UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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¨ Soliciting Material Pursuant to Rule 14a-12 |
HSN, Inc.
(Name of Registrant as Specified In Its Charter)
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April 17, 20098, 2010
Dear Shareholder:
You are invited to attend the 2009 Annual Meeting2010 annual meeting of Shareholdersshareholders of HSN, Inc., which will be held on Tuesday,Wednesday, May 19, 20092010 at 9:2:30 a.m.p.m., local time, at the HSN, Inc. corporate headquarters located at 1 HSN Drive, St. Petersburg, Florida 33729. At the meeting you will be asked to vote on the election of our directors, ratification of the appointment of our auditors and approval of the Second Amended and Restated 2008 Stock and Annual Incentive Plan.approve an employee stock purchase plan. We are pleased to announce that all of our directors have agreed to stand for re-election at the Annual Meeting.annual meeting.
Based on the Securities and Exchange Commission rules that allow companies to furnish proxy materials to shareholders over the internet, we have elected to deliver our proxy materials to the majority of our shareholders over the internet. The new delivery process will allow us to provide shareholders with the information they need, while at the same time conserving natural resources and lowering the cost of delivery. On April 8, 2010, we mailed to our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy statement and annual report online. The notice also provides instructions on how to vote online or by telephone and includes instructions on how to receive a paper copy of the proxy materials by mail. We encourage you to take advantage of voting on the internet because it is a convenient and a less expensive way for us to tabulate your vote.
Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the meeting, please take the time to complete, sign, date and return the accompanying proxy card inor vote over the enclosed envelope to make certain your shares will be represented at the meeting. You may also submit a proxy for your shares by telephone or through the internet by following the instructions on the enclosed proxy card.internet.
Thank you for your continued support of HSN, Inc. and I hope to see you on May 19th.
Sincerely, |
 |
Mindy Grossman |
Chief Executive Officer |
HSN, INC.
1 HSN Drive
St. Petersburg, Florida 33729
NOTICE OF 20092010 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of HSN, Inc.:
Notice is hereby given that the Annual Meetingannual meeting of Shareholdersshareholders of HSN, Inc., a Delaware corporation, will be held on Tuesday,Wednesday, May 19, 20092010 at 9:2:30 a.m.p.m., local time, at the HSN, Inc. corporate headquarters located at 1 HSN Drive, St. Petersburg, Florida 33729. At the Annual Meeting,annual meeting, shareholders will be asked:
| 1. | to elect ten directors, each to hold office for a one-year term ending on the date of the next succeeding |
| 2. | to ratify the appointment of Ernst & Young LLP as our independent registered certified public accounting firm for the fiscal year ending December 31, |
| 3. | to approve the |
| 4. | to transact such other business as may properly come before the meeting or any related adjournments or postponements. |
These business items are described more fully in the Proxy Statement accompanying this Notice.
Our Board of Directors has set March 6, 200922, 2010 as the record date for the Annual Meeting.annual meeting. This means that only holders of record of our common stock at the close of business on that date are entitled to receive notice of the meeting and to vote their shares at the meeting or any related adjournments or postponements.
Important Notice Regarding the Availability of Proxy Materials for the 2010 Annual Shareholders’ Meeting.We are mailing to many of our shareholders a notice of availability of the proxy materials over the internet, rather than mailing a full paper set of the materials. The notice of availability contains instructions on how to access our proxy materials on the internet, as well as instructions on obtaining a paper copy of the proxy materials. This process is more environmentally friendly and reduces our costs to print and distribute these materials. However, shareholders who do not receive such a notice of availability, as well as shareholders who have previously requested to receive a paper copy of the materials, will receive a full set of paper proxy materials by U.S. mail.
By Order of the Board of Directors, |
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Executive Vice President, General Counsel and |
April 17, 20098, 2010
St. Petersburg, Florida
All Shareholders are cordially invited to attend the Annual Meeting in person. Whether or not you expect to attend the Annual Meeting, we urge you to submit your proxy or voting instructions as soon as possible so that your shares can be voted at the Annual Meeting in accordance with your instructions. For specific instructions on voting, please refer to the instructions on the enclosed proxy card or voting instruction form.
PROXY STATEMENT
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PROXY STATEMENT
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
| Q: | Why am I |
| A: | HSN, Inc., or HSNi, is providing these proxy materials to you in connection with the solicitation of proxies by HSNi’s Board of Directors |
| Q: | Why am I being asked to review materials on-line? |
| A: | Under rules adopted by the U.S. Securities and Exchange Commission, or SEC, we are now furnishing proxy materials to many of our shareholders on the internet, rather than mailing printed copies of those materials to each shareholder. If you received a Notice of Internet Availability of Proxy Materials, or Notice, by mail, you will not receive a printed copy of the proxy material unless you request one. Instead, the Notice will instruct you as to how you may access and review the proxy materials on the internet. If you received a Notice by mail but would rather receive a printed copy of our proxy materials, please follow the instructions included in the Notice. |
| Q: | What information is contained in these materials? |
| A: | The information included in this proxy statement relates to the proposals to be voted on at the |
| Q: | What does it mean if I received more than one proxy or voting instruction form? |
| A: | It means your shares are registered differently or are in more than one account. Please provide voting instructions for each proxy |
| Q: | What matters will |
Proposal 1—to elect ten directors, each to hold office for a one-year term ending on the date of the next succeeding annual meeting of shareholders or until such director’s successor shall have been duly elected and qualified;
Proposal 2—to ratify the appointment of Ernst & Young LLP or E&Y, as our independent registered certified public accounting firm for the year ending December 31, 2009;2010; and
Proposal 3—to approve our Second Amended and Restated 2008the HSN, Inc. Employee Stock and Annual Incentive Plan; andPurchase Plan.
Proposal 4—to transact suchWe will also consider other business as may properly come before the meeting and any related adjournments or postponements.
For a more detailed discussion of each of these proposals, please see the information included elsewhere in the proxy statement relating to these proposals.
| Q: | What are the Board’s voting recommendations? |
| The Board of Directors recommends that you vote your shares as follows: |
“FOR” each of the ten nominees to the Board of Directors (Proposal 1);
“FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered certified public accounting firm (Proposal 2); and
“FOR” the approval of the Second Amended and Restated 2008HSN, Inc. Employee Stock and Annual IncentivePurchase Plan (Proposal 3).
| Q: | Who is entitled to vote at the |
Each share of our common stock outstanding as of the close of business on March |
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| Q: | What is the difference between a shareholder of record and a shareholder who holds stock in street name? |
| If your shares are registered in your name, you are a shareholder of record with respect to those shares. As a shareholder of record, you have the right to vote in person at the |
If your shares are held in the name of your broker, bank or other nominee, these shares are held in street name. As the beneficial owner of these shares, you have the right to direct your broker, bank or other nominee on how to vote the shares in your account. Since you are not the shareholder of record, you must request and receive a valid proxy from your broker, bank or another holder of record in order to vote these shares in person at the Annual Meeting. Your broker, bank, or nominee has enclosed a voting instruction form for you to use in directing the broker, bank or nominee regarding how to vote your shares.annual meeting.
| Q: | If I hold my shares in street name through my broker, will my broker vote these shares for me? |
| If you |
Banks, brokers and other holders of record have discretionary authority to vote shares held in street name, even if they do not receive instructions from the beneficial owner, on routine proposals, which include the election of directors and the ratification of the appointment of an independent registered certified public accounting firm. Accordingly, if you do not provide your bank, broker or other holder of record with voting instructions with respect to the election of directors (Proposal 1) and/or the ratification of the appointment of our independent registered certified public accounting firm (Proposal 2), which are considered routine matters, such holder will have discretionary authority to vote your shares held in street name on these proposals at the meeting. As a result of this discretionary authority, broker non-votes will not occur in connection with Proposals 1 and 2.
However, banks, brokers and other holders of record do not have discretionary authority to vote shares held in street name in connection with non-routine proposals, which include Proposal 3 and Proposal 4. As a result, broker non-votes will occur in connection with Proposal 3 and Proposal 4.
| Q: | What are the quorum requirements for the meeting? |
| The presence of holders having a majority of the outstanding shares constitutes a quorum. The shares may be presented in person or presented by proxy at the meeting. Both abstentions and broker non-votes are counted as present for purpose of determining the presence of a quorum. |
| Q: | What is the voting requirement to approve each of the proposals? |
| In an uncontested election of directors, such as this election, |
The proposal to ratify the appointment of Ernst & Young LLP as our independent registered certified public accounting firm requires the affirmative vote of a majority of the votes cast with respect to the proposal by the shares present in person or represented by proxy and entitled to vote.
The proposal to approve the HSN, Inc. Employee Stock Purchase Plan requires the affirmative vote of a majority of the votes cast with respect to the proposal by the shares present in person or represented by proxy and entitled to vote.
| Q: | What do I need to do now to vote at the meeting? |
Submitting a Proxy by Mail: If you choose to submit your proxy by mail, simply mark your proxy, date and sign it, and return it in the postage-paid envelope provided;
Submitting a Proxy by Telephone: Submit a proxy for your shares by telephone by using the toll-free telephone number provided on your proxy card. Telephone voting is available 24 hours a day and will close at 5:00 p.m., Eastern Daylight Time, on May 18, 2009;2010;
Submitting a Proxy by Internet: Submit your proxy via the internet. The website for internet proxy voting is on your proxy card. Internet proxy voting is also available 24 hours a day and will close at 5:00 p.m., Eastern Daylight Time, on May 18, 2009;2010; or
Voting in Person: If you were registered as a shareholder on our books on March 6, 200922, 2010 or if you have a letter from your broker identifying you as a beneficial owner of HSN, Inc.our shares as of that date, you may vote in person by attending the 2009 Annual Meeting.2010 annual meeting.
Street name holders may submit a proxy by telephone or the internet if their bank or broker makes these methods available, in which case the bank or broker will enclose related instructions with this proxy statement. If you submit a proxy by telephone or via the internet you should not return your proxy card. Instructions on how to submit a proxy by telephone or via the internet are located on the proxy card enclosed with this proxy statement. If you hold your shares through a bank or broker, follow the voting instructions you receive from your bank or broker.
| Q: | What happens if I abstain? |
| Abstentions are counted as present at the meeting for purposes of determining whether there is a quorum but are not counted as votes cast. |
| Q: | Can I change my vote or revoke my proxy? |
| Yes. If you are a shareholder of record, you may change your vote or revoke your proxy at any time before the vote at the meeting by: |
delivering to BNY Mellon Shareowner Services a written notice, bearing a date later than the proxy, stating that you revoke the proxy;
submitting a later-dated proxy relating to the same shares by mail, telephone or the internet prior to the vote at the meeting; or
attending the meeting and voting in person (although attendance at the meeting will not, by itself, revoke a proxy).
You should send any written notice or a new proxy card to HSN, Inc. c/o BNY Mellon Shareowner Services at the following address: BNY Mellon Shareowner Services, P.O. Box 3550, South Hackensack, NJ 07606-9250, or follow the instructions provided on your proxy card to submit a proxy by telephone or via the Internet. You may request a new proxy card by calling BNY Mellon Shareowner Services, Proxy Processing at 1-888-313-0164 (toll-free).
| Q: | Will anyone contact me regarding this vote? |
| We have retained BNY Mellon Shareowner Services to distribute proxy solicitation materials to brokers, banks and other nominees and to assist in the solicitation of proxies from |
In addition to solicitation by mail, theour directors, officers and employees of HSNi may solicit proxies from shareholders by telephone, letter, facsimile or in person.person; but will not receive any additional compensation for these services. Following the original mailing of the proxy solicitation materials, HSNiwe will request brokers, custodians, nominees and other record holders to forward copies of the proxy statement and related soliciting materials to persons for whom they hold shares of HSNiour common stock and to request authority for the exercise of proxies. In such cases, HSNi upon the request of the record holders, we will reimburse such holders for their reasonable expenses.
Such solicitations may be made by mail, telephone, facsimile, e-mail or personal interviews. In addition, we reserve the right to solicit proxies through our directors, officers and employees in person and by telephone or facsimile.
| Q: | Who has paid for this proxy solicitation? |
| All expenses incurred in connection with the solicitation of proxies, including the printing and mailing of this Proxy Statement will be borne by HSNi. |
| Q: | Where can I find the voting results of the |
| Q: | May I propose actions for consideration at next year’s annual meeting or nominate individuals to serve as directors? |
| You may submit proposals for consideration at future annual shareholder meetings. In order for a shareholder proposal to be considered for inclusion in the proxy material for our |
PROPOSAL 1—ELECTION OF DIRECTORS
Proposal 1 is the election of ten nominees to the Board of Directors. TheIn accordance with our By-Laws, the number of directors constituting the entire Board of Directors is currently fixed at ten. The Governance and Nominating Committee of the Board has recommended that these individualsall ten of our current directors be nominated for election. Each of these individuals currently serves as a director.re-election. If elected, each will hold office until the next succeeding annual meeting of shareholders or until such director’s successor shall have been duly elected and qualified. Information concerning all director nominees appears below.
The Board of Directors expects that all of the nominees will, if elected, be available to serve. If any nominee should decline re-election or become unable to serve for any reason, votes will be cast for a substitute nominee, if any, designated by the Board of Directors or, if none is so designated prior to the election, votes will be cast according to the judgment of the person or persons voting the proxy.
The election of each of Gregory R. Blatt, Michael C. Boyd, Patrick Bousquet-Chavanne, William Costello, James M. Follo, Mindy Grossman, Stephanie Kugelman, Arthur C. Martinez, Thomas J. McInerney and John B. Morse, Jr. asOur directors requires the affirmative vote ofare elected by a plurality vote of the shares of our common stock present in person or represented by proxy at the meeting and entitled to vote.
The Board of Directors unanimously recommends that shareholders vote FOR the election of each of its nominees for director named below.
Information Concerning Director Nominees
The information below provides information as of the date of this proxy statement about each nominee. The information presented includes the names of each of the nominees, along with his or her age, all positions held with the company, term of office as a director, principal occupations or employment for the past five years or more, involvement in certain legal proceedings, if applicable, and the name of all other publicly-held companies of which he or she currently serves as a director or has served as a director during the past five years. In addition, the information presented below also includes a description of the specific experience, qualifications, attributes and skills of each nominee and continuing director that led our Governance and Nominating Committee to conclude that he or she should serve as a director of the company for the ensuing term.
Gregory R. Blatt, 41, has served as a member of the Board of Directors since August 2008. Since February 2009, Mr. Blatt has served as Chief Executive Officer of Match.com, the leading subscription based on-line dating service. Prior to that, Mr. Blatt served as an executive of IAC/InterActiveCorp, or IAC, our former parent and a leading internet company with over 500 brands. From March 2005 through February 2009, Mr. Blatt served as Executive Vice President, General Counsel and Secretary of IAC and from November 2003 through March 2005, Mr. Blatt served as Senior Vice President, General Counsel and Secretary. From May 1999 through October 2003, Mr. Blatt served as General Counsel of Martha Stewart Living Omnimedia, Inc., or MSO, an integrated media and merchandising company providing consumers with lifestyle content and products. Prior to joining MSO, Mr. Blatt was an associate at Grubman Indursky & Schindler, P.C., a New York entertainment and media law firm, and, prior to that, an associate at Wachtell, Lipton, Rosen & Katz, a New York law firm. Mr. Blatt also currently serves on the boards of directors of Interval Leisure Group, Inc. and Meetic, Inc.
During his time with IAC, Mr. Blatt gained unique insight regarding our business model and operations. As the Chief Executive Officer of Match.com, Mr. Blatt has a deep understanding of online and offline marketing, as well as brand management. Mr. Blatt’s experiences as a mergers and acquisitions attorney, a media attorney, and a corporate general counsel give him an in-depth understanding of legal, transactional and financial issues.
Patrick Bousquet-Chavanne, 52, has served as a member of the Board of Directors since August 2008. Since September 2009, Mr. Bousquet-Chavanne has served as President and Chief Executive Officer of Yoostar Entertainment Group, the owner and developer of the Yoostar technology and interactive entertainment system.
From July 2008 to August 2009, Mr. Bousquet-Chavanne served as President, Chief Executive Officer and member of the board of directors of T-Ink, Inc., a company specializing in advanced conductive technology. From July 2001 through June 2008, Mr. Bousquet-Chavanne served as Group President of The Estée Lauder Companies Inc., a leading provider of skin care, makeup and fragrance products. Previously, Mr. Bousquet-Chavanne was President of Estée Lauder International, Inc. Prior to that, Mr. Bousquet-Chavanne served as Managing Director in the United Kingdom for Elizabeth Arden, a global prestige and beauty products company. Mr. Bousquet-Chavanne is a member of the board of directors of Brown-Forman Corporation and serves on the Advisory Board of the New York City Ballet.
Mr. Bousquet-Chavanne’s service with both The Estée Lauder Companies Inc. and Elizabeth Arden provide him with invaluable insight into the beauty industry. Beauty products are generally key entry points for customers of our HSN operating segment. In his current role as President of Yoostar, Mr. Bousquet-Chavanne has insight into the retail electronics market, another important category for HSN. Mr. Bousquet-Chavanne’s knowledge of these two merchandise categories and his many years of experiences marketing to women are invaluable to our Board.
Michael C. Boyd, 68, has served as a member of the Board of Directors since August 2008. Mr. Boyd currently serves on the board of directors of SHOP.COM, a site devoted to delivering a comprehensive shopping experience on the web; FourthWall Media, formerly known as BIAP.com and a leading provider of interactive television and advanced advertising solutions; and The Franklin Mint, the world’s leading private mint and a premier site for unique gifts and collectibles. Mr. Boyd also serves as Chairman and Chief Executive Officer of Longport, Inc., a medical technology company that specializes in high resolution imaging. In 1986, Mr. Boyd was a co-founder of QVC, Inc., a leader in consumer direct commerce and one of our direct competitors in the direct response television arena. He served as President until his retirement in 1994. Mr. Boyd has been nominated as a director by Liberty Media Corporation, our largest shareholder. See “Certain Relationships and Related Party Transactions—Relationship Between HSNi and Liberty.”
Mr. Boyd’s experience with QVC and his service on the board of directors of SHOP.COM and Fourth Wall Media provide him with valuable insight in the electronic retailing and direct-to-consumer markets. Mr. Boyd also has extensive experience in the direct response catalog and collectible businesses. Mr. Boyd’s professional experiences and his significant knowledge of issues that directly impact the television retail and catalog industries make him particularly well-suited for service to HSNi.
William Costello, 63, has served as a member of the Board of Directors since August 2008. Beginning in November 1987 and through his retirement in March 2007, Mr. Costello served in a number of executive positions with QVC. He joined QVC as its Chief Financial Officer in November 1987, became President of QVC International in July 2001 and Chief Operating Officer in May 2002. Prior to joining QVC, Mr. Costello served as Chief Financial Officer, then Chief Operating Officer and a member of the board of directors of Best Products, a catalog showroom retailer. Prior to joining Best Products, Mr. Costello was a partner at KPMG LLP. Mr. Costello was nominated as a director of HSNi by Liberty Media Corporation. See “Certain Relationships and Related Party Transactions—Relationship Between HSNi and Liberty.”
William Costello’s executive positions with QVC have given him important insight into the area of electronic retailing and his experience with Best Products has given him valuable insight into the catalog business. Mr. Costello’s professional experience as well as his financial acumen make him a significant asset to our Board of Directors.
James M. Follo, 50, has served as a member of the Board of Directors since August 2008. Since January 2007, Mr. Follo has served as Senior Vice President and Chief Financial Officer of The New York Times Company, a diversified media company that includes newspapers and internet businesses. From July 1998 through March 2006, Mr. Follo served in various senior financial management positions at MSO, most recently as Chief Financial and Administrative Officer.
James M. Follo is a certified public accountant and has held senior financial positions with two publicly-held companies. As the Chief Financial Officer of The New York Times, Mr. Follo’s responsibilities include all treasury, financial reporting, financial management, investor relations, taxes and internal audit oversight. Mr. Follo also has experience in such industries as print media, digital media, television, licensing and product design, catalog and e-commence. Mr. Follo’s extensive business and financial experience make him a valuable asset to our Board and a natural leader for our Audit Committee.
Mindy Grossman, 52, has served as a member of our Board of Directors since August 2008. Ms. Grossman has also served as Chief Executive Officer of HSNi since completion of the spin-off in August 2008. Commencing April 2006 and through the spin-off, Ms. Grossman served as Chief Executive Officer of IAC Retailing, which consisted of HSN, Cornerstone Brands and two other IAC e-commerce businesses. Ms. Grossman joined IAC from Nike, Inc., the largest seller of athletic footwear and apparel in the world, where she served as Vice President and head of the company’s global apparel business from October 2000 to March 2006. From October 1995 to October 2000, Ms. Grossman was President and CEO at Polo Jeans Company, then a licensee of Polo Ralph Lauren Corporation, and from October 1994 to October 1995, Vice President of New Business Development at Polo Ralph Lauren Corporation, a global leader in the design, marketing and distribution of premium lifestyle products. From September 1991 to October 1994, Ms. Grossman was President of the Chaps Ralph Lauren division of Warnaco’s Menswear and Executive Vice President of Warnaco Menswear division. From June 1987 to September 1991, Ms. Grossman was Vice President of Sales and Merchandising at Tommy Hilfiger. Ms. Grossman serves on the board of directors at the National Retail Federation, as well as on the board of Cosmetic Executive Women. She is the Chairperson of the Fashion Institute of Technology’s Executive Women in Fashion Advisory Board, and is a member of the advisory board of the J. Baker School of Retail at the Wharton School of Business.
Ms. Grossman is a 32-year veteran of the apparel and retail industries and is well-known for brand strategy and business development. She gained significant experience building businesses at Nike, Polo Jeans, Ralph Lauren and Tommy Hilfiger and, since becoming CEO of HSNi in 2006, has used this experience to help transform and relaunch HSN and to develop and expand the brand and product portfolio at HSN. Ms. Grossman also is an invaluable conduit between the Board and the senior executive leaders at HSNi.
Stephanie Kugelman, 62, has served as a member of our Board of Directors since August 2008. Ms. Kugelman currently serves as a principal of A.S.O., A Second Opinion, a brand consultancy firm that she founded in 2007. Prior to that, for 36 years, Ms. Kugelman was employed by Young & Rubicam, a marketing and communications company specializing in advertising, public relations, direct marketing and brand identity consulting. During her tenure at Young & Rubicam, Ms. Kugelman served in increasingly senior roles, most recently as Vice Chairman and Chief Strategic Officer from June 2001 to March 2007 and as Chairman and Chief Executive Officer of Young & Rubicam’s New York office from May 1999 to May 2001. Ms. Kugelman continues to serve as a Vice Chairman Emeritus at Young & Rubicam. She is also a member of the board of directors of Whole Foods Market, Inc. as well as Gilda’s Club Worldwide and Safe Horizon.
Ms. Kugelmen has significant experience with research, strategy, branding and management through her many years with Young & Rubicam. Through her consulting firm, Ms. Kugelman also specializes in consulting on strategy and marketing. Through her professional and personal experiences, Ms. Kugelman also is able to identify with our core customers and to provide tremendous insight into the buying trends of those core customers.
Arthur C. Martinez, 70, has served as the Chairman of the Board of Directors since August 2008. Mr. Martinez retired in 2000 as Chairman of the Board, President and Chief Executive Officer of Sears, Roebuck and Co., positions he held since 1995. He was Chairman and Chief Executive Officer of the former Sears Merchandise Group from 1992 to 1995. Sears is the fourth largest broadline retailer with approximately 3,900 retail stores. Prior to his tenure at Sears, from 1990 to 1992, Mr. Martinez served as Vice Chairman and a director of Saks Fifth Avenue, a fashion retail organization. Mr. Martinez is currently a member of the boards of
directors of American International Group, Inc., IAC, International Flavors & Fragrances Inc., Liz Claiborne, Inc. and PepsiCo, Inc. In addition, Mr. Martinez serves as a Trustee of Greenwich Hospital, Northwestern University and the Chicago Symphony Orchestra. Mr. Martinez previously served as Chairman of the Supervisory Board of ABN AMRO Holding, N.V.
Mr. Martinez’s significant experience working in the retail industry and advising and counseling members of senior management has made him an invaluable resource to members of our senior management. Mr. Martinez is very familiar with issues related to strategy, finance and operations faced by companies similar to HSNi. Mr. Martinez’s service on the boards of several leading public companies enables him to ensure that our Board and committee meetings are efficiently and effectively run. His wealth of experience serving companies that are leaders in the areas of good corporate governance and best practices has been invaluable.
Thomas J. McInerney, 45, has served as a member of the Board of Directors since August 2008. Mr. McInerney has been Executive Vice President and Chief Financial Officer of IAC since January 2005. Mr. McInerney previously served as Chief Executive Officer of the retailing division of IAC from January 2003 through December 2005. Beginning in May 1999 and through January 2003, Mr. McInerney served as Executive Vice President and Chief Financial Officer of Ticketmaster and its predecessor company, Ticketmaster Online-Citysearch, Inc., the worlds leading live entertainment ticketing and marketing company. Prior to joining Ticketmaster, Mr. McInerney worked at Morgan Stanley, most recently as a Principal. Mr. McInerney also serves on the board of directors of Interval Leisure Group, Inc.
Mr. McInerney has served as a senior executive officer of IAC for over seven years. During that time, he also served as Chief Executive Officer of HSNi’s predecessor company for three years. As a result, Mr. McInerney has specific experience regarding our business model and operations. Mr. McInerney’s experience with technology companies, gained through his years with IAC, enables him to provide valuable insight as we continue to expand our business model on to different platforms.
John B. (Jay) Morse, Jr., 63, has served as a member of the Board of Directors since December 2008. From November 1989 and through his retirement in December 2008, Mr. Morse served as Senior Vice President, Finance and Chief Financial Officer of The Washington Post Company, a diversified education and media company. He also served as President of Washington Post Telecommunications, Inc. and Washington Post Productions, Inc., both subsidiaries of The Washington Post Company. Prior to joining The Washington Post Company, Mr. Morse was a partner at PricewaterhouseCoopers where he worked with publishing/media companies and multilateral lending institutions for more than 17 years. Mr. Morse is currently a member of the board of directors of Host Hotels & Resorts Inc. (formerly Host Marriott Corporation) and of AES Corporation. Mr. Morse also serves as a Trustee and President of the College Foundation of the University of Virginia and is a former member of the Financial Accounting Standards Advisory Council (FASAC), an advisory group to the Financial Accounting Standards Board.
Mr. Morse brings substantial executive experience to our Board, including board, investment and finance expertise. In his former positions, Mr. Morse was responsible for preparation of financial statements and SEC filings as well as treasury, tax, audit and risk management. He has significant financial knowledge as demonstrated by his work history as well as his involvement with the Financial Accounting Standards Advisory Council.
Assuming election of all nominees above, the following information was provided byis a list of persons who will constitute our Board of Directors following the nominees:meeting, including their current committee assignments.
| Committee |
Committee | Executive Committee | Governance and Nominating Committee | ||||
Gregory R. Blatt | — | — | ||||||
Patrick Bousquet-Chavanne* | — | X | — | X | ||||
Michael C. | ||||||||
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William Costello | ||||
| — | — | — | ||
James M. | ||||
| — | — | X | ||
Mindy Grossman |
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| |||||||
Stephanie | ||||||||
| X | — | — | ||||||
Arthur C. | ||||||||
| — | X | Chair | ||||||
Thomas J. McInerney | ||||||||
| — | X | — | ||||||
John B. (Jay) Morse, Jr.* | — | — |
| * | Independent Director |
PROPOSAL 2—RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
Proposal 2 is to ratify the appointment of our independent registered certified public accounting firm. Based on the recommendation of our Audit Committee, the Board of Directors has appointed Ernst & Young LLP, or E&Y, as our independent registered certified public accounting firm for the fiscal year ending December 31, 2010. E&Y has served as our independent registered certified public accounting firm since our spin-off from IAC in 2008. A representative of E&Y is expected to be present at the annual meeting and will be given an opportunity to make a statement if he or she so chooses and will be available to respond to appropriate questions.
Our By-Laws do not require that the shareholders ratify the appointment of E&Y as our independent auditors. However, we are submitting the appointment of E&Y to the shareholders for ratification as a matter of good corporate governance. If the shareholders do not ratify the appointment, the Board of Directors and the Audit Committee will reconsider whether or not to retain E&Y. Even if the appointment is ratified, the Board and the Audit Committee, in their discretion, may change the appointment at any time during the year if they determine that such a change would be in the best interests of HSNi and our shareholders.
The ratification of the appointment of E&Y as our independent registered certified public accounting firm for 2010 requires the affirmative vote of a majority of the votes cast.
The Board of Directors unanimously recommends that the shareholders vote FOR ratification of the appointment of Ernst & Young LLP as our independent registered certified public accounting firm for 2010.
Fees Paid to Our Independent Registered Certified Public Accounting Firm
The following table sets forth fees for all professional services rendered by E&Y for the audit of our financial statements for 2008 and 2009 and fees billed for other services rendered by E&Y:
| 2008 | 2009 | |||||
Audit Fees (1) | $ | 1,568,226 | $ | 1,447,585 | ||
Tax Fees (2) | 85,000 | 120,000 | ||||
Total Fees | $ | 1,653,226 | $ | 1,567,585 | ||
| (1) | Audit Fees include fees associated with the |
| (2) | Tax Fees represent fees for corporate and |
Audit and Non-Audit Services Pre-Approval Policy
The Audit Committee’s policy is to pre-approve all audit and permitted non-audit services performed by our independent registered certified public accounting firm. Pre-approval is generally detailed as to the particular service or category of services and is subject to a specified budget. Management is required to seek pre-approval of services that will exceed the budget or for services that are not detailed in an existing pre-approval. The Chair of the Audit Committee has been delegated the authority to pre-approve certain services between regularly scheduled meetings, with ratification by the Audit Committee at the next regularly scheduled meeting. Management reports quarterly to the Audit Committee regarding the extent of services provided by the independent registered certified public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. All services performed by E&Y during fiscal years 2008 and 2009 were approved in accordance with this policy.
PROPOSAL 3—APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
Proposal 3 is to approve the HSN, Inc. Employee Stock Purchase Plan, or ESPP. The ESPP is attached as Annex A to this Proxy Statement.
The ESPP is intended to provide a convenient and practical means by which eligible employees at all levels may participate in ownership of our stock. The Board believes that the ESPP promotes the interests of HSNi and our shareholders by encouraging our employees to become shareholders and more invested in our growth and success. The Board also believes that the opportunity to acquire a proprietary interest in the success of HSNi through the acquisition of shares of common stock pursuant to the ESPP will be an important aspect of our ability to attract and retain highly qualified and motivated employees. The Board believes that it is desirable and in the best interest of HSNi and our shareholders to provide our employees with benefits under the ESPP and that additional shares must be reserved for use under the ESPP.
The Compensation and Human Resources Committee, or Compensation Committee, recommended approval of the ESPP to our Board. On February 24, 2010, the Board approved, subject to shareholder approval, adoption of the ESPP and the reservation of shares of common stock for issuance under the ESPP.
The Board of Directors unanimously recommends that the shareholders vote FOR approval of the ESPP.
An employee stock purchase plan enhances our ability to attract and retain the services of employees. In addition, such a plan provides a convenient, meaningful opportunity for eligible employees at all levels to purchase our stock, thereby increasing participating employees’ personal interest in our success. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended, or the Code, thereby providing favorable tax treatment for participating employees, subject to certain restrictions. We intend to reserve 750,000 shares of HSNi common stock for issuance under the ESPP. This number represents approximately 1.3% of our common stock currently outstanding.
Participation in the ESPP is voluntary. Any employee of HSNi, or of certain HSNi subsidiaries as designated by the Board, who owns less than 5% of our common stock and has completed 90 days of continuous employment service is eligible to participate in the ESPP, with the exception of those employees whose customary employment is less than 20 hours per week or for not more than five months in a calendar year. Approximately 5,900 employees, including executive officers, are eligible to participate in the ESPP. Non-employee directors are not eligible to participate in the ESPP.
Once implemented, the ESPP will permit employees to purchase shares of our common stock during semi-annual purchase periods of six months, beginning on the first day of January and of July each year. During a purchase period, participating employees accumulate funds in an account used to purchase our common stock through payroll deductions. The shares are purchased at a price equal to the lesser of 85% of the fair market value of the common stock as measured by the closing price on The Nasdaq Global Select Market at (1) the first day of purchase period or (2) the end of the purchase period, provided the resulting purchase price can not be less than 75% of the fair market value at the end of the purchase period. Participants are not permitted to withdraw from the ESPP except in the event of a “financial hardship” (as defined in the ESPP). The aggregate fair market value and the number of shares purchased by a participating employee pursuant to the ESPP in a calendar year
may not exceed $25,000 or 5,000 shares, respectively. Participants are required to hold purchased stock for a minimum period of six months following the date of purchase, except in the event of financial hardship in which case they may apply for a waiver from the Plan Administrator. Certain additional holding requirements must be met in order to realize certain tax treatments. See “Federal Income Tax Consequences” below.
The Compensation Committee or, as designated by the committee, the Plan Administrator will administer the ESPP and has full power to interpret the ESPP. The Compensation Committee has been delegated the authority to determine the timing of the effective date for the implementation of the ESPP once approved by our shareholders. Such determination will depend on a number of factors including market trends and prices, economic conditions, tax considerations and applicable regulatory requirements. The decisions of the Compensation Committee and/or Plan Administrator will be final and binding on all participants. We reserve the right to amend or suspend the ESPP or to terminate the participation of any participating subsidiary or group of employees at any time and for any reason. The ESPP will continue until the shares reserved under the ESPP are exhausted or the ESPP is terminated by action of our Board.
Effect of Termination of Employment
Upon termination of employment for any reason, a participating employee will have no right to purchase shares under the ESPP. In such event, we will pay the balance in the employee’s account to the employee or to his or her estate without interest. Neither payroll deductions credited to an employee’s account nor any rights with regard to the purchase of shares under the ESPP may be assigned, transferred, pledged or otherwise disposed of in any way by the employee, other than by the laws of descent and distribution.
Because benefits under the ESPP will depend upon employee elections and the fair market value of our common stock at various future dates, it is not possible to determine the benefits that will be received by our executive officers and other employees if the ESPP is approved by our shareholders and implemented by HSNi.
Federal Income Tax Consequences
We intend that the ESPP qualify as an “employee stock purchase plan” under Section 423 of the Code. Under the Code, we are deemed to grant employee participants in the ESPP an “option” on the first day of each purchase period to purchase as many shares of common stock as the employee will be able to purchase with the payroll deductions credited to his or her account during the purchase period. On the last day of each six-month purchase period, the purchase price is determined and the employee is deemed to have exercised the “option” and purchased the number of shares his or her accumulated payroll deductions will purchase at the purchase price. Neither the grant nor the exercise of an “option” to purchase shares under the ESPP will have any tax consequences to the employee participants or to HSNi.
The required holding period for favorable federal income tax treatment upon disposition of common stock acquired under the ESPP is the later of (1) two years after the option is deemed granted (the first day of the purchase period) or (2) one year after the option is exercised and the common stock is purchased (the purchase date). When the common stock is disposed of after the required holding period expires (a “qualifying disposition”), the employee realizes ordinary income to the extent of the lesser of (1) the amount by which the fair market value of the common stock at the time the option was granted exceeded the option price (as defined below) or (2) the amount by which the fair market value of the common stock at the time of the disposition exceeded the option price. The option price is equal to 85% of the lesser of the fair market value of the common stock on the first day of the purchase period or the fair market value of the common stock at the end of the purchase period; provided that the option price is not less than 75% of the fair market value at the end of the purchase period. The maximum amount of gain taxable as ordinary income is the amount of the discount measured as of the last day of the purchase period. If the sale price is less than the option price, there is no ordinary income and any loss recognized generally will be a long-term capital loss.
If an employee holds shares purchased under the ESPP at the time of his or her death, the required holding periods will automatically be deemed to have been satisfied and ordinary income must be realized by the
employee to the extent of the lesser of (1) the amount by which the fair market value of the common stock at the time the deemed option was granted exceeded the option price or (2) the amount by which the fair market value of the common stock at the time of death exceeded the option price.
When an employee sells the common stock before the expiration of the required holding period (a “disqualifying disposition”), the employee recognizes ordinary income to the extent of the difference between the price actually paid for the common stock and the fair market value of the common stock at the date the option was exercised (the purchase date), regardless of the price at which the common stock is sold. Any additional gain recognized upon the disqualifying disposition will be a capital gain. The capital gain will be long-term if the employee held the shares more than 12 months. If the sale price is less than the fair market value of the common stock at the date of exercise, then the employee will have a capital loss equal to such difference.
Even though an employee must treat part of his or her gain on a qualifying disposition of the common stock as ordinary income, we may not take a business deduction for such amount. However, if an employee makes a disqualifying disposition, the amount of income that the employee recognizes as ordinary income qualifies as a business deduction for HSNi for the year of such disposition (subject to the provisions of Section 162(m) of the Code).
The foregoing summary of the federal income tax consequences in respect of the ESPP is for general information only. Different or additional rules may apply to individuals who are subject to income tax in a foreign jurisdiction or are subject to state and/or local income taxes. Participating employees will be urged to consult their own advisors as to specific tax consequences.
Our Board of Directors is elected by the shareholders to oversee management in the conduct of HSNi’s business and to assure that the long-term interests of our shareholders are being served. The Board holds regularly scheduled meetings at least quarterly and as otherwise needed to consider corporate decisions requiring its attention and action. The Board has four standing committees: the Audit Committee, the Compensation and Human Resources Committee (also referred to as the Compensation Committee), the Governance and Nominating Committee (also referred to as the Governance Committee), and the Executive Committee. With the exception of the Executive Committee, each of the committees operates under a written charter which may be found on our website. The principal responsibilities of these committees are described below.
Code of Ethics and Corporate Governance Guidelines
The Board of Directors previously adopted a Code of Business Conduct and Ethics which is applicable to all employees of HSNi, including all of our named executive officers and directors. The code reflects our commitment to the conduct of our business affairs in accordance with not only the requirements of the law but also standards for ethical conduct that will maintain and foster our reputation for honest and straightforward business dealings.
The Board recently adopted Corporate Governance Guidelines to provide a flexible framework for the effective functioning of the Board of Directors. The guidelines address, among other things, the composition and functions of the Board of Directors, qualifications of Board and committee members, stock ownership guidelines and the process for the selection of new directors.
These documents are reviewed annually and amended as necessary or appropriate in response to changing regulatory requirements and evolving best practices. These documents, as well as other documents relating to corporate governance at HSNi, are available in the corporate governance section of our website,www.hsni.com. You may also obtain copies of these materials, free of charge, by sending a written request to HSN, Inc., Legal Department, 1 HSN Drive, St. Petersburg, FL 33729, Attn: Corporate Secretary.
The Board seeks members from diverse personal and professional backgrounds who combine a broad spectrum of experience and expertise. At a minimum, directors should also have an inquisitive and objective perspective, practical wisdom and mature judgment. Directors should also possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interest of the shareholders. While the company’s Corporate Governance Guidelines do not prescribe specific diversity standards, as a matter of practice, our Governance Committee takes into account the personal characteristics (e.g., gender, ethnicity and age) and experience (e.g., industry, professional and public service) of current and prospective directors to facilitate Board deliberations that reflect a broad range of perspectives.
