378)    (145,299)
                                                              ----------   ----------   ----------   ----------
LOSS FROM CONTINUING OPERATIONS.............................  $  (40,443)  $   (5,872)  $  (68,104)  $  (26,291)
DISCONTINUED OPERATIONS:
Discontinued operations, net of tax.........................          --      (14,367)          --      (41,407)
Gain on disposal of Broadcasting stations, net of tax.......     468,018           --      517,847           --
                                                              ----------   ----------   ----------   ----------
Earnings (loss) before cumulative effect of accounting
  change, net of tax........................................     427,575      (20,239)     449,743      (67,698)
Cumulative effect of accounting change, net of tax..........          --           --       (9,187)          --
                                                              ----------   ----------   ----------   ----------
NET EARNINGS (LOSS).........................................  $  427,575   $  (20,239)  $  440,556   $  (67,698)
                                                              ==========   ==========   ==========   ==========
LOSS PER SHARE FROM CONTINUING OPERATIONS:
  Basic and diluted loss....................................  $     (.11)  $     (.02)  $     (.18)  $     (.07)
EARNINGS (LOSS) PER SHARE BEFORE CUMULATIVE EFFECT OF
  ACCOUNTING CHANGE:
  Basic earnings (loss) per common share....................  $     1.14   $     (.06)  $     1.21   $     (.19)
  Diluted earnings (loss) per common share..................  $      .59   $     (.06)  $     1.13   $     (.19)
NET EARNINGS (LOSS) PER SHARE:
  Basic earnings (loss) per common share....................  $     1.14   $     (.06)  $     1.18   $     (.19)
  Diluted earnings (loss) per common share..................  $      .59   $     (.06)  $     1.11   $     (.19)


The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.

                                      F-23

    UNAUDITED CONDENSED BALANCE SHEETS



                                                                  SEPTEMBER 30,        DECEMBER 31,
                                                                       2001                2000
                                                                  --------------       -------------
                                                                  (IN THOUSANDS, EXCEPT SHARE DATA)
                                                                                 
                                               ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................       $   899,759          $   244,223
Restricted cash equivalents.................................             5,285                2,021
Marketable securities.......................................           143,676              126,352
Accounts and notes receivable, net of allowance of $72,374
  and $61,141, respectively.................................         1,281,711              646,196
Inventories, net............................................           445,628              404,468
Investments held for sale...................................               320                  750
Deferred tax assets.........................................            59,211               43,975
Other current assets, net...................................            73,161               52,631
Net current assets of discontinued operations...............                --                7,788
                                                                   -----------          -----------
      Total current assets..................................         2,908,751            1,528,404

PROPERTY, PLANT AND EQUIPMENT
Computer and broadcast equipment............................           359,784              322,140
Buildings and leasehold improvements........................           140,937              132,874
Furniture and other equipment...............................           119,393              100,734
Land........................................................            15,605               15,658
Projects in progress........................................            38,033               45,084
                                                                   -----------          -----------
                                                                       673,752              616,490
      Less accumulated depreciation and amortization........          (253,927)            (172,496)
                                                                   -----------          -----------
                                                                       419,825              443,994

OTHER ASSETS
Intangible assets, net......................................         7,345,565            7,461,862
Cable distribution fees, net................................           148,449              159,473
Long-term investments.......................................            52,633               49,355
Notes and accounts receivable, net of current portion
  ($81,091 and $22,575 from related parties)................           137,509               38,301
Advance to Universal........................................            39,848               95,220
Inventories, net............................................           518,545              485,941
Deferred charges and other, net.............................           116,782               83,239
Net non-current assets of discontinued operations...........                --              128,081
                                                                   -----------          -----------
                                                                   $11,687,907          $10,473,870
                                                                   ===========          ===========


The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.

                                      F-24

    UNAUDITED CONDENSED BALANCE SHEETS (CONTINUED)



                                                               SEPTEMBER 30,      DECEMBER 31,
                                                                    2001              2000
                                                              ----------------   ---------------
                                                              (IN THOUSANDS, EXCEPT SHARE DATA)
                                                                           
                              LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations.................    $    41,772        $    25,457
Accounts payable, trade.....................................        254,721            283,066
Accounts payable, client accounts...........................        118,095             97,687
Obligations for program rights and film costs...............        293,004            283,812
Cable distribution fees payable.............................         33,556             33,598
Deferred revenue............................................        141,736             93,125
Other accrued liabilities...................................        778,646            356,502
                                                                -----------        -----------
      Total current liabilities.............................      1,661,530          1,173,247
LONG-TERM OBLIGATIONS (net of current maturities)...........        545,584            552,501
OBLIGATIONS FOR PROGRAM RIGHTS AND FILM COSTS, net of
  current...................................................        325,303            295,210
OTHER LONG-TERM LIABILITIES.................................         88,551             97,526
DEFERRED INCOME TAXES.......................................        129,963             98,378
MINORITY INTEREST...........................................      4,943,105          4,817,137

STOCKHOLDERS' EQUITY
Preferred stock--$.01 par value; authorized 15,000,000
  shares; no shares issued and outstanding..................             --                 --
Common stock--$.01 par value; authorized 1,600,000,000
  shares; issued and outstanding, 313,953,890 and
  305,436,198 shares, respectively..........................          3,139              3,055
Class B--convertible common stock--$.01 par value;
  authorized, 400,000,000 shares; issued and outstanding,
  63,033,452 shares.........................................            630                630
Additional paid-in capital..................................      3,913,058          3,793,764
Retained earnings (Accumulated deficit).....................        238,215           (202,341)
Accumulated other comprehensive loss........................        (15,359)           (10,825)
Treasury stock..............................................       (140,814)          (139,414)
Note receivable from key executive for common stock
  issuance..................................................         (4,998)            (4,998)
                                                                -----------        -----------
      Total stockholders' equity............................      3,993,871          3,439,871
                                                                -----------        -----------
                                                                $11,687,907        $10,473,870
                                                                ===========        ===========


The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.

                                      F-25

    UNAUDITED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY



                                                                                                                       NOTE
                                                                                                                    RECEIVABLE
                                                                                                                     FROM KEY
                                                                                                                    EXECUTIVE
                                                        CLASS B                               ACCUM.                   FOR
                                                      CONVERTIBLE     ADDIT.                  OTHER                   COMMON
                                            COMMON      COMMON       PAID-IN      ACCUM.      COMP.     TREASURY      STOCK
                                TOTAL       STOCK        STOCK       CAPITAL      DEFICIT      LOSS       STOCK      ISSUANCE
                              ----------   --------   -----------   ----------   ---------   --------   ---------   ----------
                                                                (IN THOUSANDS)
                                                                                            
BALANCE AT DECEMBER 31,
  2000......................  $3,439,871    $3,055       $630       $3,793,764   $(202,341)  $(10,825)  $(139,414)   $(4,998)
Comprehensive income:
  Net earnings for the nine
    months ended
    September 30, 2001......     440,556        --         --               --     440,556         --          --         --
  Decrease in unrealized
    gains in available for
    sale securities.........         (37)       --         --               --          --        (37)         --         --
  Foreign currency
    translation.............      (4,497)       --         --               --          --     (4,497)         --         --
                              ----------
  Comprehensive income......     436,022
                              ----------
Issuance of common stock
  upon exercise of stock
  options...................      73,545        83         --           73,462          --         --          --         --
Income tax benefit related
  to stock options
  exercised.................      41,286        --         --           41,286          --         --          --         --
Issuance of stock in
  connection with other
  transactions..............       4,548         2         --            4,546          --         --          --         --
Purchase of Treasury
  Stock.....................      (1,401)       (1)        --               --          --         --      (1,400)        --
                              ----------    ------       ----       ----------   ---------   --------   ---------    -------
BALANCE AT SEPTEMBER 30,
  2001......................  $3,993,871    $3,139       $630       $3,913,058   $ 238,215   $(15,359)  $(140,814)   $(4,998)
                              ==========    ======       ====       ==========   =========   ========   =========    =======


    Accumulated other comprehensive income is comprised of unrealized (losses)
gains on available for sale securities of $(5,598) and $(5,561) at
September 30, 2001 and December 31, 2000, respectively and foreign currency
translation adjustments of $(9,761) and $(5,264) at September 30, 2001 and
December 31, 2000, respectively.

    Comprehensive income for the three months ended September 30, 2001 was
$430,485.

The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.

                                      F-26

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,
                                                              ---------------------
                                                                2001        2000
                                                              ---------   ---------
                                                                 (IN THOUSANDS)
                                                                    
Cash Flows From Operating Activities:
  Loss from continuing operations...........................  $ (68,104)  $ (26,291)
      Adjustments to reconcile net loss from continuing
        operations to net cash provided by operating
        activities:
    Depreciation and amortization...........................    427,077     369,970
    Amortization of cable distribution fees.................     29,384      25,335
    Amortization of program rights and film costs...........    550,363     474,142
    Amortization of deferred financing costs................      1,149       2,997
    Non-cash distribution and marketing expense.............     19,866       4,566
    Amortization of non-cash compensation expense...........      5,431       7,391
    Deferred income taxes...................................      4,945         544
    Equity in losses of unconsolidated affiliates...........     22,021      40,896
    Gain on sale of subsidiary stock........................         --    (108,343)
    Non-cash interest income................................     (3,396)     (6,880)
    Minority interest.......................................    124,378     145,299
    CHANGES IN CURRENT ASSETS AND LIABILITIES:
      Accounts receivable...................................    (65,833)    (52,972)
      Inventories...........................................      4,490      (1,888)
      Accounts payable......................................    (16,854)    (66,308)
      Accrued liabilities and deferred revenue..............     97,353     111,201
      Payment for program rights and film costs.............   (612,906)   (594,121)
      Increase in cable distribution fees...................    (18,511)    (39,251)
      Other, net............................................    (21,206)     15,991
                                                              ---------   ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES...................    479,647     302,278
Cash Flows From Investing Activities:
  Acquisitions, net of cash acquired........................   (193,857)   (203,029)
  Capital expenditures......................................   (100,232)   (102,331)
  Recoupment of advance to Universal........................     58,698      68,333
  Increase in long-term investments and notes receivable....    (76,707)    (16,518)
  Purchase of marketable securities.........................    (21,373)    (78,172)
  Proceeds from sale of broadcasting stations...............    510,374          --
  Other, net................................................    (13,864)    (30,784)
                                                              ---------   ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES.........    163,039    (362,501)
Cash Flows From Financing Activities:
  Borrowings................................................     21,974      50,211
  Principal payments on long-term obligations...............    (11,941)    (81,926)
  Purchase of treasury stock................................     (1,401)   (129,908)
  Payment of mandatory tax distribution to LLC partners.....    (17,369)    (68,065)
  Proceeds from sale of subsidiary stock....................     10,447      92,604
  Proceeds from issuance of common stock and LLC shares.....     73,545     207,795
  Other, net................................................    (10,921)    (12,901)
                                                              ---------   ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES...................     64,334      57,810
NET CASH USED IN DISCONTINUED OPERATIONS....................    (48,058)    (54,382)
  Effect of exchange rate changes on cash and cash
    equivalents.............................................     (3,426)     (4,133)
                                                              ---------   ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........    655,536     (60,928)
Cash and cash equivalents at beginning of period............    244,223     423,176
                                                              ---------   ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................  $ 899,759   $ 362,248
                                                              =========   =========


The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.