The Governance Committee believes that each of our directors has the qualities and skills that are necessary to effectively serve the Board of Directors. In addition, each of our directors has certain specific experience, qualities, attributes and/or skills that make him or her uniquely qualified to serve as a director of HSNi.
Our Director Nominations Process
Directors may be nominated by the Board of Directors or by shareholders in accordance with our By-Laws. The Governance Committee will, when appropriate, actively seek individuals qualified to become Board members, and solicit input on director candidates from a variety of sources, including current directors. As a
matter of course, the Governance Committee will evaluate a candidate’s qualifications and review all proposed nominees, including those proposed by shareholders. While the Governance Committee may retain a third party to assist in the nomination process, it has not done so to date.
You can nominate a candidate for election to the Board by complying with the nomination procedures in our By-Laws. For an election to be held at an annual meeting of shareholders, nomination by a shareholder must be made by written notice delivered to the Corporate Secretary not less than 45 nor more than 75 days prior to the first anniversary of the date on which we first mailed our proxy materials for the preceding year’s annual meeting of shareholders. If the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the first anniversary of the preceding year’s annual meeting or if we did not hold an annual meeting during the preceding year, notice must be delivered no later than the close of business on the later of (i) the 90th day prior to such annual meeting, and (ii) the 10th day following the day on which we publicly announce the date. In the case of the 2011 annual meeting of shareholders, notice must be delivered by no later than February 22, 2011.
A shareholder’s notice to the Corporate Secretary must be in writing and be delivered to HSN, Inc., Legal Department, 1 HSN Drive, St. Petersburg, Florida 33729, Attn: Corporate Secretary, and must include:
the name and address of the shareholder as they appear on our books;
the class, series, and number of securities that are owned by the shareholder;
any proxy, contract, arrangement, understanding or relationship pursuant to which such shareholder has the right to vote any shares;
the name, age and business address of each nominee proposed in the notice;
such other information concerning each nominee as must be disclosed with respect to director nominees in proxy solicitations under the proxy rules of the SEC; and
the written consent of each nominee to serve as a director, if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedures. A shareholder’s compliance with these procedures will not require HSNi to include information regarding a proposed nominee in HSNi’s proxy solicitation materials.
It is the Board’s policy that a majority of the members of the Board shall be directors who are independent. Under applicable listing standards, the Board must determine the independence of its directors in light of their relationships with HSNi and in light of applicable listing standards. To determine independence, the Board uses the Nasdaq Marketplace Rules and reviews information obtained from director questionnaires, our records and publicly available information regarding relationships with HSNi. Following these determinations, management monitors transactions, relationships and arrangements that it has considered, as well as any new relationships, for developments that could affect its determinations.
The Board, upon advice of the Governance Committee, has determined that each of Messrs. Bousquet-Chavanne, Boyd, Follo, Martinez and Morse and Ms. Kugelman are independent.
This independence determination is analyzed annually in both fact and appearance to promote arms-length oversight.
Our Corporate Governance Guidelines do not require that we separate the roles of Chairman of the Board and Chief Executive Officer (“CEO”); however, we do currently separate these roles. The CEO is responsible for
setting the strategic direction of HSNi and the day-to-day leadership and performance of the company. The Chairman is the Board’s principal liaison with management, with particular focus on public company reporting obligations and corporate governance matters. Our Chairman also provides guidance to the CEO and sets the agenda for Board meetings and presides over meetings of the full Board. We believe the current structure provides strong leadership for our Board, while also positioning the CEO as the leader of the company for our investors, employees and other stakeholders.
Shareholder Communications with the Board of Directors
Shareholders who wish to communicate with the Board of Directors or a particular director may send such communication to HSN, Inc., 1 HSN Drive, St. Petersburg, Florida 33729, Attention: Corporate Secretary. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Shareholder-Board Communication” or “Shareholder-Director Communication.” All such letters must identify the author as a shareholder, provide evidence of the sender’s stock ownership, and clearly state whether the intended recipients are all members of the Board or a particular director or directors. The Corporate Secretary will then review such correspondence and forward it to the Board, or to the specified director(s).
The Board of Directors and Committees
The Board
From January 1, 2009 through December 31, 2009, the Board met five times. Each of the members of the Board of Directors attended at least 75% of the meetings of the Board and the Board committees on which the director served. Although HSNi has no policy with respect to director attendance at annual meetings, it is anticipated that all Board members will attend the annual meetings of shareholders in person. All of the members of the Board were present at our 2009 annual meeting of shareholders.
The following table sets forth the members of each standing committee of the Board during 2009, the number of meetings held and the times that each such committee took action by written consent during fiscal 2009.
Name | Audit Committee | Compensation and Human Resources Committee | Executive Committee | Governance and Nominating Committee | ||||
Gregory R. Blatt | — | — | — | — | ||||
Patrick Bousquet-Chavanne* | — | X | — | — | ||||
Michael C. Boyd* | X | — | — | — | ||||
William Costello | — | — | — | — | ||||
James M. Follo* | Chair | — | — | X | ||||
Mindy Grossman | — | — | X | — | ||||
Stephanie Kugelman* | — | X | — | — | ||||
Arthur C. Martinez* | — | — | X | Chair | ||||
Thomas J. McInerney | — | — | X | — | ||||
John B. (Jay) Morse, Jr.* | X | Chair | — | — | ||||
Number of Meetings during fiscal 2009 | 9 | 7 | 0 | 1 | ||||
Number of Written Consents during fiscal 2009 | 0 | 0 | 0 | 0 |
| * | Independent Director |
Audit Committee
The Audit Committee oversees our accounting and financial reporting processes and the audits of our consolidated financial statements. The committee assists the Board of Directors in monitoring (1) the integrity of
our financial statements, (2) the effectiveness of our internal control over financial reporting, (3) the qualifications and independence of our independent registered certified public accounting firm, (4) the performance of our internal audit function and independent registered certified public accounting firm, and (5) our compliance with legal and regulatory requirements. The committee is also directly responsible for the appointment, compensation, retention and oversight of the independent registered certified public accounting firm.
The Audit Committee is also responsible for oversight over the company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the company’s risk assessment and risk management policies. The Audit Committee reviews all related party transactions in accordance with the company’s formal written policy. In addition, the Audit Committee has established procedures for the receipt, retention and treatment of complaints received by the company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by company employees of concerns regarding accounting and auditing matters.
The Audit Committee must consist of no fewer than three members, all of whom must be independent in accordance with applicable listing standards and at least one member must be a “financial expert” as defined under SEC rules. The Audit Committee currently consists of Messrs. Boyd, Follo and Morse, with Mr. Follo serving as Chairman of the committee. The Board of Directors has determined that Mr. Follo and Mr. Morse are both “audit committee financial experts,” as such term is defined in applicable SEC rules.
Compensation and Human Resources Committee
The Compensation Committee exercises the powers of the Board of Directors pertaining to compensation and benefits, including incentive/bonus plans, stock compensation plans, retirement programs, insurance plans and salary matters relating to the compensation of the CEO and other executive officers. The Compensation Committee is responsible for periodically reviewing our incentive compensation arrangements to confirm that the design of incentive pay does not encourage unnecessary risk taking. The Compensation Committee also reviews the Compensation Discussion and Analysis contained in our proxy statement and prepares a report for inclusion in our proxy statement.
The Compensation Committee must consist of no fewer than two members, all of whom must be independent in accordance with applicable listing standards. In addition, at least two members must qualify as “outside” directors within the meaning of Section 162(m) of the Code. The Compensation Committee currently consists of Ms. Kugelman and Messrs. Morse and Bousquet-Chavanne, each of whom is independent and qualifies as an “outside” director within the meaning of Section 162(m) of the Code.
Executive Committee
The Executive Committee has all power and authority of our Board of Directors, except those powers specifically reserved to our Board of Directors by Delaware law or our organizational documents. The Executive Committee serves primarily as a means for addressing issues that may arise and require Board approval between regularly scheduled Board meetings.
The Executive Committee consists of Ms. Grossman and Messrs. Martinez and McInerney. During 2009, the committee did not meet and did not take any action.
Governance and Nominating Committee
This committee was originally established in August 2008 as the Nominating Committee and performed traditional nominating committee type functions. In December 2009, the committee and Board determined it was
in our best interest to have a governance committee and revised the name and authority and responsibilities of this committee to include corporate governance and oversight. The Governance Committee oversees the identification and evaluation of director candidates, consistent with the criteria approved by the Board, and makes recommendations to the Board with respect to director nominees and the membership of the Board committees. The Governance Committee also reviews and recommends to the Board compensation and benefits for non-employee directors. The committee developed and annually evaluates our Corporate Governance Guidelines and Code of Business Conduct and Ethics. The committee also reviews and assesses the channels through which the Board receives information and the quality and timeliness of that information.
The Compensation Committee must consist of no fewer than two members, all of whom must be independent in accordance with applicable listing standards. In 2009, the Governance Committee consisted of Messrs. Follo and Martinez, both of whom are independent; however, in February 2010, Mr. Bousquet-Chavanne was added as a member of the committee. Each of the members is independent in accordance with applicable listing standards.
Other Committees
In addition to its standing committees, our Board of Directors may from time to time establish other committees of our Board of Directors, consisting of one or more of its directors.
The Board’s Role in Risk Oversight
Our management is responsible for the management and assessment of risk related to HSNi and its operations, including communication of the most material risks to the Board and its committees. It is the Board’s responsibility to oversee management in these efforts. In exercising its oversight, the Board of Directors has allocated some areas of focus to its committees and has retained areas of focus for itself. The Board has primary responsibility for oversight of the company’s strategic, operational, legal and regulatory and reputational risks. Our Audit Committee has primary responsibility for HSNi’s major financial risk exposures and the steps management has taken to monitor and control such exposures. The Compensation Committee is responsible for periodically reviewing incentive compensation arrangements to confirm that the design of incentive pay does not encourage unnecessary risk taking. In fulfilling these duties, each of the Board and committees receives regular reports from members of senior management on areas of material risk to the company. We believe our current Board leadership structure is appropriate and helps ensure proper risk oversight for HSNi.
Review and Approval of Related-Person Transactions
Under the Audit Committee’s charter, and consistent with Nasdaq rules, any material potential or actual conflict of interest or transaction between HSNi and any “related person” of HSNi must be reviewed and approved or ratified by the Audit Committee. SEC rules define a “related person” of HSNi as any HSNi director (or nominee), executive officer, 5%-or-greater shareholder or immediate family member of any of these persons.
In August 2008, our Board adopted a written Policy for the Review and Approval of Related-Person Transactions. The policy provides that any “related person” as defined above must notify the chair of the Audit Committee before becoming a party to, or engaging in, a potential related-person transaction that may require disclosure in our proxy statement under SEC rules, or if prior approval is not practicable, as soon as possible after engaging in the transaction. Based on current SEC rules, transactions covered by the policy include:
any individual or series of related transactions, arrangements or relationships (including but not limited to indebtedness or guarantees of indebtedness), whether actual or proposed;
in which HSNi was or is to be a participant;
the amount of which exceeds $120,000; and
in which the related person has or will have a direct or indirect material interest. Whether the related person has a material direct or indirect interest depends on the significance to investors of knowing the information in light of all the circumstances of a particular case. The importance to the person having the interest, the relationship of the parties to the transaction with each other and the amount involved in the transaction are among the factors to be considered in determining the significance of the information to investors.
The Audit Committee chair has the discretion to determine whether a transaction is or may be covered by the policy. If the chair determines that the transaction is covered by the policy, then the full Audit Committee must review and approve it. The Audit Committee’s decision is final and binding. Additionally, the Audit Committee chair has discretion to approve, disapprove or seek full Audit Committee review of anyimmaterialtransaction involving a related person (i.e., a transaction not otherwise required to be disclosed in the proxy statement).
In considering potential related-person transactions, the Audit Committee looks not only to SEC and Nasdaq rules, including the impact of a transaction on the independence of any director, but also to the consistency of the transaction with the best interests of HSNi and our shareholders. As the policy describes in more detail, the factors underlying these considerations include:
whether the transaction is likely to have any significant negative effect on HSNi, the related person or any HSNi partner;
whether the transaction can be effectively managed by HSNi despite the related person’s interest in it;
the purpose, and the potential benefits to HSNi, of the transaction;
whether the transaction would be in the ordinary course of our business; and
the availability of alternative products or services on comparable or more favorable terms.
Reflecting the significance the Board attaches to succession planning, each year, the Board, together with the Chairman and CEO, reviews succession planning practices and procedures and provides the Board with a recommendation as to succession in the event of each senior officer’s termination of employment with HSNi for any reason. This process is enterprise-wide for senior leaders up to and including our CEO. Our Compensation Committee annually reviews the performance of the senior leaders to determine, among other things, their performance in their current position as well as their potential ability to succeed other executive officers. This information is then presented to the Board.
The full Board has the primary responsibility to develop succession plans for the CEO position. The Chairman and CEO provide an annual report to the Board assessing senior managers and their potential to succeed the CEO. This report is developed in consultation with our Executive Vice President of Human Resources and the chair of our Compensation Committee and includes contingency plans in the event of our CEO’s termination of employment with HSNi for any reason.
General
HSNi does not compensate employees for service on the Board. Each non-employee member of our Board of Directors receives an annual retainer in the amount of $50,000. Each member of the Audit Committee and Compensation and Human Resources Committee (including their respective chairs) receives an additional annual retainer in the amount of $10,000. Each member of the NominatingGovernance Committee receives an additional annual retainer in the amount of $5,000. The chair of each of the Audit Committee and Compensation and Human Resources Committee receives an additional retainer in the amount of $15,000.
In addition,order to align the interests of our directors with those of our shareholders, a significant portion of the director fees are paid in the form of equity. Accordingly, each non-employee director also received a grant of
restricted stock units, or RSUs, with a dollar value of $100,000 upon his or her initial election to the Board of Directors and will receive grants in the same amount annually thereafter upon re-election at our annual meeting of shareholders. The terms of these RSUs provide for (i) vesting in two equal annual installments commencing on the first anniversary of the grant date, (ii) cancellation and forfeiture of unvested units in their entirety upon termination of service on the Board and (iii) full acceleration of vesting upon a change in control of HSNi. Non-employee directors are also reimbursed for all reasonable expenses incurred in connection with attendance at Board and committee meetings.
Mr. Martinez serves as Chairman of the Board. As such, Mr. Martinez is the Board’s principal liaison with management, with particular focus on public company reporting obligations and corporate governance matters. For his services as Chairman, Mr. Martinez receiveswas originally provided an annual retainer of $350,000 per year and receivesgranted RSUs with a dollar value of $350,000 on identical terms as those described above. Because it isIt was expected that a significant part of Mr. Martinez’s activities willwould be transitional in light of our recent spin-off from IAC, our former parent. As a result, in late 2009 the Board expects to re-evaluate thisre-evaluated Mr. Martinez’s compensation arrangementarrangements following his first year of service and periodically thereafter.determined to reduce his compensation, effective October 1, 2009, to an annual retainer of $250,000 per year and an annual grant of RSUs with a dollar value of $250,000.
The NominatingGovernance Committee has primary responsibility for establishing non-employee director compensation arrangements, which are designed to provide competitive compensation necessary to attract and retain high quality non-employee directors and to encourage ownership of our stock to further align directors’ interests with those of our shareholders. When considering non-employee director compensation arrangements, our management will provide the NominatingGovernance Committee with information regarding various types of non-employee director compensation arrangements and practices of selected peer companies.
Deferred Compensation Plan for Non-Employee DirectorsThe Board
Under our Deferred Compensation Plan for Non-EmployeeFrom January 1, 2009 through December 31, 2009, the Board met five times. Each of the members of the Board of Directors non-employee directors may defer all or a portionattended at least 75% of their boardthe meetings of the Board and committee fees. Eligible directors who defer all or any portion of these fees can elect to have such fees applied to the purchase of share units, representingBoard committees on which the number of shares of our common stock that could have been purchased on the relevant date, or credited to a cash fund. If any dividends are paid on the common stock, dividend equivalents will be credited on the share units. The cash fund will be credited with deemed interest at an annual rate equal to the weighted average prime lending rate of JPMorgan Chase Bank. After a director ceases to serve as such, he or she will receive (i)served. Although HSNi has no policy with respect to share units, such numberdirector attendance at annual meetings, it is anticipated that all Board members will attend the annual meetings of shares of our common stock as the share units represent and (ii) with respect to the cash fund, a cash paymentshareholders in an amount equal to deferred amounts, plus accrued interest. These payments will be made in either one lump sum or in up to five annual installments, as previously elected by the eligible director at the timeperson. All of the related deferral election.
2008 Director Compensationmembers of the Board were present at our 2009 annual meeting of shareholders.
The following table sets forth information for the members of each standing committee of the Board during 2009, the number of meetings held and the times that each such committee took action by written consent during fiscal year ended December 31, 2008 regarding compensation of our non-employees directors:2009.
Name | Fees Earned and Paid in Cash (1)(2) | Stock Awards (3)(4) | All Other Compensation (5) | Total | ||||||||
Gregory R. Blatt | $ | 18,356 | $ | 18,219 | $ | — | $ | 36,575 | ||||
Patrick Bousquet-Chavanne | 7,027 | 33,219 | — | 40,246 | ||||||||
Michael C. Boyd | 22,027 | 18,219 | — | 40,246 | ||||||||
William Costello | 5,856 | 30,719 | — | 36,575 | ||||||||
James M. Follo | 29,370 | 18,219 | — | 47,589 | ||||||||
Stephanie Kugelman | 22,027 | 18,219 | — | 40,246 | ||||||||
Arthur C. Martinez | 128,493 | 63,767 | — | 192,260 | ||||||||
Thomas J. McInerney | 22,027 | 18,219 | — | 40,246 | ||||||||
John B. Morse, Jr. | 5,217 | 5,140 | — | 11,097 | ||||||||
Name | Audit Committee | Compensation and Human Resources Committee | Executive Committee | Governance and Nominating Committee | ||||
Gregory R. Blatt | — | — | — | — | ||||
Patrick Bousquet-Chavanne* | — | X | — | — | ||||
Michael C. Boyd* | X | — | — | — | ||||
William Costello | — | — | — | — | ||||
James M. Follo* | Chair | — | — | X | ||||
Mindy Grossman | — | — | X | — | ||||
Stephanie Kugelman* | — | X | — | — | ||||
Arthur C. Martinez* | — | — | X | Chair | ||||
Thomas J. McInerney | — | — | X | — | ||||
John B. (Jay) Morse, Jr.* | X | Chair | — | — | ||||
Number of Meetings during fiscal 2009 | 9 | 7 | 0 | 1 | ||||
Number of Written Consents during fiscal 2009 | 0 | 0 | 0 | 0 |
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PROPOSAL 2—RATIFICATION OF APPOINTMENT OFAudit Committee
INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRMThe Audit Committee oversees our accounting and financial reporting processes and the audits of our consolidated financial statements. The committee assists the Board of Directors in monitoring (1) the integrity of
our financial statements, (2) the effectiveness of our internal control over financial reporting, (3) the qualifications and ProposalRequired Vote
Proposal 2 is to ratify the appointmentindependence of our independent registered certified public accounting firm. Based onfirm, (4) the recommendationperformance of our Audit Committee, the Board of Directors has appointed Ernst & Young LLP, or E&Y, as ourinternal audit function and independent registered certified public accounting firm, and (5) our compliance with legal and regulatory requirements. The committee is also directly responsible for the fiscal year ending December 31, 2009. E&Y has served as ourappointment, compensation, retention and oversight of the independent registered certified public accounting firm since our spin-off from IACfirm.
The Audit Committee is also responsible for oversight over the company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the company’s risk assessment and risk management policies. The Audit Committee reviews all related party transactions in 2008. A representative of E&Y is expected to be present ataccordance with the Annual Meeting and will be given an opportunity to make a statement if he or she so chooses and will be available to respond to appropriate questions.
Our By-Laws do not require that the shareholders ratify the appointment of E&Y, as our independent auditors. However, we are submitting the appointment of E&Y to the shareholders for ratification as a matter of good corporate governance. If the shareholders do not ratify the appointment, the Board andcompany’s formal written policy. In addition, the Audit Committee will reconsider whetherhas established procedures for the receipt, retention and treatment of complaints received by the company regarding accounting, internal accounting controls or not to retain E&Y. Even if the appointment is ratified, the Boardauditing matters and the confidential and anonymous submission by company employees of concerns regarding accounting and auditing matters.
The Audit Committee must consist of no fewer than three members, all of whom must be independent in their discretion, may change the appointmentaccordance with applicable listing standards and at any time during the year if they determine that suchleast one member must be a change would be in the best interests“financial expert” as defined under SEC rules. The Audit Committee currently consists of HSNiMessrs. Boyd, Follo and our shareholders.
Under our By-Laws, the ratificationMorse, with Mr. Follo serving as Chairman of the appointment of E&Y as our independent registered certified public accounting firm for 2009 requires the affirmative vote of a majority of the votes cast.
committee. The Board of Directors unanimously recommendshas determined that the shareholders vote FOR ratification of the appointment of Ernst & Young LLPMr. Follo and Mr. Morse are both “audit committee financial experts,” as our independent registered certified public accounting firm for 2009.such term is defined in applicable SEC rules.
Fees Paid to Our Independent Registered Certified Public Accounting FirmCompensation and Human Resources Committee
The following table sets forth feesCompensation Committee exercises the powers of the Board of Directors pertaining to compensation and benefits, including incentive/bonus plans, stock compensation plans, retirement programs, insurance plans and salary matters relating to the compensation of the CEO and other executive officers. The Compensation Committee is responsible for periodically reviewing our incentive compensation arrangements to confirm that the design of incentive pay does not encourage unnecessary risk taking. The Compensation Committee also reviews the Compensation Discussion and Analysis contained in our proxy statement and prepares a report for inclusion in our proxy statement.
The Compensation Committee must consist of no fewer than two members, all professional services rendered by E&Y forof whom must be independent in accordance with applicable listing standards. In addition, at least two members must qualify as “outside” directors within the period commencing August 20, 2008,meaning of Section 162(m) of the dateCode. The Compensation Committee currently consists of our spin-off, through December 31, 2008.Ms. Kugelman and Messrs. Morse and Bousquet-Chavanne, each of whom is independent and qualifies as an “outside” director within the meaning of Section 162(m) of the Code.
| 2008 | |||
Audit Fees (1) | $ | 1,538,226 | |
Tax Fees (2) | 85,000 | ||
Total Fees | $ | 1,623,226 | |
Audit and Non-Audit Services Pre-Approval PolicyExecutive Committee
The Audit Committee’s policy is to pre-approve all audit and permitted non-audit services performed by our independent registered certified public accounting firm. Pre-approval is generally detailed as to the particular service or category of services and is subject to a specified budget. Management is required to seek pre-approval of services that will exceed the budget or for services that are not detailed in an existing pre-approval. The Chair of the AuditExecutive Committee has been delegated theall power and authority to pre-approve certain services between regularly scheduled meetings, with ratification by the Audit Committee at the next regularly scheduled meeting. Management reports quarterly to the Audit Committee regarding the extent of services provided by the independent accounting firm in accordance with this pre-approval, and the fees for the services performed to date. Since our spin-off from IAC, all audit and permitted non-audit services have been pre-approved by the Audit Committee in accordance with this policy.
PROPOSAL 3—APPROVAL OF S ECOND AMENDED AND RESTATED 2008 STOCK
AND ANNUAL INCENTIVE PLAN
Proposal 3 is to approve the HSN, Inc. Second Amended and Restated 2008 Stock and Annual Incentive Plan, or the Plan. The Plan is attached as Annex A to this Proxy Statement.
The Plan increases the number of shares available for issuance under the Plan from 5,000,000 to 8,000,000. The Board unanimously recommends an increase in the number of shares available for issuance under the Plan in light of, among other things, the following:
The conversion of equity awards in connection with the spin-off resulted in our employees having equity awards in five separate publicly traded companies, or the Spincos, and no significant equity in HSNi. We believe that equity ownership is important to effectively retain and motivate the leadership of our company.
Consistent with the provisions of the Plan, HSNi has implemented a long-term incentive program providing for the grant of equity awards to leadership so that their interests will be aligned with those of our shareholders.
Of the original shares available under the Plan, options to purchase 718,940 shares were issued in connection with the employment agreement of our Chief Executive Officer. These options have exercise prices ranging from $30.46 per share to $44.71 per share and, based on the current market value, offer little incentive.
It is important that we have sufficient shares available under the Plan so that we may effectively implement our new compensation strategies and long-term incentive programs. Management currently estimates that, by the end of 2009 after fulfilling commitments pursuant to the long-term incentive program, providing for annual equity for the Chief Executive Officer and Board of Directors and any new hire grants for key executives, less than 1 million shares will remain available for future grant under the Plan.
The terms of our existing stock plan were originally approved prior to the spin-off by IAC, as our sole shareholder. Simultaneously with the spin-off from IAC, our Board of Directors, except those powers specifically reserved to our Board of Directors by Delaware law or our organizational documents. The Executive Committee serves primarily as a means for addressing issues that may arise and its standing committees, includingrequire Board approval between regularly scheduled Board meetings.
The Executive Committee consists of Ms. Grossman and Messrs. Martinez and McInerney. During 2009, the Compensationcommittee did not meet and did not take any action.
Governance and Nominating Committee were established. Since its establishment,
This committee was originally established in August 2008 as the CompensationNominating Committee has considered appropriate compensation programs for HSNi based on market considerations,and performed traditional nominating committee type functions. In December 2009, the economic climate generallycommittee and Board determined it was
in our best interest to have a governance committee and revised the name and authority and responsibilities of this committee to include corporate governance and oversight. The Governance Committee oversees the identification and evaluation of director candidates, consistent with the criteria approved by the Board, and makes recommendations to the Board with respect to director nominees and the impact of prevailing economic circumstances specifically. Among other things, the committee evaluated the impactmembership of the spin-off from IACBoard committees. The Governance Committee also reviews and recommends to the Board compensation and benefits for non-employee directors. The committee developed and annually evaluates our Corporate Governance Guidelines and Code of Business Conduct and Ethics. The committee also reviews and assesses the channels through which the Board receives information and the conversionquality and timeliness of employee equity holdings. This assessment was critical in evaluating the equity that HSNi leadership held post-spin, determining the potential impact these equity holdings would have on retaining and motivating leadership and balancing these considerations with future equity awards.information.
The Compensation Committee approved short-termmust consist of no fewer than two members, all of whom must be independent in accordance with applicable listing standards. In 2009, the Governance Committee consisted of Messrs. Follo and long-term incentive programs for HSNi leadership to be administered under the Plan. A critical componentMartinez, both of whom are independent; however, in February 2010, Mr. Bousquet-Chavanne was added as a member of the long-term programcommittee. Each of the members is to provide for the grant of equity awards. The company must have sufficient shares of common stock available for awards under the Plan so that management may effectively implement these new compensation strategies and programs. As of December 31, 2008, there were 2,767,109 shares available for future grant under the Plan; however, management currently estimates that by the end of 2009, after fulfilling commitments pursuant to the long-term incentive program, providing for annual equity for the Chief Executive Officer and Board of Directors and any new hire grants for key executives, less than 1 million shares will remain available for future grant under the Plan. As a result, management believes that the current shares available under the plan may be insufficient to fund the company’s long-term incentive program.
Other Committees
In addition to the foregoing, Section 162(m) of the Code stipulates that HSNi may not deduct compensation of more than $1 million that is paid to certain “covered employees.” The limitation on deductions does not apply, however, to qualified “performance-based compensation.” The Plan prescribes the criteria by which the Compensation Committee may set the performance goals so that awards pursuant to the Plan may constitute performance-based compensation that is not subject to the deductibility limit of Section 162(m). To continue to qualify for this exception,its standing committees, our shareholders must approve the material terms of the performance goals provided for in the Plan.
The Compensation Committee recommends approval of the Plan to ensure that HSNi has adequate shares available for issuance under the Plan pursuant to these programs and so that the performance-based awards granted pursuant to the Plan qualify for deduction as performance-based compensation. Approval of this proposal requires the affirmative vote of a majority of the votes cast.
The Board of Directors unanimously recommends a vote FOR approval of the Seconded Amended and Restated 2008 Stock and Annual Incentive Plan.
Prior to the completion of the spin-off, IAC, our sole shareholder at the time, adopted the Plan. The purpose of the Plan is to assist management in attracting, retaining and motivating officers and employees, and to enable management to provide incentives more directly linked to the profitability of our business and increases in shareholder value. Awards under the Plan are designed to motivate our employees to focus on long-term performance through cash or equity awards and reinforce accountability by linking a portion of executive compensation to our long-term performance goals.
The Plan was also designed to assume and govern other awards originally granted under the IAC Long Term Incentive Plan, or the IAC Plan, and subsequently converted into awards under the Plan in accordance with the terms of an agreement entered into between IAC and HSNi. These are referred to as Adjusted Awards.
The Plan gives the Board of Directors, and by designation the Compensation Committee, broad authority to grant awards under the Plan, to select eligible individuals to receive awards under the Plan and to determine the terms and conditions of those awards. Following are some important factors and considerations related to the Plan, our short-term and long-term incentive programs and awards under the Plan:
The Plan incorporates a broad range of compensation and governance best practices, including: a limitation on the maximum amount of awards to be granted to any one individual during the term of the Plan; a requirement that the exercise price for any award shall not be less than the closing price of HSNi stock on the date of grant; and a prohibition on transfers of awards for consideration to third parties;
The Compensation Committee recently approved short-and long-term incentive programs that provide for specific performance targets that must be achieved before awards will be granted. The stock-settled SARs and RSUs to be awarded pursuant to these programs vest over a period of three years, thereby encouraging long-term commitments to HSNi.
HSNi will only allow accelerated vesting of awards upon the occurrence of both (i) a change in control and (ii) termination of employment under certain circumstances within one-year of that change in control.
The exercise price for awards may not be “re-priced” for other than extraordinary events, as defined in Section 3(d) of the Plan, except upon approval of our shareholders.
Below you will find more detailed information regarding the Plan.
Anticipated Awards if Stock Plan is Approved
We cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to eligible employees and directors under the Plan. However, see the table under the section entitled “Grants of Plan-Based Awards” for information, as of December 31, 2008, about all equity grants to our named executive officers under the Plan.
The Plan is administered by the Compensation Committee or such other committee of the Board as the Board of Directors may from time to time designate. Amongestablish other things, the committee will have the authority to select individuals to whom awards may be granted, to determine the typecommittees of award, as well as the numberour Board of sharesDirectors, consisting of common stock to be covered by each award, to establish the performance goals upon which bonuses are paid and awards are made under the Plan and to determine the terms and conditions of any such awards.
The Plan allows the Compensation Committee to establish the performance goals in connection with the grant of restricted stock, RSUs, bonus awards or other stock-based awards. The performance goals upon which the payment or vesting of an award to a covered employee that is intended to qualify as “performance-based compensation” depends shall relate to one or more of its directors.
The Board’s Role in Risk Oversight
Our management is responsible for the following performance measures: (i) specified levelsmanagement and assessment of earnings per share from continuing operations; net profit after tax; earnings before interest, taxes, depreciationrisk related to HSNi and amortization, or EBITDA; and earnings before interest, taxes and amortization, or EBITA; gross profit; cash generation; unit volume; market share; sales; asset quality; earnings per share; operating income; revenues; return on assets; return on operating assets; return on equity; profits; total stockholder return (measured in termsits operations, including communication of stock price appreciation and/or dividend growth); cost saving levels; marketing-spending efficiency; core non-interest income; change in working capital; return on capital; and/or stock price; with respectthe most material risks to the company or any subsidiary, affiliate, division or departmentBoard and (ii) such Performance Goals shall be set byits committees. It is the Compensation Committee withinBoard’s responsibility to oversee management in these efforts. In exercising its oversight, the time period prescribed by Section 162(m)Board of Directors has allocated some areas of focus to its committees and has retained areas of focus for itself. The Board has primary responsibility for oversight of the Codecompany’s strategic, operational, legal and related regulations. Such Performance Goals also may be based uponregulatory and reputational risks. Our Audit Committee has primary responsibility for HSNi’s major financial risk exposures and the attaining of specified levels of company, subsidiary, affiliate or divisional performance under one or more of the measures described above relativesteps management has taken to the performance of other entities, divisions or subsidiaries.
monitor and control such exposures. The Compensation Committee is responsible for periodically reviewing incentive compensation arrangements to confirm that the design of incentive pay does not encourage unnecessary risk taking. In fulfilling these duties, each of the Board and committees receives regular reports from members of senior management on areas of material risk to the company. We believe our current Board leadership structure is appropriate and helps ensure proper risk oversight for HSNi.
Review and Approval of Related-Person Transactions
Under the Audit Committee’s charter, and consistent with Nasdaq rules, any material potential or actual conflict of interest or transaction between HSNi and any “related person” of HSNi must be reviewed and approved or ratified by the Audit Committee. SEC rules define a “related person” of HSNi as any HSNi director (or nominee), executive officer, 5%-or-greater shareholder or immediate family member of any of these persons.
In August 2008, our Board adopted a written Policy for the Review and Approval of Related-Person Transactions. The policy provides that any “related person” as defined above must notify the chair of the Audit Committee before becoming a party to, or engaging in, a potential related-person transaction that may require disclosure in our proxy statement under SEC rules, or if prior approval is not practicable, as soon as possible after engaging in the transaction. Based on current SEC rules, transactions covered by the policy include:
any individual or series of related transactions, arrangements or relationships (including but not limited to indebtedness or guarantees of indebtedness), whether actual or proposed;
in which HSNi was or is to be a participant;
the amount of which exceeds $120,000; and
in which the related person has established specific performance goalsor will have a direct or indirect material interest. Whether the related person has a material direct or indirect interest depends on the significance to investors of knowing the information in connectionlight of all the circumstances of a particular case. The importance to the person having the interest, the relationship of the parties to the transaction with each other and the amount involved in the transaction are among the factors to be considered in determining the significance of the information to investors.
The Audit Committee chair has the discretion to determine whether a transaction is or may be covered by the policy. If the chair determines that the transaction is covered by the policy, then the full Audit Committee must review and approve it. The Audit Committee’s decision is final and binding. Additionally, the Audit Committee chair has discretion to approve, disapprove or seek full Audit Committee review of anyimmaterialtransaction involving a related person (i.e., a transaction not otherwise required to be disclosed in the proxy statement).
In considering potential related-person transactions, the Audit Committee looks not only to SEC and Nasdaq rules, including the impact of a transaction on the independence of any director, but also to the consistency of the transaction with the grantbest interests of bonus awardsHSNi and stock-based awards. These are describedour shareholders. As the policy describes in more detail, the factors underlying these considerations include:
whether the transaction is likely to have any significant negative effect on HSNi, the related person or any HSNi partner;
whether the transaction can be effectively managed by HSNi despite the related person’s interest in it;
the purpose, and the potential benefits to HSNi, of the transaction;
whether the transaction would be in the section entitled “Compensation, Discussionordinary course of our business; and Analysis.” In
the event that the requirementsavailability of Section 162(m) and the regulations thereunder change to permit the Compensation Committee discretion to alter the performance measures without obtaining shareholder approval of such changes, the committee shall have sole discretion to make such changes without obtaining shareholder approval.alternative products or services on comparable or more favorable terms.
EligibilitySuccession Planning
In addition to individuals who hold outstanding Adjusted Awards, persons who serve or agree to serve as officers, employees, non-employee directors or consultants of HSNi and its subsidiaries and affiliates will be eligible to receive awards underReflecting the Plan. As of March 31, 2009, approximately 345 employees (including all named executive officers) are eligible to participate in the Plan.
The Plan authorizes the issuance of up to 5,000,000 shares (8,000,000 shares assuming the approval of the proposal) of our common stock pursuant to new awards under the Plan, plus shares to be granted pursuant to the assumption of outstanding Adjusted Awards under the IAC Plan. No single participant may be granted awards covering in excess of 3,333,333 shares of our common stock over the life of the Plan.
The shares of our common stock subject to grant under the Plan are to be made available from authorized but unissued shares or from treasury shares, as determined from time to time bysignificance the Board of Directors. Other than Adjusted Awards,attaches to succession planning, each year, the extent that any award is forfeited, or any option or stock appreciation right terminates, expires or lapses without being exercised, or any award is settled for cash,Board, together with the shares of common stock subjectChairman and CEO, reviews succession planning practices and procedures and provides the Board with a recommendation as to such awards not delivered as a result thereof will again be available for awards under the Plan. To the extent any Adjusted Award is forfeited, terminates, expires or lapses without being exercised or is settled for cash, the shares of common stock subject to such award not delivered as a result,do not become available for awards under the Plan. If the exercise price of any option and/or the tax withholding obligations relating to any award are satisfied by delivering shares of common stock (by either actual delivery or by attestation), only the number of shares of common stock issued net of the shares of common stock delivered or attested to will be deemed delivered for purposes of the limits in the Plan. To the extent any shares of common stock subject to an award are withheld to satisfy the exercise price (in the case of an option) and/or the tax withholding obligations relating to such award, such shares of common stock will not generally be deemed to have been delivered for purposes of the limits set forth in the Plan.
The Plan provides thatsuccession in the event of certain extraordinary corporate transactions (such as a merger, consolidation, liquidation or other similar events), the committee or the Board of Directors may make such substitutions or adjustments as it deems appropriate and equitable to (i) the aggregate number and kind of shares or other securities reserved for issuance and delivery under the Plan, (ii) the various maximum limitations set forth in the Plan, (iii) the number and kind of shares or other securities subject to outstanding awards; and (iv) the exercise price of outstanding options and SARs. Notwithstanding the foregoing, the Plan also provides that the Board of Directors may not decrease the exercise price for other than extraordinary events, as defined in Section 3(d) of the Plan, except upon approval of our shareholders.
Several types of stock grants can be made under the Plan. A summary of these types of grants is set forth below.
Stock Options and Stock Appreciation Rights
Stock options granted under the Plan may either be incentive stock options or nonqualified stock options. SARs granted under the Plan may either be granted alone or in tandem with a stock option. SARs may be settled in cash or stock, at the discretion of the Board or the Compensation Committee, although only stock-settled SARs have been issued to date. Holders of stock-settled SARs will only receive shares with a value equal to the spread between the current market price per share of common stock and the exercise price. The exercise price of options and SARs cannot be less than 100% of the fair market value of the stock underlying the options or SARs on the date of grant. Optionees may pay the exercise price in cash or, if approved by the committee, in common stock (valued at its fair market value on the date of exercise) or a combination thereof, or by “cashless exercise” through a broker or by withholding shares otherwise receivable on exercise. The term of options and SARs will be as determined by the committee, but options and SARs may not have a term longer than ten years from the date of grant. The committee will determine the vesting and exercise schedule of options and SARs, and the extent to which they will be exercisable after the award holder’s employment terminates. Generally, unvested options and SARs terminate upon the cessation of employment, and vested options and SARs will remain exercisable for one year after the award holder’s death, disability or retirement, and 90 days after the award holder’s termination for any other reason. Vested options and SARs will also terminate upon the optionee’s termination for cause (as defined in the Plan). Stock options and SARs are transferable only by will or by the laws of descent and distribution, or pursuant to a qualified domestic relations order or in the case of nonqualified stock options or SARs, as otherwise expressly permitted by the committee including, if so permitted, pursuant to a transfer to the participant’s family members, to a charitable organization, whether directly or indirectly or by means of a trust or partnership or otherwise.
A summary of the status of the outstanding stock options and SARs, including the Adjusted Awards and awards granted under the Plan, as of December 31, 2008 is as follows:
| Stock Options and Stock-Settled SARs | |||||||||
| Number of shares | Weighted Average Exercise Price (in dollars) | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in dollars) | ||||||
Outstanding at August 20, 2008 | 4,104,929 | 19.25 | |||||||
Granted (1) | 1,799,826 | 19.30 | |||||||
Exercised | (9,354 | ) | 7.93 | ||||||
Forfeited | (2,871 | ) | 18.31 | ||||||
Expired | (275,017 | ) | 19.54 | ||||||
Outstanding at December 31, 2008 (2) | 5,617,513 | 19.27 | 7.6 | 2,123,882 | |||||
Vested and expected to vest at December 31, 2008 | 4,831,848 | 19.35 | 7.3 | 1,783,935 | |||||
Exercisable at December 31, 2008 | 1,307,313 | 17.56 | 3.0 | 359,994 | |||||
The aggregate intrinsic value in the table above represents the pre-tax difference between the closing price of our common stock on December 31, 2008 of $7.27 and the exercise price for all “in the money” awards at December 31, 2008. This intrinsic value changes based on the fair market value of our common stock. The intrinsic value of the stock options and stock-settled SARs exercised during the year ended December 31, 2008 was less than $0.1 million.
The following table summarizes additional information about stock options and stock-settled SARs outstanding and exercisable under the Plan as of December 31, 2008:
| Outstanding | Exercisable | |||||||||||
| Number Outstanding at December 31, 2008 | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term in Years | Number Exercisable at December 31, 2008 | Weighted Average Exercise Price | ||||||||
$0.00 to $4.99 | 167,971 | $ | 3.65 | 6.5 | 84,585 | $ | 3.14 | |||||
$5.00 to $9.99 | 1,090,351 | 5.94 | 9.4 | 92,851 | 7.89 | |||||||
$10.00 to $14.99 | 237,803 | 12.66 | 4.2 | 204,175 | 12.57 | |||||||
$15.00 to $19.99 | 2,251,303 | 16.85 | 7.6 | 534,527 | 18.08 | |||||||
$20.00 to $24.99 | 329,208 | 22.70 | 3.1 | 329,179 | 22.70 | |||||||
$25.00 to $73.11 | 1,540,877 | 34.23 | 7.7 | 61,996 | 36.36 | |||||||
| 5,617,513 | 19.27 | 7.6 | 1,307,313 | 17.56 | ||||||||
Restricted Stock and Restricted Stock Units
RSUs are awards in the form of phantom shares or units that are denominated in a hypothetical equivalent number of shares of our common stock. At the time of grant, HSNi determines if the RSUs will be settled in cash,
stock or both. The value to the holder of the RSU is based upon the market value of our stock when the RSUs vest. Restricted stock may be granted with such restriction periods as the committee may designate. The committee may provide at the time of grant that the vesting of restricted stock will be contingent upon the achievement of applicable performance goals and/or continued service. The committee may grant RSUs payable in cash or shares of common stock. The terms and conditions of restricted stock awards (including any applicable performance goals) need not be the same with respect to each participant. During the restriction period, the committee may require that the stock certificates evidencing restricted shares be held by HSNi. RSUs may not be sold, assigned, transferred, pledged or otherwise encumbered, and are generally forfeited uponsenior officer’s termination of employment unless otherwise provided bywith HSNi for any reason. This process is enterprise-wide for senior leaders up to and including our CEO. Our Compensation Committee annually reviews the committee. Other than such restrictions on transfer and anyperformance of the senior leaders to determine, among other restrictions the committee may impose, the participant will have all the rights of a shareholder with respectthings, their performance in their current position as well as their potential ability to succeed other executive officers. This information is then presented to the restricted stock award.Board.
A summary ofThe full Board has the status of the non-vested RSUs, including the Adjusted Awards and awards granted under the Plan, as of December 31, 2008 and changes during the year ended December 31, 2008 is as follows:
| RSUs | ||||||
| Number of shares | Weighted Average Grant Date Fair Value | |||||
Nonvested at 8/20/08 | 1,090,304 | $ | 22.24 | |||
Granted | 433,065 | 5.53 | ||||
Vested | — | — | ||||
Forfeited | (88,317 | ) | 23.89 | |||
Nonvested at 12/31/08 (1) | 1,435,052 | 17.10 | ||||
A portion of the RSUs granted by IAC priorprimary responsibility to our spin-off accelerated at the date of the spin-off and were settled in HSNi common stock. In connection with these accelerated RSUs, approximately 240,000 shares of HSNi common stock issued on the date of the spin-off to employees of all five Spincos had an intrinsic value of approximately $3.0 million.
Other Stock-Based Awards
Other awards of common stock and other awards that are valued in whole or in part by reference to, or are otherwise based upon, common stock, including (without limitation), unrestricted stock, dividend equivalents and convertible debentures, may be granted under the plan.
Bonus Awards
Bonus awards granted to eligible employees of HSNi and its subsidiaries and affiliates under the Plan will be based upon the attainment of the performance goals established by the committeedevelop succession plans for the plan year or such shorter performance period it may establish. Bonus awards earned by any individual will be limitedCEO position. The Chairman and CEO provide an annual report to $10 million for any plan year, pro rated (if so determined by the committee) for any shorter performance period. Bonus awards will be paidBoard assessing senior managers and their potential to succeed the CEO. This report is developed in cash or, atconsultation with our Executive Vice President of Human Resources and the discretionchair of HSNi, in HSNi common stock, as soon as practicable following the end of the Plan year. The committee may reduce or eliminate a participant’s bonus award in any year notwithstanding the achievement of performance goals.
In the event of a Change of Control (as defined in the Plan), the committee has discretion to determine the treatment of awards granted under the Plan, including providing for the acceleration of such awards upon the occurrence of the Change of Control and/or upon a qualifying termination of employment (e.g., without cause or for good reason) following the Change of Control.
Theour Compensation Committee has recommended that accelerated vesting of awards be permitted only upon the occurrence of both (i) a Change of Control and (ii) a qualifying termination of employment. Awards recently made by HSNi include a provision to this effect.
In no event may any option or SAR granted under the Plan be amended, other thanincludes contingency plans in the event of certain extraordinary corporate transactions or other transactions affecting our capital structure, to decrease the exercise price thereof, be cancelled in conjunctionCEO’s termination of employment with the grant ofHSNi for any new option or SAR with a lower exercise price or otherwise be subject to any action that would be treated, for accounting purposes, as a “repricing” of such option or SAR, unless such amendment, cancellation, or action is approved by our shareholders.reason.
Withholding for Payment of TaxesDirector Compensation
The Plan providesGeneral
HSNi does not compensate employees for service on the withholding and payment by a participantBoard. Each non-employee member of any taxes required by applicable law. Subject to our approval and toBoard of Directors receives an annual retainer in the termsamount of $50,000. Each member of the Plan, a participant may settle such a withholding obligation with our common stock, including common stock that is a partAudit Committee and Compensation Committee (including their respective chairs) receives an additional annual retainer in the amount of $10,000. Each member of the award giving rise toGovernance Committee receives an additional annual retainer in the withholding obligation. We have the right to deduct any such taxes from any payment otherwise due to a participant.
amount of $5,000. The Plan may be amended, altered or discontinued by the Board, but no amendment, alteration or discontinuance may impair the rightschair of an optionee under an option or a recipient of a SAR, restricted stock award, RSU award or bonus award previously granted without the optionee’s or recipient’s consent. Amendments to the Plan will require shareholder approval to the extent such approval is required by law or agreement.
Federal Income Tax Consequences
With respect to nonqualified stock options, we are generally entitled to deduct and the optionee recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. A participant receiving incentive stock options will not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant will not recognize taxable income at the time of exercise. However, the excess of the fair market value of the common stock received over the option price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an incentive stock option is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the fair market value on the date of sale and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and we will not be entitled to any deduction. If the holding period requirements are not met, the incentive stock option will be treated as one that does not meet the requirements of the Code for incentive stock options and the tax consequences described for nonqualified stock options will apply.
The current federal income tax consequences of other awards authorized under the Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as nonqualified stock options; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); RSUs, stock-based performance awards, dividend equivalents and other types of awards are generally subject to tax at the time of payment. Compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, we will generally have a corresponding deduction at the time the participant recognizes income, subject to Section 162(m) of the Code with respect to covered employees.
Section 162(m) of the Code denies a deduction to any publicly held corporation for compensation paid to certain “covered employees”Audit Committee and Compensation Committee receives an additional retainer in a taxable year to the extent that compensation to such covered employee exceeds $1 million. It is possible that compensation attributable to awards under the Plan, when combined with all other types of compensation received by a covered employee from us, may cause this limitation to be exceeded in any particular year. Certain kinds of compensation, including qualified “performance-based compensation,” are disregarded for purposes of the deduction limitation. In accordance with Treasury Regulations issued under Section 162(m), compensation attributable to stock awards will generally qualify as performance-based compensation if (i) the award is granted by a compensation committee composed solely of two or more “outside directors,” (ii) the plan contains a per-employee limitation on the number of awards which may be granted during a specified period, (iii) the plan is approved by the shareholders, and (iv) under the terms of the award, the amount of compensation an employee could receive is based solely on an increase in the value of the stock after the date of the grant (which requires that the exercise price of the option is not less than the fair market value of the stock on the date of grant), and for awards other than options, established performance criteria that must be met before the award actually will vest or be paid. $15,000.
The Plan is designed to meet the requirements of Section 162(m); however, full value awards granted under the Plan will only be treated as qualified performance-based compensation under Section 162(m) if the full value awards and the procedures associated with them comply with all other requirements of Section 162(m). There can be no assurance that compensation attributable to options and full value awards granted under the Plan will be treated as qualified performance-based compensation under Section 162(m) and thus be deductible by us.
Our Board of Directors oversees management in the conduct of HSNi’s business. The Board holds regularly scheduled meetings at least quarterly and otherwise as appropriate to consider corporate decisions requiring its attention and action. The Board has four standing committees: the Audit Committee, the Compensation and Human Resources Committee, the Nominating Committee and the Executive Committee. With the exception of the Executive Committee, each of the committees operates under a written charter which may be found on our website. The principal responsibilities of these committees are described below.
Nominations of Director Candidates
Directors may be nominated by the Board of Directors or by shareholders in accordance with our By-Laws. The Nominating Committee will, when appropriate, actively seek individuals qualified to become Board members, and solicit input on director candidates from a variety of sources, including current directors. As a matter of course, the Nominating Committee will evaluate a candidate’s qualifications and review all proposed nominees, including those proposed by shareholders. This includes a review of the person’s qualifications and independence, as well as consideration of diversity, age, skills and experience in the context of the needs of the Board. While the Nominating Committee may retain a third party to assist in the nomination process, it has not done so to date.
Director nominees should possess a high degree of integrity and have broad knowledge, experience and mature judgment. Directors and nominees should have predominately business backgrounds, have experience at policy-making levels in business and/or technology, and bring a diverse set of business experience and perspectives to the Board. Board members are expected to be committed to representing the long-term interests of our shareholders. In order to align the interests of our directors with those of our shareholders, a significant portion of the director fees are paid in the form of equity. Accordingly, each non-employee director also received a grant of
restricted stock units, or RSUs, with a Mr. Martinez serves as Chairman of the You can nominatecandidate fordollar value of $100,000 upon his or her initial election to the Board by complying withof Directors and will receive grants in the nomination procedures insame amount annually thereafter upon re-election at our By-Laws. For an election to be held at an annual meeting of shareholders, nomination by a shareholder must be made by noticeshareholders. The terms of these RSUs provide for (i) vesting in writing delivered to the Corporate Secretary not less than 45 nor more than 75 days prior totwo equal annual installments commencing on the first anniversary of the grant date, (ii) cancellation and forfeiture of unvested units in their entirety upon termination of service on which we first mailed our proxy materialsthe Board and (iii) full acceleration of vesting upon a change in control of HSNi. Non-employee directors are also reimbursed for the preceding year’s annual meeting of shareholders. If the dateall reasonable expenses incurred in connection with attendance at Board and committee meetings.annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the first anniversary of the preceding year’s annual meeting, or if we did not holdBoard. For his services as Chairman, Mr. Martinez was originally provided an annual meeting during the precedingretainer of $350,000 per year notice mustand granted RSUs with a dollar value of $350,000 on identical terms as those described above. It was expected that a significant part of Mr. Martinez’s activities would be delivered no later than the close of business on the later of (i) the 90th day prior to such annual meeting, and (ii) the 10th day following the day on which we publicly announce the date.
A shareholder’s notice to the Corporate Secretary must be in writing and be delivered to HSN, Inc., Legal Department, 1 HSN Drive, St. Petersburg, Florida 33729, Attn: Corporate Secretary, and must include:
the name and address of the shareholder as they appear on our books;
the class, series, and number of securities that are owned by the shareholder;
any proxy, contract, arrangement, understanding or relationship pursuant to which such shareholder has the right to vote any shares;
the name, age and business address of each nominee proposed in the notice;
such other information concerning each nominee as must be disclosed with respect to director nominees in proxy solicitations under the proxy rules of the SEC; and
the written consent of each nominee to serve as a director, if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedures. A shareholder’s compliance with these procedures will not require HSNi to include information regarding a proposed nominee in HSNi’s proxy solicitation materials.
Under applicable law and listing standards, the Board must determine the independence of its directorstransitional in light of their relationships with HSNi andour spin-off from IAC, our former parent. As a result, in light of applicable listing standards. To do so,late 2009 the Board reviews information obtained from director questionnaires, our recordsre-evaluated Mr. Martinez’s compensation arrangements following his first year of service and publicly available information. Following these determinations, management monitors transactions, relationshipsdetermined to reduce his compensation, effective October 1, 2009, to an annual retainer of $250,000 per year and arrangements that it has considered, as well as any new relationships, for developments that could affect its determinations.an annual grant of RSUs with a dollar value of $250,000.
The BoardGovernance Committee has determined that eachprimary responsibility for establishing non-employee director compensation arrangements, which are designed to provide competitive compensation necessary to attract and retain high quality non-employee directors and to encourage ownership of Messrs. Bousquet-Chavanne, Boyd, Follo, Martinezour stock to further align directors’ interests with those of our shareholders. When considering non-employee director compensation arrangements, our management will provide the Governance Committee with information regarding various types of non-employee director compensation arrangements and Morse and Ms. Kugelman, are independent.practices of selected peer companies.
Shareholder Communications with the Board of Directors
Shareholders who wish to communicate with the Board of Directors or a particular director may send such communication to HSN, Inc., 1 HSN Drive, St. Petersburg, Florida 33729, Attention: Corporate Secretary. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Shareholder-Board Communication” or “Shareholder-Director Communication.” All such letters must identify the author as a shareholder, provide evidence of the sender’s stock ownership and clearly state whether the intended recipients are all members of the Board or a particular director or directors. The Corporate Secretary will then review such correspondence and forward it to the Board, or to the specified director(s).
The Board of Directors and Committees
The Board
Since HSNi’s spin-off from IAC in August 2008,From January 1, 2009 through December 31, 2009, the Board met five times. AllEach of the members of the Board of Directors attended allat least 75% of the meetings of the Board and the Board committees on which he or shethe director served. Although HSNi has no policy with respect to director attendance at annual meetings, it is anticipated that all Board members will attend the annual meetings of shareholders if possible, in person. All of the members of the Board were present at our 2009 annual meeting of shareholders.
The following table sets forth the current members of each standing committee of the Board during 2009, the number of meetings held and the times that each such committee took action by written consent since HSNi’s spin-off from IAC in August 2008.during fiscal 2009.
Name | Audit Committee | Compensation and Human Resources Committee | Executive Committee | Nominating Committee | Audit Committee | Compensation and Human Resources Committee | Executive Committee | Governance and Nominating Committee | ||||||||
Gregory R. Blatt | — | — | — | — | — | — | — | |||||||||
Patrick Bousquet-Chavanne* | — | X | — | — | X | — | — | |||||||||
Michael C. Boyd* | X | — | — | X | — | — | — | |||||||||
William Costello | — | — | — | — | — | — | — | |||||||||
James M. Follo* | Chair | — | X | X | Chair | — | — | X | ||||||||
Mindy Grossman | — | — | — | — | — | X | — | |||||||||
Stephanie Kugelman* | — | X | X | — | — | X | — | — | ||||||||
Arthur C. Martinez* | — | — | Chair | — | — | X | Chair | |||||||||
Thomas J. McInerney | X | — | X | — | — | — | X | — | ||||||||
John B. Morse, Jr. * | X | Chair | — | |||||||||||||
Number of Meetings since August 21, 2008 | 4 | 3 | 0 | 1 | ||||||||||||
Number of Written Consents since August 21, 2008 | 0 | 0 | 0 | 0 | ||||||||||||
John B. (Jay) Morse, Jr.* | X | Chair | — | — | ||||||||||||
Number of Meetings during fiscal 2009 | 9 | 7 | 0 | 1 | ||||||||||||
Number of Written Consents during fiscal 2009 | 0 | 0 | 0 | 0 | ||||||||||||
| * | Independent |
Audit Committee
The Audit Committee oversees theour accounting and financial reporting processes of HSNi and the audits of our consolidated financial statements. The committee assists the Board of Directors in monitoring (1) the integrity of
our financial statements, (2) the effectiveness of our internal control over financial reporting, (3) the qualifications and independence of our independent registered certified public accounting firm, (4) the performance of our internal audit function and independent registered certified public accounting firm, and (5) our compliance with legal and regulatory requirements. The committee is also directly responsible for the appointment, compensation, retention and oversight of the independent registered certified public accounting firm.
The Audit Committee is also responsible for oversight over the company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the company’s risk assessment and risk management policies. The Audit Committee reviews all related party transactions in accordance with the company’s formal written policy. In addition, the Audit Committee has established procedures for the receipt, retention and treatment of complaints received by the company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by company employees of concerns regarding accounting and auditing matters.
The Audit Committee must consist of no fewer than three members, all of whom must be independent in accordance with applicable listing standards and at least one member must be a “financial expert” as defined under SEC rules. The Audit Committee currently consists of Messrs. Boyd, Follo McInerney and Morse. With the exception ofMorse, with Mr. McInerney, eachFollo serving as Chairman of the members is independent in accordance with applicable law and listing standards.committee. The Board of Directors has determined that Mr. Follo is anand Mr. Morse are both “audit committee financial expert,experts,” as such term is defined in applicable SEC rules.
Mr. McInerney is not independent because of his relationship with IAC, HSNi’s former parent; however, because of Mr. McInerney’s knowledge of HSNi’s business, the Board of Directors decided to rely on the Nasdaq transitional rules to allow Mr. McInerney to continue to serve on the Audit Committee during this transition period. As required by those rules, Mr. McInerney will resign from the Audit Committee on or before August 20, 2009.
Compensation and Human Resources Committee
The Compensation Committee oversees mattersexercises the powers of the Board of Directors pertaining to compensation and benefits, including incentive/bonus plans, stock compensation plans, retirement programs, and insurance plans and salary matters relating to the compensation of the Chief Executive OfficerCEO and other executive officers. The Chief Executive OfficerCompensation Committee is responsible for periodically reviewing our incentive compensation arrangements to confirm that the design of incentive pay does not present during any Committee deliberations or voting with respect to her compensation.encourage unnecessary risk taking. The Compensation Committee also reviews the Compensation Discussion and Analysis contained in our proxy statement and prepares a report for inclusion in our proxy statement.
The Compensation Committee must consist of no fewer than two members, all of whom must be independent in accordance with applicable listing standards. In addition, at least two members must qualify as “outside” directors within the meaning of Section 162(m) of the Code. The Compensation Committee currently consists of Ms. Kugelman and Messrs. Bousquet-ChavanneMorse and Morse,Bousquet-Chavanne, each of whom is independent in accordance with applicable law and listing standards.qualifies as an “outside” director within the meaning of Section 162(m) of the Code.
Executive Committee
The Executive Committee has all power and authority of our Board of Directors, except those powers specifically reserved to our Board of Directors by Delaware law or our organizational documents. The Executive Committee serves primarily as a means for addressing issues that may arise and require Board approval between regularly scheduled Board meetings.
The Executive Committee consists of Ms. Grossman and Messrs. Martinez and McInerney. During 2008,2009, the committee did not meet and did not take any action.
Governance and Nominating Committee
This committee was originally established in August 2008 as the Nominating Committee and performed traditional nominating committee type functions. In December 2009, the committee and Board determined it was
in our best interest to have a governance committee and revised the name and authority and responsibilities of this committee to include corporate governance and oversight. The NominatingGovernance Committee oversees the identification and evaluation of director candidates, consistent with the criteria approved by the Board, and makes recommendations to the Board with respect to director nominees and the membership of the Board committees. The NominatingGovernance Committee also reviews and recommends to the Board compensation and benefits for non-employee directors. The committee developed and annually evaluates our Corporate Governance Guidelines and Code of Business Conduct and Ethics. The committee also reviews and assesses the channels through which the Board receives information and the quality and timeliness of that information.
The NominatingCompensation Committee consistsmust consist of no fewer than two members, all of whom must be independent in accordance with applicable listing standards. In 2009, the Governance Committee consisted of Messrs. Follo and Martinez, eachboth of whom are independent; however, in February 2010, Mr. Bousquet-Chavanne was added as a member of the committee. Each of the members is independent in accordance with applicable law and listing standards.
Other Committees
In addition to its standing committees, our Board of Directors may from time to time establish other committees of our Board of Directors, consisting of one or more of its directors.
The Board’s Role in Risk Oversight
Our management is responsible for the management and assessment of risk related to HSNi and its operations, including communication of the most material risks to the Board and its committees. It is the Board’s responsibility to oversee management in these efforts. In exercising its oversight, the Board of Directors has allocated some areas of focus to its committees and has retained areas of focus for itself. The Board has primary responsibility for oversight of the company’s strategic, operational, legal and regulatory and reputational risks. Our Audit Committee has primary responsibility for HSNi’s major financial risk exposures and the steps management has taken to monitor and control such exposures. The Compensation Committee is responsible for periodically reviewing incentive compensation arrangements to confirm that the design of incentive pay does not encourage unnecessary risk taking. In fulfilling these duties, each of the Board and committees receives regular reports from members of senior management on areas of material risk to the company. We believe our current Board leadership structure is appropriate and helps ensure proper risk oversight for HSNi.
Review and Approval of Related-Person Transactions
Under the Audit Committee’s charter, and consistent with Nasdaq rules, any material potential or actual conflict of interest or transaction between HSNi and any “related person” of HSNi must be reviewed and approved or ratified by the Audit Committee. SEC rules define a “related person” of HSNi as any HSNi director (or nominee), executive officer, 5%-or-greater shareholder or immediate family member of any of these persons.
In August 2008, our Board adopted a written Policy for the Review and Approval of Related-Person Transactions. The policy provides that any “related person” as defined above must notify the chair of the Audit Committee before becoming a party to, or engaging in, a potential related-person transaction that may require disclosure in our proxy statement under SEC rules, or if prior approval is not practicable, as soon as possible after engaging in the transaction. Based on current SEC rules, transactions covered by the policy include:
any individual or series of related transactions, arrangements or relationships (including but not limited to indebtedness or guarantees of indebtedness), whether actual or proposed;
in which HSNi was or is to be a participant;
the amount of which exceeds $120,000; and
in which the related person has or will have a direct or indirect material interest. Whether the related person has a material direct or indirect interest depends on the significance to investors of knowing the information in light of all the circumstances of a particular case. The importance to the person having the interest, the relationship of the parties to the transaction with each other and the amount involved in the transaction are among the factors to be considered in determining the significance of the information to investors.
The Audit Committee chair has the discretion to determine whether a transaction is or may be covered by the policy. If the chair determines that the transaction is covered by the policy, then the full Audit Committee must review and approve it. The Audit Committee’s decision is final and binding. Additionally, the Audit Committee chair has discretion to approve, disapprove or seek full Audit Committee review of anyimmaterialtransaction involving a related person (i.e., a transaction not otherwise required to be disclosed in the proxy statement).
In considering potential related-person transactions, the Audit Committee looks not only to SEC and Nasdaq rules, including the impact of a transaction on the independence of any director, but also to the consistency of the transaction with the best interests of HSNi and our shareholders. As the policy describes in more detail, the factors underlying these considerations include:
whether the transaction is likely to have any significant negative effect on HSNi, the related person or any HSNi partner;
whether the transaction can be effectively managed by HSNi despite the related person’s interest in it;
the purpose, and the potential benefits to HSNi, of the transaction;
whether the transaction would be in the ordinary course of our business; and
the availability of alternative products or services on comparable or more favorable terms.
Reflecting the significance the Board attaches to succession planning, each year, the Board, together with the Chairman and CEO, reviews succession planning practices and procedures and provides the Board with a recommendation as to succession in the event of each senior officer’s termination of employment with HSNi for any reason. This process is enterprise-wide for senior leaders up to and including our CEO. Our Compensation Committee annually reviews the performance of the senior leaders to determine, among other things, their performance in their current position as well as their potential ability to succeed other executive officers. This information is then presented to the Board.
The full Board has the primary responsibility to develop succession plans for the CEO position. The Chairman and CEO provide an annual report to the Board assessing senior managers and their potential to succeed the CEO. This report is developed in consultation with our Executive Vice President of Human Resources and the chair of our Compensation Committee and includes contingency plans in the event of our CEO’s termination of employment with HSNi for any reason.
General
HSNi does not compensate employees for service on the Board. Each non-employee member of our Board of Directors receives an annual retainer in the amount of $50,000. Each member of the Audit Committee and Compensation Committee (including their respective chairs) receives an additional annual retainer in the amount of $10,000. Each member of the Governance Committee receives an additional annual retainer in the amount of $5,000. The chair of each of the Audit Committee and Compensation Committee receives an additional retainer in the amount of $15,000.
In order to align the interests of our directors with those of our shareholders, a significant portion of the director fees are paid in the form of equity. Accordingly, each non-employee director also received a grant of
restricted stock units, or RSUs, with a dollar value of $100,000 upon his or her initial election to the Board of Directors and will receive grants in the same amount annually thereafter upon re-election at our annual meeting of shareholders. The terms of these RSUs provide for (i) vesting in two equal annual installments commencing on the first anniversary of the grant date, (ii) cancellation and forfeiture of unvested units in their entirety upon termination of service on the Board and (iii) full acceleration of vesting upon a change in control of HSNi. Non-employee directors are also reimbursed for all reasonable expenses incurred in connection with attendance at Board and committee meetings.
Mr. Martinez serves as Chairman of the Board. For his services as Chairman, Mr. Martinez was originally provided an annual retainer of $350,000 per year and granted RSUs with a dollar value of $350,000 on identical terms as those described above. It was expected that a significant part of Mr. Martinez’s activities would be transitional in light of our spin-off from IAC, our former parent. As a result, in late 2009 the Board re-evaluated Mr. Martinez’s compensation arrangements following his first year of service and determined to reduce his compensation, effective October 1, 2009, to an annual retainer of $250,000 per year and an annual grant of RSUs with a dollar value of $250,000.
The Governance Committee has primary responsibility for establishing non-employee director compensation arrangements, which are designed to provide competitive compensation necessary to attract and retain high quality non-employee directors and to encourage ownership of our stock to further align directors’ interests with those of our shareholders. When considering non-employee director compensation arrangements, our management will provide the Governance Committee with information regarding various types of non-employee director compensation arrangements and practices of selected peer companies.
Deferred Compensation Plan for Non-Employee Directors
Under our Deferred Compensation Plan for Non-Employee Directors, non-employee directors may defer all or a portion of their Board and committee fees. Eligible directors who defer all or any portion of these fees can elect to have such fees applied to the purchase of share units, representing the number of shares of our common stock that could have been purchased on the relevant date, or credited to a cash fund. If any dividends are paid on the common stock, dividend equivalents will be credited on the share units. The cash fund will be credited with deemed interest at an annual rate equal to the weighted average prime lending rate of JPMorgan Chase Bank. After a director ceases to serve as such, he or she will receive (i) with respect to share units, such number of shares of our common stock as the share units represent and (ii) with respect to the cash fund, a cash payment in an amount equal to deferred amounts, plus accrued interest. These payments will be made in either one lump sum or in up to five annual installments, as previously elected by the eligible director at the time of the related deferral election.
2009 Director Compensation
The following table sets forth information for the fiscal year ended December 31, 2009 regarding compensation of our non-employees directors:
Name | Fees Earned and Paid in Cash (1) | Stock Awards (2)(3) | Total | ||||||
Gregory R. Blatt | $ | 50,000 | $ | 100,009 | $ | 150,009 | |||
Patrick Bousquet-Chavanne | — | 160,009 | 160,009 | ||||||
Michael C. Boyd | 60,000 | 100,009 | 160,009 | ||||||
William Costello | — | 150,009 | 150,009 | ||||||
James M. Follo | 81,637 | 100,009 | 181,646 | ||||||
Stephanie Kugelman | 60,000 | 100,009 | 160,009 | ||||||
Arthur C. Martinez | 325,000 | 350,007 | 675,007 | ||||||
Thomas J. McInerney | 56,115 | 100,009 | 156,124 | ||||||
John B. (Jay) Morse, Jr. | 68,000 | 117,009 | 185,009 | ||||||
| (1) | Includes fees with respect to which directors elected to defer and credit to a cash fund pursuant to our Deferred Compensation Plan for Non-Employee Directors, including accrued interest. Does not include fees with respect to which directors elected to defer and credit towards the purchase of share units. |
| (2) | Reflects the dollar amount for (i) the RSUs granted to the directors in 2009, and (ii) the share units credited to the journal-entry accounts of certain directors who elected to defer a portion of their 2009 fees towards the purchase of share units pursuant to our Deferred Compensation Plan for Non-Employee Directors. |
| (3) | For the year ended December 31, 2009, the non-employee directors described below were granted the aggregate number of RSUs and, in certain cases, share units issued in lieu of fees, in each case under our Deferred Compensation Plan for Non-Employee Directors: |
Name | RSUs and Share Units Earned as Director Compensation | |
Gregory R. Blatt | 10,289 | |
Patrick Bousquet-Chavanne | 16,291 | |
Michael C. Boyd | 10,289 | |
William Costello | 15,291 | |
James M. Follo | 10,289 | |
Stephanie Kugelman | 10,289 | |
Arthur C. Martinez | 36,009 | |
Thomas J. McInerney | 10,289 | |
John B. (Jay) Morse, Jr. | 11,990 |
Management is responsible for our internal controls and financial reporting process. Management is also responsible for the preparation of our consolidated financial statements in accordance with generally accepted accounting principles and applicable rules and regulations. Ernst & Young LLP, the company’s independent registered certified public accounting firm, is responsible for performing an independent audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board and issuing reports thereon.
The Audit Committee is responsible for monitoring the effectiveness of our internal control over financial reporting and the integrity of our financial statements. The Audit Committee is also responsible for oversight over the company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the company’s risk assessment and risk management policies. The Audit Committee reviews all related party transactions in accordance with the company’s formal written policy. In addition, the Audit Committee has established procedures for the receipt, retention and treatment of complaints received by the company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by company employees of concerns regarding accounting and auditing matters.
In fulfilling its responsibilities,obligations, the Audit Committee met nine times in 2009 and held discussions with management, the company’s internal auditor and the company’s independent registered certified public accounting firm, both collectively and independently. The Audit Committee appointed our independent registered certified public accounting firm and pre-approved all audit and non-audit services to be performed by Ernst & Young LLP. The committee discussed with our independent accounting firm the overall scope and plans for the independent audit. The Audit Committee regularly received reports from and met with management, internal audit and the independent accounting firm. The Audit Committee has reviewed and discussed the audited consolidated financial statements of HSNi for the fiscal year ended December 31, 20082009 with management and Ernst & Young LLP. The Audit Committee also reviewed HSNi’s quarterly financial statements with management and Ernst & Young LLP. The committee discussed HSNi’s interim financial information contained in each quarterly earnings announcement with HSNi’s Chief Financial Officer and Controller and Ernst & Young LLP prior to public release.
In performance of its duties, the Audit Committee regularly met separately with our independent registered certified public accounting firm, with and without management present, to discuss the results of their examinations, including the integrity, adequacy, and effectiveness of the accounting and financial reporting process and controls, and the overall quality of our reporting. In addition to discussing key areas, since the “spin-off” from IAC/InterActive Corp, management, internal audit and the independent accounting firm also made presentations to the Audit Committee on specific topics of interest, including the audit process and methodology, and SEC guidance and methodologies utilized by management for significant policies and accounting estimates.
In addition, the committee reviewed and discussed HSNi’s compliance with the requirements of the Sarbanes-Oxley Act of 2002 with respect to internal control over financial reporting. The Audit Committee also reviewed and discussed, together with management and the independent registered certified public accounting firm, the results of management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the independent registered certified public accounting firm’s audit of internal control over financial reporting.
The Audit Committee has discussed with Ernst & Young LLP the matters required to be discussed by Statement on Auditing Standards No. 61, as amended and adopted by the Public Company Accounting Oversight Board in Rule 3200T, “Communication with Audit Committees.” The Audit Committee has also received the written disclosures and the letter from Ernst & Young LLP required pursuant to Rule 3526 of the Public Company Accounting Oversight Board “Communication with the Audit Committees Concerning Independence”,Independence,” and the Audit Committee has discussed with Ernst & Young LLP their firm’s independence. In addition, the committee considered whether the non-audit services provided by the independent accounting firm could impair its independence and concluded that such services would not.
Based on its review and the meetings, discussions and reports described above, and subject to the limitations of its role and responsibilities referred to above and in the Audit Committee Charter, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements for HSN, Inc. for the fiscal year ended December 31, 20082009 be included in our Annual Report on Form 10-K for the year ended December 31, 20082009 for filing with the SEC.
Members of the Audit Committee |
James M. Follo (Chairman) |
Michael C. Boyd |
|
John B. Morse, Jr. |
Compensation Committee Interlocks Insider Participation
None of the members of the Compensation Committee is, or was during the last completed fiscal year, an employee or officer of HSNi or a former employee of HSNi, nor did any of them have any relationship requiring disclosure under Item 404 of Regulation S-K under the Securities Exchange Act of 1934, or the Exchange Act. In addition, during the last completed fiscal year, none of our executive officers have served as a member of the board of directors or compensation committee of any other entity that has or has had one or more of its executive officers serving as a member of our Board or the Compensation Committee.
Report of the Compensation and Human Resources Committee
The Compensation and Human Resources Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K promulgated by the SEC and set forth in this proxy statement. The Compensation Committee has reviewed and discussed with management the company’s incentive compensation arrangements to confirm that the design of incentive pay does not encourage unnecessary risk taking. Based upon its review and the discussions referred to above, the Compensation and Human Resources Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Members of the Compensation and Human Resources Committee:Committee
John B. Morse, Jr. (Chair)(Chairman)
Patrick Bousquet-Chavanne
Stephanie Kugelman
Executive officers are elected annually by the Board and serve at the discretion of the Board. Set forth below is information regarding our executive officers as of March 31, 2009.2010.
Name | Age | Position(s) | ||
Mindy Grossman | Chief Executive Officer and Director of HSNi | |||
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Judy A. Schmeling | Executive Vice President and Chief Financial Officer of HSNi | |||
| Executive Vice President, | |||
Lisa A. Letizio | 47 | Executive Vice President, Human Resources of HSNi | ||
Barbara Lynne Ronon | 57 | Executive Vice President, Merchandising of HSN |
Mindy Grossman’s biography is set forth under the heading “Proposal 1—Election of Directors.��”
Judy A. Schmeling has served as Executive Vice President and Chief Financial Officer of HSNi since completion of the spin-off in August 2008. Prior to that, she served as Executive Vice President and Chief Financial Officer of HSN, when it was IAC Retailing, a position she held since February 2002. Ms. Schmeling has held positions of increasing responsibility since joining HSN in September 1994. From November 1999 to February 2002, Ms. Schmeling served as Senior Vice President, Finance; from January 2001 to February 2002, served as Chief Operating Officer of HSN’s international operations and from January 1998 to November 1999, as Vice President, Strategic Planning and Analysis. Ms. Schmeling served as Director of Investor Relations and Operating Vice President, Finance of HSN from September 1994 to January 1998 during the time in which HSN was a separately traded public company. Prior to joining HSN, Ms. Schmeling was Managing Director of Tunstall Consulting, Inc., a corporate financial planning firm, from 1986 to 1994. Ms. Schmeling began her career at Deloitte & Touche, an international public accounting firm where she held various positions from 1982 to 1986.
Gregory J. Henchel has served as Executive Vice President, General Counsel and Secretary of HSNi since February 2010. Prior to joining HSNi, Mr. Henchel was Senior Vice President and General Counsel of Tween Brands, Inc. from October 2005 to February 2010. Mr. Henchel served as the company’s Secretary since August 2008. From May 1998 to October 2005, Mr. Henchel served Cardinal Health, Inc., a global medical device, pharmaceutical and healthcare technology company, as Assistant General Counsel (2001-2005) and Senior Litigation Counsel (1998-2001). Prior to his service at Cardinal Health, Mr. Henchel was an associate with the law firm of Jones Day from September 1993 to May 1998.
Lisa A. Letizio has served as Executive Vice President, Human Resources of HSNi since completion of the spin-off in August 2008. Prior to that, she served as Executive Vice President, Human Resources of HSN since 1998. In this capacity, Ms. Letizio oversees the Human Resources team for all of HSNi, which includes both the HSN and the Cornerstone operating segments. Previously, Ms. Letizio spent six years as Vice President of Human Resources for the Timberland Company, a company listed on the New York Stock Exchange and recognized as a global leader in the design and marketing of premium-quality footwear, apparel and accessories with approximately 6,000 full and part-time employees worldwide. Ms. Letizio also serves on the Board of Big Brothers Big Sisters serving Pinellas, Citrus and Hernando counties in Florida.
Barbara Lynne Ronon has served as Executive Vice President, Merchandising of HSN since October 2007. Prior to joining HSN, Ms. Ronon was Senior Vice President North Asia for Burberry from December 2003 to September 2007. From November 2001 to July 2003, Ms. Ronon worked at Lane Crawford, a luxury department store based in Hong Kong. Ms. Ronon served as a consultant to Lane Crawford from 2001 to 2002 and then as Senior Vice President Commercial between 2002 and 2003. Prior to her tenure with Lane Crawford, Ms. Ronon held various positions at Saks Fifth Avenue from August 1986 to August 2001, including Senior Vice President Chief Merchant from 2000 to 2001, Senior Vice President General Merchandise Manager from 1995 to 2000, Vice President Divisional Merchandise Manager from 1987 to 1995, and Buyer for Petites from 1986 to 1987. Prior to Saks Fifth Avenue, Ms. Ronon held various positions at Gimbels East in New York and Philadelphia.
There is no family relationship between any of directors or executive officers of HSNi.
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee is responsible for reviewing and approving the design and overseeing the administration of our compensation program. The Compensation Committee also reviews and approves the annual compensation and compensation procedures for our “named executive officers.” Our named executive officers, as determined as of December 31, 2009 under applicable SEC rules, are listed below.