                                      F-27

    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--ORGANIZATION

    USA Networks, Inc. (the "Company" or "USA") is focused on the new
convergence of entertainment, information and direct selling.

    On January 31, 2001, Ticketmaster Online-Citysearch, Inc. ("TMCS") and
Ticketmaster Corporation, both of which are subsidiaries of USA, completed a
transaction which combined the two companies. The combined company has been
renamed "Ticketmaster". Under the terms of the transaction, USA contributed
Ticketmaster Corporation to Ticketmaster Online-Citysearch and received
52 million Ticketmaster Online-Citysearch Class B Shares. The Ticketmaster
Class B common stock is quoted on the Nasdaq Stock Market. As of January 31,
2001, USA beneficially owned 68% of the outstanding Ticketmaster common stock,
representing 85% of the total voting power of Ticketmaster's outstanding common
stock.

    On July 27, 2000, USA and Styleclick.com Inc., an enabler of e-commerce for
manufacturers and retailers ("Styleclick.com"), completed the merger of Internet
Shopping Network ("ISN") and Styleclick.com (the "Styleclick Transaction"). See
Note 3.

    On April 5, 2000, the Company acquired Precision Response Corporation
("PRC") (the "PRC Transaction"). See Note 3.

    As disclosed in our report for the quarterly period ended June 30, 2001, on
July 16, 2001, USA announced an agreement to acquire a controlling interest in
Expedia, Inc. (NASDAQ: EXPE), a leading provider of branded online travel
services for leisure and small business travelers. Under the terms of the
definitive agreement, USA will acquire up to 37,500,000 shares of Expedia common
stock. The acquisition of Expedia is subject to customary closing conditions and
is expected to close during the fourth quarter of 2001.

    USA's segments are organized into three units, USA Entertainment, USA
Electronic Retailing and USA Information and Services. The units and segments
are as follows:

    USA ENTERTAINMENT

    - CABLE AND STUDIOS, consisting of the cable networks USA Network and Sci Fi
      Channel and Studios USA, which produces and distributes television
      programming.

    - EMERGING NETWORKS, consists primarily of the cable television properties
      Trio and News World International, which were acquired on May 19, 2000,
      and SciFi.com, an emerging Internet content and commerce site.

    - FILMED ENTERTAINMENT, consisting primarily of USA Films, which is in the
      film distribution and production businesses.

    USA ELECTRONIC RETAILING

    - ELECTRONIC RETAILING, consisting primarily of HSN and America's Store, HSN
      International and HSN Interactive, including HSN.com.

                                      F-28

NOTE 1--ORGANIZATION (CONTINUED)

    USA INFORMATION AND SERVICES

    - TICKETING OPERATIONS, consisting primarily of Ticketmaster and
      Ticketmaster.com, which provide offline and online automated ticketing
      services.

    - HOTEL RESERVATIONS, which includes Hotel Reservations Network, a leading
      consolidator of hotel rooms for resale in the consumer market.

    - TELESERVICES, consisting of Precision Response Corporation, a leader in
      outsourced customer care for both large corporations and high-growth
      internet-focused companies.

    - MATCH, consisting of an online personals business.

    - CITYSEARCH AND RELATED, which primarily consists of Citysearch, which
      operates an online network that provides locally oriented services and
      information to users.

    - ELECTRONIC COMMERCE SOLUTIONS, which primarily represents the Company's
      electronic commerce solutions business.

    - STYLECLICK, a facilitator of e-commerce websites and Internet enabled
      applications.

    BASIS OF PRESENTATION

    The interim Condensed Consolidated Financial Statements and Notes thereto of
the Company are unaudited and should be read in conjunction with the audited
Consolidated Financial Statements and Notes thereto for the twelve months ended
December 31, 2000.

    In the opinion of the Company, all adjustments necessary for a fair
presentation of such Condensed Consolidated Financial Statements have been
included. Such adjustments consist of normal recurring items. Interim results
are not necessarily indicative of results for a full year. The interim Condensed
Consolidated Financial Statements and Notes thereto are presented as permitted
by the Securities and Exchange Commission and do not contain certain information
included in the Company's audited Consolidated Financial Statements and Notes
thereto.

    ACCOUNTING ESTIMATES

    Management of the Company is required to make certain estimates and
assumptions during the preparation of consolidated financial statements in
accordance with accounting principles generally accepted in the United States.
These estimates and assumptions impact the reported amount of assets and
liabilities and disclosures of contingent assets and liabilities as of the date
of the consolidated financial statements. They also impact the reported amount
of net earnings during any period. Actual results could differ from those
estimates.

    Significant estimates underlying the accompanying consolidated financial
statements include the inventory carrying adjustment, program rights and film
cost amortization, sales return and other revenue allowances, allowance for
doubtful accounts, recoverability of intangibles and other long-lived assets,
estimates of film revenue ultimates and various other operating allowances and
accruals.

                                      F-29

NOTE 1--ORGANIZATION (CONTINUED)

    NEW ACCOUNTING PRONOUNCEMENTS

    FILM ACCOUNTING.  The Company adopted SOP 00-2, ACCOUNTING BY PRODUCERS OR
DISTRIBUTORS OF FILMS ("SOP 00-2") during the nine months ended September 30,
2001. SOP 00-2 established new film accounting standards, including changes in
revenue recognition and accounting for advertising, development and overhead
costs. Specifically, SOP 00-2 requires advertising costs for theatrical and
television product to be expensed as incurred. This compares to the Company's
previous policy of first capitalizing these costs and then expensing them over
the related revenue streams. In addition, SOP 00-2 requires development costs
for abandoned projects and certain indirect overhead costs to be charged
directly to expense, instead of those costs being capitalized to film costs,
which was required under the previous accounting rules. SOP 00-2 also requires
all film costs to be classified in the balance sheet as non-current assets.
Provisions of SOP 00-2 in other areas, such as revenue recognition, generally
are consistent with the Company's existing accounting policies.

    SOP 00-2 was adopted as of January 1, 2001, and the Company recorded a
one-time, non-cash expense of $9.2 million, net of tax. The net effect is
reflected as a cumulative effect of an accounting change in the accompanying
consolidated statement of operations.

    GOODWILL AND OTHER INTANGIBLE ASSETS.  In June 2001, the Financial
Accounting Standards Board issued Statements of Financial Accounting Standards
No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible
Assets," effective for fiscal years beginning after December 15, 2001. Under the
new rules, goodwill and intangible assets deemed to have indefinite lives will
no longer be amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives. The Company will apply the new rules on
accounting for goodwill and other intangible assets beginning in the first
quarter of 2002, and is presently in the process of evaluating the potential
impacts of the new rules.

    RECLASSIFICATIONS

    Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform to the 2001 presentation, including all amounts
charged to customers for shipping and handling, which are now presented as
revenue.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    See the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 (the "2000 Form 10-K") for a summary of all significant
accounting policies.

NOTE 3--BUSINESS ACQUISITIONS

    The following unaudited pro forma condensed consolidated financial
information for the nine months ended September 30, 2001 and 2000, is presented
to show the results of the Company, as if the PRC Transaction and the Styleclick
Transaction and the merger of Ticketmaster and Ticketmaster Online-Citysearch,
which did not impact revenues or operating profit, but rather minority interest
and income taxes, had occurred at the beginning of the periods presented. The
pro forma results include certain adjustments, including increased amortization
related to goodwill, and are not necessarily indicative of what the results
would have been had the transactions actually occurred on the

                                      F-30

NOTE 3--BUSINESS ACQUISITIONS (CONTINUED)

aforementioned dates. Note that the amounts exclude USAB, the sale of which was
announced in December 2000 and is now presented as a discontinued operation.



                                                          NINE MONTHS ENDED
                                                            SEPTEMBER 30,
                                                       -----------------------
                                                          2001         2000
                                                       ----------   ----------
                                                           (IN THOUSANDS,
                                                       EXCEPT PER SHARE DATA)
                                                              
Net revenues.........................................  $3,943,457   $3,357,172
Loss from continuing operations......................     (69,640)     (65,954)
Basic and diluted loss from continuing operations per
  common share.......................................  $     (.19)  $     (.18)


NOTE 4--STATEMENTS OF CASH FLOWS

    SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS FOR THE NINE MONTHS ENDED
     SEPTEMBER 30, 2001:

    For the nine months ended September 30, 2001, interest accrued on the
$200.0 million advance to Universal amounted to $3.3 million.

    For the nine months ended September 30, 2001, the Company incurred non-cash
distribution and marketing expense of $19.9 million and non-cash compensation
expense of $5.4 million.

    During the nine months ended September 30, 2001, the Company realized a
pre-tax loss of $6.7 million related to the write-off of investments to fair
value.

    SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS FOR THE NINE MONTHS ENDED
     SEPTEMBER 30, 2000:

    On January 20, 2000, the Company completed its acquisition of Ingenious
Designs, Inc. ("IDI"), by issuing approximately 190,000 shares of USA common
stock for all the outstanding stock of IDI, for a total value of approximately
$5.0 million.

    On January 31, 2000, TMCS completed its acquisition of 2b Technology, Inc.
("2b"), by issuing approximately 458,005 shares of TMCS Class B Common Stock for
all the outstanding stock of 2b, for a total value of approximately
$17.1 million.

    On April 5, 2000, USA completed its acquisition of PRC by issuing
approximately 24.3 million shares of USA common stock for all of the outstanding
stock of PRC, for a total value of approximately $711.7 million.

    On May 26, 2000, TMCS completed its acquisition of Ticketweb, Inc.
("Ticketweb"), by issuing approximately 1.8 million shares of TMCS Class B
Common Stock for all of the outstanding stock of Ticketweb, for a total value of
approximately $35.3 million.

    For the nine months ended September 30, 2000, interest accrued on the
$200.0 million advance to Universal amounted to $6.9 million.

    For the nine months ended September 30, 2000, the Company incurred non-cash
distribution and marketing expense of $4.6 million and non-cash compensation
expense of $7.4 million.

                                      F-31

NOTE 4--STATEMENTS OF CASH FLOWS (CONTINUED)

    During the second quarter, the Company recorded $11.6 million of expenses
related to an agreement with an executive. Of this amount, $3.8 million is a
non-cash stock compensation charge related to restricted stock.

    During the third quarter, the Company realized a pre-tax loss of
$30.5 million related to the write-off of investments to fair value.