Name |
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Judy A. Schmeling | Chief Financial Officer | |
Barbara Lynne Ronon | ||
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COMPENSATION DISCUSSION AND ANALYSIS
Prior to our spin-off from IAC, the compensation of our named executive officers (who were then executives of the retailing division of IAC) was predominantly determined by IAC, acting in effect as a compensation committee. IAC’s compensation process was principally driven by IAC’s General Counsel, who had primary responsibility for administering compensation and making compensation recommendations, with all material decisions approved by IAC’s Chairman and Chief Executive Officer and, where appropriate, the compensation committee of IAC’s board of directors.
Simultaneously with HSNi’s spin-off from IAC, the Board of Directors was constituted and in turn established the Compensation and Human Resources Committee, which is comprised solely of independent directors of HSNi. Since the spin-off HSNi’sin August 2008, our senior management has worked with the Compensation Committee to establish HSNi’sour compensation philosophy and to design programs to align compensation with business objectives and performance for future periods,periods. The Compensation Committee’s goal is to ensure that a significant amount of the total compensation paid to our named executive officers, who have the greatest influence over our performance, is performance based. The programs are also designed to ensure that compensation awards vest in a manner that rewards consistent performance over time and to determinefacilitates the retention of our key employees. Each year the Compensation Committee evaluates the programs and determines appropriate payments and awards to itsour named executive officers for the year ended December 31, 2008.
This Compensation Discussionbased on HSNi’s and Analysis describes the compensation philosophy, objectives and programs applicable to our executive officers as they were in effect prior to our spin-off from IAC as well as our compensation programs and philosophies and how they have changed since the spin-off and our transition to being a stand-alone public company.their performance.
HSNi operates in the fast-paced and highly competitive retail environment. To be successful, we must be able to attract and retain management that thrives in this environment. At the same time, we are committed to achieving long-term sustainable growth and increasing shareholder value. Generally, our executive officer compensation program isprograms are designed to increase long-term shareholder value by attracting, retaining, motivating and rewarding leaders with the competence, character, experience and ambition necessary to enable HSNius to meet itsour growth objectives.
Historically, when establishing compensation packages for a given executive, IAC followed a flexible approach, making decisions based on factors particular to a given executive’s role and performance, including direct experience with the competition for recruiting and retaining executive talent, negotiation with the relevant individual, competitive survey data, internal equity considerations and other factors deemed relevant at the time. Similarly, IAC did not historically follow an arithmetic approach to establishing compensation levels and measuring and rewarding performance. IAC generally avoided the use of strict formulas or pre-set performance targets in its compensation practices and relied primarily on a discretionary approach to establishing compensation levels. IAC believed that strict formulas often failed to adequately take into account the multiple factors that contribute to success at the individual and business level. IAC believed that formulaic approaches often over-compensate or under-compensate at given performance levels. As a result, in any given period, HSNi would have multiple objectives, and these objectives and their relative importance often changed, including within a given compensation cycle, to adapt to compensation opportunities to changes in the competitive and strategic landscape.
HSNi operates in the fast-paced and highly competitive retail environment. To be successful, we must be able to attract and retain creative management that thrives in this environment. At the same time, we are committed to achieving long-term sustainable growth and increasing shareholder value. Since the spin-off, management Management and the Compensation Committee have worked with outside consultants to develop a compensation programprograms that rewardsreward the performance, behaviors and culture that we believe will drive long-term success.
The compensation program wasprograms were designed with the following objectives in mind:
offer total compensation opportunities that are competitive with identified peer companies and other select organizations with whom HSNi competes for executive talent in order to attract and retain talent;
provide incentive compensation based uponcreate clear targets for individuals that encourage both the achievement of HSNi’s operating planlong-term and individual contributions relative to that performance;short-term goals;
provide an appropriate link between compensation and creation of shareholder value through awards tied to HSNi’s achievement of certain key financial metrics;
reflect HSNi’s commitment to a strong team-based culture and focus on overall company performance by linking compensation to the financial results of business units or HSNi as a whole;
promote a long-term commitment to HSNi through the vesting schedules of RSUequity awards SARs and certain performance cash bonuses;
create clear targets for individuals that encourage both the achievement of long-term and short-term goals;
ensure that compensation paid to HSNi’s named executive officers, to the extent practicable, qualifies as deductible for federal income tax purposes under Section 162(m) of the Code, unless there is a valid reason in the judgment of the Compensation Committee to forego tax deductibility; and
be easily understood by program participants so as to encourage and facilitate achievement of goals.
In
HSNi’s compensation programs have also been designed with features that discourage executives from taking unnecessary risks that would threaten the health and viability of the company. For our named executive officers, at least 80% of the short-term incentive awards are based on company-wide or business unit financial performance. Long-term incentive compensation, which represents the most significant element of executive officer pay, is also based primarily on financial performance and is designed to ensure that executives have a strong incentive to create long-term shareholder value.
The Compensation Committee believes that it is necessary to consider market data in making compensation decisions in order to createattract and retain talent. The committee also recognizes that at the executive level, we compete for talent against larger global companies. As a competitive compensation program,result, in 2008, we utilized Towers Watson, formerly known as Towers Perrin, to create a list of reference companies from which we recruit talent and to evaluate our forms of compensation (e.g., salary, bonus and short and long-term incentives) relative to those companies. The committee believes that it is necessary to consider this market data in making compensation decisions in order to attract and retain talent. The committee also recognizes that at the executive level, we compete for talent against larger global companies, not just companies based in Florida. The initial reference group of companies consists of publicly traded companies in two peer groups (technology companies and retail companies) that consist of the following companies:
Technology Peer Group: | Retail Peer Group: | |
Amazon.com, | Abercrombie & Fitch Co. | |
Apple, Inc. | AnnTaylor Stores Corporation | |
The Walt Disney Company | bebe stores, inc. | |
eBay, Inc. | Chico’s FAS, Inc. | |
Liberty Media Interactive | Coach, Inc. | |
Scripps Networks Interactive, Inc. | Foot Locker, Inc. | |
ValueVision Media, Inc. | The Gap, Inc. | |
J. Crew Group, Inc. | ||
| Limited Brands, Inc. | ||
| Nike, Inc. | ||
| Polo Ralph Lauren Corporation | ||
| Starbucks Corporation | ||
| The Talbots, Inc. | ||
| Tiffany & Co. | ||
| Williams-Sonoma, Inc. |
Factors generally considered in deciding whether a company should be included in a peer group, include:
the nature of the primary line of business of the company;
the size of the company in terms of revenue and market capitalization; and
whether we compete with the company for executive talenttalent.
To ensure that these peer groups continue to reflect the markets in which we compete for executive talent, the Compensation Committee will reviewreviews the peer groups annually. Before adding or deleting a company from a peer group,In February 2010, when the Compensation Committee will consider howconducted its annual review of the change would impactgroup, it made no changes. The Compensation Committee prefers to keep the comparative market data.group substantially consistent from year to year to produce more consistent compensation benchmarking.
Although we considered the compensation packages and programs offered by the companies in these peer groups for purposes of evaluating our own compensation packages,program, we made adjustments to these packagesour program based on qualitative factors, such as: the size, scope and complexity of the business of those companies.
IAC did not have an ongoing relationship with any particular compensation consulting firm, though IAC had from time to time retained the services of consultants on specific occasions regarding broad-based IAC compensation programs.
In anticipation of the spin-off, HSNi engaged Towers Perrin to assist in the evaluation of our compensation programs and the development of new and improved short-term and long-term incentive programs. Towers Perrin is a compensation consulting firm that has particular expertise in compensation matters. Towers Perrin assisted senior management of HSNi in designing the plan and collecting market data. Towers Perrin met with the Compensation Committee to report its findings and make recommendations. Additionally, on occasion Towers Perrin provided support to the Compensation Committee and met with the members of the Compensation Committee in executive session.
Pursuant to the Compensation Committee charter, the Compensation Committee has sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of executive officer compensation, including Towers Perrin, and has sole authority to approve the terms and conditions of the consultant’s retention and the consultant’s compensation. In compliance with its charter, the committee has approved the engagement of Towers Perrin and fees paid to Towers Perrin for work completed prior to December 31, 2008.
As generally described above, prior to the spin-off of HSNi from IAC, the compensation of HSNi’s executive officersThe Compensation Committee was predominantly determinedappointed by IAC. All material decisions were approved by IAC’s Chairman and Chief Executive Officer and, where appropriate, the compensation committee of IAC’s board of directors. In general, IAC was responsible for establishing bonus pools and equity pools for HSNi, and then such pools were allocated throughout HSNi, with IAC directly establishing all compensation elements for HSNi’s Chief Executive Officer, while the HSNi Chief Executive Officer made the determinations for HSNi’s other executives, subject to IAC’s review and approval.
Effective as of the date of the spin-off, the Board of Directors to exercise all powers of the Board with respect to matters pertaining to compensation and the Compensation Committee have taken a more active role. The Compensation Committee reviewsbenefits, including but not limited to, incentive/bonus
plans, stock compensation plans, retirement programs and approves all compensation programs applicableinsurance plans and salary matters relating to our executive officers and the specific compensation arrangements for our named executive officers as well as other executive officers who are required to file reports under Section 16 of the Exchange Act. On a quarterly basis, the Compensation Committee reports to the Board on its activities.officers.
Senior management, led by our Executive Vice President of Human Resources, generally recommends compensation programs applicable to all executive officers and presents these to the Compensation Committee for review, comment and approval. With respect to the compensation for our named executive officers, the Compensation Committee may seek input from outside advisors. In that case, our Executive Vice President of Human Resources acts as a resource for historical and peer group information and facilitates communication between the committee and the outside advisors. In addition, our Executive Vice President of Human Resources also plays an active role in developing proposed compensation packages for any new executive officers and determining executive officers’ total compensation, including recommendations for annual compensation reviews. Recommendations are presented to the Compensation Committee for final approval. Our Chief Executive Officer,CEO, Chief Financial Officer and Executive Vice President of Human Resources and Executive Vice
President & General Counsel regularly attend the Compensation Committee’s meetings to provide perspectives on the competitive landscape, the needs of the business, information regarding HSNi’s performance, and technical advice. However, these officers are not permitted to be present duringparticipate in the discussion and determination of their own specific compensation.
Our Chief Executive OfficerCEO generally plays an advisory role to the Compensation Committee during this process. Our Chief Executive OfficerCEO works with our Executive Vice President of Human Resources and Chief Financial Officer to assist the Compensation Committee in establishing company-wide compensation programs, including the structure of bonus and equity programs and in establishing appropriate company-wide bonus and equity pools. At year-end, the Chief Executive OfficerCEO meets with the committee and discusses her views of corporate and individual executive officer performance for the prior year and her recommendations for appropriate compensation packages for the individual executive officers other than herself. The Chief Executive OfficerCEO and the Compensation Committee discuss each individual recommendation. Following such discussion, the Compensation Committee typically meets without the Chief Executive OfficerCEO and discusses the Chief Executive Officer’sCEO’s recommendations, as well as any information provided by the compensation consultant concerning peer group comparisons and industry trends and makes the ultimate compensation decisions.
In 2008, after a recommendation from management and approval of the Compensation Committee, HSNi first engaged Towers Watson to assist in the evaluation of our compensation programs and the development of new and improved short-term and long-term incentive programs. Towers Watson is a compensation consulting firm that has particular expertise in executive compensation matters. Towers Watson assisted senior management of HSNi in designing the plan and collecting market data. Towers Watson met with the Compensation Committee to report its findings and make recommendations. Additionally, on occasion, Towers Watson has provided support to the Compensation Committee and met with the members of the Compensation Committee in executive session.
In 2009, the Compensation Committee worked with Towers Watson to assist in the evaluation of the appropriate performance metrics under our short-term incentive program as well as our long-term incentive programs, particularly as it relates to the long-term incentive compensation for our CEO and the senior executives responsible for our Cornerstone business segment. In this regard, Towers Watson assisted senior management of HSNi in collecting market data, making recommendations and designing programs to be effective in 2010.
Pursuant to the Compensation Committee charter, the Compensation Committee has sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of executive officer compensation, including Towers Watson, and has sole authority to approve the terms and conditions of the consultant’s retention and the consultant’s compensation. In compliance with its charter, the committee approved the engagement of Towers Watson and has approved the fees paid to Towers Watson for work completed prior to December 31, 2009. Payments to Towers Watson in 2009 did not exceed $120,000.
The key elements of HSNi’s compensation packages for executive officers historically and currently consist ofprogram are base salary, short-term incentive compensation in the form of annual bonuses and long-term incentives predominantlyincentive compensation in the form of equity awards and performance cash. The compensation program also includes some minor perquisites and other benefits. Historically, priorbenefits but these are not significant elements of compensation. Prior to making specific decisions related to any particular element of compensation, we typically reviewed the total compensation of each executive and evaluated the executive’s total short- and long-term compensation in the aggregate. We determineddetermine which element or combinationscombination of compensation elements (salary, bonus or equity) could be used most effectively to further our compensation objectives; however, historically all such decisions were subjective, and made on a facts and circumstances basis without any prescribed relationship between the various elements of the total compensation package. Beginning in 2008, after the spin-off, senior management has worked with the Compensation Committee to create a more objective compensation program aligned with our overall compensation philosophy and to promote and balance our key objectives.
The following table outlines our objectives for each of the principal components of executive compensation and our target positioning for those components:compensation:
Compensation Element |
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Base Salary | Cash | Fixed | • • Rewards individual performance | |||||
| Short-Term Incentive Program | Cash | Variable | • • Provides appropriate link between compensation and creation of shareholder value | |||||
| Long-Term Incentive Program | Equity and Performance Cash | Variable | • • Aligns interests with shareholders • Rewards for | |||||
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A significant portion of the compensation program for our executive officers is variable. This means that it is contingent upon the company and the individual achieving specific results that are essential to our long-term success and growth in shareholder value. The Compensation Committee has not established a specific formula for the allocation of fixed and variable compensation components. In general, though, a large percentage of executive officers’ compensation is variable, with the CEO having the largest percentage of variable compensation. The Compensation Committee believes this approach directly aligns our executive officers with shareholder interests and is reflective of their greater responsibilities.
Salary
Base salary is the fixed portion of executive pay and is set to compensate individuals for their expected day-to-day performance. Salary is the most fundamental of all our compensation program elements. Providing a competitive salary to our executives is essential to achieving our objective of attracting and retaining talent and rewarding executives’ current contributions for their expected day-to-day performance.
HSNi negotiates a new executive officer’s starting salary upon arrival, typically based on the executive’s prior compensation history, HSNi’s prior compensation levels for the particular position, within HSNi, salary levels of other executives within HSNi, salary levels available to the individual in alternative opportunities, reference to certain survey information and the extent to which HSNi desires to secure the executive’s services. Once established, salaries can increase based on a number of factors, including the assumption of additional responsibilities, internal equity, periodic market checks and other factors which demonstrate an executive’s increased value to HSNi.
Since the spin-off, our Our strategy for base salary is to target annual base salary of each of our executive officers at median levels relative to our peer group, in the retail sector, although individual officer salaries may be above or below those targets.
The committee annually reviews and approves the compensation package of each named executive officer. The committee considers an individual’s qualifications and experience in setting our executives’ initial base salary, including those executive officers who are hired from the outside and those who are promoted from
within. In 2008, we retained Towers Perrin to evaluatedetermining base salary amounts and increases, the committee considers the size and responsibility of the individual’s position, the business unit’s overall performance, the individual’s overall performance and future potential and the base salaries of our named executive officers relativeand merit increases paid by competitors to salaries paid toemployees in comparable companies in that peer group. As a result of this survey, we determined that our named executive officers were generally within the 25th to 50th percentile of our peer group.positions.
Short-Term Incentives or Annual BonusesIncentive Program
Our short-term incentive program, or STIP, is designed to reward achievement of our annual bonusoperating plan. The STIP is payable in the form of annual bonuses and is provided for and administered under our Second Amended and Restated 2008 Stock and Annual Incentive Plan, as amended, which was approved by our shareholders. The amount payable each year is based on the extent to which certain pre-established performance goals are achieved during the year and is “at risk” because the company must achieve certain performance goals established by the Compensation Committee for the executive officers to receive an annual incentive bonus. This short-term incentive program is designed to motivate our executive officers to continuously improve company performance by aligningperformance. The program aligns a portion of theirexecutive compensation with our key business and financial targets.targets and, as a result, provides a valuable link between compensation and creation of shareholder value. Due to its variable nature, and because in any given year bonuses have the potential to make up a significant portion of an executive officer’s total compensation, the bonus program provides an important incentive tool to achieve HSNi’sour annual performance objectives.
Historically, after consultation with HSN management, IAC established the annual bonus for the Chief Executive Officer of HSNi and an annual bonus pool for HSN based on its assessment of HSN’s performance. In large part, success was measured based on HSN’s growth in profitability, but this was measured subjectively both in absolute terms over the prior year and in comparison to HSN’s competitors, taking into account economic and other factors, without any pre-established targets on which compensation levels were based. Consideration was sometimes given to achievement of various strategic objectives over the course of the year and other factors IAC and HSNi’s management deemed relevant. Factors affecting compensation were not accorded specific weightings, and compensation was not determined based on formulaic calculations. Rather, IAC engaged in an overall assessment of appropriate bonus levels based on a subjective interpretation of all the relevant criteria. Ms. Grossman, as the Chief Executive Officer of HSN, would then establish the bonus payments for the other executives out of the HSN bonus pool. Specific bonus payouts were determined based on the size of the bonus pool generally and Ms. Grossman’s assessment of individual performance.
The annual bonus, or short-term incentive compensation of HSNi’s Chief Executive Officer is provided for in her employment agreement, which provides that she will be eligible to receive an annual cash bonus each fiscal year ending during the term of the agreement. The bonus has a high performance target of 100% of the base salary, with the actual amount determined in the sole discretion of the Compensation Committee based on the factors it deems relevant. These may include, among other factors, the performance of HSNi against pre-established performance criteria (including competition, prior year results, the achievement of established initiatives, etc.) and the contribution and performance of the Chief Executive Officer.
Going forward, HSNi intends to award short-term incentives orawards annual bonuses based primarily on a more objective approach and, specifically, the achievement of specific financial performance goals. PerformanceAccording to our stock and annual incentive plan, performance goals may be based on a wide variety of business metrics. For 2009, the annual performance bonusesbonus for the Chief Executive Officer and all other named executive officers will beour CEO was based on established targets for the following performance measures:measures HSNi Free Cash Flow and HSNi Adjusted EBITDA. For our other named executive officers annual performance bonuses were based on established targets for HSNi Free Cash Flow and HSNi Adjusted EBITDA as more specifically described below. Thewell as for individual performance. These same measures were used for all of our senior leaders.
For 2009, the committee established a bonus target of 100% of annual base salary for our CEO and 50% of annual base salary for all other named executive officers. For our CEO, we utilize two specific financial performance metrics to evaluate performance with 50% allocated to Free Cash Flow and 50% allocated to Adjusted EBITDA. This was designed to ensure that the payment of a short-term incentive to the CEO is entirely “performance-based” compensation and deductible pursuant to Section 162(m) of the Code. For all other named executive officers, we utilize three components in the following manner: 40% towards HSNi Free Cash Flow, 40% towards HSNi Adjusted EBITDA and 20% towards individual performance. During 2009, at least one of the two financial performance measures must have been achieved at a threshold of 70% or no short term bonus would be earned.
When the Compensation Committee believesestablished these performance metrics for the fiscal year ended December 31, 2009, the committee believed that these arewere the best measures of short-term and intermediate-term results since they are widely followed by the investment and analyst communities and can be influenced by management in the short to intermediate term. The committee also believed that the 2009 performance goals represented an appropriate and substantial degree of difficulty for achieving a payout, particularly in light of the very challenging macro-economic and retail environments. For the year ended December 31, 2009, the company was able to exceed these performance goals despite this very challenging environment.
HSNiFor the fiscal year ending December 31, 2010, the Compensation Committee determined that the annual performance bonus for all executive officers (other than the CEO) would be based on Adjusted EBITDA and individual performance and that Free Cash Flow is defined as Adjusted EBITDA (as defined below), less capital expenditures, less cash interest and cash taxes, plus or minus changes in working capital. We believe Free Cash Flow iswould no longer be a useful measure because it represents the cash that our operating businesses generate. Free Cash Flow takes into account capital expenditure investments necessary to grow and operate the business and also takes into account cash outflows relating to taxes and interest on our indebtedness. Additionally, Free Cash Flow reflects HSNi’s significant working capital requirements relative to accounts receivable, inventories, other current assets, accounts payable and accrued expenses (including cash payments to cable and satellite distribution partners). Free Cash Flow thus represents
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Adjusted EBITDA is defined as operating income (as reported in our audited consolidated statement of operations) excluding, if applicable: (1) non-cash compensation expense and amortization of non-cash marketing, (2) amortization of intangible assets, (3) depreciation and related gains and losses on asset dispositions, (4) goodwill, long-lived asset and intangible asset impairments, (5) pro forma adjustments for significant acquisitions, and (6) one-time items. Such one-time items of gain or loss include items that are truly one-time in nature and non-recurring, infrequent or unusual. We believe Adjusted EBITDA is a useful measure because it represents the consolidated operating results from HSNi’s segments, but excludes the effects of non-cash expenses or one-time items. We report Adjusted EBITDA according to this definition when we report our quarterly and annual results. We believe that use of this measure will foster transparency with HSNi’s management team and give management timely feedback on this key performance measure. Adjusted EBITDA will be computed on a consolidated basis and for each business segment (as well as for each of the Cornerstone Brands) and will be used as aspecific financial performance metric for all levels. Adjusted EBITDA maypurposes of awarding annual incentive compensation. For 2010, the financial performance metric must be adjusted upachieved by a threshold equal to the greater of 80% of target or down for items that are truly non-recurring, infrequentprior year actual or unusual. Inno short-term bonus would be earned. For our CEO, the event of a change in accounting rules or tax laws that becomes effective during a plan year, the applicable targetannual performance bonus will be recomputed and adjusted as though the financial operating plan for that fiscal year had been preparedbased entirely on a basis consistent with the new accounting rule or tax law.
For 2009, the committee established bonus targets of 50% of annual base salary for all named executive officers, with the exception of the Chief Executive Officer, and a performance range of 70% to 120%, with a payout range of 30% to 200%.Adjusted EBITDA. The individual goal achievement has a payout range of 0% to 125%. For all the named executive officers, excluding the Chief Executive Officer, the short-term annual incentive is allocated among the three components in the following manner: 40% towards HSNi Free Cash Flow, 40% towards HSNiCompensation Committee determined this change was appropriate since most executives have influence over Adjusted EBITDA and 20% towards individual performance. At least oneits cash flow impact, more so than measurements that impact other components of the two financial performance measures must be achieved at a threshold of 70% or no individual performance payout is funded or earned.
cash flow such as working capital. For the Chief Executive Officer, the committee established a target of 100% of base annual salary for her short-term annual incentive with the same performance range and payout range as referenced above; however, her plan was weighted 50% towards HSNicertain executives, Free Cash Flow and 50% towards HSNi Adjusted EBITDA. This was designedworking capital metrics that they are able to ensure that the paymentinfluence will continue to be a component for purposes of a short-term incentive to the Chief Executive Officer is entirely “performance-based” compensation and deductible pursuant to Section 162(m).evaluating individual performance. The
To the extent earned, HSNi will pay bonuses shortly after year-end following finalization of financial results for the applicable year.
The Compensation Committee intends to administeralso reviewed the payout levels under the short-term incentive program soand determined that, payments pursuantin order to maintain a competitive advantage in the program will qualify as “performance-based” compensation under Section 162(m)market and with companies with which we compete for talent, the company should establish an additional level between the target for the CEO and the target for other named executive officers.
As a result of the Code, to the extent practicable. However,changes approved by the Compensation Committee, recognizes that, where a component offor the year ending December 31, 2010, the short-term incentive compensationprogram target and performance measures for each of our named executive officers shall be as described below:
| Performance Measures | ||||||
Officer | STIP Target (1) | Adjusted EBITDA | Individual Performance | |||
CEO | 100% | 100% | 0% | |||
CFO | 75% | 80% | 20% | |||
Other NEOs | 60% | 80% | 20% | |||
| (1) | STIP Target is a percentage of base salary as of September 30th of the company’s fiscal year. |
The performance measures, performance ranges and payout levels are described in more detail below.
| Performance Measures | Threshold | Target | Maximum | |||||
EBITDA | Performance Range | The greater of 80% of target or prior year actual | 100% | 120% | ||||
| Payout Level | 50% | 100% | 200% | |||||
Individual Performance | Performance Range | EBITDA achievement of the greater of 80% of target or prior year actual | EBITDA achievement at 100% of target | EBITDA greater than 100% of target | ||||
| Payout Level | 50% | 125% | 125% |
While individual performance for named executive officers (other than the CEO) will also be based on individual performance alone, this portionachievement of the incentive compensation will not be considered “qualified performance-based compensation.” As a result, this portion ofAdjusted EBITDA target, the incentive compensationCompensation Committee may not be deductible under Section 162(m). As a wayapply negative discretion to mitigate this, onlyreduce the Chief Financial Officer, Chief Operating Officer and Executive Vice President/Merchandising and Executive Vice President/General Counsel have anpayout based on the individual performance component, for theirif appropriate.
All payments under the short-term incentive plan thatprogram are subject to the Compensation Committee’s ability to apply negative discretion and reduce the pay out, as appropriate. All payments under the short-term incentive program are also contingent upon the named executive officer being employed by HSNi on the date payment is weighted at 20% of the target, with a maximum payout level of 125% for achievement on individual performance goals.made.
Long-Term IncentivesIncentive Program
HSNi believes that ownership shapes behavior and that by providing a meaningful portion of an executive officer’s compensation in stock,stock-based compensation, an executive’s incentivesinterests are aligned with the shareholders’ interests in a manner that drives better performance over time. In establishing this program and setting particulargoals and award levels, the other predominant objectives are
providingobjective is to provide the person with effective retention incentives appropriate reward for past performance, and incentives for strong future performance. by granting awards with cliff-vesting.
Appropriate levels to meet these goals may vary from year to year and from individual to individual, based on a variety of factors.
Prior to our spin-off from IAC, awards to The Compensation Committee determines the Chief Executive Officer were made by IAC. Additionally, IAC established a poolaward opportunity level for annual equity awards that the Chief Executive Officer allocated to the company’s employees, including executives, subject to IAC’s approval. In establishing the equity pool, IAC took into account historical practices, its view of market compensation generally, the dilutive impact of equity grants across IAC and other relevant factors. Additionally, IAC approved any equity grants made to HSN executives outside of the annual grant process. Executives received grants that were subjectively determinedeach executive officer based on the judgmentindividual’s responsibility level and potential within our company, competitive practices, the number of HSN’s Chief Executive Officer on how best to allocateshares available for grant, individual and company performance and the equity poolmarket price for retention, reward and motivation based on a host of subjective factors (including past contribution, retention risk, contribution potential, and market data).our common stock.
Chief Executive Officer Compensation
Going forward, the Chief Executive Officer’s long-term incentive compensation is provided for in herThe CEO’s employment agreement, which runs through January 31, 2012 and was approved by IAC prior to the spin-off. This contract remainsspin-off, provides for long-term incentive compensation. In December 2009, after consultation with Towers Watson, the Compensation Committee agreed to align the CEO’s long-term compensation with that of the other named executive officers. As a result, in effect through January 31, 2012. The general termsFebruary 2010, the Compensation Committee recommended that the Board of Directors replace Ms. Grossman’s existing long-term incentive plan as described in her employment agreement with an award opportunity under our existing long-term incentive program as described herein. In February 2010, the Board approved this recommendation. As a result, subject to Ms. Grossman executing an appropriate amendment to her employment agreement, in 2010, Ms. Grossman will participate in the long-term incentive program on the same terms as the other named executive officers, with one exception. Ms. Grossman’s long-term incentive compensation provided for in the agreement are as follows:
Four year plan with payments being made in years three and four up to a maximum payout of $4 million;
Payment canwould be madepaid entirely in the form of common stock or cash or some combination thereof as determined by HSNi in its discretion;
The plan is tiedstock-settled SARs to ensure that such compensation remains within the performancededuction limit of HSNiSection 162(m). See “Impact of Tax and specifically, to cumulative compounded annual earnings before interest, taxes and amortization, or EBITA, growth rates in years one through three andAccounting Issues” below for a second look back inclusivemore detailed discussion of years one through four;
The performance ranges and payout levels are as follows:
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Payments made in years three and four are both reduced by 25% of the gross amount for each 12 month period in which the cumulative compounded annual growth rate of EBITA is less than 5%;
Payment in year four is also reduced by, or net of, the payment made in year three.
In addition, the employment agreement provides that the Chief Executive Officer is eligible to receive equity incentive awards pursuant to annual or other grants under any equity based compensation plan or plans that may be established or maintained by HSNi and cash incentive awards pursuant to any incentive, bonus or similar plan that may be established or maintained by HSNi. In determining whether and to what extent the Chief Executive Officer will participate in any such plans or programs, the Board (or the Compensation Committee) shall exercise its reasonable discretion, taking into account the Chief Executive Officer’s position, responsibilities and performance; the company’s performance; the Chief Executive Officer’s then-existing equity position in HSNi; prior equity and/or cash incentive awards granted to the Chief Executive Officer and equity and/or cash incentive awards granted to other HSNi executives.
Other Named Executive Officers Compensation
All other named executive officers will participate in aHSNi’s long-term incentive program, that will useor LTIP, uses a combination of three components to deliver long-term incentives. The target for eachStock-settled SARs and RSUs are issued at the beginning of the eligible named executive officers is 100% of base annual salary. As described below, the three components of awards are stock-settled SARs, performance cash and RSUs.
Stock-Settled SARs • Performance-oriented • Rewards growth • Shareholder aligned • Three-year annual vesting | Performance Cash • Performance-leveraged • Enhanced line-of-sight • One-year EPS goal • Payable at the end of three years | RSUs • Promotes retention • Shareholder aligned • Three-year cliff vesting | ||
| 40% | 40% | 20% |
year. The number of stock-settled SARs and RSUs awarded will be based onis calculated at a relative share value.target percentage of base salary. The SARs will have an exercise price equal to Fair Market Value (as defined inof the Plan)SARs is calculated using the fair market value on the date of grant,grant. The SARs will vest annually over a three yearthree-year term and expire ten years from the date of grant. Performance cash will be payable at the end of a three-year period contingent upon HSNi stock achieving a one-year Adjusted earnings per share, or Adjusted EPS target. RSUs will vest in full on the third anniversary of the date of grant.
Performance cash is payable at the end of a three-year vesting period contingent upon HSNi achieving a one-year adjusted earnings per share, or Adjusted EPS, target. The performance measure, performance range and payout levels for performance cash are described below.
| Performance Measure | Threshold | Target | Maximum | |||||
Adjusted EPS | Performance Range | The greater of 80% of target or prior year actual | 100% | 120% | ||||
| Payout Level | 50% | 100% | 200% |
Unvested performance cash payments are forfeited upon termination of employment. However, in the event of a “change in control” (as defined in the Plan) an executive may be entitled to performance cash, under certain circumstances. If the change in control occurs before the completion of both the performance period and the vesting period and the executive is terminated within 12 months of the change in control, the participant shall be eligible to be paid out the performance cash award at the target value but prorated for the number of months completed in the performance period. If the change in control occurs after the completion of the performance period but before completion of the vesting period, executive shall be paid the performance cash award at the appropriate payout level will be determined based on achievementas shown above with such payment being made as soon as practicable following the change in control.
Summary
As a result of an Adjusted EPS target within an established performance range.these changes in the long-term incentive compensation and short-term incentive compensation programs, a significant portion of the executive officers’ compensation is weighted towards variable compensation. The Compensation Committee believes that this financial measure isallocation of a significant portion of total compensation to variable compensation will encourage our executives to take appropriate risks aimed at improving company performance and building long-term shareholder value as well as encourage our executives to remain committed to the best measure of HSNi’s long-term results since Adjusted EPS is a widely followed metric and will most closely align the interestgrowth of our executive officers with those of our shareholders.
Adjusted EPS | Threshold | Target | Maximum | ||||||
Performance Range | 70 | % | 100 | % | 120 | % | |||
Payout Level | 30 | % | 100 | % | 200 | % |
Adjusted EPS is defined as Adjusted Net Income (as defined below) divided by diluted weighted average shares outstandingorganization for Adjusted EPS purposes. Adjusted Net Income generally captures all items on the statement of operations that have been, or ultimately will be, settled in cash and is defined as net income available to common shareholders excluding, net of tax effects, if applicable: (1) non-cash compensation expense and amortization of non-cash marketing, (2) amortization of intangible assets, (3) gains and losses on asset dispositions (4) goodwill, long-lived asset and intangible asset impairments, (5) pro forma adjustments for significant acquisitions, (6) one-time items, and (7) discontinued operations. We believe Adjusted Net Income is a useful measure because it represents HSNi’s consolidated results taking into account charges which are not allocated to the operating businesses such as interest expense and taxes, but excluding the effects of identified non-cash expenses or one-time items. The definition of Adjusted EPS above is consistent with the definition used by HSNi in its quarterly earnings release, thereby maximizing transparency for our management team. Adjusted EPS may be adjusted up or down for one-time items. Such one-time items of gain or loss include items that are truly one-time in nature and non-recurring, infrequent or unusual. In the event of a change in accounting rules or tax laws that becomes effective during a plan year, the applicable Key Performance Measure target shall be recomputed and adjusted as though the financial operating plan for that fiscal year had been prepared on a basis consistent with the new accounting rule or tax law.long-term.
UnderAs described above, under the Plan, the Compensation Committee may grant a variety of long-term incentive vehicles, including stock options, RSUs, SARs and SARs. Historically, IAC relied onperformance cash. Following is a combinationgeneral description of stock options and RSUs. Prospectively, we plan to rely on a combinationeach of RSUs and stock-settled SARs.these vehicles.
Stock Options. Options reward participants for long-term improvement in HSNi’s stock price. Although the options are given a value at the date of grant for financial reporting purposes, the actual value of the options is entirely based on future increases in our stock price. If the stock price does not increase over the term of the option, the participant receives no value.
In 2008, IAC used non-qualified stock options as its primary equity compensation tool for HSNi’s executive officers to continue the shift to performance-based equity that began with the granting of Growth Shares in 2007. IAC believed that following the spin-off, HSNi’s performance would have a greater correlation to HSNi’s stock price than it did to IAC’s stock price in the former conglomerate structure, thus making stock options a more targeted equity incentive tool.
Restricted Stock Units. RSUs are a promise to issue shares of our common stock that are awarded within the restriction thatfuture provided the recipient remainremains employed with us through the award’s vesting period. RSU awards generally cliff vest 100% at the end ofover a three-year period or ratably vest over a five-year period. Unvested RSUs are generally forfeited upon termination of employment. As a result, RSUs are intended to retain key employees, including the named executive officers. RSUs provide the opportunity for capital accumulation and more predictable long-term incentive value.
Until 2008, IAC used RSUs as its exclusive equity compensation tool for HSN’s executive officers. Through 2006, these awards generally vested in equal annual installments over five years (annual vesting RSUs), or cliff vested at the end of five years (cliff-vesting RSUs). Annual vesting awards were intended to provide frequent rewards and near-term retention incentives, while cliff-vesting RSUs provided more of a long-term retention mechanism.
Stock Appreciation Rights. Stock-settled SARs are similar to traditional stock options, except, upon exercise, holders of stock-settled SARs will only receive shares with a value equal to the spread between the current market price per share of our common stock and the exercise price. SARs may be settled in cash or stock; HSNi plans to settle SARs in HSNi securities. The exercise price for awards granted under the Plan is required to be priced at, or above, the fair market value of our common stock at the date of grant. For stock options granted prior to the spin-off, the exercise price wasAwards typically vest annually over a three-year term.
Performance Cash. An award of performance cash is typically based on the fair marketcompany’s achievement of a specific financial metric in the immediately following year but paid thereafter, assuming the recipient remains employed with the company through the award’s vesting period. Awards of performance cash typically vest in full upon expiration of a three-year term commencing at the beginning of the performance period. Performance cash, as utilized by the company, is a performance and retention driven award calculated as a percentage of base salary.
Stock Options. Options reward participants for long-term appreciation in HSNi’s stock price. Although the options are given a value of IAC’s stock at the date of grant and then adjustedfor financial reporting purposes, the actual value of the options to the participant is entirely based on future increases in our stock price. If the relative market capitalizationsstock price does not increase over the term of IAC and HSNi followingthe option, the participant receives no value. Stock options were utilized by the company’s former parent company prior to the spin-off. Awards typically vest periodically over a three-We do not currently issue stock options as part of our short-term or four-year term.long-term incentive programs; however, we may do so in the future if appropriate.
We provide certain executive officers with perquisites and other personal benefits that the Compensation Committee believes are reasonable and consistent with industry norms and position levels. These personal benefits do not have a relationship to other compensation levels. They are provided in order to enable us to attract and retain these executives. The committee periodically reviews the levels of these benefits provided to our executive officers.
Under limited circumstances, our executive officers have received non-cash and non-equity compensatory benefits. The values of these benefits are reported under the heading “Other Annual Compensation” in this proxy statement pursuant to applicable rules, and are generally considered in determining overall compensation levels. For example, Ms. Grossman, who liveslived in New York in 2009 but spendsspent the majority of her professional time at our headquarters in Florida, received reimbursement of her travel expenses as well as certain of her Florida living expenses, along with a tax “gross-up” of certain of these expenses. Under other limited circumstances, our executive officers have received non-cash and non-equity compensatory benefits. The values of these benefits are reported under the heading “Other Annual Compensation” in this filing pursuant to applicable rules, and are generally considered in determining overall compensation levels. Nonetheless, despiteDespite the fact that we reportreported these reimbursements as compensation in 2009, we do not believe Ms. Grossman receivesreceived a personal benefit as a result of such reimbursements, as they merely compensate her for the incremental expensesexpense of commuting to and working in Florida, while her family continues to resideresided in New York. Ms. Grossman relocated to Florida in 2010 and will be eligible for relocation expense reimbursement under the terms of her employment agreement.
During 2008, the executive officers did not participate in any deferred compensation or retirement program other than IAC’s 401(k) plan. In 2008, as part of the IAC/InterActiveCorp Retirement Savings Plan (401k), the company’s matching contribution was $0.50 for every $1.00 up to a maximum of the first 6% of the employee’s contributions (excluding catch-up contributions allowable by the plan). This included those contributions of executive officers. Effective January 1, 2009, under the newly created HSN, Inc. Retirement Savings Plan (401k), HSNiwe reduced the employer matching contributions to $0.10 on every $1.00 up to a maximum of the
first 6% of employee contributions (excluding catch-up contributions allowable by the plan). The value of this benefit to executive officers is reported under the heading “Other Annual Compensation” in the Summary Compensation Table. Effective April 1, 2010, we increased the employer matching contributions to $0.25 on every $1.00 up to a maximum of the first 6% of employee contributions (excluding catch-up contributions allowable by the plan).
Post-Termination Compensation and Benefits
We believe that a strong, experienced management team is essential and in the best interests of HSNi and our shareholders. In addition, we recognize that the possibility of a change in control could arise and that such a possibilityan event could result in the departure of the named executive officers to the detriment of HSNi and its shareholders. As a result, historically we havehad entered into employment agreements with each of our named executive officers in order to retain qualified executive officers and to minimize employment security concerns. UnderHowever, effective November 17, 2009, we adopted a Named Executive Officer and Executive Vice President Severance Plan applicable to certain executives. The plan formalizes and standardizes our severance practices for our most senior executive officers and was adopted in lieu of issuing new employment agreements. The plan applies to all “named executive officers” excluding Ms. Grossman who has a severance arrangement pursuant to her employment agreement. As a result, we have terminated the agreement,employment agreements with our most senior executive officers (other than Ms. Grossman). Adoption of the severance is providedplan was approved by the Compensation Committee. Please refer to the section entitled “Payments Upon Termination or Change of Control” for specific details regarding post-termination compensation and benefits.