NOTE 5--INDUSTRY SEGMENTS

    The Company operates principally in the following industry segments: Cable
and studios, Emerging networks, Filmed entertainment, Electronic retailing,
Ticketing operations, Hotel reservations, Teleservices, Match, Citysearch and
related, Electronic commerce solutions and Styleclick. The Cable and studios
segment consists of the cable networks USA Network and Sci Fi Channel and
Studios USA, which produces and distributes television programming. The Emerging
networks segment consists primarily of the cable television properties Trio and
News World International, which were acquired on May 19, 2000, and SciFi.com, an
emerging Internet content and commerce site. The Filmed entertainment segment
consists primarily of USA Films, which engages in the film distribution and
production businesses. The Electronic retailing segment consists principally of
the Home Shopping Network, America's Store, HSN International and HSN
Interactive, including HSN.com, which are engaged in the sale of merchandise
through electronic retailing. The Ticketing operations segment primarily
consists of Ticketmaster and Ticketmaster.com, which provide offline and online
automated ticketing services. The Hotel reservations segment consists of Hotel
Reservations Network, a leading consolidator of hotel rooms for resale in the
consumer market. The Teleservices segment was formed on April 5, 2000 in
conjunction with the acquisition of PRC, which handles outsourced customer care
for both large corporations and high-growth internet-focused companies. The
Match segment consists of an online personals business. The Citysearch and
related segment primarily consists of Citysearch, which operates an online
network that provides locally oriented services and information to users. The
Electronic commerce solutions segment primarily represents the Company's
electronic solutions business. The Styleclick segment represents Styleclick, a
facilitator of e-commerce websites and Internet enabled applications.

                                      F-32

NOTE 5--INDUSTRY SEGMENTS (CONTINUED)



                                                  THREE MONTHS ENDED         NINE MONTHS ENDED
                                                     SEPTEMBER 30,             SEPTEMBER 30,
                                                -----------------------   -----------------------
                                                   2001         2000         2001         2000
                                                ----------   ----------   ----------   ----------
                                                                 (IN THOUSANDS)
                                                                           
REVENUE
USA ENTERTAINMENT
Cable and studios.............................  $  398,211   $  336,047   $1,280,065   $1,105,688
Emerging networks.............................       5,784        8,591       18,125       12,862
Filmed entertainment..........................      15,995       14,468      129,562       65,548
USA ELECTRONIC RETAILING
Electronic retailing..........................     453,447      427,058    1,364,248    1,245,323
USA INFORMATION AND SERVICES
Ticketing operations..........................     133,897      124,929      447,904      395,909
Hotel reservations............................     151,242       94,619      394,830      227,964
Teleservices..................................      72,610       70,162      228,926      140,374
Match.........................................      12,477        7,600       31,686       21,978
Citysearch and related........................      11,079       13,962       35,852       36,798
Electronic commerce solutions.................       4,817        7,174       15,560       15,634
Styleclick....................................         901        5,147        7,358       17,556
Intersegment Elimination......................      (4,128)          --      (10,659)          --
                                                ----------   ----------   ----------   ----------
                                                $1,256,332   $1,109,757   $3,943,457   $3,285,634
                                                ==========   ==========   ==========   ==========
OPERATING PROFIT (LOSS)
USA ENTERTAINMENT
Cable and studios.............................  $  124,558   $   90,394   $  397,680   $  312,371
Filmed entertainment..........................      (2,046)      (8,244)      (7,414)     (12,794)
Developing networks...........................      (4,860)      (1,875)     (13,998)      (6,669)
USA ELECTRONIC RETAILING
Electronic retailing..........................       5,179       27,232       44,320       92,041
USA INFORMATION AND SERVICES
Ticketing operations..........................        (651)      (2,735)      25,440       22,667
Hotel reservations............................       5,895        1,899       10,574        3,650
Teleservices..................................     (17,102)      (1,597)     (28,561)      (4,586)
Match.........................................       1,054       (2,565)      (5,704)      (9,003)
Citysearch and related........................     (40,540)     (45,789)    (123,123)    (137,112)
Electronic commerce solutions.................     (12,749)      (7,451)     (28,076)     (19,961)
Styleclick....................................      (5,525)     (18,156)     (36,496)     (37,382)
Other.........................................     (15,489)      (8,271)     (39,519)     (41,095)
                                                ----------   ----------   ----------   ----------
                                                $   37,724   $   22,842   $  195,123   $  162,127
                                                ==========   ==========   ==========   ==========


           The Company operates principally within the United States.

                                      F-33

NOTE 6--GAIN ON SALE OF BROADCAST STATIONS

    In December 2000, the Company announced that Univision Communications Inc.
("Univision") would acquire, for $1.1 billion in cash, all of the capital stock
of certain USA Broadcasting ("USAB") subsidiaries that own 13 full-power
television stations and minority interests in four additional full-power
stations. In August 2001, the Company completed the sale. The gain on the sale
of the stations was $468 million, net of taxes of $343 million and
$518 million, net of taxes of $377 million for the three and nine months ended
September 30, 2001, respectively. To date, the Company has received proceeds of
$510.4 million. A note receivable of $589.6 million is reflected in current
assets.

NOTE 7--SAVOY SUMMARIZED FINANCIAL INFORMATION (UNAUDITED)

    The Company has not prepared separate financial statements and other
disclosures concerning Savoy because management has determined that such
information is not material to holders of the Savoy Debentures, all of which
have been assumed by the Company as a joint and several obligor. The information
presented is reflected at Savoy's historical cost basis.

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                  NINE MONTHS
                                                                     ENDED
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                                2001       2000
                                                              --------   --------
                                                                (IN THOUSANDS)
                                                                   
Net sales...................................................   $3,428     $4,632
Operating expenses..........................................    2,796      1,408
Operating income............................................      632      3,224
Net income..................................................    2,969      4,165


SUMMARY CONSOLIDATED BALANCE SHEETS



                                                      SEPTEMBER 30,   DECEMBER 31,
                                                          2001            2000
                                                      -------------   ------------
                                                             (IN THOUSANDS)
                                                                
Current assets......................................     $   441         $    --
Non-current assets..................................     163,822         158,561
Current liabilities.................................      14,251          17,021
Non-current liabilities.............................      38,768          38,902


NOTE 8-- NOTES OFFERING AND GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

    On November 23, 1998, the Company and USANi LLC as co-issuers completed an
offering of $500.0 million 6 3/4% Senior Notes due 2005 (the "Old Notes"). In
May 1999, the Old Notes were exchanged in full for $500.0 million of new 6 3/4%
Senior Notes due 2005 (the "Notes") that have terms that are substantially
identical to the Old Notes. Interest is payable on the Notes on May 15 and
November 15 of each year, commencing May 15, 1999. The Notes are jointly,
severally, fully and unconditionally guaranteed by certain subsidiaries of the
Company, including Home Shopping Network, Inc. ("Holdco"), a non-wholly owned,
direct subsidiary of the Company, and all of the subsidiaries of USANi LLC
(other than subsidiaries that are, individually and in the aggregate,

                                      F-34

NOTE 8-- NOTES OFFERING AND GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)

inconsequential to USANi LLC on a consolidated basis) (collectively, the
"Subsidiary Guarantors"). All of the Subsidiary Guarantors (other than Holdco)
(the "Wholly Owned Subsidiary Guarantors") are wholly owned, directly or
indirectly, by the Company or USANi LLC, as the case may be.

    The following tables present condensed consolidating financial information
for the three and nine months ended September 30, 2001 and 2000 for: (1) the
Company on a stand-alone basis, (2) Holdco on a stand-alone basis, (3) USANi LLC
on a stand-alone basis, (4) the combined Wholly Owned Subsidiary Guarantors
(including Wholly Owned Subsidiary Guarantors that are wholly owned subsidiaries
of USANi LLC), (5) the combined non-guarantor subsidiaries of the Company
(including the non-guarantor subsidiaries of USANi LLC (collectively, the
"Non-Guarantor Subsidiaries")), and (6) the Company on a consolidated basis.

    Separate financial statements for each of the Wholly Owned Subsidiary
Guarantors are not presented and such Wholly Owned Subsidiary Guarantors are not
filing separate reports under the Securities Exchange Act of 1934 because the
Company's management has determined that the information contained in such
documents would not be material to investors.



                                                                         WHOLLY
                                                                          OWNED
                                                            USANI      SUBSIDIARY    NON-GUARANTOR                       USA
                                   USA         HOLDCO        LLC       GUARANTORS     SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                ----------   ----------   ----------   -----------   --------------   ------------   ------------
                                                                         (IN THOUSANDS)
                                                                                                
BALANCE SHEET AS OF SEPTEMBER
  30, 2001:
Current Assets................  $  609,572   $       --   $  677,026   $  965,065      $  657,088     $        --    $ 2,908,751
Property and equipment, net...          --           --       23,502      194,633         201,690              --        419,825
Goodwill and other intangible
  assets, net.................      72,122           --           --    4,809,036       2,464,407              --      7,345,565
Investment in subsidiaries....   3,585,269    1,317,087    7,061,144      101,355              --     (12,064,855)            --
Other assets..................      42,064           --           --      723,620         841,442        (593,360)     1,013,766
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Total assets..................  $4,309,027   $1,317,087   $7,761,672   $6,793,709      $4,164,627     $(12,658,215)  $11,687,907
                                ==========   ==========   ==========   ==========      ==========     ============   ===========
Current liabilities...........  $  413,467   $       --   $    2,835   $  715,951      $  535,598     $    (6,321)   $ 1,661,530
Long-term debt, less current
  portion.....................          --           --      498,439        1,634          45,511              --        545,584
Other liabilities.............    (110,593)          --      942,604      375,084         549,209      (1,212,487)       543,817
Minority interest.............          --           --     (141,138)     162,362         385,197       4,536,684      4,943,105
Interdivisional equity........      12,282           --           --    5,538,678       2,649,112      (8,200,072)            --
Stockholders' equity..........   3,993,871    1,317,087    6,458,932           --              --      (7,776,019)     3,993,871
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Total liabilities and
  stockholders equity.........  $4,309,027   $1,317,087   $7,761,672   $6,793,709      $4,164,627     $(12,658,215)  $11,687,907
                                ==========   ==========   ==========   ==========      ==========     ============   ===========
STATEMENT OF OPERATIONS FOR
  THE THREE MONTHS ENDED
  SEPTEMBER 30, 2001
Revenue.......................  $       --   $       --   $       --   $  784,541      $  476,349     $    (4,558)   $ 1,256,332
Operating expenses............      (3,411)          --      (11,878)    (654,017)       (553,860)          4,558     (1,218,608)
Interest expense, net.........      (5,253)          --        2,455       (8,104)            771              --        (10,131)
Other income, expense.........     (31,779)      18,023       92,347          108         (13,051)        (78,591)       (12,943)
Income tax expense............          --           --           --      (20,606)         (1,295)             --        (21,901)
Minority interest.............          --           --           --      (51,613)         18,421              --        (33,192)
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Earnings (loss) from
  continuing operations.......  $  (40,443)  $   18,023   $   82,924   $   50,309      $  (72,665)    $   (78,591)   $   (40,443)
Gain on disposal of
  Broadcasting Stations.......     468,018           --           --           --              --              --        468,018
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Net earnings (loss)...........  $  427,575   $   18,023   $   82,924   $   50,309      $  (72,665)    $   (78,591)   $   427,575
                                ==========   ==========   ==========   ==========      ==========     ============   ===========