Executives covered by the severance plan will generally be eligible to receive severance benefits in the event of a termination by the company without causeCause (as defined inunder the agreement).Named Executive Officer and Executive Vice President Severance Plan) or by the executive for good reason. The employment agreement of our chief executive officer requires that severance also be providedbenefits increase if the executive officer terminates her employment for “good reason” (as definedtermination is within 12 months following a change in the agreement). These agreements generally provide for severance in the form of base salary for the remainder of the term of the agreement, subject to mitigation for salary or wages earned from another employer, including self-employment.control.
Vesting of Awards Upon Change-in-Control
The Compensation Committee determined to include “double-trigger”double-trigger change-in-control provisions in each of the award agreements. Upon a “change-in-control”change-in-control and a termination of employment for other than cause within one year of the change-in-control, the unvested portion of the outstanding RSU, SAR and option awards will vest. The purpose of this accelerated vesting in addition to those set forth above, is to ensure that we retain our named executive officers prior to and through thea change-in-control.
Impact of Tax and Accounting Issues
The Compensation Committee also considers and evaluates the impact of applicable tax laws with respect to compensation paid under our plans, arrangements and agreements.
For instance, with certain exceptions, Section 162(m) of the Code limits our deduction for compensation in excess of $1 million paid to certain covered employees (generally our named executivesexecutive officers). Compensation paid to covered employees is not subject to the deduction limitation if it is considered “qualified performance-based compensation” within the meaning of Section 162(m). While the Compensation Committee generally intends to structure and administer our Plan and the related programs so as to not be subject to the deduction limit of Section 162(m), the Compensation Committee may from time to time, where it believes it is in the best interest of our shareholders and to remain competitive in the marketplace for talent, approve payments that cannot be deducted in order to maintain flexibility in structuring appropriate compensation programs.programs and remain competitive in the marketplace. As a way to mitigate this, only the Chief Financial Officer, Executive Vice President of Merchandising, Executive Vice President of Human Resources and Executive Vice President and General Counsel have an individual performance component for their short-term incentive program that is weighted at 20% of the target, with a maximum payout level of 125% for achievement on individual performance goals.
Specifically,For the bonusesyear ended December 31, 2009, approximately $642,000 of compensation expense will be non-deductible under Section 162(m) of the Code. This primarily relates to compensation arrangements entered into with, and awards granted to, our CEO prior to the spin-off. The company works with the Compensation Committee to evaluate whether compensation arrangements will be structured and administered so as to not be subject to the deduction limit of Section 162(m).
In February 2009, we established the performance measures and bonus targets for each of our named executive officers for the year ended December 31, 2009. The actual bonus amounts paid to our named executive officers for performance during the year ended December 31, 2008 did not qualify as “qualified performance based compensation” within the meaning of Section 162(m) because of the lack of a defined short-term incentive program and established and pre-approved performance measures for 2008. However, the total compensation paid to these named executive officers (including the bonuses) did not exceed the deduction limit of $1 million. In addition, the Compensation Committee recognizes that for certain named executive officers it is possible that the component of short-term incentive compensation based on individual performance may not be considered “qualified performance-based compensation” and deductible under Section 162(m). Additionally, if any other provision of a plan or award that is intended to be performance-based under Section 162(m) is later found to not satisfy the conditions of Section 162(m), our ability to deduct such compensation may be limited.
In 2008, the Compensation Committee completed its review and approval of modifications to our compensatory arrangements in order to comply with Section 409A of the Code. This code provision generally provides that amounts deferred under nonqualified deferred compensation arrangements will be subject to accelerated income recognition, interest and substantial penalties unless the arrangement satisfies certain design
and operational requirements. The transition period for amending plans and other arrangements to comply with Section 409A ended on December 31, 2008, and we have modified our compensatory arrangements so that compensation payable under such arrangements now comply with Section 409A.
During 2008 and prior to the spin-off, the pay and scope of responsibilities for our Chief Operating Officer, Mr. Ethier, and our Executive Vice President/General Counsel, Mr. Warner, were evaluated. As a result, their individual base salaries were increased.
In 2008, we retained Towers Perrin to conduct a base salary competitive assessment and to evaluate the base salaries of our named executive officers relative to the executive officers in our peer groups. We determined that the base salaries for our named executive officers ranged between the 25th and the 50th percentile of our peer groups.
Based on her assumption of significantly more responsibility in connection with the spin-off and our status as a stand-alone public company and a comparison of her pay in relation to our peer groups, it was recommended that the base salary of our Chief Financial Officer be increased. The Compensation Committee approved this recommendation.
Increases in base salaries during the year ended December 31, 2008 for our named executive officers ranged from 11% to 25%.
Also during 2008, HSNi awarded a one-time “emergence grant” of stock-settled SARs to our senior leaders, including the named executive officers (other than our Chief Executive Officer). It was determined that an award of stock-settled SARs, as opposed to RSUs, would more closely align the participants’ interests with those of our shareholders. These stock-settled SARs will be conditioned on continued employment and vest over a three-year period, with 50% vesting on each of the second and third anniversaries of the date of grant. The exercise price for these stock-settled SARs is the closing price of our common stock on the date of grant. The Compensation Committee believes that these grants achieve the company’s objectives of aligning individual incentives with the long-term interest of the company’s shareholders and encourage long-term commitment to HSNi and its long-term goals.
Since we did not previously have a short-term annual incentive program, bonus targets or performance measures for our named executive officers (other than our Chief Executive Officer), management and the Compensation Committee exercised discretion in awarding annual bonuses for the year ended December 31, 2008. For each of these named executive officers, the Compensation Committee discussed with the Chief Executive Officer individual performance, enterprise value, activities in connection with the spin-off and additional responsibilities assumed during the year.
The employment agreement of our Chief Executive Officer provides for an annual bonus with a performance target of 100% of base salary, with the actual amount determinedfiscal 2009 are specifically described in the sole discretion of theSummary Compensation Committee based on performance targets it deems relevant. In determining theTable below. The annual bonus for our Chief Executive Officer, the Compensation Committee discussed the Chief Executive Officer’s performance in connection with the spin-off and during the current challenging macroeconomic environment and the many other contributions she made to the enterprise during the year.
The bonuses paid to our named executive officers for the year ended December 31, 20082009 ranged from 19%86% to 50%191% of base salaries.
The actual bonus amounts paid to This was primarily the result of our named executive officers for fiscal 2008 are specifically describedstrong performance in 2009 despite the Summary Compensation Table below.very challenging macro-economic and retail environment. The Compensation Committee believes that the annual bonuses awarded achieveachieved the committee’s objectives for our short-term incentive program by rewarding the short-term effort and performance of each of these executives and aligning executive compensation with annual performance.
Effective November 17, 2009, we adopted a Named Executive Officer and Executive Vice President Severance Plan applicable to our most senior executives, other than our CEO, and adopted an Executive Severance Plan applicable to our other senior leaders. These plans formalize and standardize our severance practices for our most senior officers and our senior leaders and were adopted in lieu of issuing new employment agreements. Neither plan applies to our CEO, who has a severance arrangement pursuant to her employment agreement. Adoption of the plans was approved by our Compensation and Human Resources Committee.
In 2009, we retained Towers Watson to assess the competitiveness of the compensation structure for our CEO and to identify potential structure changes for 2010, including pay levels and long-term incentive compensation. Competitive market data was considered from three market perspectives: (1) publicly disclosed data for selected retail industry peers; (2) published and proprietary survey data for retail companies; and (3) published and proprietary survey data for general industry companies. Based on the results of its analysis, Towers Watson recommended that the Compensation Committee modify the CEO’s long-term incentive compensation to, among other things, align the CEO’s long-term incentive compensation with that of the other named executive officers. As a result, in December 2009, the Compensation Committee recommended that Ms. Grossman’s existing long-term incentive plan as described in her employment agreement be replaced with an award opportunity under the company’s existing long-term incentive program described above. This recommendation was subsequently approved by our Board of Directors. As a result, subject to Ms. Grossman executing an appropriate amendment to her employment agreement, Ms. Grossman will participate in the company’s long-term incentive program on generally the same terms as those offered to the other named executive officers.
In December 2009, the Compensation Committee determined that, for the fiscal year ending December 31, 2010, for all named executive officers other than the CEO, 80% of annual performance bonuses, or payments under our short-term incentive program, will be based on the achievement of Adjusted EBITDA targets and 20% will be based on individual performance. For our CEO, 100% of her annual bonus will be based on the achievement of an Adjusted EBITDA target.
HSNi exceeded each of the financial performance measures established for 2009 with respect to our short-term and long-term incentive compensation programs. To evaluate the individual performance component of compensation, the Compensation Committee, working with the Executive Vice President of Human Resources, assessed the personal performance of each of the named executive officers and determined the final bonus amounts to be paid to each of the named executive officers. The total compensation for each named executive officer is described in more detail below. Based on its review of analysis from Towers Watson regarding industry standards for compensation of comparable executives at these levels, the Compensation Committee believes that the overall compensation of HSNi’s named executive officers is competitive to HSNi’s peers and is well-aligned with the interest of our shareholders.
The following table summarizes the compensation information for the years ended December 31, 20082009 and 20072008 for our chief executive officer,CEO, chief financial officer and each of our other three most highly compensated executive officersofficer as of the end of the last fiscal year. We refer to these persons as our named executive officers elsewhere in this proxy statement. Mr. Henchel and Ms. Letizio did not become named executive officers until February 24, 2010. The amounts reported under “Stock Awards” and “Stock Appreciation Rights and Option Awards” are unusually high because, in connection withrepresent the spin-off, the vesting of certain previously granted awards was accelerated. The amounts reported in these columns include the amounts of all unamortized compensation expense related to these accelerated awards.grant date fair value.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Stock Appreciation Rights and Option Awards ($) (1) | All Other Compensation ($) (2) | Total ($) | |||||||
Mindy Grossman | 2008 | 1,000,000 | 500,000 | 937,675 | 700,104 | 100,886 | 3,238,665 | |||||||
Chief Executive Officer | 2007 | 1,000,000 | 500,000 | 499,331 | — | 128,178 | 2,127,509 | |||||||
Mark Ethier | 2008 | 429,615 | 125,000 | 1,110,594 | 102,464 | 7,750 | 1,775,423 | |||||||
Executive Vice President and Chief Operations Officer | 2007 | 400,000 | 100,000 | 819,260 | — | 7,750 | 1,327,010 | |||||||
Barbara Lynne Ronon (3) | 2008 | 475,000 | 90,000 | 262,544 | 24,422 | 53,941 | 905,907 | |||||||
Executive Vice President– Merchandising | 2007 | 102,308 | 100,000 | 77,060 | — | 8,561 | 287,929 | |||||||
Judy Schmeling | 2008 | 420,000 | 150,000 | 1,172,457 | 102,464 | 7,750 | 1,852,671 | |||||||
Executive Vice President and Chief Financial Officer | 2007 | 389,039 | 120,000 | 681,413 | — | 7,750 | 1,198,202 | |||||||
James Warner (4) | 2008 | 336,000 | 100,000 | 264,637 | 76,050 | 48,662 | 825,349 | |||||||
Executive Vice President and General Counsel | 2007 | 254,423 | 100,000 | 153,482 | — | 47,185 | 555,090 | |||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Stock Appreciation Rights and Option Awards ($) (1) | All Other Compensation ($) (2) | Total ($) | |||||||
Mindy Grossman | 2009 | 1,000,000 | 1,910,000 | — | 1,059,164 | 96,510 | 4,065,674 | |||||||
Chief Executive Officer | 2008 | 1,000,000 | 500,000 | 1,262,000 | 5,174,370 | 100,886 | 8,037,256 | |||||||
Judy A. Schmeling | 2009 | 500,000 | 444,500 | 56,159 | 47,947 | 1,387 | 1,049,993 | |||||||
Executive Vice President and Chief Financial Officer | 2008 | 420,000 | 150,000 | — | 523,361 | 7,750 | 1,101,111 | |||||||
Barbara Lynne Ronon | 2009 | 475,000 | 410,400 | 53,352 | 45,550 | 11,847 | 996,149 | |||||||
Executive Vice President–Merchandising | 2008 | 475,000 | 90,000 | — | 164,610 | 53,941 | 783,551 | |||||||
| (1) |
| (2) | The table below describes the amounts included in the “All Other Compensation” column above for |
| Mindy Grossman | Mark Ethier | Barbara Lynne Ronon | Judy Schmeling | James Warner | Mindy Grossman | Judy A. Schmeling | Barbara Lynne Ronon | ||||||||||||||||||
Housing | $ | 87,569 | * | $ | — | $ | 50,210 | $ | — | $ | 38,039 | $ | 86,210 | $ | — | $ | 7,875 | ||||||||
Relocation Expenses | — | — | — | — | — | ||||||||||||||||||||
Personal Travel | — | — | — | — | 4,721 | ||||||||||||||||||||
Automobile | 7,875 | — | — | — | — | ||||||||||||||||||||
Life Insurance | 1,242 | 810 | 2,322 | ||||||||||||||||||||||
Automobile (1) | 7,408 | — | — | ||||||||||||||||||||||
401(k) Plan match | 5,442 | 7,750 | 3,731 | 7,750 | 5,902 | 1,650 | 577 | 1,650 | |||||||||||||||||
Total All Other Compensation | $ | 100,886 | $ | 7,750 | $ | 53,941 | $ | 7,750 | $ | 48,662 | $ | 96,510 | $ | 1,387 | $ | 11,847 | |||||||||
| (1) |
The table below provides the following information regarding equity awards granted to our named executive officers in 20082009 under the Plan (including Adjusted Awards). For information concerning RSU and stock option awards received by our named executives in connection with the spin-off, see “Equity Grants in Connection with the Spin-off” below.Plan.
Name | Grant Date | All Other Option Awards: Number of Units or Shares of Common Stock Underlying Options (#) | Exercise or Base Price of Option Awards ($) (sh) | Grant Date Fair Value of Stock and Option Awards ($) (1) | ||||
Mindy Grossman | ||||||||
Options (2) | 8/20/08 | 142,521 | 30.46 | 584,000 | ||||
Options (2) | 8/20/08 | 205,864 | 37.58 | 717,000 | ||||
Options (2) | 8/20/08 | 370,555 | 44.71 | 1,115,000 | ||||
Options (2) | 8/21/08 | 348,930 | 16.48 | 2,758,370 | ||||
Mark Ethier | ||||||||
Options (2) | 8/21/08 | 59,318 | 16.46 | 469,136 | ||||
SARs (3) | 12/22/08 | 22,500 | 5.76 | 54,225 | ||||
Barbara Lynne Ronon | ||||||||
Options (2) | 8/21/08 | 13,957 | 16.46 | 110,385 | ||||
SARs (3) | 12/22/08 | 22,500 | 5.76 | 54,225 | ||||
Judy Schmeling | ||||||||
Options (2) | 8/21/08 | 59,318 | 16.46 | 469,136 | ||||
SARs (3) | 12/22/08 | 22,500 | 5.76 | 54,225 | ||||
James Warner | ||||||||
Options (2) | 8/21/08 | 43,965 | 16.46 | 347,713 | ||||
SARs (3) | 12/22/08 | 22,500 | 5.76 | 54,225 | ||||
Name | Grant Date | All Other Option Awards: Number of Units or Shares of Common Stock Underlying Options (#) | Exercise or Base Price of Option Awards ($) (sh) | Grant Date Fair Value of Stock and Option Awards ($) (1) | ||||
Mindy Grossman | ||||||||
SARs (2) | 2/25/09 | 132,551 | 4.24 | 239,917 | ||||
SARs (2) | 8/25/09 | 132,350 | 11.41 | 819,247 | ||||
Judy A. Schmeling | ||||||||
SARs (2) | 2/25/09 | 26,490 | 4.24 | 47,947 | ||||
RSUs | 2/25/09 | 13,245 | 4.24 | 56,159 | ||||
Barbara Lynne Ronon | ||||||||
SARs (2) | 2/25/09 | 25,166 | 4.24 | 45,550 | ||||
RSUs | 2/25/09 | 12,583 | 4.24 | 53,352 | ||||
| (1) |
| (2) | Reflects |
Outstanding Equity Awards at Fiscal Year-End
The table below provides information regarding various HSNi equity awards held by HSNi’s named executive officers as of December 31, 2008.2009. The market value of all awards is based on the closing price of HSNi common stock of $7.27$20.19 as of December 31, 2008.2009.
| Stock Appreciation Rights and Option Awards (1) | Stock Awards (2)(3) | Stock Appreciation Rights and Option Awards (1) | Stock Awards (2)(3) | |||||||||||||||||||||
Name | Number of Securities Underlying Unexercised SARs and Options (#) (Exercisable) | Number of Securities Underlying Unexercised SARs and Options (#) (Unexercisable) | SARs and Option Exercise Price ($) | SARs and Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(4) | Market Value of Shares or Units of Stock That Have Not Vested ($) (4) | Number of Securities Underlying Unexercised SARs and Options (#) (Exercisable) | Number of Securities Underlying Unexercised SARs and Options (#) (Unexercisable) | SARs and Option Exercise Price ($) | SARs and Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | ||||||||||||
Mindy Grossman | 348,929 142,521 205,864 370,555 | 16.48 30.46 37.58 44.71 | 4/9/18 8/20/18 8/20/18 8/20/18 | 135,931 | 988,218 | 87,232 | 261,697 | 16.48 | 4/9/18 | |||||||||||||||
Mindy Grossman | 35,630 | 106,891 | 30.46 | 8/20/18 | ||||||||||||||||||||
| 51,466 | 154,398 | 37.58 | 8/20/18 | |||||||||||||||||||||
| 92,638 | 277,917 | 44.71 | 8/20/18 | |||||||||||||||||||||
| — | 132,551 | 4.24 | 2/25/19 | |||||||||||||||||||||
| — | 132,350 | 11.41 | 8/25/19 | |||||||||||||||||||||
| 126,605 | 2,556,155 | |||||||||||||||||||||||
Mark Ethier | 59,318 22,500 | 16.46 5.76 | 1/31/18 12/22/18 | 40,008 | 290,858 | |||||||||||||||||||
Judy A. Schmeling | 1,400 | — | 18.96 | 12/16/11 | ||||||||||||||||||||
| 14,829 | 44,489 | 16.46 | 1/31/18 | |||||||||||||||||||||
| 22,500 | 5.76 | 12/22/18 | ||||||||||||||||||||||
| 26,490 | 4.24 | 2/25/19 | ||||||||||||||||||||||
| 31,884 | 643,738 | |||||||||||||||||||||||
Barbara Lynne Ronon | 13,957 | 16.46 | 1/31/18 | 3,489 | 10,468 | 16.46 | 1/31/18 | |||||||||||||||||
| 22,500 | 5.76 | 12/22/18 | 22,119 | 160,805 | ||||||||||||||||||||
Judy Schmeling | 499 1,400 | 59,318 22,500 | 22.21 18.96 16.46 | 12/20/09 12/16/11 1/31/18 12/22/18 | 18,639 | —
135,506 | ||||||||||||||||||
James Warner | 287 116 221 | 43,965 22,500 | 8.19 12.34 23.74 16.46 5.76 | 2/20/11 5/15/11 3/19/12 1/31/18 12/22/18 | 7,914 | 57,535 | ||||||||||||||||||
Barbara Lynne Ronon | 22,500 | 5.76 | 12/22/18 | |||||||||||||||||||||
| 25,166 | 4.24 | 2/25/19 | ||||||||||||||||||||||
| 31,781 | 641,659 | |||||||||||||||||||||||
| (1) | In connection with the spin-off from IAC, each unexercised stock option to purchase shares of IAC common stock issued to our named executive officers and granted prior to December 31, 2007 converted into awards of HSNi and each of the other companies spun-off from IAC, or Spincos. All stock options granted by IAC after December 31, 2007 converted into awards of HSNi. Adjustments were made to the number of shares subject to such awards and to the corresponding exercise prices based on the relative market capitalizations of HSNi and each of the Spincos to maintain pre-and post spin-off value. |
| (2) | In connection with the spin-off, RSUs granted by IAC converted into awards in HSNi and, for certain awards, awards in the other four Spincos. |
The table below provides the following information regarding RSU awards in HSNi stock held by HSNi’s named executive officers as of December 31, 2009: (i) the grant date of each award, (ii) the number of RSUs outstanding (on an aggregate and grant-by-grant basis), (iii) the market value of RSUs outstanding as of December 31, 2009, (iv) the vesting schedule for each award and (v) the total number of RSUs that vested or are scheduled to vest in each of the fiscal years ending December 31, 2010, 2011, 2012 and 2013.
| Number of Unvested RSUs as of 12/31/09 | Market Value of Unvested RSUs as of 12/31/09 | Vesting Schedule (#) | ||||||||||
Name and Grant Date | (#) | ($) | 2010 | 2011 | 2012 | 2013 | ||||||
Mindy Grossman | ||||||||||||
5/17/06 | 18,654 | 376,625 | 9,327 | 9,327 | — | — | ||||||
5/17/06 (a) | 30,653 | 618,884 | — | 30,653 | — | — | ||||||
2/16/07 (b) | 7,512 | 151,667 | 7,512 | — | — | — | ||||||
4/9/08 (c) | 69,786 | 1,408,980 | — | — | 69,786 | — | ||||||
Total | 126,605 | 2,556,156 | 16,839 | 39,980 | 69,786 | — | ||||||
Judy A. Schmeling | ||||||||||||
2/6/06 (d) | 6,922 | 139,755 | 3,461 | 3,461 | — | — | ||||||
2/16/07 (d) | 4,204 | 84,879 | 1,401 | 1,401 | 1,402 | — | ||||||
2/16/07 (b) | 7,513 | 151,687 | 7,513 | — | — | — | ||||||
2/25/09 (e) | 13,245 | 267,417 | — | — | 13,245 | — | ||||||
Total | 31,884 | 643,738 | 12,375 | 4,862 | 14,647 | — | ||||||
Barbara Lynne Ronon | ||||||||||||
9/12/07 (d) | 8,763 | 176,925 | 2,921 | 2,921 | 2,921 | — | ||||||
9/12/07 (b) | 10,435 | 210,683 | 10,435 | — | — | — | ||||||
2/25/09 (e) | 12,583 | 254,051 | — | — | 12,583 | — | ||||||
Total | 31,781 | 641,659 | 13,356 | 2,921 | 15.504 | — | ||||||
| Number of Unvested RSUs as of 12/31/08 | Market Value of Unvested RSUs as of 12/31/08 | Vesting Schedule (#) | ||||||||||
Name and Grant Date | (#) | ($) | 2009 | 2010 | 2011 | 2012 | ||||||
Mindy Grossman | ||||||||||||
5/17/06 | 27,981 | 203,422 | 9,327 | 9,327 | 9,327 | — | ||||||
5/17/06 (b) | 30,652 | 222,840 | — | — | 30,652 | — | ||||||
2/16/07 (c) | 7,512 | 54,612 | — | 7,512 | — | — | ||||||
4/9/08 (d) | 69,786 | 507,344 | — | — | 69,786 | |||||||
Total | 135,931 | 988,218 | 9,327 | 16,839 | 39,979 | 69,786 | ||||||
Mark Ethier | ||||||||||||
2/6/06 (a) | 8,426 | 61,257 | — | 4,213 | 4,213 | — | ||||||
2/6/06 (b) | 24,373 | 177,192 | — | — | 24,373 | — | ||||||
2/16/07 (a) | 4,204 | 30,563 | — | 1,401 | 1,401 | 1,402 | ||||||
2/16/07 (c) | 3,005 | 21,846 | — | 3,005 | — | — | ||||||
Total | 40,008 | 290,858 | — | 8,619 | 29,987 | 1,402 | ||||||
Barbara Lynne Ronon | ||||||||||||
9/12/07 (a) | 11,684 | 84,943 | 2,921 | 2,921 | 2,921 | 2,921 | ||||||
9/12/07 (c) | 10,435 | 75,862 | — | 10,435 | — | — | ||||||
Total | 22,119 | 160,805 | 2,921 | 13,356 | 2,921 | 2,921 | ||||||
Judy Schmeling | ||||||||||||
2/6/06 (a) | 6,922 | 50,323 | — | 3,461 | 3,461 | — | ||||||
2/16/07 (a) | 4,204 | 30,563 | — | 1,401 | 1,401 | 1,402 | ||||||
2/16/07 (c) | 7,513 | 54,620 | — | 7,513 | — | — | ||||||
Total | 18,639 | 135,506 | 12,375 | 4,862 | 1,402 | |||||||
James Warner | ||||||||||||
2/6/06 (a) | 1,606 | 11,676 | — | 803 | 803 | — | ||||||
2/16/07 (a) | 3,678 | 26,739 | — | 1,226 | 1,226 | 1,226 | ||||||
2/16/07 (c) | 2,630 | 19,120 | — | 2,630 | — | — | ||||||
Total | 7,914 | 57,535 | — | 4,659 | 2,029 | 1,226 | ||||||
| (b) | These awards vest in one lump sum installment on the third anniversary of the date of grant, subject to continued employment. |
| These awards vest in one lump sum installment on the fourth anniversary of the date of grant, subject to continued employment. |
| (d) | Originally these awards were to vest in five equal annual installments on each of the first five anniversaries of the grant date subject to continued employment. As a result of the spin-off, any awards scheduled to vest by February 2009 accelerated and vested at the date of the spin-off. |
| These awards vest in one lump sum installment on the third anniversary of the date of grant, subject to continued |
Equity Grants in Connection with the Spin-off
In connection with the spin-off, certain IAC RSU and stock option awards held by our named executive officers were converted into (i) HSNi RSUs and stock options and (ii) RSUs and stock options of the other Spincos—IAC, Interval Leisure Group, Inc., Ticketmaster Entertainment, Inc. and Tree.com. Only HSNi RSUs and stock options received in connection with the spin-off are reflected in the Outstanding Equity Awards at Fiscal Year-End table above.
The tables below provide information concerning the RSUs and stock options of the other Spincos that were received by our named executives in connection with our spin-off.
Security | Award Type | Grant Date | Number of Spinco Securities Underlying Options (a) | Intrinsic Value of Spinco Option Awards at 12/31/08 ($/Sh) (b) | Number of Spinco Shares of Stock or Units (#) (c) | Market Value of Spinco RSUs that have not vested as of 12/31/08 ($) (d) | ||||||||
Mindy Grossman | IAC | RSUs | 8/21/2008 | — | — | 10,866 | 170,922 | |||||||
| Interval Leisure Group, Inc. | RSUs | 8/21/2008 | — | — | 4,346 | 23,425 | ||||||||
| Ticketmaster Entertainment | RSUs | 8/21/2008 | — | — | 4,346 | 27,901 | ||||||||
| Tree.com | RSUs | 8/21/2008 | — | — | 725 | 1,885 | ||||||||
| 224,133 | ||||||||||||||
Mark Ethier | IAC | RSUs | 8/21/2008 | — | — | 12,452 | 195,870 | |||||||
| Interval Leisure Group, Inc. | RSUs | 8/21/2008 | — | — | 4,981 | 26,848 | ||||||||
| Ticketmaster Entertainment | RSUs | 8/21/2008 | — | — | 4,981 | 31,978 | ||||||||
| Tree.com | RSUs | 8/21/2008 | — | — | 824 | 2,142 | ||||||||
| 256,838 | ||||||||||||||
Barbara Lynne Ronon | IAC | RSUs | 8/21/2008 | — | — | 1,744 | 27,433 | |||||||
| Interval Leisure Group, Inc. | RSUs | 8/21/2008 | — | — | 699 | 3,768 | ||||||||
| Ticketmaster Entertainment | RSUs | 8/21/2008 | — | — | 699 | 4,488 | ||||||||
| Tree.com | RSUs | 8/21/2008 | — | — | 116 | 302 | ||||||||
| 35,991 | ||||||||||||||
Judy Schmeling | IAC | Stock Options | 8/21/2008 | 4,748 | — | — | — | |||||||
| Interval Leisure Group, Inc. | Stock Options | 8/21/2008 | 1,899 | — | — | — | ||||||||
| Ticketmaster Entertainment | Stock Options | 8/21/2008 | 1,899 | — | — | — | ||||||||
| Tree.com | Stock Options | 8/21/2008 | 316 | — | — | — | ||||||||
| IAC | RSUs | 8/21/2008 | — | — | 4,182 | 65,783 | ||||||||
| Interval Leisure Group, Inc. | RSUs | 8/21/2008 | — | — | 1,673 | 9,017 | ||||||||
| Ticketmaster Entertainment | RSUs | 8/21/2008 | — | — | 1,673 | 10,741 | ||||||||
| Tree.com | RSUs | 8/21/2008 | — | — | 280 | 728 | ||||||||
| 86,269 | ||||||||||||||
James Warner | IAC | Stock Options | 8/21/2008 | 1,560 | — | — | — | |||||||
| Interval Leisure Group, Inc. | Stock Options | 8/21/2008 | 624 | — | — | — | ||||||||
| Ticketmaster Entertainment | Stock Options | 8/21/2008 | 624 | — | — | — | ||||||||
| Tree.com | Stock Options | 8/21/2008 | 104 | — | — | — | ||||||||
| IAC | RSUs | 8/21/2008 | — | — | 1,464 | 23,029 | ||||||||
| Interval Leisure Group, Inc. | RSUs | 8/21/2008 | — | — | 586 | 3,159 | ||||||||
| Ticketmaster Entertainment | RSUs | 8/21/2008 | — | — | 586 | 3,762 | ||||||||
| Tree.com | RSUs | 8/21/2008 | — | — | 99 | 257 | ||||||||
| 30,207 | ||||||||||||||
Option Exercises and Stock Vested
In connection with the spin-off, IAC’s Compensation and Human Resources Committee determined that certain IAC-granted equity awards would accelerate in connection with the spin-off. As a result, our named executive officers received shares that were converted into shares of HSNi and each of the Spincos. The table below provides information regarding the number of shares acquired by our named executive officers during 20082009 upon the vesting of RSU awards and the related value realized, excluding the effect of any applicable taxes. The dollar value realized upon vesting of RSUs represents the closing price of common stock on the applicable vesting date multiplied by the number of RSUs. As described in “Equity Grants in Connection with the Spin-off,” at the time of the spin-off certain IAC option awards held by our named executive officers were converted into options to purchase shares of common stock of the other Spincos. None of our named executive officers exercised options to purchase shares of common stock of any of the Spincos in 2008.2009.
| Stock Awards | ||||||||
Name | Security | Award Type | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||
Mindy Grossman | Pre-spin IAC | RSUs | 6,682 | 139,052 | ||||
| HSNi | RSUs | — | — | |||||
| IAC | RSUs | — | — | |||||
| Interval Leisure Group, Inc. | RSUs | — | — | |||||
| Ticketmaster Entertainment | RSUs | — | — | |||||
| Tree.com | RSUs | — | — | |||||
| 139,052 | ||||||||
Mark Ethier | Pre-spin IAC | RSUs | 12,615 | 297,974 | ||||
| HSNi | RSUs | 8,651 | 109,089 | |||||
| IAC | RSUs | 21,625 | 332,128 | |||||
| Interval Leisure Group, Inc. | RSUs | 8,651 | 122,152 | |||||
| Ticketmaster Entertainment | RSUs | 8,651 | 187,208 | |||||
| Tree.com | RSUs | 1,444 | 10,714 | |||||
| 1,059,265 | ||||||||
Barbara Lynne Ronon | Pre-spin IAC | RSUs | — | — | ||||
| HSNi | RSUs | 419 | 5,284 | |||||
| IAC | RSUs | 1,046 | 16,065 | |||||
| Interval Leisure Group, Inc. | RSUs | 419 | 5,916 | |||||
| Ticketmaster Entertainment | RSUs | 419 | 9,067 | |||||
| Tree.com | RSUs | 70 | 519 | |||||
| 36,851 | ||||||||
Judy Schmeling | Pre-spin IAC | RSUs | 12,194 | 285,303 | ||||
| HSNi | RSUs | 9,872 | 124,486 | |||||
| IAC | RSUs | 24,676 | 378,986 | |||||
| Interval Leisure Group, Inc. | RSUs | 9,872 | 139,393 | |||||
| Ticketmaster Entertainment | RSUs | 9,872 | 213,630 | |||||
| Tree.com | RSUs | 1,647 | 12,221 | |||||
| 1,154,019 | ||||||||
James Warner | Pre-spin IAC | RSUs | 3,514 | 81,285 | ||||
| HSNi | RSUs | 783 | 9,874 | |||||
| IAC | RSUs | 1,955 | 30,026 | |||||
| Interval Leisure Group, Inc. | RSUs | 783 | 11,056 | |||||
| Ticketmaster Entertainment | RSUs | 783 | 16,944 | |||||
| Tree.com | RSUs | 133 | 987 | |||||
| 150,172 | ||||||||
Name Mindy Grossman Judy A. Schmeling Barbara Lynne Ronon Stock Awards Number of
Shares
Acquired on
Vesting (#) Value Realized
on Vesting ($) 9,326 64,443 — — 2,921 48,547
Payments Upon Termination or Change of Control
We have entered into an employment agreementsagreement with our CEO and maintain certain plansan executive severance plan for our other named executive officers that will require us to provide compensation or other benefits to our named executive officers in connection with certain events related to a termination of employment or change of control. Set forth below are descriptions of these arrangements as they were in effect as of December 31, 2008.2009.
Grossman Arrangements
Under Ms. Grossman’s employment agreement, upon a termination by the company for other than death or disability and without Cause (as defined below) or resignation by Ms. Grossman for Good Reason (as defined below), Ms. Grossman will be entitled to certain benefits. These benefits include continued payment of her base salary and provision of health benefits for a period of twenty-four consecutive months. She will also be entitled to pro ratedpro-rated portions of the bonus she would otherwise earn during the year in which the qualifying termination occurs, payable at the time such bonus would otherwise be payable. Ms. Grossman’s rights under her long-term cash incentive plan continue following such a termination.
Under Ms. Grossman’s employment agreement, “Cause” shall mean:
| • | the plea of guilty or nolo contendere to, or conviction for, the commission of a felony offense by employee;provided,however, that after indictment, we may suspend executive from the rendition of services, but without limiting or modifying in any other way our obligations under the agreement; provided, further, that Ms. Grossman’s employment shall be immediately reinstated if the indictment is dismissed or otherwise dropped and there is not otherwise grounds to terminate Ms. Grossman’s employment; |
a material breach by the executive of a fiduciary duty owed to us, which in the good faith reasonable determination of the Board, undermines the confidence of the Board in Ms. Grossman’s fitness to continue in her position, and a failure to cure such breach upon receipt of notice;
a material breach by executive of any of the covenants made by executive in her employment agreement and a failure to cure such breach upon receipt of notice;
the continued failure to perform material duties required by the agreement upon receipt of notice; or
a knowing and material violation of any material company policy pertaining to ethics, wrongdoing or conflicts of interest and a failure to cure such breach upon receipt of notice.
In each case, causeCause shall only be deemed to exist if it is determined in good faith by the vote of not less than 2/3 of the Board of Directors (excluding Ms. Grossman).
Under Ms. Grossman’s employment agreement, “Good Reason” shall mean:
HSNi’s material breach of the agreement;
the material reduction in title, duties, reporting responsibilities or level of responsibilities, excluding any such reduction resulting from any disposition of assets so long as we retain the business relating to the HSN television network and web-site and acknowledging that the involvement of the Chairman of the Board in certain matters primarily related to public company reporting, significant corporate transactions, or other significant financial, legal and accounting matters, shall not constitute any such reduction provided that Ms. Grossman continues to have primary responsibility for the management of all operations and activities of the businesses of the company;
a material reduction in base salary or target bonus, or
a relocation to an area more than 50 miles from New York City.of Ms. Grossman’s principal place of business by HSNi.
Upon termination of employment for death or disability, Ms. Grossman is entitled to accelerated vesting of a percentage, based on years of service, of the unvested portion of the awards granted to her pursuant to her employment agreement. In addition, upon a termination of employment by the company for other than death, disability or Cause, a termination of employment by Ms. Grossman for Good Reason, or a Change of Control (as defined below) Ms. Grossman is entitled to accelerated vesting of all unvested awards outstanding as of that date.
Under Ms. Grossman’s employment agreement, “Change of Control” shall mean:
The acquisition by any individual, entity or group, other than HSNi, of beneficial ownership of equity securities of HSNi representing more than 50% of the voting power of the then outstanding equity securities of HSNi entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”);
| • | Individuals who, as of the effective date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board;provided,however, that any individual becoming a director subsequent to the effective date, whose election, or nomination for election by our shareholders, was approved by a vote of at least a majority of the Incumbent Directors at such time shall become an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or |
Consummation of a reorganization, merger, consolidation, sale or other disposition of all or substantially all of the assets of HSNi, the purchase of assets or stock of another entity, or other similar corporate transaction (a “Business Combination”), in each case, unless immediately following such Business Combination, (A) more than 50% of the resulting voting power shall reside in Outstanding Company Voting Securities retained by our shareholders in the Business Combination and/or voting securities received by such shareholders in the Business Combination on account of Outstanding Company Voting Securities, and (B) at least a majority of the members of the board of directors (or equivalent governing body, if applicable) of the entity resulting from such Business Combination were Incumbent Directors at the time of the initial agreement, or action of the Board, providing for such Business Combination; or
Approval by our shareholders of a complete liquidation or dissolution of the company.
The amounts payable upon termination are all subject to the execution of a general release and to compliance with confidentiality, non-compete, non-solicitation of employees and non-solicitation of customer covenants set forth in the relevantMs. Grossman’s employment agreements.agreement. Salary continuation payments will be offset by the amount of any compensation earned by an executive from other employment during the severance payment period.
Ethier, Schmeling and WarnerOther NEO Arrangements
Under theirEffective November 17, 2009, we adopted a Named Executive Officer and Executive Vice President Severance Plan applicable to certain named executive officers. The plan formalizes and standardizes our severance practices for our most senior executive officers and was adopted in lieu of issuing new employment agreements, uponagreements. All named executive officers and senior executive officers agreed to the termination of their employment agreements. The plan applies to all named executive officers excluding Ms. Grossman, who has a severance arrangement pursuant to her employment agreement. Adoption of the plan was approved by the Compensation Committee.
Executives covered by the severance plan will generally be eligible to receive severance benefits in the event of a termination by the company without Cause or by the executive for other than death, disability orGood Reason. The severance benefits increase if the termination is within 12 months following a Change in Control.
Under the plan, in the event of a termination by HSNi without Cause (as defined below), these named or by the executive officers are entitledfor Good Reason (as defined below) prior to salary continuationa Change in Control (as defined below) or more than 12 months following a Change in Control, the severance benefits for the remainder of their agreements. The expiration datesexecutive shall generally consist of the employment agreementsfollowing:
continued payment of base salary for Mr. Ethier, Ms. Schmelinga period of eighteen (18) months following the date of such executive’s termination of employment; and Mr. Warner are February 28, 2010, October 26, 2010 and October 26, 2010, respectively.
continuation of coverage under our health insurance plan for a period of twelve (12) months following the date of such executive’s termination of employment.