                                      F-35

NOTE 8-- NOTES OFFERING AND GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)



                                                                         WHOLLY
                                                                          OWNED
                                                            USANI      SUBSIDIARY    NON-GUARANTOR                       USA
                                   USA         HOLDCO        LLC       GUARANTORS     SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                ----------   ----------   ----------   -----------   --------------   ------------   ------------
                                                                         (IN THOUSANDS)
                                                                                                
STATEMENT OF OPERATIONS FOR
  THE NINE MONTHS ENDED
  SEPTEMBER 30, 2001
Revenue.......................  $       --   $       --   $       --   $2,448,238      $1,507,042     $   (11,823)   $ 3,943,457
Operating expenses............      (8,481)          --      (29,892)  (2,017,292)     (1,704,492)         11,823     (3,748,334)
Interest expense, net.........     (18,195)          --        5,665      (24,478)          2,546              --        (34,462)
Other income, expense.........     (41,428)      68,849      304,043       (7,297)        (25,899)       (331,464)       (33,196)
Provision for income taxes....          --           --           --      (56,598)        (14,593)             --        (71,191)
Minority interest.............          --           --           --     (173,353)         48,975              --       (124,378)
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Earnings (loss) from
  continuing operations.......  $  (68,104)  $   68,849   $  279,816   $  169,220      $ (186,421)    $  (331,464)   $   (68,104)
Gain on disposal of
  Broadcasting Stations.......     517,847           --           --           --              --              --        517,847
Cumulative effect of
  accounting change...........      (9,187)          --           --        2,438         (11,625)          9,187         (9,187)
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Net earnings (loss)...........  $  440,556   $   68,849   $  279,816   $  171,658      $ (198,046)    $  (322,277)   $   440,556
                                ==========   ==========   ==========   ==========      ==========     ============   ===========
CASH FLOW FOR THE NINE MONTHS
  ENDED SEPTEMBER 30, 2001
Cash flow from (used in)
  operations..................  $  (18,882)  $       --   $   (9,300)  $  408,452      $   99,377     $        --    $   479,647
Cash flow provided (used in)
  investing activities........      54,240           --       (4,367)     (76,229)        189,395              --        163,039
Cash flow from financing
  activities..................     (35,358)          --      652,265     (273,517)       (279,056)             --         64,334
Net Cash used by Discontinued
  Operations..................          --           --           --      (48,058)             --              --        (48,058)
Effect of exchange rate.......          --           --         (278)          91          (3,239)             --         (3,426)
Cash at beginning of period...          --           --       78,079      (28,949)        195,093              --        244,223
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Cash at end of period.........  $       --   $       --   $  716,399   $  (18,210)     $  201,570     $        --    $   899,759
                                ==========   ==========   ==========   ==========      ==========     ============   ===========
STATEMENT OF OPERATIONS FOR
  THE THREE MONTHS ENDED
  SEPTEMBER 30, 2000
Revenue.......................  $       --   $       --   $       --   $  719,812      $  391,878     $    (1,933)   $ 1,109,757
Operating expenses............      (3,353)          --       (5,764)    (615,381)       (464,350)          1,933     (1,086,915)
Interest expense, net.........      (7,718)          --        6,471       (5,836)         (1,095)             --         (8,178)
Other income, expense.........       6,019       34,197      147,313      (46,172)         (1,987)        (69,450)        69,920
Income tax expense............        (820)          --           --      (17,856)         (8,776)             --        (27,452)
Minority interest.............          --           --           --       (4,087)         28,309         (87,226)       (63,004)
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Earnings (loss) from
  continuing operations.......      (5,872)      34,197      148,020       30,480         (56,021)       (156,676)        (5,872)
Earnings (loss) from
  discontinued operations.....     (14,367)          --           --      (14,367)             --          14,367        (14,367)
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Net earnings (loss)...........  $  (20,239)  $   34,197   $  148,020   $   16,113      $  (56,021)    $  (142,309)   $   (20,239)
                                ==========   ==========   ==========   ==========      ==========     ============   ===========


                                      F-36

NOTE 8-- NOTES OFFERING AND GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
        (CONTINUED)



                                                                         WHOLLY
                                                                          OWNED
                                                            USANI      SUBSIDIARY    NON-GUARANTOR                       USA
                                   USA         HOLDCO        LLC       GUARANTORS     SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                ----------   ----------   ----------   -----------   --------------   ------------   ------------
                                                                         (IN THOUSANDS)
                                                                                                
STATEMENT OF OPERATIONS FOR
  THE NINE MONTHS ENDED
  SEPTEMBER 30, 2000
Revenue.......................  $       --   $       --   $       --   $2,207,099      $1,080,352     $    (1,817)   $ 3,285,634
Operating expenses............     (12,164)          --      (29,627)  (1,856,120)     (1,227,332)          1,736     (3,123,507)
Interest expense, net.........     (18,499)          --       16,260      (20,024)         (1,692)             --        (23,955)
Other income, expense.........       3,850       78,571      382,640      (72,179)         (5,442)       (320,080)        67,360
Provision for income taxes....         522           --      (27,351)     (36,017)        (23,678)             --        (86,524)
Minority interest.............          --           --           --       (8,778)         71,998        (208,519)      (145,299)
                                        --           --           --           --              --              --             --
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Earnings (loss) from
  continuing operations.......     (26,291)      78,571      341,922      213,981        (105,794)       (528,680)       (26,291)
Earnings (loss) from
  discontinued operations.....     (41,407)          --           --      (41,407)             --          41,407        (41,407)
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Net earnings (loss)...........  $  (67,698)  $   78,571   $  341,922   $  172,574      $ (105,794)    $  (487,273)   $   (67,698)
                                ==========   ==========   ==========   ==========      ==========     ============   ===========
CASH FLOW FOR THE NINE MONTHS
  ENDED SEPTEMBER 30, 2000
Cash flow from (used in)
  operations..................  $  (29,055)  $       --   $   (2,018)  $  304,656      $   28,695     $        --    $   302,278
Cash flow provided (used in)
  investing activities........       9,870           --      (44,131)    (165,498)       (162,742)             --       (362,501)
Cash flow from financing
  activities..................      19,185           --      (63,944)    (124,514)        227,083              --         57,810
Net Cash used by discontinued
  operations..................          --           --           --      (54,382)             --              --        (54,382)
Effect of exchange rate.......          --           --           --          (15)         (4,118)             --         (4,133)
Cash at beginning of period...          --           --      276,678      (25,067)        171,565              --        423,176
                                ----------   ----------   ----------   ----------      ----------     ------------   -----------
Cash at end of period.........  $       --   $       --   $  166,585   $  (64,820)     $  260,483     $        --    $   362,248
                                ==========   ==========   ==========   ==========      ==========     ============   ===========


                                      F-37

                         EXPEDIA, INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE QUARTER ENDED
                               SEPTEMBER 30, 2001

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
     LOSS



                                                               THREE MONTHS ENDED
                                                                  SEPTEMBER 30,
                                                              ---------------------
                                                                2000        2001
                                                              ---------   ---------
                                                              (IN THOUSANDS, EXCEPT
                                                               PER SHARE AMOUNTS)
                                                                    
Agency revenues.............................................  $ 21,646     $39,279
Merchant revenues...........................................    12,335      34,102
Advertising and other revenues..............................     8,124       6,097
                                                              --------     -------
Revenues....................................................    42,105      79,478
                                                              --------     -------

Cost of agency revenues (excluding recognition of
  stock-based compensation of $189 and $43 for the three
  months ended September 30, 2000 and 2001).................    11,882      15,977
Cost of merchant revenues (excluding recognition of
  stock-based compensation $297 and of $65 for the three
  months ended September 30, 2000 and 2001).................     3,745       9,509
Cost of advertising and other revenues (excluding
  recognition of stock-based compensation of $73 and $10 for
  the three months ended September 30, 2000 and 2001).......       684         801
Cost of revenues............................................    16,311      26,287
                                                              --------     -------
Gross profit................................................    25,794      53,191
                                                              --------     -------

Operating expenses:
  Product development (excluding recognition of stock-based
    compensation of $9,087 and $2,263 for the three months
    ended September 30, 2000 and 2001)......................     5,270       7,209
  Sales and marketing (excluding recognition of stock-based
    compensation of $1,150 and $183 for the three months
    ended September 30, 2000 and 2001)......................    17,899      26,071
  General and administrative (excluding recognition of
    stock-based compensation of $2,821 and $1,000 for the
    three months ended September 30, 2000 and 2001).........     5,342       6,181
  Amortization of goodwill and intangibles..................    15,532       9,904
  Recognition of stock-based compensation...................    13,617       3,564
                                                              --------     -------
Total operating expenses....................................    57,660      52,929
                                                              --------     -------
(Loss) income from operations...............................   (31,866)        262
Net interest income and other...............................     1,082       1,329
USAI transaction related costs..............................        --      (6,341)
                                                              --------     -------
Loss before provision for income taxes......................   (30,784)     (4,750)
Provision for income taxes..................................        --          --
Net loss....................................................  $(30,784)    $(4,750)
                                                              --------     -------
Net loss....................................................  $(30,784)    $(4,750)
  Currency translation adjustment...........................       (10)         19
                                                              --------     -------
Comprehensive loss..........................................  $(30,794)    $(4,731)
                                                              --------     -------
Basic and diluted net loss per common share.................  $  (0.69)    $ (0.09)
                                                              --------     -------
Weighted average shares used to compute basic and diluted
  net loss per common share.................................    44,849      50,319
                                                              --------     -------


                                      F-38

    UNAUDITED CONDENSED BALANCE SHEETS



                                                              JUNE 30,   SEPTEMBER 30,
                                                                2001         2001
                                                              --------   -------------
                                                                   (IN THOUSANDS)
                                                                   
                                        ASSETS

Current assets:
  Cash and cash equivalents.................................  $182,161     $197,801
  Accounts receivable, net of allowance of $513 and $628....    29,716       18,425
  Prepaid merchant bookings.................................    30,170       18,690
  Prepaid expenses and other current assets.................    11,642        8,729
                                                              --------     --------
    Total current assets....................................   253,689      243,645
Property and equipment, net.................................    16,778       16,120
Investment and restricted deposits..........................     1,298        1,840
Intangible assets, net......................................    43,298       29,285
Goodwill....................................................    74,781       78,890
                                                              --------     --------
    Total assets............................................  $389,844     $369,780
                                                              ========     ========

                                     LIABILITIES

Current liabilities:
  Accounts payable..........................................  $ 33,994     $ 29,063
  Accrued expenses..........................................    40,831       40,879
  Due to Microsoft..........................................       801        1,556
  Deferred merchant bookings................................    80,326       62,457
  Current portion of notes payable..........................        45           --
  Unearned revenue..........................................     1,545        1,074
                                                              --------     --------
    Total current liabilities...............................   157,542      135,029
Notes payable, net of current portion.......................     1,303           --
                                                              --------     --------
    Total liabilities.......................................   158,845      135,029
                                                              --------     --------

Commitments and contingencies (Note 8)

                                 STOCKHOLDERS' EQUITY

Common stock, $.01 par value, 120,000 shares authorized,
  50,176 and 51,378 issued and outstanding..................       502          514
Preferred stock, $.01 par value, 10,000 shares authorized,
  none issued and outstanding...............................        --           --
Additional paid-in-capital..................................   437,903      442,371
Unearned stock-based compensation...........................   (16,172)     (12,131)
Retained deficit............................................  (191,418)    (196,168)
Accumulated other comprehensive income:
  Cumulative currency translation adjustment................       184          165
                                                              --------     --------
    Total stockholders' equity..............................   230,999      234,751
                                                              --------     --------
    Total liabilities and stockholders' equity..............  $389,844     $369,780
                                                              ========     ========


                            See accompanying notes.

                                      F-39

    UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY



                                                                                                   CUMULATIVE
                                       COMMON STOCK       ADDITIONAL     UNEARNED                   CURRENCY
                                    -------------------    PAID-IN     STOCK-BASED    RETAINED    TRANSLATION
                                     SHARE      AMOUNT     CAPITAL     COMPENSATION    DEFICIT     ADJUSTMENT     TOTAL
                                    --------   --------   ----------   ------------   ---------   ------------   --------
                                                                       (IN THOUSANDS)
                                                                                            
Balance, June 30, 2001............   50,176      $502      $437,903      $(16,172)    $(191,418)      $184       $230,999
  Proceeds from issuance of common
    stock and common stock
    warrants......................      351         4            (4)                                                   --
  Proceeds from exercise of
    options.......................      851         8         4,949                                                 4,957
  Recognition of stock-based
    compensation..................                                          3,564                                   3,564
  Forfeiture of stock-based
    Compensation..................                             (477)          477                                      --
  Net loss........................                                                       (4,750)                   (4,750)
  Other comprehensive income:
    Currency translation
      adjustment..................                                                                     (19)           (19)
                                     ------      ----      --------      --------     ---------       ----       --------

Balance, September 30, 2001.......   51,378      $514      $442,371      $(12,131)    $(196,168)      $165       $234,751
                                     ======      ====      ========      ========     =========       ====       ========


                            See accompanying notes.

                                      F-40

    UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                              THREE MONTHS ENDED
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                                2000       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
                                                                   
Operating activities:
  Net loss..................................................  $(30,784)  $ (4,750)
  Adjustments to reconcile net loss to net cash used by
    operating activities:
    Depreciation and amortization...........................       555      2,644
    Recognition of stock-based compensation.................    13,617      3,564
    Amortization of goodwill and intangibles................    15,532      9,904
    USAI transaction related costs..........................        --      6,341
  Cash provided (used) by changes in operating assets and
    liabilities:
    Accounts receivable.....................................     4,889     11,291
    Due (from) to Microsoft.................................      (117)       755
    Prepaid expenses and other current assets...............    (2,131)     2,913
    Prepaid merchant bookings...............................       (30)    11,480
    Accounts payable and accrued expenses...................     1,784     (4,883)
    Deferred merchant bookings..............................     6,097    (17,869)
    Unearned revenue........................................    (5,731)      (471)
                                                              --------   --------
      Net cash provided by operating activities.............     3,681     20,919
                                                              --------   --------

Investing activities:
  Additions to property and equipment.......................    (2,644)    (3,374)
  Proceeds from sale of building............................        --      1,388
  Funding of restricted deposits, net.......................      (514)      (542)
                                                              --------   --------
      Net cash used by investing activities.................    (3,158)    (2,528)
                                                              --------   --------

Financing activities:
  Repayment of notes payable................................       (73)    (1,348)
  Net proceeds from issuance of common stock and warrants...    60,483         --
  Net proceeds from exercise of options.....................       746      4,957
  USAI transaction related costs............................        --     (6,341)
                                                              --------   --------
      Net cash provided (used) by financing activities......    61,156     (2,732)
                                                              --------   --------
Effect of foreign exchange rates changes on cash and cash
  equivalents...............................................       (10)       (19)
                                                              --------   --------
Net increase in cash and cash equivalents...................    61,669     15,640
Cash and cash equivalents at beginning of period............    60,670    182,161
                                                              --------   --------
Cash and cash equivalents at end of period..................  $122,339   $197,801
                                                              --------   --------

SUPPLEMENTAL DISCLOSURES TO CASH FLOW STATEMENTS:
  Cash paid for interest....................................  $     64   $     28
  Forfeiture of stock-based compensation....................       571        477


                            See accompanying notes.

                                      F-41

    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS DESCRIPTION

    In October 1996, Microsoft Corporation (Microsoft) launched its online
travel services product called Expedia-Registered Trademark-. Since that launch,
Expedia, Inc. (the Company) has become a leading provider of branded online
travel services for leisure and business travelers. The Company operates eight
websites, located at Expedia.com-Registered Trademark-, Expedia.co.uk,
Expedia.de, Expedia.ca-TM-, Expedia.it, Expedia.nl, VacationSpot.com-TM- and
Rent-a-Holiday.com. The Expedia-branded websites also serve as the travel
channel on MSN.com, Microsoft's online services network. In addition, during the
quarter, the Company began redirecting traffic from the Travelscape.com-TM- and
LVRS.com websites. Visitors to these websites are automatically transferred to
the Expedia.com website.

    The Company's goal is to sell the broadest possible array of travel services
to the broadest possible range of customers around the world. This encompasses
providing real-time access to schedule, pricing and availability information for
booking reservations for airlines, hotels, rental cars, and cruises. The Company
sells these reservations both individually and as components of dynamically
assembled packaged travel vacations and trips. In addition, the Company provides
content on its websites that provides travelers information about travel
destinations, maps, and other travel details.

    The Company was incorporated in the state of Washington on August 23, 1999.
On October 1, 1999, Microsoft separated the assets and contributed them in
exchange for 33,000,000 shares of Expedia common stock or 100% of the
outstanding common stock at that date. Concurrent with this, the Company entered
into a number of agreements with Microsoft to facilitate the operation of the
Company and its assets after the separation.

    On November 10, 1999, the Company completed an initial public offering in
which it sold 5,890,000 shares of common stock at a price of $14.00 per share,
raising $83.7 million in gross proceeds. After deducting $5.3 million in
aggregate underwriters' discounts and commissions and $1.8 million in related
expenses, net proceeds from this offering totaled $76.6 million. Microsoft's
interest has since been further diluted as a result of option exercises, a
private placement of shares and the exercise of warrants associated with the
private placement, and shares issued in conjunction with acquisitions.

    In March 2000, the Company acquired Travelscape.com, Inc. (Travelscape), a
Delaware corporation based in Las Vegas, Nevada.
Travelscape-Registered Trademark- is a leading Internet travel wholesaler and
packager with discounted rate contracts with hotel and travel suppliers
worldwide. Hotel rooms, car rentals, and travel services from those suppliers
are offered on all of the Expedia-branded websites. In July 2001, Travelscape
also operates under the business name, WWTE, which is a private label online
travel business that supplies car and hotel inventory to third parties.

    In March 2000, the Company also acquired VacationSpot.com, Inc.
(VacationSpot), a Delaware corporation based in Seattle, Washington.
VacationSpot is a leading reservation network for vacation homes, rental
condominiums, inns and bed & breakfasts around the world. VacationSpot was
subsequently merged into the Company. The VacationSpot.com-TM- and
Rent-a-Holiday.com websites, acquired as part of the acquisition, offer unique
properties in vacation destinations and countries worldwide and operate as
independent websites. In addition, the majority of this inventory is also
offered on all of the Expedia-branded websites and the private label websites.

    The Company classifies revenues into three categories: agency, merchant and
advertising and other. Agency revenues are derived from travel-related sales
transactions where the Company receives commissions and fees from travel
suppliers. Merchant revenues primarily come from travel-related sales
transactions where the Company both purchases from the supplier and sells to the
customer the requested travel service. In addition, the Company derives revenues
from advertisements on its websites. The Company has also licensed components of
its technology and editorial content. Both

                                      F-42

1. BUSINESS DESCRIPTION (CONTINUED)
advertising and licensing revenues are categorized as "Advertising and Other"
revenues in the Company's consolidated statements of operations and
comprehensive loss.

2. BASIS OF PRESENTATION

    The accompanying condensed consolidated balance sheets and related interim
condensed consolidated statements of operations, cash flows, and changes in
stockholders' equity, are unaudited and in the opinion of management, include
all adjustments (consisting only of normal recurring items) necessary for their
fair presentation in conformity with accounting principles generally accepted in
the United States of America. Preparing financial statements requires the
Company to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses. Actual results may differ from those
estimates. Interim results are not necessarily indicative of results for a full
year. Readers of the condensed consolidated financial statements should read the
information included in this Form 10-Q in conjunction with Management's
Discussion and Analysis and consolidated financial statements and notes included
in the Company's Annual Report filed on Form 10-K with the Securities and
Exchange Commission on August 22, 2001.

3. GOODWILL AND OTHER INTANGIBLES

    In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
No. 141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under SFAS No. 142, goodwill and
intangible assets with indefinite lives are no longer amortized, but are
reviewed annually for impairment or more frequently if impairment indicators
arise. Separable intangible assets that have finite lives will continue to be
amortized over their useful lives. The Company elected to adopt SFAS No. 142 on
July 1, 2001. As required under the standard, the Company continues to amortize
intangibles assets with finite lives and has ceased the amortization
prospectively on goodwill upon the adoption of the standard.

    The Company has completed its initial impairment assessment of the goodwill,
which is attributable to the Destinations segment, by comparing the fair value
of the segment to its carrying value. Fair value was determined using a
discounted cash flow methodology. This impairment test is required to be
performed upon adoption of the SFAS No. 142 and at least annually thereafter.

    Based on the initial impairment test, none of the goodwill recorded was
impaired. Impairment adjustments recognized after adoption, if any, generally
are recognized as operating expenses.