Under these employment agreements, “cause”the plan, in the event of a termination by HSNi without Cause or by the executive for Good Reason, in each case within 12 months following a Change in Control, the severance benefits for the executive shall consist of the following:
payment of a lump sum amount equal to two times the sum of (i) the executive’s Base Salary, and (ii) the executive’s Target Bonus multiplied by a fraction, the numerator of which is the number of days from the first day of the year in which the termination occurs and ending on the last day of the severance period, and the denominator of which is the number of days in the year in which the termination occurs;
payment of a lump sum amount equal to medical coverage under our health insurance plan for a period of eighteen (18) months;
outplacement benefits in an amount not to exceed $20,000; and
immediate vesting of all of the executive’s outstanding awards.
Under this severance plan, “Cause” shall mean:
|
the willful or gross neglect by the executive of his or her employment duties;
the plea of guilty or nolo contendere to, or conviction for, the commission of a felony offense by the executive;
a material breach by the executive of a fiduciary duty owed to us;
a material breach by executive of any of the covenants made by executive in hisnon-disclosure, non-solicitation or her employment agreement;
the willful or gross neglect by the executive of the material duties required by the agreement;non-competition obligation owed to us; or
a violation by the executive of any company policy pertaining to ethics, wrongdoing or conflicts of interest.
OverUnder this severance plan, “Good Reason” shall mean, without the years, these namedexecutive’s prior written consent:
a material reduction in the executive’s rate of annual base salary from the rate of annual base salary in effect for such executive; or
a relocation of the executive’s principal place of business more than 50 miles further from the location of the principal place of business from which executive officers have been issued awardsworks; or
a material and demonstrable adverse change in the nature and scope of various types. These awards contain various provisions for acceleration upon different events. Generally, uponthe executive’s duties. In order to invoke a termination of employment for Good Reason, the executive must provide written notice to HSNi of the existence of one or more of the conditions described in the clauses above within 90 days following the executive’s knowledge of the initial existence of such condition or conditions, and HSNi shall have 30 days following receipt of such written notice during which it may remedy the condition.
Under this severance plan, a “Change of Control” shall mean any of the following events:
the acquisition by HSNi forany individual, entity or group, other than death, disability, or Cause,HSNi, of beneficial ownership of equity securities of HSNi representing more than 50% of the named executive officers arevoting power of the then outstanding equity securities of HSNi entitled to accelerated vestingvote generally in the election of certaindirectors; or
incumbent directors cease for any reason to constitute at least a majority of these awards. In addition, upon Changethe Board; or
consummation of Control (as defined above), the named executive officers are also entitled to accelerated vesting of certain unvested awards outstanding as of that date. Upon a Change of Control (combined with a termination of employment), these named executive officers are entitled to accelerated vestingreorganization, merger, consolidation, sale or other disposition of all unvested awardsor substantially all of the assets of HSNi, the purchase of assets or stock of another entity, or other similar corporate transaction (a “Business Combination”), in each case, unless immediately following such Business Combination, (i) more than 50% of the Resulting Voting Power shall reside in outstanding asvoting securities retained by our shareholders, and (ii) at least a majority of that date.the members of the board of directors (or equivalent governing body, if applicable) of the entity resulting from such Business Combination were incumbent directors at the time of the initial agreement, or action of the Board, providing for such Business Combination; or
approval by our shareholders of a complete liquidation or dissolution of HSNi.
The amounts payable upon termination are all subject to the execution of a general release and to compliance with confidentiality, non-compete, non-solicitation of employees and non-solicitation of customer covenants set forth in the relevant employment agreements. Salary continuation payments will be offset by the amount of any compensation earned by an executive from other employment during the severance payment period.
Estimated Post-Employment Compensation and Benefits
The following table describes the potential payments and benefits under our compensation and benefit plans and arrangements to which our named executive officers would have beenbe entitled upon termination of employment, orboth in connection with a change in control.control and otherwise. The amounts shown in the table assume that the termination or change in control was effective as of December 31, 2008 and that2009. The vesting of equity awards in other Spincos may accelerate upon the termination of employment of our named executive officers under certain circumstances. As a result, to the extent appropriate, the value of such equity awards which could accelerate are included in the amounts described below. The price of HSNi common stock and the common stock of the other Spincos on which certain calculations are based wasis the closing price of $7.27 on The Nasdaq Global Select Market on that date. December 31, 2009.
These amounts do not take into account equity grants made, and contractual obligations entered into, after December 31, 2008.2009. The actual amounts to be paid out can only be determined at the time the event actually occurs.
Name and Benefit | Termination without cause | Resignation for good reason | Death or Disability | Change in Control | Termination w/o cause or for good reason in connection with Change in Control | Termination without Cause | Resignation for Good Reason | Change in Control | Termination w/o Cause or for Good Reason and Change in Control | |||||||||||||||||
Mindy Grossman | ||||||||||||||||||||||||||
Cash Severance (salary) | $ | 2,000,000 | $ | 2,000,000 | — | — | $ | 2,000,000 | $ | 2,000,000 | $ | 2,000,000 | — | $ | 2,000,000 | |||||||||||
Bonus | 1,910,000 | 1,910,000 | — | 1,910,000 | ||||||||||||||||||||||
Stock Options and SARs (vesting accelerated) | — | — | — | — | — | 4,247,379 | 4,247,379 | 4,247,379 | 4,247,379 | |||||||||||||||||
RSUs (vesting accelerated) | 1,212,345 | 1,212,345 | — | 1,212,345 | 1,212,345 | 2,892,586 | 2,892,586 | 2,892,586 | 2,892,586 | |||||||||||||||||
Health Benefits | 23,346 | 23,346 | — | — | 23,346 | 23,270 | 23,270 | — | 23,270 | |||||||||||||||||
Total estimated value | $ | 3,235,691 | $ | 3,235,691 | — | $ | 1,212,345 | $ | 3,235,691 | |||||||||||||||||
Total Estimated Value | $ | 11,073,235 | $ | 11,073,235 | $ | 7,139,965 | $ | 11,073,235 | ||||||||||||||||||
Mark Ethier | ||||||||||||||||||||||||||
Judy A. Schmeling | ||||||||||||||||||||||||||
Cash Severance (salary) | $ | 522,693 | — | — | — | $ | 522,693 | $ | 750,000 | $ | 750,000 | — | $ | 1,000,000 | ||||||||||||
Bonus | — | — | — | 1,194,500 | ||||||||||||||||||||||
Stock Options and SARs (vesting accelerated) | — | — | — | — | 33,975 | — | — | — | 913,134 | |||||||||||||||||
RSUs (vesting accelerated) | — | — | — | — | 547,696 | — | — | — | 773,254 | |||||||||||||||||
Health Benefits | 15,405 | 15,405 | — | 23,107 | ||||||||||||||||||||||
Outplacement Benefits | — | — | — | 20,000 | ||||||||||||||||||||||
Total estimated value | $ | 522,693 | — | — | — | $ | 1,104,364 | |||||||||||||||||||
Total Estimated Value | $ | 765,405 | $ | 765,405 | — | $ | 3,923,995 | |||||||||||||||||||
Barbara Lynne Ronon | ||||||||||||||||||||||||||
Cash Severance (salary) | $ | 374,520 | — | — | — | $ | 374,520 | $ | 712,500 | $ | 712,500 | — | $ | 950,000 | ||||||||||||
Bonus | — | — | — | 980,400 | ||||||||||||||||||||||
Stock Options and SARs (vesting accelerated) | — | — | — | — | 33,975 | — | — | — | 765,118 | |||||||||||||||||
RSUs (vesting accelerated) | — | — | — | 196,795 | — | — | — | 695,680 | ||||||||||||||||||
Health Benefits | 4,426 | 4,426 | — | 6,639 | ||||||||||||||||||||||
Outplacement Benefits | — | — | — | 20,000 | ||||||||||||||||||||||
Total estimated value | $ | 374,520 | — | — | — | $ | 605,290 | |||||||||||||||||||
Total Estimated Value | $ | 716,926 | $ | 716,926 | — | $ | 3,417,837 | |||||||||||||||||||
Judy Schmeling | ||||||||||||||||||||||||||
Cash Severance (salary) | $ | 911,539 | — | — | — | $ | 911,539 | |||||||||||||||||||
Stock Options and SARs (vesting accelerated) | — | — | — | — | 33,975 | |||||||||||||||||||||
RSUs (vesting accelerated) | — | — | — | — | 221,775 | |||||||||||||||||||||
Total estimated value | $ | 911,539 | — | — | — | $ | 1,167,289 | |||||||||||||||||||
James Warner | ||||||||||||||||||||||||||
Cash Severance (salary) | $ | 638,077 | — | — | — | $ | 638,077 | |||||||||||||||||||
Stock Options and SARs (vesting accelerated) | — | — | — | — | 33,975 | |||||||||||||||||||||
RSUs (vesting accelerated) | — | — | — | — | 87,742 | |||||||||||||||||||||
Total estimated value | $ | 638,077 | — | — | — | $ | 759,794 | |||||||||||||||||||
Securities Authorized for Issuance under Equity Compensation Plans
The table below provides information pertaining to all compensation plans under which equity securities of our company are authorized for issuance as of December 31, 2008:2009:
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights (1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in 1st column) | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights ($) (1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in 1st column) | ||||||
Equity compensation plans approved by security holders for: | ||||||||||||
Employee equity compensation | 2,232,891 | 15.56 | 2,767,109 | 3,729,765 | 10.02 | 4,186,971 | ||||||
Non-employee directors’ deferred compensation plan | 3,961 | — | 96,039 | 16,669 | — | 83,331 | ||||||
Adjusted Awards under employee equity plan approved by IAC shareholders prior to the spin-off | 4,819,674 | 15.25 | — | 3,990,245 | 16.32 | — | ||||||
Subtotal | 7,056,526 | 15.35 | 2,863,148 | 7,736,679 | 4,270,302 | |||||||
Equity compensation plans not approved by security holders: | — | — | — | — | — | — | ||||||
Total equity compensation plans (2) | 7,056,526 | 15.35 | 2,863,148 | 7,736,679 | 4,270,302 | |||||||
| (1) | The calculation of the weighted average exercise price includes RSUs that do not have an exercise price. Excluding the RSUs, the weighted average exercise price of outstanding options and SARs would be |
| (2) | Approximately |
We do not currently have any plans that provide for payments or other benefits at, following, or in connection with retirement.
Non-Qualified Deferred Compensation
We do not currently have any other defined contribution or other plan that provides for deferred compensation on a basis that is not tax-qualified.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial Ownership of Officers and Directors
The following table sets forth information as of March 6, 2009,1, 2010, with respect to the beneficial ownership of our common stock by (i) each shareholderperson who, to our knowledge, is the beneficial owner of more than 5% of the outstanding common stock, (ii) each director (iii) each of ourand named executive officers, and (iv)(iii) all of our executive officers and directors as a group. The percentages below are based on 56,342,62056,912,318 shares of common stock outstanding on March 6, 2009.1, 2010. In each case, except as otherwise indicated in the footnotes to the table, the shares of common stock are owned directly by the named owners, with sole voting and dispositive power. Beneficial ownership has been determined in accordance with the SEC rules and regulations.
Unless otherwise indicated, beneficial owners listed here may be contacted at our corporate headquarters located at 1 HSN Drive, St. Petersburg, Florida 33729.
Name and Address of Beneficial Owner | Shares | % | Shares | % | ||||
5% Beneficial Owners: | ||||||||
Liberty Media Corporation (1) | 16,643,958 | 29.5 | 18,516,167 | 32.5 | ||||
Lord Abbett & Co. LLC (2) | 9,782,413 | 17.4 | 6,458,153 | 11.3 | ||||
BlackRock, Inc. (3) | 3,042,267 | 5.3 | ||||||
Directors and Named Executive Officers: | ||||||||
Gregory R. Blatt | 33,512 | * | 35,917 | * | ||||
Patrick Bousquet-Chavanne (3) | 2,063 | — | ||||||
Patrick Bousquet-Chavanne (4) | 12,031 | * | ||||||
Michael C. Boyd | — | — | 3,966 | * | ||||
William Costello (4) | 14,219 | * | ||||||
Mark Ethier (5) | 20,597 | * | ||||||
William Costello (5) | 23,187 | * | ||||||
James M. Follo | — | — | 3,966 | * | ||||
Mindy Grossman (6) | 114,773 | * | ||||||
Stephanie Kugelman | — | — | 5,466 | * | ||||
Arthur C. Martinez | 2,500 | * | 16,378 | * | ||||
Thomas J. McInerney | 57,975 | * | ||||||
John B. Morse, Jr. (3) | 179 | — | ||||||
Barbara Lynne Ronon (7) | 3,796 | — | ||||||
Judy Schmeling (8) | 27,601 | * | ||||||
James Warner (9) | 12,662 | * | ||||||
Thomas J. McInerney (6) | 90,066 | * | ||||||
John B. (Jay) Morse, Jr. (7) | 28,059 | * | ||||||
Mindy Grossman (8) | 432,212 | * | ||||||
Judy A. Schmeling (9) | 59,869 | * | ||||||
Gregory J. Henchel | 0 | — | ||||||
Lisa A. Letizio (10) | 53,728 | * | ||||||
Barbara Lynne Ronon (11) | 17,821 | * | ||||||
All executive officers and directors as a group (14 persons) | 289,877 | * | 782,666 | 1.4 | ||||
| * | The percentage of shares beneficially owned does not exceed 1% |
| (1) | Reflects shares beneficially owned by Liberty Media Corporation as of |
| (2) | Reflects shares beneficially owned by Lord Abbett & Co. LLC |
| (3) |
| (4) |
| (5) |
| (6) | Represented by (i) 28,125 shares issuable upon exercisable options, and (ii) 61,941 shares of HSNi common stock held directly by the reporting person. |
| (7) | Represents (i) |
| (8) | Represents (i) 23,005 shares held |
| Represents (i) |
| Represents (i) |
| (11) | Represents (i) 2,455 shares held directly, and (ii) 15,366 shares issuable upon currently exercisable options. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers, and holders of more than 10% of our common stock to file reports regarding their ownership and changes in ownership of our securities with the SEC, and to furnish us with copies of all Section 16(a) reports that they file. Specific due dates for these reports have been established, and we are required to report in this proxy statement any failure to comply therewith during the fiscal year ended December 31, 2009. We believe that during the fiscal year ended December 31, 2008,2009, our directors, executive officers, and greater than 10% shareholders complied with all applicable Section 16(a) filing requirements. In making this statement, we have relied upon a review of the copies of Section 16(a) reports furnished to us and the written representations of our directors, executive officers, and greater than 10% shareholders.shareholders that no Form 5s were required to be filed under applicable SEC rules.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review and Approval of Related Person Transactions
Prior to the spin-off in August 2008, we were subject to the policies and procedures of IAC regarding the review and approval of related person transactions. Immediately prior to the spin-off, weWe have adopted a written policy governing the review and approval of related person transactions. Consistent with applicable law and listing standards, the terms “related person” and “transaction” are determined by reference to Item 404(a) of Regulation S-K under the Securities Act. In accordance with the policy, management is required to determine whether any proposed transaction, arrangement or relationship with a related person falls within the definition of “transaction,” and if so, submit the transaction to the Audit Committee for approval. The Audit Committee, in considering whether to approve related person transactions, consider all facts and circumstances that it deems relevant.
Relationships Involving Named Executive Officers
HSNi works with High Fashion Garments, Inc., or HFG, and a number of other third parties to develop new product lines and source manufacturers for existing product lines in the ordinary course of business. TheDuring 2008 and until approximately April, 2009, the brother-in-law of Mindy Grossman, HSNi’s Chief Executive Officer, isCEO, was an employee of HFG, in which capacity he assisted with the development and manufacturing of three product lines for HSN, and hisHFG. His spouse iswas also a consultant for HFG, in which capacity she assisted with the design and development of a product line for HSN.HFG. In 2008, HSNi purchased merchandise from HFG that was developed, manufactured and/or designed with assistance from these individuals. For the ended December 31, 2008,2009, HSNi paid this vendor $5,425,178$1,935,320 for merchandise.
Relationship Between HSNi and IAC
HSNi’s expenses include allocations from IAC of costs associated with IAC’s accounting, treasury, legal, tax, corporate support, human resources and internal audit functions. These expenses were allocated based on the ratio of HSNi’s revenue as a percentage of IAC’s total revenue. Allocated costs were $3.3 million for the year ended December 31, 2008. It is not practicable to determine what the amounts of these expenses would have been incurred had HSNi operated as an unaffiliated entity. In the opinion of management, the allocation method is reasonable.
During 2008, IAC provided HSNi with non-cash advertising totaling $8.0 million.
For purposes of governing certain of the ongoing relationships between HSNi and IAC at and after the spin-off and to provide for an orderly transition, effective August 20, 2008, HSNi entered into the following agreements:
a Separation and Distribution Agreement that sets forthdescribes the arrangements between IAC and HSNi regarding the principal transactions necessary to separate HSNi from IAC, and that governs certain aspects of theour relationship of HSNi with IAC and the other Spincos after the spin-off;
a Tax Sharing Agreement that governs the respective rights, responsibilities and obligations of IAC and HSNi after the spin-off with respect to tax periods ending on or before the spin-off, including tax liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, other taxes and related tax returns;
an Employee Matters Agreement that covers a wide range of compensation and benefit issues, including the allocation among IAC and HSNi of responsibility for the employment and benefit obligations and liabilities of each company’s current and former employees (and their dependents and beneficiaries), as well as the provision of health and welfare benefits to employees of HSNi (the costs of which will be borne by HSNi) pursuant to IAC’s employee benefit plans through the end of 2008; and
a Transition Services Agreement that governs the provision of transition services among IAC and HSNi.
The Separation and Distribution Agreement has been consummated and HSNi has satisfied its obligations under the Employee Matters Agreement and Transition Services Agreement. HSNi continues to be subject to certain post-spin obligations under the Tax Sharing Agreement.
Relationship betweenBetween HSNi and Liberty
Also in connection with the spin-off, pursuant to a Spinco Assignment and Assumption Agreement, dated as of August 20, 2008, among HSNi, IAC, Liberty Media Corporation (“Liberty”) and a subsidiary of Liberty that holds shares of IAC common stock and IAC Class B common stock (together with Liberty, the “Liberty
Parties”), HSNi (i) assumed from IAC all rights and obligations providing for post-spin-off governance and other arrangements at HSNi under the Spinco Agreement, dated May 13, 2008, among IAC, Liberty and affiliates of Liberty that held shares of IAC common stock and/or Class B common stock at the time such Spinco Agreement was entered into, and (ii) as required by the Spinco Agreement, entered into a registration rights agreement with the Liberty Parties.
Spinco Agreement
Representation of Liberty on the Board of Directors
The Spinco Agreement generally provides that so long as Liberty beneficially owns securities of HSNi representing at least 20% of the total voting power of the HSNi’s equity securities, Liberty has the right to nominate up to 20% of the directors serving on the Board of Directors (rounded up to the nearest whole number). Any individual nominated by Liberty must be reasonably acceptable to a majority of the directors on HSNi’s Board who were not nominated by Liberty. All but one of Liberty’s nominees serving on the Board of Directors must qualify as “independent” under applicable stock exchange rules. In addition, the NominatingGovernance Committee of the Board may include only “Qualified Directors,” namely directors other than any who were nominated by Liberty, are officers or employees of HSNi or were not nominated by the NominatingGovernance Committee in connection with their initial election to the Board and for whose election any Liberty Party voted shares.
Until the second anniversary of the spin-off, the Liberty Parties agreed to vote all of the equity securities of HSNi beneficially owned by them in favor of the election of the full slate of director nominees recommended to shareholders by the HSNi Board of Directors so long as the slate includes the director-candidates that Liberty has the right to nominate.
Acquisition Restrictions
The Liberty Parties have agreed not to acquire beneficial ownership of any equity securities of HSNi (with specified exceptions) unless:
the acquisition was approved by a majority of the Qualified Directors;
the acquisition is permitted under the provisions described in “Competing Offers” below; or
after giving effect to the acquisition, Liberty’s ownership percentage of the equity securities of HSNi, based on voting power, would not exceed the Applicable Percentage.
The “Applicable Percentage” is Liberty’s ownership percentage upon the spin-off of HSNi, based on voting power (approximately 30% as of December 31, 2008), plus 5%, but in no event more than 35%. Following the spin-off, the Applicable Percentage for the Spinco will be reduced for specified transfers of equity securities of the Spinco by the Liberty Parties. During the first two years following the spin-off, acquisitions by the Liberty Parties are further limited to specified extraordinary transactions and, otherwise, to acquisitions representing no more than one-third of HSNi Common Stock received by the Liberty Parties in the spin-off.
Standstill Restrictions
Until the second anniversary of the spin-off, unless a majority of the Qualified Directors consent or to the extent permitted by the provisions described under “Acquisition Restrictions” or “Competing Offers” or in certain other limited circumstances, no Liberty Party may:
offer to acquire beneficial ownership of any equity securities of such Spinco;
initiate or propose any shareholder proposal or seek or propose to influence, advise, change or control the management, Board of Directors, governing instruments or policies or affairs of HSNi;
offer, seek or propose, collaborate on or encourage any merger or other extraordinary transaction;
subject any equity securities of HSNi to a voting agreement;
make a request to amend any of the provisions described under “Acquisition Restrictions”,Restrictions,” “Standstill Restrictions” or “Competing Offers”;
make any public disclosure, or take any action which could reasonably be expected to require HSNi to make any public disclosure, with respect to any of the provisions described under “Standstill Restrictions”; or
enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the provisions described hereunder.
Transfer Restrictions
Unless a majority of the Qualified Directors consent, the Spinco Agreement prohibits transfers by the Liberty Parties of any equity securities of HSNi to any person except for certain transfers, including:
transfers under Rule 144 under the Securities Act (or, if Rule 144 is not applicable, in “broker transactions”);
transfers pursuant to a third party tender or exchange offer or in connection with any merger or other business combination, which merger or business combination has been approved by HSNi;
transfers in a public offering in a manner designed to result in a wide distribution, provided that no such transfer is made, to the knowledge of the Liberty Parties, to any person whose ownership percentage (based on voting power) of HSNi’s equity securities, giving effect to the transfer, would exceed 15%;
a transfer of all of the equity securities of HSNi beneficially owned by the Liberty Parties and their affiliates in a single transaction if the transferee’s ownership percentage (based on voting power), after giving effect to the transfer, would not exceed the Applicable Percentage and only if the transferee assumes all of the rights and obligations (subject to limited exceptions) of the Liberty Parties under the Spinco Agreement relating;
specified transfers in connection with changes in the beneficial ownership of the ultimate parent company of a Liberty Party or a distribution of the equity interests of a Liberty Party or certain similar events; and
specified transfers relating to certain hedging transactions or stock lending transactions in respect of the Liberty Parties’ equity securities in HSNi, subject to specified restrictions.
During the first two years following the spin-off, transfers otherwise permitted by the first and third bullets above will be prohibited, and transfers otherwise permitted by the fourth and sixth bullets above in respect of which IAC and HSNi do not make certain determinations with respect to the transferee will be prohibited, unless such transfers represent no more than one-third of HSNi Common Stock received by the Liberty Parties in the spin-off.
Competing Offers
During the period when Liberty has the right to nominate directors to the Board, if the Board determines to pursue certain types of transactions on a negotiated basis (either through an “auction” or with a single bidder), Liberty is granted certain rights to compete with the bidder or bidders, including the right to receive certain notices and information, subject to specified conditions and limitations. In connection with any such transaction that HSNi is negotiating with a single bidder, the Board must consider any offer for a transaction made in good faith by Liberty but is not obligated to accept any such offer or to enter into negotiations with Liberty.
If a third party (x) commences a tender or exchange offer for at least 35% of the capital stock of HSNi other than pursuant to an agreement with HSNi or (y) publicly discloses that its ownership percentage (based on voting power) exceeds 20% and the Board fails to take certain actions to block such third party from acquiring an ownership percentage of HSNi (based on voting power) exceeding the Applicable Percentage, the Liberty Parties generally will be relieved of the obligations described under “Standstill Restrictions” and “Acquisition Restrictions” above to the extent reasonably necessary to permit Liberty to commence and consummate a competing offer. If Liberty’s ownership percentage (based on voting power) as a result of the consummation of a competing offer in response to a tender or exchange offer described in (x) above exceeds 50%, any consent or approval requirements of the Qualified Directors in the Spinco Agreement will be terminated, and, following the later of the second anniversary of the spin-off and the date that Liberty’s ownership percentage (based on voting power) exceeds 50%, the obligations described under “Acquisition Restrictions” will be terminated.
Other
Following the spin-off, amendments to the Spinco Agreement and determinations required to be made thereunder (including approval of transactions between a Liberty Party and HSNi that would be reportable under the proxy rules) will require the approval of the Qualified Directors.
Under the registration rights agreement, the Liberty Parties and their permitted transferees (the “Holders”) will be entitled to three demand registration rights (and unlimited piggyback registration rights) in respect of the shares of HSNi common stock received by the Liberty Parties as a result of the spin-off and other shares of HSNi common stock acquired by the Liberty Parties consistent with the Spinco Agreement (collectively, the “Registrable Shares”). The Holders will be permitted to exercise their registration rights in connection with certain hedging transactions that they may enter into in respect of the Registrable Shares.
HSNi will be obligated to indemnify the Holders, and each selling Holder will be obligated to indemnify HSNi, against specified liabilities in connection with misstatements or omissions in any registration statement.
ANNUAL REPORTS AND OTHER MATERIALS
Upon written request to the Corporate Secretary, HSN, Inc., 1 HSN Drive, St. Petersburg, Florida 33729, we will provide without charge to each person solicited an additional copy of our Annual Report on Form 10-K, including the financial statements and financial statement schedules filed therewith. Copies are also available on our website,www.hsni.com. We will furnish requesting shareholders with any exhibit not contained in its Annual Report upon written request without charge.
Our code of business conduct and ethics, which applies to all employees (including executive officers) and directors is posted on our website at www.hsni.com.www.hsni.com. The code of business conduct and ethics complies with applicable laws and listing requirements. Any waivers to the code of business conduct and ethics for our executive officers and directors will also be disclosed on our website. We will furnish requesting shareholders with a copy of our code of business conduct and ethics upon written request without charge.
PROPOSALS BY SHAREHOLDERS FOR THE 20102011 ANNUAL MEETING
Shareholders who intend to have a proposal considered for inclusion in HSN, Inc. proxy materials for presentation at the 20102011 annual meeting of shareholders must submit the proposal to us at our corporate headquarters no later than March 3, 2010,February 22, 2011, which proposal must be made in accordance with the provisions of Rule 14a-8 of the Exchange Act. Shareholders who intend to present a proposal at the 20102011 annual meeting of shareholders without inclusion of the proposal in our proxy materials are required to provide notice of such proposal to HSN, Inc. no later than March 3, 2010.February 22, 2011. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 19, 2009.2010.
The Proxy Statement and Annual Report to Shareholders are available at:
| • | http://bnymellon.mobular.net/bnymellon/hsnifor registered holders; and |
| • | http://bnymellon.mobular.net/bnymellon/hsnifor beneficial owners who own their shares in streetname. |
| • | These materials are also available at HSNi’s investor relations website atwww.hsni.com. |
YOUR VOTE IS VERY IMPORTANT. THE BOARD ENCOURAGES YOU TO MARK,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
Annex A
HSN, INC.EMPLOYEE STOCK PURCHASE PLAN
SECONDED AMENDED AND RESTATED 2008 STOCK AND ANNUAL INCENTIVE PLANThe following constitute the provisions of the HSN, Inc. Employee Stock Purchase Plan (the “Plan”), as adopted by HSN, Inc. (“HSNi”) and its Designated Subsidiaries described in Section 2 of this Plan (collectively, with HSNi, the “Company”).
Section 1. Purpose; DefinitionIntroduction.
(a)Purpose.The purpose of thisthe Plan is (a) to giveenable the Company to obtain and retain the services of employees. In addition, the Plan provides a competitive advantage in attracting, retaining and motivating officers, employees, directors and/or consultants andconvenient, meaningful opportunity for eligible Employees to provide the Company and its Subsidiaries and Affiliates with a stock and incentive plan providing incentives directly linked to stockholder value and (b) to assume and govern other awards pursuant to the adjustmentpurchase Common Stock of awards granted under any IAC Long Term Incentive Plan (as definedHSNi, thereby increasing participating Employees’ personal interest in the Employee Matters Agreement) in accordanceCompany’s success.
(b)Portion of Plan to Comply with the termsCode Section 423. The Company intends to have a portion of the Employee Matters Agreement (“Adjusted Awards”). Certain terms used herein have definitions givenPlan qualify as an “employee stock purchase plan” within the meaning of Code section 423; and intends that such portion of the Plan be treated as a separate plan. Such portion of the Plan shall, accordingly, be construed so as to themextend and limit participation in the first place in which they are used. In addition, for purposesa manner that is consistent with Code section 423.
(c)Portions of Plan Not Complying with Code Section 423. Section 20 of this Plan, and any additional provisions adopted by the following termsCommittee pursuant thereto, are defined as set forth below:intended by HSNi to allow creation of separate portions of the Plan providing for the offering of Common Stock other than through the portion of the Plan governed by Code section 423, for purchase by individuals who are either (i) generally not subject to income taxation by the United States, or (ii) employed by non-corporate Subsidiaries that are not eligible to be Designated Subsidiaries because they are described in clause (ii) of the definition of Subsidiary below.
2. Definitions.
(a) “AffiliateAccount” means an account established pursuant to Section 6(b) and maintained on the books and records of the Company to record the amount of all remaining Contributions accumulated with respect to a corporation or other entity controlled by, controlling orParticipant as a result of deductions made from such Participant’s paychecks for the purpose of purchasing Shares under common control with, the Company.Plan.
(b) “Applicable ExchangeLaws” means Nasdaqshall mean all applicable laws, rules, regulations and requirements, including, but not limited to, corporate and securities laws of any of the United States, United States federal securities laws, the Code, the rules of any stock exchange or such other securities exchange as may atquotation system on which Shares are listed or quoted; and the applicable laws, rules, regulations and requirements of any other country or jurisdiction where Options are granted under the Plan or where Employees reside or provide services, as such laws, rules, regulations and requirements shall be in effect from time be the principal market for the Common Stock.to time.
(c) “Award” means an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or other stock-based award granted or assumed pursuant to the terms of this Plan, including Adjusted Awards.
(d) “Award Agreement” means a written or electronic document or agreement setting forth the terms and conditions of a specific Award.
(e) “Beneficial Ownership” shall have the meaning given in Rule 13d-3 promulgated under the Exchange Act.
(f) “Board” means the Board of Directors of the Company.HSNi.
(g)(d) “Bonus AwardBusiness Day” means any day (other than a bonus award made pursuantSaturday or Sunday) on which the Nasdaq Global Select Market is permitted to Section 9.be open for trading.
(h)(e) “Cause” means, unless otherwise provided in an Award Agreement, (i) “Cause” as defined in any Individual Agreement to which the applicable Participant is a party, or (ii) if there is no such Individual Agreement or if it does not define Cause: (A) the willful or gross neglect by a Participant of his employment duties; (B) the plea of guilty ornolo contendere to, or conviction for, the commission of a felony offense by a Participant; (C) a material breach by a Participant of a fiduciary duty owed to the Company or any of its subsidiaries; (D) a material breach by a Participant of any nondisclosure, non-solicitation or non-competition obligation owed to the Company or any of its Affiliates; or (E) before a Change in Control, such other events as shall be determined by the Committee and set forth in a Participant’s Award Agreement. Notwithstanding the general rule of Section 2(c), following a Change in Control, any determination by the Committee as to whether “Cause” exists shall be subject tode novo review.
(i) “Change in Control” has the meaning set forth in Section 10(c).
(j) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto, the Treasury Regulations thereunder and other relevant interpretive guidance issued by the Internal Revenue Service or the Treasury Department. Reference to any specific section of the Code shall be deemed to include such regulations and guidance, as well as any successor provision of the Code.time.
(k)(f) “CommissionCommencement Date” means the Securitiesfirst calendar day of each Contribution Period of the Plan.
(g) “Committee” means the Compensation and Exchange CommissionHuman Resources Committee of the Board, or any successor agency.
(l) “Committee” hascommittee of the meaning set forth in Section 2(a).Board with similar responsibilities; provided, however, that the Board shall have the power to take any action that may be taken by the Committee under this Plan, except to the extent such action would not comply with any Applicable Laws.
(m)(h) “Common Stock” means the common stock, par value $0.01 per share, of HSNi.
(i) “Company” means collectively, HSNi and the Company.Designated Subsidiaries (but only while a Designated Subsidiary is so designated).
(n)(j) “CompanyCompensation” means HSN, Inc.,total cash compensation received by a Delaware corporation,Participant from the Company. Compensation shall be limited to amounts received by a Participant during the period he or its successor.
(o) “Disability” means (i) “Disability” as definedshe is participating in any Individual Agreement to whichthe Plan and includes salary, wages, overtime premiums, bonuses and other incentive payments, amounts contributed by the Participant is a party, or (ii) if there is no such Individual Agreement or it does not define “Disability,” (A) permanent and total disability as determined under the Company’s long-term disabilityto any benefit plan applicable to the Participant, or (B) if there is no such plan applicable to the Participant or the Committee determines otherwise in an applicable Award Agreement, “Disability” as determinedmaintained by the Committee. Notwithstanding the above, with respect to an Incentive Stock Option, Disability shall mean PermanentCompany (including any Code section 125 plan, Code section 401(k) plan or any other deferred compensation plan), overtime pay, commissions, draws against commissions, shift differentials, sick pay, vacation pay, holiday pay, and Total Disability as defined in Section 22(e)(3) of the Code and, with respect to all Awards,shutdown pay, except to the extent requiredthat the exclusion of any such item (or a subset of any such items) is specifically directed by Section 409A of the Plan Administrator for all Participants in a manner that does not violate Code “disability” withinsection 423. “Compensation” does not include any remuneration paid in a form other than cash, fringe benefits (including car allowances, tuition assistance and relocation payments), employee discounts, expense reimbursement or allowances, long-term disability payments, workers’ compensation payments, welfare benefits, and any contributions that the meaning of Section 409A of the Code.
(p) “Disaffiliation” means a Subsidiary’sCompany or Affiliate’s ceasingany other Subsidiary makes to be a Subsidiaryany benefit plan (including any 401(k) plan or Affiliate for any reason (including, without limitation,other welfare or retirement plan), nor income realized as a result of a public offering,participation in any stock option, restricted stock, stock purchase or a spinoff or sale by the Company, of the stock of the Subsidiary or Affiliate) or a sale of a division of the Company and its Affiliates.
(q) “EBITA” means for any period, operating profit (loss) plus (i) amortization, including goodwill impairment, (ii) amortization of non-cash distribution and marketing expense and non-cash compensation expense, (iii) restructuring charges, (iv) non-cash write-downs of assets or goodwill, (v) charges relating to disposal of lines of business, (vi) litigation settlement amounts and (vii) costs incurred for proposed and completed acquisitions.
(r) “EBITDA” means for any period, operating profit (loss) plus (i) depreciation and amortization, including goodwill impairment, (ii) amortization of non-cash distribution and marketing expense and non-cash compensation expense, (iii) restructuring charges, (iv) non-cash write-downs of assets or goodwill, (v) charges relating to disposal of lines of business, (vi) litigation settlement amounts and (vii) costs incurred for proposed and completed acquisitions.
(s) “Eligible Individuals” means directors, officers, employees and consultantssimilar plans of the Company or any other Subsidiary.
(k) “Continuous Status as an Employee” means, with respect to an Employee, a period of itsemployment by the Company without any interruption or termination of his or her service as an Employee of the Company. Continuous Status as an Employee shall not be considered interrupted in the case of (i) medical leave; (ii) leave allowed under the Family and Medical Leave Act; (iii) personal leave; (iv) military leave; (v) jury duty; (vi) any other leave of absence approved by the Plan Administrator; provided, however, that such leave does not exceed the respective time period designated by Company policy, unless re-employment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (vii) transfers between locations of the Company, between HSNi and any of the Designated Subsidiaries, or Affiliates,between any of the Designated Subsidiaries. See the definition of “Employee” for the effect of any Designated Subsidiary ceasing to be a Designated Subsidiary.
(l) “Contribution Period” means any period of six consecutive months specified in Section 4(a), which shall be subject to change pursuant to Section 4(b); provided, however, that no Contribution Period shall exceed 27 months.
(m) “Contributions” means all amounts credited to the Account of a Participant pursuant to the Plan.
(n) “Designated Subsidiaries” means all Subsidiaries that are either corporations described in clause (i) of the definition of Subsidiary below, or are treated as corporations under the Code as described in clause (iii) of that definition; and prospective employees and consultantsin either case have been designated by the Committee from time to time in its sole discretion as employers that are eligible to participate in the portion of the Plan that is subject to Code section 423. This definition of Designated Subsidiaries shall be interpreted consistently with Code section 424(f).
(o) “Employee” means any individual who have accepted offersis a common-law employee of employment or consultancy from the Company for purposes of tax withholding under Code section 3401(c), including an officer or its Subsidiariesdirector who is also such an employee, but excluding any individual whose customary employment is (i) less than 20 hours per week or Affiliates.(ii) for not more than 5 months in any calendar year. If the Committee determines that any Designated Subsidiary shall no longer be a Designated Subsidiary, or a Designated Subsidiary ceases to be a Designated Subsidiary because it is no longer a Subsidiary, the employees of such Designated Subsidiary shall automatically cease to be Employees or Participants as of the effective date of such event.
(t)(p) “Employee Matters AgreementESPP Broker” means the Employee Matters Agreementlicensed broker-dealer or other financial services firm designated from time to time by and among IAC, Ticketmaster, Interval Leisure Group, Inc., HSN, Inc. and Tree.com, Inc.the Plan Administrator in accordance with Section 9(a) to assist in administering this Plan.
(u)(q) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.amended.
(v)(r) “Fair Market Value” means, unless otherwisewith respect to the Common Stock on a given date, the last reported sale price for the Common Stock for such date, or if such date is not a Business Day, the last reported sale
price for the Common Stock for the last Business Day preceding such date, as quoted on the Nasdaq Global Select Market; provided, however, that if the Common Stock ceases to be listed for trading on the Nasdaq Global Select Market or another exchange, “Fair Market Value” of the Common Stock for a given date shall mean the value determined in good faith by the Committee.
(s) “Financial Hardship” means an immediate and heavy financial need of the Participant (including the Participant’s spouse or other dependents) as determined by the Committee,Plan Administrator, in its sole and absolute discretion, which may include, but are not limited to, the closing pricefollowing: (i) certain medical expenses; (ii) costs relating to the purchase of a share of Common Stock on the Applicable Exchange on the date of measurement,principal residence; (iii) tuition and related educational fees and expenses; (iv) payments necessary to prevent eviction from, or if Shares were not traded on the Applicable Exchange on such measurement date, then on the next preceding date on which Shares were traded, all as reported by such source as the Committee may select. If the Common Stock is not listedforeclosure on, a national securities exchange, Fair Market Value shallprincipal residence; (v) burial or funeral expenses; and (vi) certain expenses for the repair of damage to the Participant’s principal residence. A financial need may be determinedimmediate and heavy even if it was reasonably foreseeable or voluntarily incurred by the Committee in its good faith discretion, taking into account, to the extent appropriate, the requirements of Section 409A of the Code.Participant.