    The financial information for the acquired intangible assets is as follows:



                                                        ORIGINAL   ACCUMULATED    NET BOOK
                                                          COST     AMORTIZATION    VALUE
                                                        --------   ------------   --------
                                                                         
Amortized Intangible Assets
  Supplier relationships..............................  $26,200      $20,143      $ 6,057
  Trademarks and tradenames...........................   20,300       10,405        9,895
  Distribution agreements.............................   24,900       19,143        5,757
  Other...............................................   18,800       11,224        7,576
                                                        -------      -------      -------
                                                        $90,200      $60,915      $29,285
                                                        =======      =======      =======


    In connection with adopting SFAS No. 142, the Company also reassessed the
useful lives and the classification of identifiable intangible assets. The only
change was the reclassification of $4.1 million for the intangible asset
"acquired workforce", which was identified in previous acquisitions in
accordance with accounting guidance prior to SFAS No. 142, as goodwill.
Amortization expense for the

                                      F-43

3. GOODWILL AND OTHER INTANGIBLES (CONTINUED)
acquired intangible assets for the quarter ended September 30, 2001, was
$9.9 million and annual estimated amortization for the acquired intangible
assets for the next three fiscal years are as follows:


                                                           
2002........................................................  $30,943
2003........................................................    7,141
2004........................................................    1,104
                                                              -------
                                                              $39,188
                                                              =======


    The table below shows the effect on net loss and net loss per share had SFAS
No. 142 been adopted in prior periods:



                                                              THREE MONTHS ENDED
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                                2000       2001
                                                              --------   --------
                                                                   
Reported net loss...........................................  $(30,784)  $(4,750)
Amortization of goodwill....................................     5,421        --
                                                              --------   -------
Adjusted net loss...........................................  $(25,363)  $(4,750)
                                                              --------   -------
Reported basic and diluted net loss per share...............  $  (0.69)  $ (0.09)
Amortization of goodwill....................................      0.12        --
                                                              --------   -------
Adjusted basic and diluted net loss per share...............  $  (0.57)  $ (0.09)
                                                              --------   -------


4. RECENT ACCOUNTING PRONOUNCEMENTS

    In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. This statement establishes accounting standards for recognition and
measurement of a liability for an asset retirement obligation and the associated
asset retirement cost. This statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002. The Company does not
expect the adoption of SFAS No. 143 to have a material effect on its financial
position or result of operations.

    In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. This statement supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Assets to Be Disposed
Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting
the Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business (as previously defined
in that opinion). SFAS No. 144 established a single accounting model, based on
the frame work established in SFAS No. 121 for long-lived assets to be disposed
of for sale. It retains the fundamental provisions of SFAS No. 121 for
(a) recognition and measurement of the impairment of long-lived assets to be
held and used and (b) measurement of long-lived assets to be disposed of by
sale. SFAS No. 144 is effective for fiscal years beginning after December 15,
2001, with earlier applications encouraged. The Company has not yet determined
the impact of adopting SFAS No. 144 on its financial position or results of
operations.

5. INCOME TAXES

    Effective October 1, 1999, the Company entered into a tax allocation
agreement with Microsoft. On March 18, 2000, Microsoft's investment in the
Company fell below 80% ownership. As such, from March 18, 2000 onward, the
Company must file a separate tax return. Based on the tax allocation agreement,
the Company may be reimbursed by Microsoft for tax losses incurred during the
period from October 1, 1999 to March 17, 2000 that are utilized on the Microsoft
consolidated U.S. federal tax return. As of September 30, 2001, the Company has
received no such reimbursement from

                                      F-44

5. INCOME TAXES (CONTINUED)
Microsoft. Reimbursements of approximately $2.5 million are expected to be
received from Microsoft under this agreement. Any reimbursement from Microsoft
will be recorded as a capital contribution.

    In November 2001, the Company entered into an agreement with Microsoft
setting forth the manner in which the Company will compensate Microsoft for
compensation deductions attributable to the "Inherent Bargain Element" as used
in the tax allocation agreement. Under this agreement, the Company generally
will be required to compensate Microsoft for the actual federal and state tax
savings that the Company realizes as a result of the use of the compensation
deductions, as and when the Company realizes such tax savings.

    At September 30, 2001, the Company has a net operating loss carryforward of
approximately $105 million for federal income tax purposes. The net operating
loss carryforwards begin to expire in 2017. Of this amount, $5 million is the
amount available to the Company from the period ended March 17, 2000. In
addition, $31 million of the loss carryforward is from acquired companies, the
utilization of which in each carryforward year may be limited by the Internal
Revenue Code. Under the tax allocation agreement with Microsoft which was
subsequently amended in November 2001, the Company must pay Microsoft for a
portion of the tax savings resulting from the exercise of certain stock options.
The Company will pay Microsoft approximately $36 million under this agreement
when the tax savings are utilized on the Company's tax return. The Company has
not utilized the tax savings as of September 30, 2001. Reimbursements to
Microsoft will be recorded as a capital distribution.

    Because of the Company's limited operating history, losses incurred to date
and the difficulty in accurately forecasting long-term future results, the
Company has applied a valuation allowance equivalent to the expected tax benefit
from its net operating loss carryforward and other deferred tax assets. As a
result, the Company has not recorded a benefit for current federal and state
income taxes or a related deferred tax asset. Management evaluates, on a
quarterly basis, the recoverability of the deferred tax assets and the level of
the valuation allowance.

6. NET LOSS PER SHARE

    Net loss per share has been computed in accordance with SFAS No. 128,
Earnings per Share. Net loss per share is computed by dividing the net loss for
the period by the weighted average number of common shares outstanding. Common
stock equivalent shares related to stock options, warrants and shares subject to
repurchase are excluded from the calculation as their effect is anti-dilutive.
Accordingly, basic and diluted loss per share are equivalent.

7. RELATED PARTY TRANSACTIONS

    In June 2001, the Company signed an amended and restated carriage and cross
promotion agreement with Microsoft. Under this agreement, Microsoft's domestic
and international MSN websites promote co-branded versions of the Expedia
websites that include the logos of both the Company and MSN in the U.S., the
U.K., Germany and Canada, the countries in which the Company is currently
present. These co-branded websites are the preferred travel transaction services
offered on MSN, except in international markets where Expedia does not have a
presence. Under the agreement, the parties also agreed to certain restrictions
regarding the promotion of competitors on MSN.com and on the MSN Expedia
co-branded travel websites accessed via MSN.com. The Company pays Microsoft
slotting fees and performance fees under this agreement. These fees are
calculated in accordance with the terms of the agreement and, in certain cases,
a letter agreement entered into between the parties in July 2001. The Company
pays Microsoft an annual slotting fee of $500,000 for the U.S. co-branded travel
website. This fee is credited toward the performance fees that the Company is
required to pay Microsoft. The Company pays Microsoft an annual slotting fee of
$250,000 for each non-U.S. co-branded travel website. These fees are credited
toward the performance fees the Company is

                                      F-45

7. RELATED PARTY TRANSACTIONS (CONTINUED)
required to pay Microsoft only if these non-U.S. websites exceed specified
revenue targets. The performance fees the Company pays to Microsoft are based on
the number of transactions of each transaction type that occur on the co-branded
websites multiplied by the average gross profit per transaction achieved by the
Company for each transaction type multiplied by the agreed percentage of gross
profit to be shared for each transaction type. This agreement runs through
June 30, 2005.

    The Company entered into an amended and restated services agreement with
Microsoft on October 1, 1999 whereby Microsoft provides the Company with certain
administrative and operational services. This agreement was subsequently amended
and restated effective January 1, 2001 and further amended as of July 1, 2001.
The Company intends to enter into a second amended and restated services
agreement in connection with the USAI transaction, which is discussed in
Note 10. The second amended and restated services agreement will extend through
September 30, 2002, although Microsoft may elect in limited circumstances to
terminate certain services if Microsoft determines, in good faith after
consultation with USAI and Expedia, that it is inappropriate for Microsoft to
provide such services to an unaffiliated third party.

    Under the second amended and restated services agreement, Microsoft will
continue to provide the Company with specified administrative and operational
services. In return, the Company will pay Microsoft fees based on the total
direct and indirect costs incurred by Microsoft in providing these services to
the Company. The Company has been developing and will continue to develop its
own resources in these administrative and operational areas.

    In August 2001, in connection with the USAI transactions, the Company and
Microsoft entered into a hosting services agreement under which Microsoft
provides the Company with internet service provider services for the Expedia
websites. Microsoft previously provided these services to the Company under the
amended and restated services agreement. The hosting services agreement has a
four-year term. The Company pays Microsoft for the hosting services on a cost
basis.

    On October 1, 1999, the Company and Microsoft entered into a license
agreement under which Microsoft provides the Company with rights to intellectual
property used in its business. Microsoft assigned to the Company the trademarks
and domain names associated with the name "Expedia." In addition, Microsoft
assigned to the Company copyrights for software relating to online travel
services. The Company licenses the right to use some of Microsoft's retail
products and other technology under the license agreement. All of the licenses
relating to Expedia-specific software content and data and patents are
royalty-free, irrevocable and perpetual. Upon completion of the USAI
transaction, the license agreement will be terminated, however, the perpetual
licenses will remain.

    In August 2001, the Company signed an amended and restated map server
license agreement with Microsoft. Under this agreement, Microsoft will develop,
maintain, host and serve maps to the Expedia websites. The maps will be
customized for the Company's websites and will include both the Company's logo
and Microsoft's MapPoint.Net logo. The Company will pay route transaction fees,
location lookup transaction fees and map transaction fees to Microsoft. This
agreement was applied retroactively to December 2000. The agreement runs through
August 2005.

    On September 25, 2001, Expedia and Microsoft entered into the following
agreements that provide Expedia with worldwide rights to use some of Microsoft's
retail products: Microsoft Business Agreement; Microsoft Enterprise Agreement;
Microsoft Enterprise Enrollment Agreement; Microsoft Select Agreement; and
Microsoft Select Enrollment Agreement to replace some of the licenses in the
license agreement dated October 1, 1999.

    Effective October 1, 1999, the Company entered into a tax allocation
agreement with Microsoft relating to periods during which the Company was
included in Microsoft's U.S. federal tax return. In November 2001, the Company
entered into an agreement with Microsoft setting forth the manner in

                                      F-46

7. RELATED PARTY TRANSACTIONS (CONTINUED)
which the Company will compensate Microsoft for compensation deductions
attributable to the "Inherent Bargain Element" as used in the tax allocation
agreement. Under this agreement, the Company generally will be required to
indemnify Microsoft for the actual federal and state tax savings that the
Company realizes as a result of the use of the compensation deductions, as and
when the Company realizes such tax savings.

    In November 2001, the Company entered into an agreement to assign patent
applications and royalty sharing agreement with Microsoft. Under this agreement,
Microsoft assigned to the Company all of Microsoft's patents relating to the
operation of the Company's websites. The assignment agreement includes a limited
license of such patents from the Company to Microsoft. Further, the agreement
includes a royalty sharing agreement under which the Company will pay a
percentage of any royalties collected by the Company for licenses to such
patents that are granted by the Company to third parties for use in products
and/or services other than online travel services.

    The Company incurs various charges from the above agreements as follows (in
thousands):



                                                                 THREE MONTHS
                                                                     ENDED
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                                2000       2001
                                                              --------   --------
                                                                   
Revenues....................................................   $  (44)    $   --
Cost of revenues............................................      526      1,035
Product development.........................................      383        760
Sales and marketing.........................................    1,222      2,327
General and administrative..................................      438        414
                                                               ------     ------
Net expense.................................................   $2,525     $4,536
                                                               ------     ------


8. COMMITMENTS AND CONTINGENCIES

    The Company has multi-year agreements with certain travel service providers
that make available the services accessed through the Company's website. Under
these agreements, the Company pays monthly service fees to the service providers
based on the volume of activity. The Company expenses these amounts as the
services are provided.

    Between June 5 and July 26, 2001, four class action complaints, alleging
violations of Section 11 of the Securities Act of 1933 and Section 10(b) of the
Securities Exchange Act of 1934, were filed in the Southern District of New York
against the Company, certain of its officers and directors and certain
underwriters of the Company's initial public offering (IPO). The complaint
alleges that the Company's prospectus was false or misleading in that it failed
to disclose (i) that the underwriters allegedly were paid excessive commissions
by certain customers in return for receiving shares in the IPO and (ii) that
certain of the underwriters' customers allegedly agreed to purchase additional
shares of the Company in the aftermarket in return for an allocation of shares
in the IPO. Plaintiffs contend that as a result of those omissions from the
prospectus, the price of the Company's stock was artificially inflated between
November 9, 1999 and December 6, 2000 and that the defendants are liable for
unspecified damages to those persons who purchased stock during that period. On
August 9, 2001, these actions were consolidated before a single judge along with
cases brought against numerous other issuers and their underwriters that make
similar allegations involving the IPO's of those issuers. The consolidation was
for purposes of pretrial motions and discovery only. The Company intends to
defend this matter vigorously.

    In addition to the matter discussed above, the Company is subject to various
legal proceedings and claims that arise in the ordinary course of business.
Management believes that the resolution of all such

                                      F-47

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
matters will not have a material impact to the Company's financial position,
results of operations or cash flows.

9. SEGMENT INFORMATION

    The Company has five reportable segments: Transportation, Destinations,
Advertising, International and Corporate. The Transportation segment serves
primarily as an agent for U.S.-originated airline tickets and car rentals. The
Destinations segment generates most of its revenues from U.S.-originated hotel
bookings where the Company acts as merchant of record. The Advertising segment
sells advertisements on the domestic websites. The International segment
generates most of its revenues as agency revenues from airline tickets, car
rentals and hotel bookings on its websites in the United Kingdom, Germany,
Belgium, Italy, the Netherlands and Canada. The Corporate segment generates
revenues from the licensing of technology and generates expenses consisting of
the amortization of goodwill and intangibles, recognition of stock-based
compensation and certain corporate headquarters costs.

    Segment information is presented in accordance with SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. This
standard is based on a management approach, which requires segmentation based
upon the Company's internal organization and disclosures of revenue and
operating loss based upon internal accounting methods.

    Management evaluates each segment's performance based upon income or loss
from operations. This involves significant allocations of various expenses to
the non-Corporate segments. These allocations are primarily based on transaction
volumes and other metrics.

    The segment information for the three months ended September 30, 2000 and
2001, are as follows (in thousands):



                                    TRANSPORTATION   DESTINATIONS   ADVERTISING   INTERNATIONAL   CORPORATE    TOTAL
                                    --------------   ------------   -----------   -------------   ---------   --------
                                                                                            
For the three months ended
  September 30, 2000
Revenues..........................     $18,645         $14,060        $3,087         $ 1,621      $  4,692    $ 42,105
                                       -------         -------        ------         -------      --------    --------
Depreciation and amortization.....     $   125         $   271        $   10         $    34      $ 15,647    $ 16,087
                                       -------         -------        ------         -------      --------    --------
Income (loss) from operations.....     $(1,720)        $   291        $1,826         $(3,491)     $(28,772)   $(31,866)
                                       -------         -------        ------         -------      --------    --------
For the three months ended
  September 30, 2001
Revenues..........................     $41,621         $28,628        $3,467         $ 4,121      $  1,641    $ 79,478
                                       -------         -------        ------         -------      --------    --------
Depreciation and amortization.....     $   625         $   733        $  103         $   254      $ 10,833    $ 12,548
                                       -------         -------        ------         -------      --------    --------
Income (loss) from operations.....     $ 8,717         $ 8,858        $1,221         $(2,199)     $(16,335)   $   (262)
                                       -------         -------        ------         -------      --------    --------


    Assets of the segments are not relevant for management of the business.
However, depreciation and amortization expense, excluding amortization of
goodwill and intangibles that has been exclusively allocated to the Corporate
segment, has been allocated to the five segments for these segment disclosures
based on a usage metric. There are no reconciling items between the segment
information indicated above to the consolidated statements of operations, nor
are there any inter-segment revenues.

    The Company has allocated revenues from external customers to geographic
areas by selling location. The Transportation, Destinations and Advertising
segments derive revenues from the Company's U.S. websites and the International
segment derives revenues from the Company's international websites.

                                      F-48

10. USAI TRANSACTION

    On July 16, 2001, the Company announced that it had entered into a merger
agreement with Microsoft and USA Networks, Inc. (USAI), among others, whereby
USAI agreed to acquire up to 37,500,000 shares of Expedia common stock,
representing a controlling interest in the Company. In connection with the
transaction, the Company will create a Class B common stock with fifteen votes
per share, subject to certain limitations. Following the completion of the
recapitalization of Expedia's common stock, which will take place immediately
prior to the merger, and the completion of the merger, USAI is expected to hold
all Class B common shares and hold over 90% of the voting interest in the
Company. As part of the agreement, Microsoft will elect to exchange all
33,602,258 of its Expedia shares and all 120,452 of its warrants in exchange for
a package of USAI securities (described below), subject to a ratable reduction
depending upon the number of elections made by other shareholders. Under the
terms of the transaction agreements, the Company's shareholders may elect to
either retain their common stock in the Company and receive for each share of
common stock, 0.192 warrants to purchase the Company's common stock at $52 per
common share or exchange their shares of the Company's common stock for a
package of USAI securities consisting of USAI common stock, USAI convertible
redeemable preferred stock and warrants to acquire USAI common stock. Also,
under the terms of the transaction agreements, the Company's employee option
holders and in, certain cases, the Company's existing warrant holders will
receive 0.192 warrants per option or warrant to purchase the Company's common
stock at $52 per common share. Warrants granted to each employee option holder
will have the same vesting schedule as such employee's unvested options.

    As part of the transaction, USAI will contribute $75 million in media time
on its media outlets to the Company over a five year period following closing.
In addition, the Company will acquire an option to participate in a new
television channel to be developed by USAI called the USA Travel Channel. The
terms of the transaction also provide for the Company to have an option to
purchase from USAI the National Leisure Group (NLG), a supplier of cruise travel
products. In the event that USAI does not acquire NLG within 6 months of the
completion of the merger agreement, the Company will be entitled to a payment
from USAI of $20 million plus interest.

    The completion of the transaction is subject to the approval of the
Company's shareholders. The Company has incurred $6.3 million of costs related
to the transaction for the quarter ended September 30, 2001 and anticipates
incurring further costs for investment banking, legal, and accounting services
in order to complete this transaction. The Company anticipates completing the
transaction by the end of December 2001.

    USAI holds approximately 90% of the voting rights in Hotel Reservations
Network, Inc. (HRN), a competitor of the Company. USAI has announced publicly
that HRN and the Company will continue to operate independently despite being
controlled by a common parent.

11. SEPTEMBER 11, 2001--TERRORIST ATTACKS

    The terrorist attacks of September 11, 2001 had an impact on this quarter's
revenues. The mandated grounding of all flights by the FAA for several days
coupled with the slow ramp-up of flights and cutbacks in schedules by the
airlines reduced this quarter's revenues. In addition, airlines allowed
customers with non-refundable tickets to refund them and hotels relaxed their
cancellation policies, resulting in lost agency and merchant revenue for
Expedia. Also, the volume of calls and length of calls at the Company's call
centers increased as the call centers were addressing customers' travel
concerns, thereby increasing cost of revenues.

                                      F-49

                              PART II INFORMATION
                         NOT REQUIRED IN THE PROSPECTUS

ITEM 20. 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 representative of such director or officer) in defending any proceeding
within 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, officers and directors may be
provided 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 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 attorney's
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.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS


      
   2.1   Amended and Restated Agreement and Plan of Recapitalization and Merger, dated as of July 15, 2001,
         by and among the Registrant, Taipei, Inc., Expedia, Inc., Microsoft Corporation and Microsoft
         E-Holdings, Inc. (included as Annex A to the joint prospectus/proxy and information statement
         incorporated as part of this registration statement).

   2.2   Transaction Agreement, dated as of December 16, 2001, among Vivendi Universal, S.A., Universal
         Studios, Inc., the Registrant, USANi LLC and Liberty Media Corporation (incorporated by reference to
         Exhibit 2.1 to the Registrant Form 8-K filed on December 18, 2001).

   3.1   Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to
         Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000).

   3.2   Amendment to Restated Certificate of Incorporation of Registrant (included as Exhibit A to
         Registrant's Definitive Information Statement, filed on November 19, 2001).


                                      II-1


      
   3.3   Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to
         Registrant's Form 8-K, dated January 9, 1998).

   4.1   Form of Certificate of Designations of Series A Cumulative Convertible Preferred Stock of the
         Registrant.*

   4.2   Form of Equity Warrant Agreement between the Registrant and The Bank of New York.*

   4.3   Form of Equity Warrant Agreement between the Registrant and The Bank of New York, as equity warrant
         agent (incorporated by reference to Exhibit 4.1 to the Registrant Form 8-K filed on December 18,
         2001).

   5.1   Opinion of Wachtell, Lipton, Rosen & Katz regarding the legality of the shares being issued.*

   8.1   Opinion of Shearman & Sterling as to certain U.S. federal income tax matters.*

  10.1   Form of Registration Rights Agreement by and between the Registrant and Expedia, Inc.*

  10.2   Amended and Restated Governance Agreement, dated as of December 16, 2001, among the Registrant,
         Universal Studios, Inc., Liberty Media Corporation, Barry Diller and Vivendi Universal, S.A.
         (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on December 18, 2001).

  10.3   Amended and Restated Stockholders Agreement, dated as of December 16, 2001, among Universal Studios,
         Inc., Liberty Media Corporation, Barry Diller and Vivendi Universal, S.A. (incorporated by reference
         to Exhibit 99.2 to the Registrant Form 8-K filed on December 18, 2001).