(w)(t) “Free-Standing SARHSNi” hasmeans HSN, Inc., a Delaware corporation.
(u) “New Purchase Date” shall have the meaning set forth in Section 5(b).13.
(v) “Option” shall mean a right granted to a Participant under Section 7, as of the Commencement Date of a Contribution Period, to purchase Shares as of the Purchase Date in that Contribution Period.
(w) “Participant” means any Employee who is eligible and has elected to participate in the Plan accordance with Sections 3 and 5, and who has not withdrawn from the Plan or whose participation in the Plan is not otherwise terminated.
(x) “Grant Date” means (i) the date on which the Committee by resolution selects an Eligible Individual to receive a grant of an Award and determines the number of Shares to be subject to such Award or the formula for earning a number of shares or cash amount, (ii) such later date as the Committee shall provide in such resolution or (iii) the initial date on which an Adjusted Award was granted under the IAC Long Term Incentive Plan.
(y) “Group” shall have the meaning given in Section 13(d)(3) and 14(d)(2) of the Exchange Act.
(z) “IAC” means IAC/InterActiveCorp, a Delaware corporation.
(aa) “Incentive Stock Option” means any Option that is designated in the applicable Award Agreement as an “incentive stock option” within the meaning of Section 422 of the Code, and that in fact so qualifies.
(bb) “Individual Agreement” means an employment, consulting or similar agreement between a Participant and the Company or one of its Subsidiaries or Affiliates.
(cc) “Nasdaq” means the National Association of Securities Dealers Inc. Automated Quotation System.
(dd) “Nonqualified Option” means any Option that is not an Incentive Stock Option.
(ee) “Option” means an Award granted under Section 5.
(ff) “Participant” means an Eligible Individual to whom an Award is or has been granted.
(gg) “Performance Goals” means the performance goals established by the Committee in connection with the grant of Restricted Stock, Restricted Stock Units or Bonus Awards or other stock-based awards. In the case of Qualified-Performance Based Awards, (i) such goals shall be based on the attainment of one or any combination of the following: specified levels of earnings per share from continuing operations, net profit after tax, EBITDA, EBITA, gross profit, cash generation, unit volume, market share, sales, asset quality, earnings per share, operating income, revenues, return on assets, return on operating assets, return on equity, profits, total stockholder return (measured in terms of stock price appreciation and/or dividend growth), cost saving levels, marketing-spending efficiency, core non-interest income, change in working capital, return on capital, and/or stock price, with respect to the Company or any Subsidiary, Affiliate, division or department of the Company and (ii) such Performance Goals shall be set by the Committee within the time period prescribed by Section 162(m) of the Code and related regulations. Such Performance Goals also may be based upon the attaining of specified levels of Company, Subsidiary, Affiliate or divisional performance under one or more of the measures described above relative to the performance of other entities, divisions or subsidiaries.
(hh) “Plan” means this HSN, Inc. Seconded Amended and Restated 2008Employee Stock and Annual IncentivePurchase Plan, as set forth herein and as hereafterit may be amended from time to time.
(ii)(y) “Plan YearAdministrator” means the Committee, or if and to the extent the Committee designates one or more employees of the Company to administer the Plan in accordance with Section 14, such employee(s) shall be the Plan Administrator; provided, however, that, notwithstanding any such delegation, the Committee shall have the power to take any action that may be taken by the Plan Administrator under this Plan, except to the extent such action would not comply with any Applicable Laws.
(z) “Purchase Date” means the last calendar year or,day of each Contribution Period of the Plan.
(aa) “Purchase Price” means, with respect to Bonus Awards,a Contribution Period, an amount equal to 85% (or such other percentage as the Company’s fiscal year if different.Committee may establish from time to time before any Commencement Date, though in no case may such percentage be less than 85%) of the Fair Market Value of a Share on the Commencement Date or on the Purchase Date, whichever is lower, subject to such additional limitations which may be set by the Committee from time to time.
(jj)(bb) “Qualified Performance-Based AwardReserves” means an Award intended to qualify for the Section 162(m) Exemption, as provided in Section 11.
(kk) “Restricted Stock” means an Award granted under Section 6.
(ll) “Restricted Stock Units” means an Award granted under Section 7.
(mm) “Resulting Voting Power” shall mean the outstanding combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (or equivalent governing body, if applicable) of the entity resulting from a Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries).
(nn) “Retirement” means retirement from active employment with the Company, a Subsidiary or Affiliate at or after the Participant’s attainment of age 65.
(oo) “Section 162(m) Exemption” means the exemption fromsum of (i) the limitation on deductibility imposednumber of Shares covered by Section 162(m)Options granted under the Plan that have not yet been exercised and (ii) the number of Shares that have been authorized for issuance under the Code that is set forth in Section 162(m)(4)(C) of the Code.Plan but have not yet been placed under an Option.
(pp)(cc) “Separation” has the meaning set forth in the Employee Matters Agreement.
(qq) “Share” means a share of Common Stock.
(rr) “Specified Employee” shall mean any individual who is a “key employee” (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) with respect to the Company and its affiliates,Stock, as determined by the Companyadjusted in accordance with its uniform policySection 12.
(dd) “Subsidiary” means any of the following entities:
(i) a corporation, domestic or foreign, of which not less than 50% of the total combined voting power of all classes of stock is held by HSNi or any such corporate subsidiary of HSNi, whether or not such corporation now exists or is hereafter organized or acquired by HSNi or another such subsidiary of HSNi;
(ii) an unincorporated business entity, domestic or foreign, such as a limited liability company or partnership, in which HSNi or another Subsidiary holds directly or indirectly not less than 50% of the total combined voting power with respect to all arrangementsclasses of equity ownership of such entity; or
(iii) an unincorporated business entity described in the preceding clause (ii) that either (A) has duly elected under applicable Treasury Regulations to be an association treated as a corporation for United States federal income tax purposes, and such election continues in effect; or (B) is disregarded as a separate entity for United States federal income tax purposes, has not made an election described in the preceding clause (A) and, pursuant to applicable Treasury Regulations, its assets are considered to be owned by HSNi or another Subsidiary that is a corporation or is treated as one under the preceding clause (A); whether or not such unincorporated business entity now exists or is hereafter organized or acquired by HSNi or another Subsidiary of HSNi.
3. Eligibility.
(a)Eligible Employees. Any individual who is an Employee, immediately after he or she has completed 90 calendar days of Continuous Status as an Employee, shall become eligible to participate in the Plan on the first day of the month coincident with or next following completion of such period of service, subject to Section 409Athe requirements of the following paragraph (b), Sections 5(a) and 11, and the limitations imposed by Code based uponsection 423(b). Except as otherwise provided in the twelve (12) month period ending December 31st. All individualsfollowing paragraph (b), each Employee who are determinedis eligible to be key employeesparticipate in this Plan shall have the same rights and privileges under Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (without regardPlan.
(b)Limitations on Option Grants to paragraph (5) thereof) on December 31st shall be treated as Specified Employees for purposesEligible Employees. Notwithstanding any contrary provisions of the Plan, duringno Employee shall be granted an Option under the twelve (12)Plan (except for Options granted under any portion of the Plan not intended to be subject to the requirements of Code section 423):
(i) if, immediately after the grant, such Employee (together with any other person whose HSNi stock would be attributed to such Employee pursuant to section 424(d) of the Code) would own capital stock of HSNi or of any Subsidiary that is a corporation (or is treated as one under the Code) and/or hold outstanding options to purchase stock possessing in the aggregate 5% or more of the total combined voting power or value of all classes of issued and outstanding stock of HSNi or of any such Subsidiary; or
(ii) if such Option would permit his or her rights to purchase stock under all employee stock purchase plans (described in section 423 of the Code) of HSNi or of any Subsidiary that is a corporation (or is treated as one under the Code) to accrue at a rate that exceeds $25,000 of the Fair Market Value of such stock (determined at the time such Option is granted), or that exceeds 5,000 Shares, for each calendar year in which such Option is outstanding at any time. The annual 5,000 share limitation in the preceding sentence shall be further measured as of each Contribution Period that may be then in effect for the Plan (for example, the limit would be 2,500 shares per Contribution Period in the case of two six month period that beginsContribution Periods in a calendar year).
Without limiting the Committee’s authority under Section 19, it shall have the power to amend the Plan by changing the conditions for eligibility to participate in the Plan with respect to future grants of Options, without shareholder approval, if such change is announced at least 20 Business Days before the next Commencement Date on which Options are to be granted, and only if such eligibility conditions comply with the requirements of Code section 423(b)(4).
4. Contribution Periods.
(a)Initial Contribution Periods. Subject to the following paragraph (b), the Plan shall be implemented by a series of consecutive Contribution Periods commencing on January 1 and July 1 each year and ending on the following AprilJune 30 and December 31, respectively. The first Contribution Period under this Plan shall commence on July 1,st. 2010, and shall end on December 31, 2010. The Plan shall continue until terminated in accordance with Section 13 or Section 19.
(ss) “(b)Stock Appreciation RightChanges.” has The Committee shall have the meaningpower to change the duration and/or frequency of Contribution Periods with respect to future purchases of Shares, without shareholder approval, if such change is announced to all Employees who are eligible under Section 3 at least five Business Days before the Commencement Date of the first Contribution Period to be affected by the change; provided, however, that no Contribution Period shall exceed 27 months.
5. Participation.
(a)Enrollment Process. An eligible Employee may become a Participant by following the established enrollment procedure as directed by the Plan Administrator, or any other entity designated by the Plan Administrator, before the Commencement Date of the applicable Contribution Period, unless an earlier or later time for completing the enrollment procedure is set forthby the Plan Administrator for all eligible Employees with respect to a given Contribution Period. Each eligible Employee who elects to participate for a Contribution Period shall determine the percentage of his or her future Compensation, subject to the limits in Sections 3(b)(ii) and 6(a), to be deducted from his or her paychecks after the Commencement Date for that Contribution Period and allocated to his or her Account as Contributions pursuant to the Plan.
(b)Payroll Contributions. Any such payroll deductions for a Contribution Period shall commence from the first payroll following its Commencement Date and shall end on the last payroll paid on or before the Purchase Date of the Contribution Period, unless sooner terminated as provided in Section 5(b).10. A Participant who has elected to participate during a Contribution Period shall automatically participate in future Contribution Periods at the same rate of Contributions until the Participant’s rate of Contributions is changed pursuant to Section 6, or the Participant withdraws from the Plan or ceases to be an Employee as provided in Section 10.
(tt) “6. Method of Payment of Contributions.
(a)SubsidiaryContribution Amounts.” means Subject to the limitations of Sections 3(b) and 11, a Participant shall elect to have Contributions made as payroll deductions on each payday during the Contribution Period in any corporation, partnership, joint venture, limited liability companypercentage of his or her Compensation that is not less than 1% and not more than 15% (or such other entitymaximum percentage as the Committee may establish from time to time before any Commencement Date) of such Participant’s Compensation on each payday during the Contribution Period. Contribution amounts shall be withheld in whole percentages only.
(b)Accounts. Accounts will be maintained for each Participant in the Plan. All payroll deductions made by a Participant as Contributions shall be credited to his or her Account. A Participant may not make any periodadditional payments into his or her Account. A Participant’s Account balance shall remain the property of the Participant at all times, subject to the limitations of Sections 16 and 17, but the funds deducted from his or her paychecks may be commingled with the general funds of the Company, except to the extent such commingling may be prohibited by any Applicable Laws. No interest shall accrue on the Contributions or the Account balance of a Participant in which at leastthe Plan, unless otherwise determined necessary by the Plan Administrator for the Accounts of Participants in the portion of the Plan that is not intended to qualify under Code section 423.
(c)Contribution Changes by a 50% votingParticipant. A Participant may discontinue his or profits interesther participation in the Plan as provided in Section 10.
(i) Unless otherwise provided by the Plan Administrator, a Participant may decrease the rate of his or her Contributions once during a Contribution Period by following the established administrative procedures as directed by the Plan Administrator to authorize a decrease in the payroll deduction rate. The decrease in rate shall be effective as soon as administratively feasible following the date the rate change election is owned, directly or indirectly,received by the Company or any successorother entity designated by the Plan Administrator. However, any decrease in a Participant’s rate of Contributions for a Contribution Period must be made at least 20 Business Days before the end of the Contribution Period, or it will not be effective until the next following Contribution Period.
(ii) Unless otherwise provided by the Plan Administrator, a Participant may not increase the rate of his or her Contributions during a Contribution Period. A Participant may only increase the rate of his or her Contributions with respect to a future Contribution Period by following the established administrative procedures as directed by the Plan Administrator to authorize an increase in the payroll deduction rate of Contributions. Any such rate increase shall be effective as of the Commencement
Date of the next Contribution Period following a reasonable period (set by the Plan Administrator) after the date of its receipt by the Company, or any other entity designated by the Plan Administrator.
(d)Contribution Changes by the Company. Notwithstanding the foregoing, to the Company.extent necessary to comply with Section 3(b), Section 11 and Code section 423(b)(8), the Plan Administrator may in its sole discretion direct the Company to reduce a Participant’s payroll deductions for Contributions during any Contribution Period. If that occurs, any such Participant’s payroll deductions shall re-commence, at the Contributions rate provided in the Participant’s most recently submitted enrollment materials, at the beginning of the first Contribution Period that is scheduled to end in the next succeeding calendar year, unless any such limit continues to apply in that Contribution Period or the Participant terminates his or her payroll deductions as provided in Section 10.
(uu)7.Grant of Options. On the Commencement Date of each Contribution Period, each eligible Employee participating in such Contribution Period shall be granted the right and option to purchase (an “Tandem SAROption” has), on the meaningnext Purchase Date, a number of Shares determined by dividing (a) such Employee’s Contributions accumulated before such Purchase Date and retained in the Participant’s Account as of the Purchase Date, by (b) the applicable Purchase Price, subject to the limitations set forth in Section 5(b).Sections 3(b) and 11.
No Participant shall have any interest or voting right in Shares covered by any Option granted to him or her under this Plan until the Option has been exercised.
(vv) “8.TermExercise of Options.” means Unless a Participant withdraws from the Plan or ceases to be an eligible Employee as provided in Sections 3 and Section 10, his or her Option for a Contribution Period shall be exercised automatically on the Purchase Date of the Contribution Period; and the maximum period during whichnumber of Shares (which may include a fractional Share) subject to the Option will be purchased at the applicable Purchase Price with the accumulated Contributions remaining in his or her Account. The Shares purchased upon exercise of an Option or Stock Appreciation Right may remain outstanding, subject to earlier termination upon Termination of Employment or otherwise, as specified in the applicable Award Agreement.
(ww) “Termination of Employment” means the termination of the applicable Participant’s employment with, or performance of services for, the Company and any of its Subsidiaries or Affiliates. Unless otherwise determined by the Committee, if a Participant’s employment with, or membership on a board of directors of the Company and its Affiliates terminates but such Participant continues to provide services to the Company and its Affiliates in a non-employee director capacity or as an employee, as applicable, such change in status shall not be deemed a Termination of Employment. A Participant employed by, or performing services for, a Subsidiary or an Affiliate or a division of the Company and its Affiliateshereunder shall be deemed to incur a Termination of Employment if, as a result of a Disaffiliation, such Subsidiary, Affiliate, or division ceasesbe transferred to be a Subsidiary, Affiliate or division, as the case may be, and the Participant does not immediately thereafter become an employee of (or service provider for),on the Purchase Date. During a Participant’s lifetime, his or member ofher Options shall be exercisable only by the board of directors of, the Company or another Subsidiary or Affiliate. Temporary absences from employment because of illness, vacation or leave of absenceParticipant; and transfers among the Company and its Subsidiaries and Affiliates shall not be considered Terminationsexercisable after his or her death.
9. Delivery of Employment. NotwithstandingShares, Holding Periods and Dividends.
(a)Delivery of Shares to ESPP Broker. As promptly as practicable after the foregoing,Purchase Date of each Contribution Period, the number of Shares purchased by each Participant upon exercise of his or her Option shall be issued by HSNi and deposited into a brokerage account established in the Participant’s name with respect to any Award that constitutes “nonqualified deferred compensation” within the meaning of Section 409AESPP Broker, for and on behalf of the Code, “Termination of Employment” shall mean a “separation from service” as defined under Section 409A of the Code. For the avoidance of doubt, the Separation shall not constitute a Termination of Employment for purposes of any Adjusted Award.
Section 2. Administration
(a)Committee. The Plan shall be administered by the Compensation Committee of the Board or such other committee of the Board as the Board mayParticipant, in accordance with procedures established from time to time designate (the “Committee”), whichby the Plan Administrator. The terms of such ESPP Broker account shall be composed of not less than two directors,as provided herein and shall be appointed by and serve at the pleasure of the Board. The Committee shall, subject to Section 11, have plenary authority to grant Awards pursuant to the terms of the Plan to Eligible Individuals. Among other things, the Committee shall have the authority, subject to the terms and conditions of the Plan and the Employee Matters Agreement (including the original terms of the grant of the Adjusted Award):
(i) to select the Eligible Individuals to whom Awards may from time to time be granted;
(ii) to determine whether and to what extent Incentive Stock Options, Nonqualified Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, other stock-based awards, or any combination thereof, are to be granted hereunder;
(iii) to determine the number of Shares to be covered by each Award granted hereunder;
(iv) to determine the terms and conditions of each Award granted hereunder, based on such factors as the Committee shall determine;
(v) subject to Section 12, to modify, amend or adjust the terms and conditions of any Award;
(vi) to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable;
(vii) subject to Section 11, to accelerate the vesting or lapse of restrictions of any outstanding Award, based in each case on such considerations as the Committee in its sole discretion determines;
(viii) to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreement relating thereto);
(ix) to establish any “blackout” period that the Committee in its sole discretion deems necessary or advisable;
(x) to determine whether, to what extent, and under what circumstances cash, Shares, and other property and other amounts payable with respect to an Award under this Plan shall be deferred either automatically or at the election of the Participant;
(xi) to decide all other matters that must be determined in connection with an Award; and
(xii) to otherwise administer the Plan.
(b)Procedures.
(i) The Committee may act only by a majority of its members then in office, except that the Committee may, except to the extent prohibited by applicable law or the listing standards of the Applicable Exchange and subject to Section 11, allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it.
(ii) Subsection to Section 11(c), any authority granted to the Committee may also be exercised by the full Board. To the extent that any permitted action taken by the Board conflicts with action taken by the Committee, the Board action shall control.
(c)Discretion of Committee. Subject to Section 1(h), any determination made by the Committee or by an appropriately delegated officer pursuant to delegated authority under the provisions of the Plan with respect to any Award shall be made in the sole discretion of the CommitteePlan Administrator; and a Participant’s participation in the Plan is expressly conditioned on his or her acceptance of such delegateterms.
(b)Conditions Preceding Issuance of Shares. Shares shall not be issued with respect to an Option unless the exercise of the Option and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, applicable state securities laws and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for HSNi with respect to such compliance. As a further condition to the exercise of an Option, HSNi may require the Participant exercising the Option to represent and warrant at the time of any such exercise that the grantShares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel HSNi, such a representation is required by any of the Award or, unlessApplicable Laws mentioned above.
(c)Disposition of Shares; Holding Period under Code Section 423. Any ESPP Broker account established to hold a Participant’s Shares shall be titled solely in contravention of any express termthe name of the Participant, unless the Participant is notified by the Plan Administrator that the account may be titled or re-titled jointly with another person, consistent with the policies of the ESPP Broker and Applicable Law. After satisfying any
holding period that may be required by Section 9(d), the Participant may dispose of the Shares in his or her ESPP Broker account, whether by sale, exchange, gift or other transfer of title, in which case applicable transaction fees will be charged. However, in the absence of such disposition or a transfer upon the Participant’s death pursuant to Section 15, the Shares must remain in the Participant’s ESPP Broker account for a period of at least 18 months from the Purchase Date for those Shares, regardless of the Participant’s Continuous Status as an Employee. After such time, the Participant, at his or her option, may elect to (i) keep the Shares in the ESPP Broker account; (ii) request a DRS transfer (book entry registration without a certificate) or (iii) transfer, at the Participant’s expense, all or some of the Shares credited to the Participant’s ESPP Broker account to an account with another broker chosen by the Participant.
However, any Participant who is not subject to United States taxation may, at any time thereafter. All decisions madeand without regard to the 18-month holding period specified in the preceding paragraph for any Shares, move any of his or her Shares from his or her ESPP Broker account to an account with another broker chosen by the Participant.
(d)Other Holding Periods. The Committee shall have the sole and absolute discretion to impose a minimum holding period on Shares purchased under this Plan, during which each Participant’s right to transfer or any appropriately delegated officer pursuant to the provisionsotherwise dispose of Shares will be restricted for a specified period of time. Any such holding period may be imposed or increased only for Shares purchased during Contribution Periods that begin after all eligible Employees have been given notice of the Plannew or increased holding period, which notice shall be finalgiven at least five Business Days before the Commencement Date of the first Contribution Period in which Shares that will be subject to such new or increased holding period may be purchased. Commencing with the first Contribution Period beginning on July 1, 2010 and binding on all persons, including the Company, Participants, and Eligible Individuals.
(d)Award Agreements. The terms and conditions of each Award,continuing until such time as determined by the Committee shall be set forth in an Award Agreement, which shall be delivereddetermine otherwise, the Committee has instituted a six month holding period commencing on the Purchase Date and continuing for a period of six months thereafter. In the event of a Financial Hardship, a Participant may seek a waiver of such minimum holding period by making a written request to the Plan Administrator. Whether a Participant receiving such Award upon,is granted a full or as promptly as is reasonably practicable following, the grant of such Award. The effectiveness of an Awardpartial waiver under this provision shall not be subject to the Award Agreement’s being signedsole and absolute discretion of the Plan Administrator and would be based on the facts and circumstances of each situation.
(e)Dividends. Dividends paid in the form of cash, Shares or other non-cash consideration with respect to the Common Stock in a Participant’s ESPP Broker account established under this Section 9 shall be credited to such ESPP Broker account. However, if a Participant holding Shares in any ESPP Broker account is subject to United States withholding taxes on any dividends payable with respect to the Shares, all cash dividends payable on those Shares shall be paid by HSNi net of the applicable United States withholding taxes on such dividends, which taxes shall be withheld by HSNi and paid to the appropriate United States tax authorities. The Company or any other Subsidiary employing each Participant shall annually notify the Participant, as part of its periodic reporting obligations under Applicable Laws, of the amount of such withholding applicable to dividends on the Participant’s Shares in an ESPP Broker account, in order to enable the Participant to apply for any applicable tax credit in each country in which the Participant is subject to taxes on such dividends.
10. Withdrawal; End of Employee Status.
(a)Withdrawal. In the event of a Financial Hardship, a Participant may seek to withdraw from the Plan by making a written request to the Plan Administrator, or other entity designated by the Plan Administrator. Whether a withdrawal request is granted under this provision shall be subject to the sole and absolute discretion of the Plan Administrator and would be based on the facts and circumstances of each situation. However, any withdrawal request must be made at least 20 Business Days before the end of a Contribution Period, or such withdrawal request shall not be effective until the next following Contribution Period. If a withdrawal request is approved by the Plan Administrator during a Contribution Period, all of the Participant’s Contributions credited to his or her Account for that Contribution Period will be paid to him or her, his or her Option granted for that Contribution Period will be automatically terminated, and the Participant may not make any further Contributions for the purchase of Shares until he or she re-enrolls.
Upon withdrawal from the Plan, a Participant may not re-enroll in the Plan until the next Contribution Period after the Contribution Period in which the withdrawal was effective. In order to re-enroll, a Participant must follow the procedures described in Section 5(a).
(b)End of Employee Status. Upon termination of the Participant’s Continuous Status as an Employee before the Purchase Date of a Contribution Period for any reason including his or her death or retirement, or if the Participant remains employed by a Subsidiary that ceases to be a Designated Subsidiary before that Purchase Date, the Contributions credited to his or her Account for that Contribution Period will be returned to him or her or, in the case of his or her death, to the person or persons entitled thereto under Section 15; and his or her Option for that Contribution Period will be automatically terminated. Whether the Participant’s Continuous Status as an Employee has been terminated shall be determined by the Plan Administrator in its sole discretion.
(c)Other Plans. A Participant’s withdrawal from the Plan shall not have any effect upon his or her eligibility to participate in any similar plan that may hereafter be adopted by the Company and/or the Participant receiving the Award unless specifically soany other Subsidiary.
11. Limit on Shares Available under this Plan.
(a)Maximum Number. Subject to adjustment as provided in the Award Agreement. Award Agreements may be amended only in accordance with Section 12, hereof. Notwithstanding the provisions of the Plan or an Award Agreement to the contrary, in the event that any term of any Award Agreement conflicts with any provision of the Plan that specifically pertains to Section 409A of the Code, the provision of the Plan shall govern.
Section 3. Common Stock Subject to Plan
(a)Plan Maximums. The maximum number of Shares that may be delivered pursuant to Awardsoffered and issued under the Plan shall be 750,000 Shares. If any Option granted under the sumPlan shall for any reason terminate without having been exercised, at a time when such maximum number of (a)Shares has not been reached, the Shares not purchased under such Option shall again become available for offering and issuance under the Plan.
(b)Application of Limit. If the Plan Administrator determines that, on a given Purchase Date, the number of Shares with respect to which Options are to be exercised will exceed (i) the number of Shares that were available for sale under the Plan on the Commencement Date of the applicable Contribution Period, or (ii) the number of Shares available for sale under the Plan on such Purchase Date, the Plan Administrator may in its sole discretion provide that the Company shall make a pro rata allocation of the Shares available for purchase on such Commencement Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants on such Purchase Date. If such event occurs at the beginning of a Contribution Period, the Company shall appropriately reduce the payroll deductions to be made pursuant to the Participants’ authorizations for that Contribution Period, and the Company shall give notice of such reduction to each Participant affected thereby. If such event occurs at the end of a Contribution Period, the Company shall refund to each affected Participant any Contributions made for that Contribution Period that cannot be used to purchase Shares.
12. Adjustments Upon Changes in Capitalization.
(a)Adjustments. Subject to any required action by the shareholders of HSNi, and subject to Section 13, upon (or, as may be issuable upon exercisenecessary to effect the adjustment, immediately prior to) a stock split, reverse stock split, stock dividend, combination or vestingreclassification of the Adjusted AwardsCommon Stock (including any such change in the number of Shares effected in connection with a change in domicile of HSNi), a merger, consolidation or reorganization or any spin-off, split-up, or similar extraordinary dividend distribution in respect of the Common Stock, or an exchange of Common Stock or other securities of HSNi, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock, the Committee shall equitably and (b) 8,000,000. Theproportionately adjust (i) the number of Shares constituting the Reserves, as well as the maximum number of Shares that may be grantedpurchased by a Participant in a calendar year pursuant to Options intended to be Incentive Stock Options shall be 3,333,333 Shares. Shares subject to an Award underSection 3(b)(ii); (ii) the Plan may be authorized and unissued Shares or may be treasury Shares.
(b)Individual Limits. No Participant may be granted Awards covering in excess of 3,333,333 Shares during the term of the Plan;provided that Adjusted Awards shall not be subject to this limitation.
(c)Rules for Calculating Shares Delivered.
(i) With respect to Awards other than Adjusted Awards, to the extent that any Award is forfeited, or any Option and the related Tandem SAR (if any) or Free-Standing SAR terminates, expires or lapses without being exercised, or any Award is settled for cash, the Shares subject to such Awards not delivered as a result thereof shall again be available for Awards under the Plan.
(ii) With respect to Awards other than Adjusted Awards, if the exercise price of any Option and/or the tax withholding obligations relating to any Award are satisfied by delivering Shares to the Company (by either actual delivery or by attestation), only themaximum number of Shares issued net of the Shares delivered or attested to shall be deemed delivered for purposes of the limits set forth in Section 3(a). To the extent any Shares subject to an Award are withheld to satisfy the exercise price (in the case of an Option) and/or the tax withholding obligations relating to such Award, such Shares shall not be deemed to have been delivered for purposes of the limits set forth in Section 3(a).
(d)Adjustment Provision. In the event of a merger, consolidation, acquisition of property or shares, stock rights offering, liquidation, Disaffiliation, or similar event affecting the Company or any of its Subsidiaries (each, a “Corporate Transaction”), the Committee or the Board may in its discretion make such substitutions or adjustments as it deems appropriate and equitable to (i) the aggregate number and kind of Shares or other securities reserved for issuance and delivery under the Plan, (ii) the various maximum limitations set forth in Sections 3(a) and 3(b) upon certain types of Awards and upon the grants to individuals of certain types of Awards,11; (iii) the number and kind of Shares price per Share covered by each Option that has not yet been exercised; and/or other securities subject to outstanding Awards; and (iv) the exercise price of outstanding Options and Stock Appreciation Rights. In the event of a stock dividend, stock split, reverse stock split, separation, spinoff, reorganization, extraordinary dividend ofsecurities, cash or other property share combination,deliverable upon exercise or recapitalization or similar event affectingpayment of any outstanding Options, in each case to the capital structureextent necessary to preserve (but not increase) the level of incentives intended by the Plan and the then-outstanding Options and otherwise to account for the
effects of the Company (each, a “Share Change”), the Committee or the Board shall make such substitutions or adjustments as it deems appropriate and equitable to (i) the aggregate number and kind of Shares or other securities reserved for issuance and delivery under the Plan, (ii) the various maximum limitations set forth in Sections 3(a) and 3(b) upon certain types of Awards and upon the grants to individuals of certain types of Awards, (iii) the number and kind of Shares or other securities subject to outstanding Awards; and (iv) the exercise price of outstanding Options and Stock Appreciation Rights. In the case of Corporate Transactions, such adjustments may include, without limitation, (1) the cancellation of outstanding Awards in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Committee or the Board in its sole discretion (it being understood that in the case of a Corporate Transactiontransaction. The Committee’s determination with respect to which stockholdersthe adjustment shall be final, binding and conclusive. Except as expressly provided herein, no issue by HSNi of Common Stock receive consideration other than publicly traded equityshares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the ultimate surviving entity,number or price of Shares reserved hereunder or subject to an Option hereunder.
(b)Compliance with Applicable Laws. It is intended that, if possible, any adjustments contemplated by the preceding paragraph be made in a manner that satisfies Applicable Laws (including, without limitation and as applicable in the circumstances, Code sections 424 and 409A) and accounting requirements (so as to not trigger any charge to earnings with respect to such adjustment).
(c)Authority of Committee. Without limiting the generality of Section 14, any good faith determination by the Committee that the value ofas to whether an Option or Stock Appreciation Right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being paid for each Share pursuant to such Corporate Transaction over the exercise price of such Option or Stock Appreciation Right shall conclusively be deemed valid); (2) the substitution of other property (including, without limitation, cash or other securities of the Company and securities of entities other than the Company) for the Shares subject to outstanding Awards; and (3) in connection with any Disaffiliation, arranging for the assumption of Awards, or replacement of Awards with new awards based on other property or other securities (including, without limitation, other
securities of the Company and securities of entities other than the Company), by the affected Subsidiary, Affiliate, or division or by the entity that controls such Subsidiary, Affiliate, or division following such Disaffiliation (as well as any corresponding adjustments to Awards that remain based upon Company securities). The Committee may adjust in its sole discretion the Performance Goals applicable to any Awards to reflect any Share Change and any Corporate Transaction and any unusual or non-recurring events and other extraordinary items, impact of charges for restructurings, discontinued operations, and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles or as identifiedadjustment is required in the Company’s financial statements, notes to the financial statements, management’s discussion and analysis or the Company’s other SEC filings,provided that in the case of Performance Goals applicable to any Qualified Performance-Based Awards, such adjustment does not violate Section 162(m) of the Code. Any adjustment under this Section 3(d) need not be the same for all Participants.
(e)Section 409A. Notwithstanding the foregoing: (i) any adjustments made pursuant to Section 3(d) to Awards that are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code; (ii) any adjustments made pursuant to Section 3(d) to Awards that are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such a manner as to ensure that after such adjustment, the Awards either (A) continue not to be subject to Section 409A of the Code or (B) comply with the requirements of Section 409A of the Code; and (iii) in any event, neither the Committee nor the Board shall have the authority to make any adjustments pursuant to Section 3(d) to the extent the existence of such authority would cause an Award that is not intended to be subject to Section 409A of the Code at the Grant Date to be subject thereto as of the Grant Date.
Section 4. Eligibility
Awards may be granted under the Plan to Eligible Individuals and, with respect to Adjusted Awards, in accordance with the terms of the Employee Matters Agreement;provided,however, that Incentive Stock Options may be granted only to employees of the Company and its subsidiaries or parent corporation (within the meaning of Section 424(f) of the Code) and, with respect to Adjusted Awards that are intended to qualify as incentive stock options within the meaning of Section 421 of the Code, in accordance with the terms of the Employee Matters Agreement.
Section 5. Options and Stock Appreciation Rights
With respect to Adjusted Awards, the provisions below will be applicable only to the extent that they are not inconsistent with the Employee Matters Agreement and the terms of the Adjusted Award assumed under the Employee Matters Agreement:
(a)Types of Options. Options may be of two types: Incentive Stock Options and Nonqualified Options. The Award Agreement for an Option shall indicate whether the Option is intended to be an Incentive Stock Option or a Nonqualified Option.
(b)Types and Nature of Stock Appreciation Rights. Stock Appreciation Rights may be “Tandem SARs,” which are granted in conjunction with an Option, or “Free-Standing SARs,” which are not granted in conjunction with an Option. Upon the exercise of a Stock Appreciation Right, the Participant shall be entitled to receive an amount in cash, Shares, or both, in value equal to the product of (i) the excess of the Fair Market Value of one Share over the exercise price of the applicable Stock Appreciation Right, multiplied by (ii) the number of Shares in respect of which the Stock Appreciation Right has been exercised. The applicable Award Agreement shall specify whether such payment is to be made in cash or Common Stock or both, or shall reserve to the Committee or the Participant the right to make that determination prior to or upon the exercise of the Stock Appreciation Right.
(c)Tandem SARs. A Tandem SAR may be granted at the Grant Date of the related Option. A Tandem SAR shall be exercisable only at such time or times and to the extent that the related Option is exercisable in
accordance with the provisions of this Section 5, and shall have the same exercise price as the related Option. A Tandem SAR shall terminate or be forfeited upon the exercise or forfeiture of the related Option, and the related Option shall terminate or be forfeited upon the exercise or forfeiture of the Tandem SAR.
(d)Exercise Price. The exercise price per Share subject to an Option or Free-Standing SAR shall be determined by the Committee and set forth in the applicable Award Agreement, and shall not be less than the Fair Market Value of a share of the Common Stock on the applicable Grant Date. In no event may any Option or Free-Standing SAR granted under this Plan be amended, other than pursuant to Section 3(d), to decrease the exercise price thereof, be cancelled in conjunction with the grant of any new Option or Free-Standing SAR with a lower exercise price or otherwise be subject to any action that would be treated, for accounting purposes, as a “repricing” of such Option or Free-Standing SAR, unless such amendment, cancellation, or action is approved by the Company’s stockholders.
(e)Term. The Term of each Option and each Free-Standing SAR shall be fixed by the Committee, but shall not exceed ten years from the Grant Date.
(f)Vesting and Exercisability. Except as otherwise provided herein, Options and Free-Standing SARs shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. If the Committee provides that any Option or Free-Standing SAR will become exercisable only in installments, the Committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Committee may determine. In addition, the Committee may at any time accelerate the exercisability of any Option or Free-Standing SAR.
(g)Method of Exercise. Subject to the provisions of this Section 5, Options and Free-Standing SARs may be exercised, in whole or in part, at any time during the applicable Term by giving written notice of exercise to the Company or through the procedures established with the Company’s appointed third-party Option administrator specifying the number of Shares as to which the Option or Free-Standing SAR is being exercised;provided,however, that, unless otherwise permitted by the Committee, any such exercise must be with respect to a portion of the applicable Option or Free-Standing SAR relating to no less than the lesser of the number of Shares then subject to such Option or Free-Standing SAR or 100 Shares. In the case of the exercise of an Option, such notice shall be accompanied by payment in full of the purchase price (which shall equal the product of such number of Shares multiplied by the applicable exercise price) by certified or bank check or such other instrument as the Company may accept. If approved by the Committee, payment, in full or in part, may also be made as follows:
(i) Payments may be made in the form of unrestricted Shares (by delivery of such Shares or by attestation) of the same class as the Common Stock subject to the Option already owned by the Participant (based on the Fair Market Value of the Common Stock on the date the Option is exercised);provided,however, that, in the case of an Incentive Stock Option, the right to make a payment in the form of already owned Shares of the same class as the Common Stock subject to the Option may be authorized only at the time the Option is granted.
(ii) To the extent permitted by applicable law, payment may be made by delivering a properly executed exercise notice to the Company, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the purchase price, and, if requested, the amount of any federal, state, local or foreign withholding taxes. To facilitate the foregoing, the Company may, to the extent permitted by applicable law, enter into agreements for coordinated procedures with one or more brokerage firms. To the extent permitted by applicable law, the Committee may also provide for Company loans to be made for purposes of the exercise of Options.
(iii) Payment may be made by instructing the Company to withhold a number of Shares having a Fair Market Value (based on the Fair Market Value of the Common Stock on the date the applicable Option is exercised) equal to the product of (A) the exercise price multiplied by (B) the number of Shares in respect of which the Option shall have been exercised.
(h)Delivery; Rights of Stockholders. No Shares shall be delivered pursuant to the exercise of an Option until the exercise price therefor has been fully paid and applicable taxes have been withheld. The applicable Participant shall have all of the rights of a stockholder of the Company holding the class or series of Common Stock that is subject to the Option or Stock Appreciation Right (including, if applicable, the right to vote the applicable Shares and the right to receive dividends), when the Participant (i) has given written notice of exercise, (ii) if requested, has given the representation described in Section 14(a), and (iii) in the case of an Option, has paid in full for such Shares.
(i)Terminations of Employment. Subject to Section 10, a Participant’s Options and Stock Appreciation Rights shall be forfeited upon such Participant’s Termination of Employment, except as set forth below:
(i) Upon a Participant’s Termination of Employment by reason of death, any Option or Stock Appreciation Right held by the Participant that was exercisable immediately before the Termination of Employment may be exercised at any time until the earlier of (A) the first anniversary of the date of such death and (B) the expiration of the Term thereof;
(ii) Upon a Participant’s Termination of Employment by reason of Disability or Retirement, any Option or Stock Appreciation Right held by the Participant that was exercisable immediately before the Termination of Employment may be exercised at any time until the earlier of (A) the first anniversary of such Termination of Employment and (B) the expiration of the Term thereof;
(iii) Upon a Participant’s Termination of Employment for Cause, any Option or Stock Appreciation Right held by the Participant shall be forfeited, effective as of such Termination of Employment;
(iv) Upon a Participant’s Termination of Employment for any reason other than death, Disability, Retirement or for Cause, any Option or Stock Appreciation Right held by the Participant that was exercisable immediately before the Termination of Employment may be exercised at any time until the earlier of (A) the 90th day following such Termination of Employment and (B) expiration of the Term thereof; and
(v) Notwithstanding the above provisions of this Section 5(i), if a Participant dies after such Participant’s Termination of Employment but while any Option or Stock Appreciation Right remains exercisable as set forth above, such Option or Stock Appreciation Right may be exercised at any time until the later of (A) the earlier of (1) the first anniversary of the date of such death and (2) expiration of the Term thereof and (B) the last date on which such Option or Stock Appreciation Right would have been exercisable, absent this Section 5(i)(v).
Notwithstanding the foregoing, the Committee shall have the power, in its discretion, to apply different rules concerning the consequences of a Termination of Employment;provided,however, that if such rules are less favorable to the Participant than those set forth above, such rules are set forth in the applicable Award Agreement. If an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Option will thereafter be treated as a Nonqualified Option.
(j)Nontransferability of Options and Stock Appreciation Rights. No Option or Free-Standing SAR shall be transferable by a Participant other than (i) by will or by the laws of descent and distribution, or (ii) in the case of a Nonqualified Option or Free-Standing SAR, pursuant to a qualified domestic relations order or as otherwise expressly permitted by the Committee including, if so permitted, pursuant to a transfer to the Participant’s family members or to a charitable organization, whether directly or indirectly or by means of a trust or partnership or otherwise. For purposes of this Plan, unless otherwise determined by the Committee, “family member” shall have the meaning given to such term in General Instructions A.1(a)(5) to Form S-8 under the Securities Act of 1933, as amended, and any successor thereto. A Tandem SAR shall be transferable only with the related Option as permitted by the preceding sentence. Any Option or Stock Appreciation Right shall be exercisable, subject to the terms of this Plan, only by the applicable Participant, the guardian or legal representative of such Participant, or any person to whom such Option or Stock Appreciation Right is permissibly transferred pursuant to this
Section 5(j), it being understood that the term “Participant” includes such guardian, legal representative and other transferee;provided,however, that the term “Termination of Employment” shall continue to refer to the Termination of Employment of the original Participant.
Section 6. Restricted Stock
With respect to Adjusted Awards, the provisions below will be applicable only to the extent that they are not inconsistent with the Employee Matters Agreement and the terms of the Adjusted Award assumed under the Employee Matters Agreement:
(a)Nature of Awards and Certificates. Shares of Restricted Stock are actual Shares issued to a Participant, and shall be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates. Any certificate issued in respect of Shares of Restricted Stock shall be registered in the name of the applicable Participant and, in the case of Restricted Stock, shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:
“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the HSN, Inc. 2008 Stock and Annual Incentive Plan and an Award Agreement. Copies of such Plan and Agreement are on file at the offices of HSN, Inc., 1 HSN Drive, St. Petersburg, Florida 33729.”
The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition of any Award of Restricted Stock, the applicable Participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award.
(b)Terms and Conditions. Shares of Restricted Stock shall be subject to the following terms and conditions:
(i) The Committee shall, prior to or at the time of grant, condition the vesting or transferability of an Award of Restricted Stock upon the continued service of the applicable Participant or the attainment of Performance Goals, or the attainment of Performance Goals and the continued service of the applicable Participant. In the event that the Committee conditions the grant or vesting of an Award of Restricted Stock upon the attainment of Performance Goals or the attainment of Performance Goals and the continued service of the applicable Participant, the Committee may, prior to or at the time of grant, designate such an Award as a Qualified Performance-Based Award. The conditions for grant, vesting, or transferability and the other provisions of Restricted Stock Awards (including without limitation any Performance Goals) need not be the same with respect to each Participant.
(ii) Subject to the provisions of the Plan and the applicable Award Agreement, during the period, if any, set by the Committee, commencing with the date of such Restricted Stock Award for which such vesting restrictions apply and until the expiration of such vesting restrictions (the “Restriction Period”), the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber Shares of Restricted Stock.
(iii) Except as provided in this Section 6 and in the applicable Award Agreement, the applicable Participant shall have, with respect to the Shares of Restricted Stock, all of the rights of a stockholder of the Company holding the class or series of Common Stock that is the subject of the Restricted Stock, including, if applicable, the right to vote the Shares and the right to receive any cash dividends. If so determined by the Committee in the applicable Award Agreement and subject to Section 14(e), (A) cash dividends on the class or series of Common Stock that is the subject of the Restricted Stock Award shall be automatically deferred and reinvested in additional Restricted Stock, held subject to the vesting of the underlying Restricted Stock, and (B) subject to any adjustment pursuant to Section 3(d), dividends payable in Common Stock shall be paid in the form of Restricted Stock of the same class as the Common Stock with which such dividend was paid, held subject to the vesting of the underlying Restricted Stock.
(iv) Except as otherwise set forth in the applicable Award Agreement, upon a Participant’s Termination of Employment for any reason during the Restriction Period, all Shares of Restricted Stock still subject to restriction shall be forfeited by such Participant;provided,however, that subject to Section 11(b), the Committee shall have the discretion to waive, in whole or in part, any or all remaining restrictions with respect to any or all of such Participant’s Shares of Restricted Stock.
(v) If and when any applicable Performance Goals are satisfied and the Restriction Period expires without a prior forfeiture of the Shares of Restricted Stock for which legended certificates have been issued, unlegended certificates for such Shares shall be delivered to the Participant upon surrender of the legended certificates.
Section 7. Restricted Stock Units
With respect to Adjusted Awards, the provisions below will be applicable only to the extent that they are not inconsistent with the Employee Matters Agreement and the terms of the Adjusted Award assumed under the Employee Matters Agreement:
(a)Nature of Awards. Restricted Stock Units are Awards denominated in Shares that will be settled, subject to the terms and conditions of the Restricted Stock Units, in an amount in cash, Shares or both, based upon the Fair Market Value of a specified number of Shares.
(b)Terms and Conditions. Restricted Stock Units shall be subject to the following terms and conditions:
(i) The Committee shall, prior to or at the time of grant, condition the grant, vesting, or transferability of Restricted Stock Units upon the continued service of the applicable Participant or the attainment of Performance Goals, or the attainment of Performance Goals and the continued service of the applicable Participant. In the event that the Committee conditions the grant or vesting of Restricted Stock Units upon the attainment of Performance Goals or the attainment of Performance Goals and the continued service of the applicable Participant, the Committee may, prior to or at the time of grant, designate such Awards as Qualified Performance-Based Awards. The conditions for grant, vesting or transferability and the other provisions of Restricted Stock Units (including without limitation any Performance Goals) need not be the same with respect to each Participant. An Award of Restricted Stock Units shall be settled as and when the Restricted Stock Units vest or at a later time specified by the Committee or in accordance with an election of the Participant, if the Committee so permits.
(ii) Subject to the provisions of the Plan and the applicable Award Agreement, during the period, if any, set by the Committee, commencing with the date of such Restricted Stock Units for which such vesting restrictions apply and until the expiration of such vesting restrictions (the “Restriction Period”), the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber Restricted Stock Units.
(iii) The Award Agreement for Restricted Stock Units shall specify whether, to what extent and on what terms and conditions the applicable Participant shall be entitled to receive current or deferred payments of cash, Common Stock or other property corresponding to the dividends payable on the Common Stock (subject to Section 14(e) below).
(iv) Except as otherwise set forth in the applicable Award Agreement, upon a Participant’s Termination of Employment for any reason during the Restriction Period, all Restricted Stock Units still subject to restriction shall be forfeited by such Participant;provided,however, that subject to Section 11(b), the Committee shall have the discretion to waive, in whole or in part, any or all remaining restrictions with respect to any or all of such Participant’s Restricted Stock Units, provided, however, if any of such Participant’s Restricted Stock Units constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code, settlement of such Restricted Stock Units shall not occur until the date such Restricted Stock Units would otherwise be settled pursuant to the terms of the Award Agreement.
Section 8. Other Stock-Based Awards
Other Awards of Common Stock and other Awards that are valued in whole or in part by reference to, or are otherwise based upon or settled in, Common Stock, including (without limitation), unrestricted stock, performance units, dividend equivalents, and convertible debentures, may be granted under the Plan.
Section 9. Bonus Awards
(a)Determination of Awards. The Committee shall determine the total amount of Bonus Awards for each Plan Year or such shorter performance period as the Committee may establish in its sole discretion. Prior to the beginning of the Plan Year or such shorter performance period as the Committee may establish in its sole discretion (or such later date as may be prescribed by the Internal Revenue Service under Section 162(m) of the Code), the Committee shall establish Performance Goals for Bonus Awards for the Plan Year or such shorter period;provided, that such Performance Goals may be established at a later date for Participants who are not “covered employees” (within the meaning of Section 162(m)(3) of the Code). Bonus amounts payable to any individual Participant with respect to a Plan Year will be limited to a maximum of $10 million. For performance periods that are shorter than a Plan Year, such $10 million maximum may be pro-rated if so determined by the Committee.
(b)Payment of Awards. Bonus Awards under the Plan shall be paid in cash or in shares of Common Stock (valued at Fair Market Value as of the date of payment) as determined by the Committee, as soon as practicable following the close of the Plan Year or such shorter performance period as the Committee may establish. It is intended that a Bonus Award will be paid no later than the fifteenth (15th) day of the third month following the later of: (i) the end of the Participant’s taxable year in which the requirements for such Bonus Award have been satisfied by the Participant or (ii) the end of the Company’s fiscal year in which the requirements for such Bonus Award have been satisfied by the Participant. The Committee may at its option establish procedures pursuant to which Participants are permitted to defer the receipt of Bonus Awards payable hereunder (provided such plan complies with Section 409A of the Code). The Bonus Award for any Plan Year or such shorter performance period to any Participant may be reduced or eliminated by the Committee in its discretion.
Section 10. Change in Control Provisions
(a)Adjusted Awards. With respect to all Adjusted Awards, subject to Sections 3(d), 3(e), 10(e) and 14(k), unless otherwise provided in the applicable Award Agreement, notwithstanding any other provision of this Plan to the contrary, upon a Participant’s Termination of Employment, during the two-year period following a Change in Control, by the Company other than for Cause or Disability or by the Participant for Good Reason (as defined below):
(i) any Options outstanding as of such Termination of Employment which were outstanding as of the date of such Change in Control shall be fully exercisable and vested and shall remain exercisable until the later of (i) the last date on which such Option would be exercisable in the absence of this Section 10(a) and (ii) the earlier of (A) the first anniversary of such Change in Control and (B) expiration of the Term of such Option;
(ii) the restrictions and deferral limitations applicable to any Restricted Stock shall lapse, and such Restricted Stock outstanding as of such Termination of Employment which were outstanding as of the date of such Change in Control shall become free of all restrictions and become fully vested and transferable; and
(iii) all Restricted Stock Units outstanding as of such Termination of Employment which were outstanding as of the date of such Change in Control shall be considered to be earned and payable in full, and any restrictions shall lapse and such Restricted Stock Units shall be settled as promptly as is practicable in the form set forth in the applicable Award Agreement; provided, however, that with respect to any Restricted Stock Unit that constitutes “nonqualified deferred compensation” within the meaning of Section 409A of the Code, the settlement of such Restricted Stock Unitscircumstances pursuant to this Section 10(a)(iii)
12, and the extent and nature of any such adjustment, shall only occur upon the Change in Control if such Change in Control constitutes a “change in the ownership of the corporation,” a “change in effective control of the corporation: or a “change in the ownership of a substantial portion of the assets of the corporation,” within the meaning of Section 409A(a)(2)(v) of the Code.
(b)Impact of Eventbe conclusive and binding on Awards other than Adjusted Awards. Subject to paragraph (e) of this Section 10, and paragraph (d) of Section 12, unless otherwise provided in any applicable Award Agreement and except as otherwise provided in paragraph (a) of this Section 10, in connection with a Change of Control, the Committee may make such adjustments and/or settlements of outstanding Awards as it deems appropriate and consistent with the Plan’s purposes, including, without limitation, the acceleration of vesting of Awards either upon a Change of Control or upon various terminations of employment following a Change of Control. The Committee may provide for such adjustments as a term of the Award or may make such adjustments following the granting of the Award.all persons.
(c) Definition13.Effect of Change in Control. For purposes of the Plan, unless otherwise provided inSale, Merger or Liquidation. If either (a) HSNi or its shareholders enter into an option agreement or other agreement relating to an Award, a “Change in Control” shall mean the happening of any of the following events:
(i) The acquisition by any individual, entity or Group (a “Person”), other than the Company, of Beneficial Ownership of equity securities of the Company representing more than 50% of the voting power of the then outstanding equity securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”);provided,however, that any acquisition that would constitute a Change in Control under this subsection (i) that is also a Business Combination shall be determined exclusively under subsection (iii) below; or
(ii) Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board;provided,however, that any individual becoming a director subsequent to the Effective Date, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the Incumbent Directors at such time shall become an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger, consolidation, sale or other dispositiondispose of all or substantially all of the assets of the Company, the purchase of assets or outstanding capital stock of another entity,HSNi by means of a sale, merger or reorganization in which HSNi will not be the surviving corporation (other than a reorganization effected primarily to change the state in which HSNi is incorporated, a merger or consolidation with a wholly-owned Subsidiary that is a corporation (or is treated as one under the Code), or any other similar corporate transaction (a “Business Combination”), in each case, unless immediately following such Business Combination, (A) more than 50% of the Resulting Voting Power shall reside in Outstanding Company Voting Securities retained by the Company’s stockholderswhich there is no substantial change in the Business Combination and/shareholders of HSNi or voting securities received by such stockholderstheir relative stock holdings, regardless of whether HSNi is the surviving corporation) or (b) HSNi is liquidated, then the Contribution Period in the Business Combination on account of Outstanding Company Voting Securities, and (B) at least a majority of the members of the board of directors (or equivalent governing body, if applicable) of the entity resulting from such Business Combination were Incumbent Directorsprogress at the time of such transaction or liquidation shall be shortened and a new Purchase Date shall be set (the “New Purchase Date”), as of which date the initial agreement,Contribution Period then in progress will terminate. The New Purchase Date shall be on or before the date of consummation of such transaction or liquidation, and the Plan Administrator shall notify each Participant in writing, at least 10 Business Days before the New Purchase Date, that the Purchase Date for his or her Option has been changed to the New Purchase Date and that his or her Option will be exercised automatically on the New Purchase Date, unless before such date, the Participant has withdrawn from the Plan for that Contribution Period as provided in Section 10.
14.Administration. The Plan Administrator shall supervise and administer the Plan and shall have full power to adopt, amend and rescind any rules deemed desirable and appropriate for the administration of the Plan and not inconsistent with the Plan, to construe and interpret the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The Plan Administrator may delegate ministerial duties to such of the Company’s other employees, outside entities and outside professionals as the Plan Administrator so determines.
15.Death of Participant. If Participant dies, the Company shall deliver any Shares and cash in the Participant’s Account to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
16.Transferability. Neither Contributions credited to a Participant’s Account nor any rights with regard to the exercise of an Option may be assigned, transferred, pledged or otherwise disposed of in any way (other than as provided in Section 15) by the Participant or any person entitled to the Account balance or such rights under Section 15. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw the Account balance in accordance with Section 10. Furthermore, no balance in a Participant’s Account or Shares that have not been delivered shall be subject to any debts, contracts, liabilities, engagements or torts of the Participant or any person entitled to the Account balance or such Shares under Section 15.
17.Use of Funds. All Contributions received or held by the Company under the Plan may be used by the Company for any corporate purpose; and the Company shall not be obligated to segregate such Contributions. The Plan is unfunded and shall not create nor be construed to create a trust or separate fund of any kind or a fiduciary relationship among the Company, the Board, the Committee, the Plan Administrator and any Participant. To the extent a Participant acquires a right to receive payment from the Company pursuant to the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company.
18.Reports. Account statements will be made available (at times directed by the Plan Administrator) to participating Employees by the Company and/or the ESPP Broker. For each Contribution Period, those statements will set forth the amounts of Contributions, the per Share Purchase Price, the number of Shares purchased, the remaining Account balance, if any, and the balance of any ESPP Broker account.
19. Amendment or Termination of Plan.
(a)General Authority of Committee. The Committee may at any time terminate the Plan, or may from time to time amend the Plan in any manner it deems necessary or advisable; provided, however, that no such action shall adversely affect any Options then outstanding under the Plan unless such action is required to comply with Applicable Laws; and provided, further, that no such action of the Board providing forshall be effective without the approval of HSNi’s shareholders if such Business Combination;approval is required by Applicable Laws. Upon the termination of the Plan, any balance in a Participant’s Account shall be refunded to him or
(iv) Approval her as soon as practicable thereafter, unless the Committee terminates the Plan on a Purchase Date or by the stockholders of the Company ofCommittee’s setting a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, the Separation shall not constitute a Change in Control. For the avoidance of doubt,New Purchase Date with respect to Adjusted Awards,a Contribution Period then in progress.
(b)Administrative Amendments and Similar Actions. Without shareholder approval and without regard to whether any reference in an Award Agreement orParticipant rights may be considered to have been adversely affected, the applicable IAC Long Term Incentive Plan to a “change in control,” “change of control” or similar definitionCommittee shall be deemedentitled to referchange the Contribution Periods, limit the frequency and/or number of changes in the amount deducted during a Contribution Period, establish the exchange ratio applicable to amounts deducted in a Changecurrency other than United States dollars, permit payroll deductions in excess of Control hereunder.
(d) For purposesthe amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of this Section 10, “Good Reason” means (i) “Good Reason” as defined in any Individual Agreement properly completed payroll deduction elections, establish reasonable waiting and adjustment periods and/or Award Agreementaccounting and crediting procedures to whichensure that amounts applied toward the applicablepurchase of Common Stock for each Participant is a party, or (ii) if there is no such
Individual Agreement or if it does not define Good Reason, withoutproperly correspond with amounts deducted from the Participant’s prior written consent: (A) a material reductionCompensation, and establish such other limitations or procedures as the Committee determines in its sole discretion to be advisable and consistent with the Participant’s ratePlan.
(c)Exhaustion of annual base salary fromReserves. The Plan shall automatically terminate on the rate of annual base salary in effect for such Participant immediately prior to the Change in Control, (B) a relocationdate when all of the Participant’s principal placeShares that were reserved under Section 11 for issuance under this Plan have been purchased by Participants under the Plan.
20. International Participants and Employees of business moreNon-corporate Subsidiaries.
(a)Adoption of Special Provisions by Certain Subsidiaries. The Committee shall have the power and authority to allow any of HSNi’s Subsidiaries other than 35 miles from the cityDesignated Subsidiaries to adopt and join in which such Participant’s principal place of business was located immediately prior to the Change in Control or (C) a material and demonstrable adverse change in the nature and scopeone of the Participant’s duties from those in effect immediately prior to the Change in Control. In order to invoke a Termination of Employment for Good Reason, a Participant shall provide written notice to the Company of the existence of one or more of the conditions described in clauses (A) through (C) within 90 days following the Participant’s knowledge of the initial existence of such condition or conditions, and the Company shall have 30 days following receipt of such written notice (the “Cure Period”) during which it may remedy the condition. In the event that the Company fails to remedy the condition constituting Good Reason during the Cure Period, the Participant must terminate employment, if at all, within 90 days following the Cure Period in order for such Termination of Employment to constitute a Termination of Employment for Good Reason.
(e) Notwithstanding the foregoing, if any Award is subject to Section 409A of the Code, this Section 10 shall be applicable only to the extent specifically provided in the Award Agreement and as permitted pursuant to Section 14(k).
Section 11. Qualified Performance-Based Awards; Section 16(b)
(a) The provisionsportions of this Plan arethat is not intended to ensurecomply with Code section 423, as described in Section 1(c):
(i) A portion for employees of any such Subsidiary who are generally not subject to income taxation by the United States (the “Non-U.S. Portion”), or
(ii) A portion for employees who are employed by any non-corporate Subsidiary that all Options and Stock Appreciation Rights granted hereunderis not eligible to any Participant who is or may be a “covered employee” (within the meaning of Section 162(m)(3)Designated Subsidiary because it is described in clause (ii) of the Code) in the tax year in which such Option or Stock Appreciation Right is expected to be deductible to the Company qualifydefinition of Subsidiary (the “Non-corporate Portion”).
(b)Terms and Conditions for the Section 162(m) Exemption, and all such Awards shall therefore be considered Qualified Performance-Based Awards and this Plan shall be interpreted and operated consistent with that intention (including, without limitation, to require that all such Awards be granted by a committee composed solely of members who satisfy the requirements for being “outside directors” for purposesAny Non-U.S. Portion of the Section 162(m) Exemption (“Outside DirectorsPlan.”)). When granting If the Committee allows any AwardSubsidiary other than an Option or Stock Appreciation Right,a Designated Subsidiary to adopt the Non-U.S. Portion of the Plan, the Committee may designateallow certain employees of such Award as a Qualified Performance-Based Award, based upon a determination that (i) the recipient isSubsidiaries who work or may be a “covered employee” (within the meaning of Section 162(m)(3)reside outside of the Code) with respectUnited States an
opportunity to such Award, and (ii) the Committee wishes such Award to qualify for the Section 162(m) Exemption, and the terms of any such Award (and of the grant thereof) shall be consistentacquire Shares in accordance with such designation (including, without limitation, that all such Awards be granted by a committee composed solely of Outside Directors).
(b) Each Qualified Performance-Based Award (other than an Option or Stock Appreciation Right) shall be earned, vestedspecial terms and payable (as applicable) only upon the achievement of one or more Performance Goals (as certified in writing by the Committee, except if compensation is attributable solely to the increase in the value of the Common Stock), together with the satisfaction of any other conditions such as continued employment, as the Committee may determineadopt from time to be appropriate,time, which terms and no Qualified Performance-Based Awardconditions may be amended, nor maymodify the Committee exercise any discretionary authority it may otherwise have underterms and conditions set forth elsewhere in this Plan, with respect to a Qualified Performance-Based Award under this Plan, in any manner that would cause the Qualified Performance-Based Award to cease to qualify for the Section 162(m) Exemption;provided,however, that (i) the Committee may provide, either in connection with the grant of the applicable Award or by amendment thereafter, that achievement of such Performance Goals will be waived upon the death or Disability of the Participant or under any other circumstance with respect to which the existence of such possible waiver will not cause the Award to fail to qualify for the Section 162(m) Exemption as of the Grant Date, and (ii) the provisions of Section 10 shall apply notwithstanding this Section 11(b).
(c) The full Board shall not be permitted to exercise authority granted to the Committee to the extent that the grant or exercise of such authority would cause an Award designated as a Qualified Performance-Based Award not to qualify for, or to cease to qualify for, the Section 162(m) Exemption.
(d) The provisions of this Plan are intended to ensure that no transaction under the Plan is subject to (and not exempt from) the short-swing recovery rules of Section 16(b) of the Exchange Act (“Section 16(b)”). Accordingly, the composition of the Committee shall be subject to such limitations as the Board deems appropriate to permit transactions pursuant to this Plan to be exempt (pursuant to Rule 16b-3 promulgated under the Exchange Act) from Section 16(b), and no delegation of authority by the Committee shall be permitted if such delegation would cause any such transaction to be subject to (and not exempt from) Section 16(b).
Section 12. Term, Amendment and Termination
(a)Effectiveness. The Plan shall be effective as of the date (the “Effective Date”) it is adopted by the Board, subject to the approval by the holders of at least a majority of the voting power represented by outstanding capital stock of the Company that is entitled generally to vote in the election of directors.
(b)Termination. The Plan will terminate on the tenth anniversary of the Effective Date. Awards outstanding as of such date shall not be affected or impaired by the termination of the Plan.
(c)Amendment of Plan. The Board may amend, alter, or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would materially impair the rights of the Participant with respect to a previously granted Award without such Participant’s consent, except such an amendment made to comply with applicable law, including without limitation Section 409A of the Code, stock exchange rules or accounting rules. In addition, no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by applicable law or the listing standards of the Applicable Exchange.
(d)Amendment of Awards. Subject to Section 5(d), the Committee may unilaterally amend the terms of any Award theretofore granted, but no such amendment shall cause a Qualified Performance-Based Award to cease to qualify for the Section 162(m) Exemption or without the Participant’s consent materially impair the rights of any Participant with respect to an Award, except such an amendment made to cause the Plan or Award to comply with applicable law, stock exchange rules or accounting rules.
Section 13. Unfunded Status of Plan
It is presently intended that the Plan constitute an “unfunded” plan for incentive and deferred compensation. Solelyemployees, to the extent permitted under Section 409A,the following paragraph (d). Without limiting the authority of the Committee, the special terms and conditions that may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or make payments; provided, however, that the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan. Notwithstanding any provision of this Plan to the contrary,be adopted with respect to any Awardforeign country need not be the same for all foreign countries; and may include but are not limited to the right to participate, procedures for elections to participate, the payment of any interest with respect to amounts received from or credited to Accounts held for the benefit of such employees who elect to participate, the purchase price of any Shares to be acquired, the length of any Contribution Period, the maximum amount of contributions, credits or Shares that constitutes “nonqualified deferred compensation” withinmay be acquired by any such participating employees, and a participating employee���s rights in the meaningevent of Section 409Ahis or her death, disability, withdrawal from participation in the purchase of Shares under the Non-U.S. Portion of the Code, no trust shallPlan, or termination of employment.
(c)Terms and Conditions for Any Non-corporate Portion of the Plan. If the Committee allows any non-corporate Subsidiary to adopt the Non-corporate Portion of the Plan, the Committee may allow certain employees of such Subsidiaries an opportunity to acquire Shares in accordance with such special terms and conditions as the Committee may adopt from time to time, which terms and conditions may modify the terms and conditions set forth elsewhere in this Plan, with respect to such employees, to the extent permitted under the following paragraph (d). Without limiting the authority of the Committee, the special terms and conditions that may be fundedadopted with respect to any such Award if such funding would result in taxable incomenon-corporate Subsidiary need not be the same for all non-corporate Subsidiaries; and may include but are not limited to the Participantright to participate, procedures for elections to participate, the payment of any interest with respect to amounts received from or credited to Accounts held for the benefit of such employees who elect to participate, the purchase price of any Shares to be acquired, the length of any Contribution Period, the maximum amount of contributions, credits or Shares that may be acquired by reason of Section 409A(b) of the Code and in no event shall any such trust assets at any time be locatedparticipating employees, and a participating employee’s rights in the event of his or transferred outsideher death, disability, withdrawal from participation in the purchase of Shares under the United States, within the meaning of Section 409A(b) of the Code.
Section 14. General Provisions
(a)Conditions for Issuance. The Committee may require each person purchasing or receiving Shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to the distribution thereof. The certificates for such Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. Notwithstanding any other provisionNon-corporate Portion of the Plan, or agreements made pursuant thereto, the Company shall not be required to issue or deliver any certificate or certificates for Shares under the Plan prior to fulfillmenttermination of all of the following conditions: (i) listing or approval for listing upon notice of issuance, of such Shares on the Applicable Exchange; (ii) any registration or other qualification of such Shares of the Company under any state or federal law or
regulation, or the maintaining in effect of any such registration or other qualification which the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and (iii) obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its absolute discretion after receiving the advice of counsel, determine to be necessary or advisable.
(b)Additional Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Subsidiary or Affiliate from adopting other or additional compensation arrangements for its employees.
(c)No Contract of Employment. The Plan shall not constitute a contract of employment, and adoption of the Plan shall not confer upon any employee any right to continued employment, nor shall it interfere in any way with the right of the Company or any Subsidiary or Affiliate to terminate the employment of any employee at any time.employment.
(d)Required Taxes. No later than the date asCompliance with Applicable Laws; Effect of which an amount first becomes includible in the gross incomeCode Section 409A. Any purchases of a Participant for federal, state, local or foreign income or employment or other tax purposes with respect to any Award under the Plan, such Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. If determined by the Company, withholding obligations may be settled with Common Stock including Common Stock that is part of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to such Participant. The Committee may establish such procedures as it deems appropriate, including making irrevocable elections, for the settlement of withholding obligations with Common Stock.
(e)Limitation on Dividend Reinvestment and Dividend Equivalents. Reinvestment of dividends in additional Restricted Stock at the time of any dividend payment, and the payment of Shares with respect to dividends to Participants holding Awards of Restricted Stock Units, shall only be permissible if sufficient Shares are available under Section 3 for such reinvestment or payment (taking into account then outstanding Awards). In the event that sufficient Shares are not available for such reinvestment or payment, such reinvestment or payment shall be made in the form of a grant of Restricted Stock Units equal in number to the Shares that would have been obtained by such payment or reinvestment, the terms of which Restricted Stock Units shall provide for settlement in cash and for dividend equivalent reinvestment in further Restricted Stock Units on the terms contemplated by this Section 14(e).
(f)Designation of Death Beneficiary. The Committee shall establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable in the event of such Participant’s death are to be paid or by whom any rights of such eligible Individual, after such Participant’s death, may be exercised.
(g)Subsidiary Employees. In the case of a grant of an Award to any employee of a Subsidiary of the Company, the Company may, if the Committee so directs, issue or transfer the Shares, if any, covered by the Award to the Subsidiary, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Subsidiary will transfer the Shares to the employee in accordance with the terms of the Award specified by the Committee pursuant to the provisions of this Section 20 shall not be subject to the Plan. All Shares underlying Awardsrequirements of Code section 423, but shall be made pursuant to any other Applicable Laws; provided, however, the granting of any Options under this Section 20 shall be completed and administered only in a manner that is intended to either (i) comply with Code section 409A, or (ii) be exempt from taxation imposed by Code section 409A(a)(1)(A) or (B), so as to prevent any such taxation being imposed on participants receiving any such grant. For example, Options granted under this Section 20 may either:
(i) comply with Code section 409A by either specifying exercise prices that are forfeitednot less than the fair market value of the Common Stock at the date of grant, or canceled should revertspecifying Purchase Dates that are fixed dates or made contingent upon the occurrence of certain earlier or later payment events permitted under Code section 409A, in either case when the Options are granted; or
(ii) be exempt from Code section 409A if granted under the Non-U.S. Portion of the Plan to certain non-resident alien individuals employed by Subsidiaries that are not Designated Subsidiaries and operate outside the United States, to the Company.extent the latter type of grant is treated under section 1.409A-1(b)(8) of the Treasury Regulations as not providing deferred compensation for such individuals.
21.Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
(h)Governing Law and Interpretation.22.Term of Plan; Effective Date. The Plan shall become effective upon approval by HSNi’s shareholders and adoption by HSNi. It shall continue in effect until all Awards madeof the Reserves are exhausted or such earlier time as the Plan is terminated pursuant to Section 19.
23.Governing Law. Except as otherwise explicitly stated in this Plan, the validity, construction and actions taken thereundereffect of the Plan and any rules and regulations relating to the Plan shall be governed by and construeddetermined in accordance with the laws of the State of Delaware,Florida and applicable United States federal laws.
24.Severability. If any provision of the Plan is or becomes invalid, illegal, or unenforceable in any jurisdiction or would disqualify the Plan under any law, such provision shall be construed or deemed amended to conform to Applicable Laws; or if it cannot be so construed or deemed amended without referencematerially altering the intent of the Plan, such provision shall be stricken as to principlessuch jurisdiction, and the remainder of conflictthe Plan shall remain in full force and effect.
25.No Rights as an Employee. Nothing in the Plan shall be construed to give any individual (including an Employee or Participant) the right to remain in the employ of laws. The captionsHSNi or any Subsidiary, nor to affect the right of HSNi or any Subsidiary to terminate the employment of any individual (including the Employee or Participant) at any time with or without cause. Nothing in this Plan are notshall confer on any person any legal or equitable right against HSNi or any Subsidiary, or give rise to any cause of action at law or in equity against HSNi or any Subsidiary. Neither the Options granted, any Shares purchased hereunder nor any other benefits conferred hereby, including the right to purchase Common Stock at a discount, shall form any part of the provisions hereof andwages or salary of any eligible Employee for purposes of any severance pay or termination damages, irrespective of the reason for termination of employment. Under no circumstances shall any individual ceasing to be an Employee be entitled to any compensation for any loss of any right or benefit under this Plan that such Employee might otherwise have no forceenjoyed, but for ceasing to be an Employee, whether such compensation is claimed by way of damages for wrongful or effect.unfair dismissal, breach of contract or otherwise.
(i)Non-Transferability. Except as otherwise provided26.Taxes. Participants are responsible for the payment of all income taxes, employment, social insurance, welfare and other taxes under Applicable Laws relating to any amounts deemed under the laws of the country of their residency or of the organization of the Subsidiary employing such Participant to constitute income arising out of the Plan, the purchase and sale of Shares pursuant to the Plan and the distribution of Shares or cash to the Participant in Section 5(j)accordance with this Plan. Each Participant hereby authorizes HSNi or any Designated Subsidiary that pays Compensation to the Participant to make appropriate tax withholding deductions from that Compensation with respect to any Contributions authorized by the Committee, Awards underParticipant, which deductions shall be in addition to any payroll deductions made as Contributions pursuant to Section 6, and to pay such withheld taxes to the Plan are not transferable except by will or by laws of descent and distribution.
(j)Foreign Employees and Foreign Law Considerations. The Committee may grant Awards to Eligible Individuals who are foreign nationals, who are located outside the United States or who are not compensated from a payroll maintainedappropriate tax authorities in the United States,relevant country or who are otherwise subjectcountries in order to (or could causesatisfy any of the Company to be subject to) legal or regulatory provisionsabove tax liabilities of countries or jurisdictions outside the United States, on such terms and conditions different from those specifiedParticipant under Applicable Laws.
27.Acceptance of Terms. By participating in the Plan, as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes, the Committee may make such modifications, amendments, procedures, or subplans as may be necessary or advisable to comply with such legal or regulatory provisions.
(k)Section 409A of the Code. It is the intention of the Company that no Awardeach Participant shall be “deferred compensation” subjectdeemed to Section 409Ahave accepted all the conditions of the Code, unless and to the extent that the Committee specifically determines otherwise as provided in this Section 14(k), and the Plan and the terms and conditions of all Awardsany rules and regulations adopted by the Committee or the Plan Administrator; and shall be interpreted accordingly. The termsfully bound thereby.
Approved by the Compensation and conditions governing any Awards thatHuman Resources Committee and Board of Directors of HSN, Inc. on February 24, 2010.
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 5:00 PM Eastern Time the Committee determines will be subject to Section 409A of the Code, including any rules for elective or mandatory deferral of the delivery of cash or Shares pursuant thereto and any rules regarding treatment of such Awards in the event of a Change in Control, shall be set forth in the applicable Award Agreement, and shall comply in all respects with Section 409A of the Code. Notwithstanding any other provision of the Planday prior to the contrary, with respect to any Award that constitutes a “nonqualified deferred compensation plan” subject to Section 409A of the Code, any payments (whether in cash, Shares or other property) to be made with respect to the Award upon the Participant’s Termination of Employment shall be delayed until the earlier of (A) the first day of the seventh month following the Participant’s Termination of Employment if the Participant is a “specified employee” within the meaning of Section 409A of the Code, and (B) the Participant’s death.shareholder meeting date.
(l)Employee Matters Agreement. Notwithstanding anything in this Plan to the contrary, to the extent that the terms of this Plan are inconsistent with the terms of an Adjusted Award, the terms of the Adjusted Award shall be governed by the Employee Matters Agreement, the applicable IAC Long-Term Incentive Plan and the award agreement entered into thereunder.
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Please mark your votes as indicated in this example | x | |||||||||||||||||||||||||
FOR all nominees listed to the left (except as marked to the contrary |
WITHHOLD AUTHORITY to vote for all nominees listed to the left | *EXCEPTIONS | FOR | AGAINST | ABSTAIN | |||||||||||||||||||||
| 1. | Election of Directors
Nominees: |
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2. |
Approval of Second Amended and Restated 2008 Stock and Annual Incentive Plan. |
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01 Gregory R. Blatt 02 Michael C. Boyd 03 Patrick Bousquet-Chavanne 04 Wiliam Costello 05 James M. Follo | 06 Mindy Grossman 07 Stephanie Kugelman 08 Arthur C. Martinez 09 Thomas J. McInerney 10 John B. Morse, Jr. |
3. |
Ratification of the appointment of Ernst & Young LLP as HSN, Inc.’s independent registered certified public accounting firm for the 2009 fiscal year. |
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(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below.) | ||||||||||||||||||||||||||
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HSN, Inc. | ||||||||||
INTERNET http://www.proxyvoting.com/hsni
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site. | |||||||||
OR
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TELEPHONE
1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. | |||||||||
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
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To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope. | |||||||||
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Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. | ||||||||
WO# | Fulfillment# | |||
71817 | 71825 |
q FOLD AND DETACH HEREq
Please mark your votes as indicated in this example | x |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL NOMINEES AND “FOR” PROPOSALS 2 AND 3.
FOR ALL | WITHHOLD FOR ALL | *EXCEPTIONS | ||||
1. ELECTION OF DIRECTORS Nominees: | ¨ | ¨ | ¨ | |||
| 01 Gregory R. Blatt | 06 Mindy Grossman | |||||
| 02 Michael C. Boyd | 07 Stephanie Kugelman | |||||
| 03 Patrick Bousquet-Chavanne | 08 Arthur C. Martinez | |||||
| 04 William Costello | 09 Thomas J. McInerney | |||||
| 05 James M. Follo | 10 John B. (Jay) Morse | |||||
| (INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box above and write that nominee’s name in the space provided below.) | ||||
| *Exceptions | ||||
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FOR | AGAINST | ABSTAIN | ||||||
2. | To ratify the appointment of Ernst & Young LLP as our independent registered certified public accounting firm for the fiscal year ending December 31, 2010; | ¨ | ¨ | ¨ | ||||
| 3. | To approve the HSN, Inc. Employee Stock Purchase Plan; and | ¨ | ¨ | ¨ | ||||
| 4. | To consider and act upon any other business that may properly come before the meeting or any adjournment(s) thereof. | |||||||
THE PROXY WILL BE VOTED AS DIRECTED. IF THIS PROXY IS EXECUTED BUT NO DIRECTION IS GIVEN, THE PROXY WILL BE VOTED IN FAVOR OF ALL NOMINEES, IN FAVOR OF PROPOSALS 2 AND 3 AND IN THE DISCRETION OF THE PROXY HOLDER ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF. | ||||||||
| Mark Here for | ¨ | |||
| Address Change | ||||
or Comments SEE REVERSE | ||||
| Signature | Signature | Date | ||||||||||
| NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. | ||||||||||||
You can now access your HSN, Inc. account online.
Access your HSN, Inc. account online via Investor ServiceDirect® (ISD).
BNY Mellon Shareowner Services, the transfer agent for HSN, Inc., now makes it easy and convenient to get current information on your shareholder account.
| • View account status | • View payment history for dividends | |
| • View certificate history | • Make address changes | |
| • View book-entry information | • Obtain a duplicate 1099 tax form |
Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
ChooseMLinkSM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestorServiceDirect® atwww.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment. |
| Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders. The Proxy Statement and the 2009 Annual Report on Form 10-K are available at:http://www.proxyvoting.com/hsni |
q FOLD AND DETACH HERE q
PROXY
HSN, INC.
Annual Meeting of Shareholders – May 19, 2010
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Mindy Grossman and Judy A. Schmeling, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of HSN, Inc. common stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Shareholders of the company to be held May 19, 2010 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the meeting.
Address Change/Comments (Mark the corresponding box on the reverse side) | BNY MELLON SHAREOWNER SERVICES P.O. BOX 3550 | |
SOUTH HACKENSACK, NJ 07606-9250 | ||
(Continued and to be marked, dated and signed, on the other side) |
| WO# | Fulfillment# | |||||
| 71817 | 71825 |