  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).

  23.4   Consent of Shearman & Sterling (included in Exhibit 8.1).

  23.5   Consent of Morgan Stanley & Co.*

    24   Powers of Attorney.*

  99.1   Form of Proxy Card of Expedia, Inc.*

99.1.1   Form of Proxy Card for reconvened annual meeting of Expedia, Inc.

  99.2   Form of Election Form and Letter of Transmittal.*

  99.3   2001 Expedia Annual Meeting Instruction Booklet for Expedia Shareholders, Warrantholders and
         Optionholders.*

99.3.1   Form of Notice of Guaranteed Delivery.*

99.3.2   Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.*

  99.4   Terms of NLG Call Option.*

  99.5   Terms of Travel Channel Option.*

  99.6   Terms of Media Arrangements in USA Media, LLC.*

  99.7   Voting and Election Agreement, dated July 15, 2001, between the Registrant, Microsoft and Microsoft
         E-Holdings (included as Annex E to the joint prospectus/proxy and information statement incorporated
         as part of this registration statement).*


                                      II-2


      
  99.8   Form of Limited Liability Limited Partnership Agreement of [Vivendi Universal Entertainment],
         L.L.L.P., among a wholly owned subsidiary of Universal Studios, Inc., the Registrant, USANi Sub LLC
         and Barry Diller (incorporated by reference to Exhibit 99.1 to the Registrant's Form 8-K filed on
         December 18, 2001).


------------------------

*   Previously filed

ITEM 22. UNDERTAKINGS

    The undersigned Registrant hereby undertakes:

        (a)  To file, during any period in which offers or sales are being made,
    a post-effective amendment to this registration statement:

            (i) To include any prospectus required by Section 10(a)(3) of the
                Securities Act of 1933;

            (ii) To reflect in the prospectus any facts or events arising after
                 the effective date of the registration statement (or the most
                 recent post-effective amendment thereof) which, individually or
                 in the aggregate, represent a fundamental change in the
                 information set forth in the registration statement.
                 Notwithstanding the foregoing, any increase or decrease in
                 volume of securities offered (if the total dollar value of
                 securities offered would not exceed that which was registered)
                 and any deviation from the low or high end of the estimated
                 maximum offering range may be reflected in the form of
                 prospectus filed with the Commission pursuant to Rule 424(b)
                 if, in the aggregate, the changes in volume and price represent
                 no more than a 20 percent change in the maximum aggregate
                 offering price set forth in the "Calculation of Registration
                 Fee" table in the effective registration statement;

           (iii) To include any material information with respect to the plan of
                 distribution not previously disclosed in the registration
                 statement or any material change to such information in the
                 registration statement.

        (b)  That, for the purpose of determining any liability under the
    Securities Act of 1933, 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.

        (c)  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.

        (d)  That, for purposes of determining any liability under the
    Securities Act of 1933, each filing of the Registrant's annual report
    pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of
    1934 (and, where applicable, each filing of an employee benefit plan's
    annual report pursuant to Section 15(d) of the Securities Exchange Act of
    1934) 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.

        (e)  That prior to any public reoffering of the securities registered
    hereunder through use of a prospectus which is a part of this registration
    statement, by any person or party who is deemed to be an underwriter within
    the meaning of Rule 145(c), the issuer undertakes that such reoffering
    prospectus will contain the information called for by the applicable
    registration form with respect to reofferings by persons who may be deemed
    underwriters, in addition to the information called for by the other items
    of the applicable form.

                                      II-3

        (f)  That every prospectus: (i) that is filed pursuant to paragraph (e)
    immediately preceding, or (ii) that purports to meet the requirements of
    Section 10(a)(3) of the Act and is used in connection with an offering of
    securities subject to Rule 415, will be filed as a part of an amendment to
    the registration statement and will not be used until such amendment is
    effective, and that, for purposes of determining any liability under the
    Securities Act of 1933, each such post-effective amendment shall be deemed
    to be a new registration statement relating to the securities offering
    therein, and the offering of such securities at that time shall be deemed to
    be the initial BONA FIDE offering thereof.

        (g)  To respond to requests for information that is incorporated by
    reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
    form, within one business day of receipt of such request, and to send the
    incorporated documents by first class mail or other equally prompt means.
    This includes information contained in the documents filed subsequent to the
    effective date of the registration statement through the date of responding
    to the request.

        (h)  To supply by means of a post-effective amendment all information
    concerning a transaction, and the company being acquired involved therein,
    that was not the subject of and included in the registration statement when
    it became effective.

    Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 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 Act and will be governed by the final adjudication of
such issue.

                                      II-4

                                   SIGNATURES

    Pursuant to the requirements of the Securities Act, the registrant 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 7, 2002.


                                                      
                                                       USA NETWORKS, INC.

                                                       By:              /s/ BARRY DILLER*
                                                            -----------------------------------------
                                                                           Barry Diller
                                                               CHAIRMAN AND CHIEF EXECUTIVE OFFICER


    Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities as of
January 7, 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
                William J. Severance                     Controller (Chief Accounting Officer)

                 /s/ MICHAEL SILECK*
     -------------------------------------------       Senior Vice President and
                   Michael Sileck                        Chief Financial Officer

                 /s/ PAUL G. ALLEN*
     -------------------------------------------       Director
                    Paul G. Allen

     -------------------------------------------       Director
                  Robert R. Bennett

              /s/ EDGAR BRONFMAN, JR.*
     -------------------------------------------       Director
                 Edgar Bronfman, Jr.

                /s/ ANNE M. BUSQUET*
     -------------------------------------------       Director
                   Anne M. Busquet


                                      II-5




                      SIGNATURE                                            TITLE
                      ---------                                            -----
                                                    
                /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

     -------------------------------------------       Director
                   John C. Malone

               /s/ JEAN-MARIE MESSIER*
     -------------------------------------------       Director
                 Jean-Marie Messier

                /s/ WILLIAM D. SAVOY*
     -------------------------------------------       Director
                  William D. Savoy

           /s/ GEN. H. NORMAN SCHWARZKOPF*
     -------------------------------------------       Director
             Gen. H. Norman Schwarzkopf

             /s/ DIANE VON FURSTENBERG*
     -------------------------------------------       Director
                Diane Von Furstenberg



                                                                                 
*By:                 /s/ JULIUS GENACHOWSKI*
             --------------------------------------
                       Julius Genachowski
                        ATTORNEY-IN-FACT


                                      II-6

                                 EXHIBIT INDEX



       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------                           -----------
                     
          2.1           Amended and Restated Agreement and Plan of Recapitalization
                        and Merger, dated as of July 15, 2001, by and among the
                        Registrant, Taipei, Inc., Expedia, Inc., Microsoft
                        Corporation and Microsoft E-Holdings, Inc. (included as
                        Annex A to the joint prospectus/proxy and information
                        statement incorporated as part of this registration
                        statement).
          2.2           Transaction Agreement, dated as of December 16, 2001, among
                        Vivendi Universal, S.A., Universal Studios, Inc., the
                        Registrant, USANi LLC and Liberty Media Corporation
                        (incorporated by reference to Exhibit 2.1 to the Registrant
                        Form 8-K filed on December 18, 2001).
          3.1           Restated Certificate of Incorporation of the Registrant
                        (incorporated by reference to Exhibit 3.1 to Registrant's
                        Quarterly Report on Form 10-Q for the fiscal quarter ended
                        June 30, 2000).
          3.2           Amendment to Restated Certificate of Incorporation of
                        Registrant (included as Exhibit A to Registrant's Definitive
                        Information Statement, filed on November 19, 2001).
          3.3           Amended and Restated Bylaws of the Registrant (incorporated
                        by reference to Exhibit 3.1 to Registrant's Form 8-K, dated
                        January 9, 1998).
          4.1           Form of Certificate of Designations of Series A Cumulative
                        Convertible Preferred Stock of the Registrant.*
          4.2           Form of Equity Warrant Agreement between the Registrant and
                        The Bank of New York.*
          4.3           Form of Equity Warrant Agreement between the Registrant and
                        The Bank of New York, as equity warrant agent (incorporated
                        by reference to Exhibit 4.1 to the Registrant Form 8-K filed
                        on December 18, 2001).
          5.1           Opinion of Wachtell, Lipton, Rosen & Katz regarding the
                        legality of the shares being issued.*
          8.1           Opinion of Shearman & Sterling as to certain U.S. federal
                        income tax matters.*
         10.1           Form of Registration Rights Agreement by and between the
                        Registrant and Expedia, Inc.*
         10.2           Amended and Restated Governance Agreement, dated as of
                        December 16, 2001, among the Registrant, Universal Studios,
                        Inc., Liberty Media Corporation, Barry Diller and Vivendi
                        Universal, S.A. (incorporated by reference to Exhibit 10.1
                        to the Registrant's Form 8-K filed on December 18, 2001).
         10.3           Amended and Restated Stockholders Agreement, dated as of
                        December 16, 2001, among Universal Studios, Inc., Liberty
                        Media Corporation, Barry Diller and Vivendi Universal, S.A.
                        (incorporated by reference to Exhibit 99.2 to the Registrant
                        Form 8-K filed on December 18, 2001).
         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).
         23.4           Consent of Shearman & Sterling (included in Exhibit 8.1).
         23.5           Consent of Morgan Stanley & Co.*
           24           Powers of Attorney.*
         99.1           Form of Proxy Card of Expedia, Inc.*
       99.1.1           Form of Proxy Card for reconvened annual meeting of Expedia,
                        Inc.
         99.2           Form of Election Form and Letter of Transmittal.*
         99.3           2001 Expedia Annual Meeting Instruction Booklet for Expedia
                        Shareholders, Warrantholders and Optionholders.*
       99.3.1           Form of Notice of Guaranteed Delivery.*
       99.3.2           Form of Guidelines for Certification of Taxpayer
                        Identification Number on Substitute Form W-9.*






       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------                           -----------
                     
         99.4           Terms of NLG Call Option.*
         99.5           Terms of Travel Channel Option.*
         99.6           Terms of Media Arrangements in USA Media, LLC.*
         99.7           Voting and Election Agreement, dated July 15, 2001, between
                        the Registrant, Microsoft and Microsoft E-Holdings (included
                        as Annex E to the joint prospectus/proxy and information
                        statement incorporated as part of this registration
                        statement).*
         99.8           Form of Limited Liability Limited Partnership Agreement of
                        [Vivendi Universal Entertainment], L.L.L.P., among a wholly
                        owned subsidiary of Universal Studios, Inc., the Registrant,
                        USANi Sub LLC and Barry Diller (incorporated by reference to
                        Exhibit 99.1 to the Registrant's Form 8-K filed on December
                        18, 2001).


------------------------

*   Previously filed