Home Shopping Network 2008 Annual Report Download - page 18

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The spin-off agreements were not the result of arm's length negotiations; accordingly, the terms may not
be as favorable to us as would have resulted from negotiations among unrelated third parties.
The agreements that we entered into with IAC in connection with the spin-off, including the separation and
distribution agreement, tax sharing agreement, employee matters agreement and transition services agreement, were
established by IAC with the intention of maximizing the value to current IAC stockholders. Accordingly, the terms
for us may not be as favorable as would have resulted from negotiations among unrelated third parties.
For example, the tax sharing agreement with IAC restricts our ability to enter into certain transactions that
might be advantageous to us and our stockholders. In particular, the tax sharing agreement limits our ability to
repurchase equity securities, dispose of certain assets or engage in mergers and acquisitions. In addition, the Tax
Sharing Agreement generally provides that each Spinco will have to indemnify IAC and the other Spincos for any
taxes resulting from the spin-off of such Spinco (and any related interest, penalties, legal and professional fees, and
all costs and damages associated with related stockholder litigation or controversies) to the extent such amounts
result from (i) any act or failure to act by such Spinco described in the covenants in the Tax Sharing Agreement, (ii)
any acquisition of equity securities or assets of such Spinco or a member of its group, and (iii) any breach by such
Spinco or any member of its group of any representation or covenant contained in the separation documents or in the
documents relating to the IRS private letter ruling and/or tax opinions.
Risks Related to Our Common Stock
The stockholders’ rights plan adopted by the Board of Directors in December 2008 may inhibit
takeovers that would otherwise be beneficial to stockholders.
In the fourth quarter of 2008, our Board of Directors approved the creation of a Series A Junior
Participating Preferred Stock, adopted a stockholders’ rights plan and declared a dividend of one right for each
outstanding share of common stock held by our stockholders. Initially, these rights, which will trade with the shares
of our common stock, will not be exercisable. Under the rights plan, these rights will be exercisable if a person or
group acquires or commences a tender or exchange offer for 15% or more of our common stock (except for certain
grandfathered persons to which higher thresholds apply). If the rights become exercisable, each right will permit the
holder, other than the “acquiring person,” to purchase from us shares of common stock at a 50% discount to the then
prevailing market price. As a result, the rights will cause substantial dilution to a person or group that becomes an
“acquiring person” on terms not approved by our Board of Directors. The existence of these rights may prevent,
discourage or delay an acquisition of us, even if such acquisition would be beneficial to our stockholders.
The market price and trading volume of our common stock may be volatile and may face negative
pressure.
Following the spin-off, our common stock became publicly traded for the first time. The market price for
our common stock has been volatile, especially in light of recent instability in the financial markets. Our stock price
has experienced, and could continue to experience in the future, substantial volatility as a result of many factors,
including persistent adverse macroeconomic conditions, broad market fluctuations and public perception of the
prospects for the retail industry. Our failure to meet market expectations would also likely result in a decline in the
market price of our stock. These and other factors may result in short-term or long-term negative pressure on the
value of our common stock.
We do not intend to pay dividends for the foreseeable future.
We have never paid any cash dividends and do not anticipate paying any cash dividends in the foreseeable
future. Additionally, under the terms of our credit facility and senior notes, the payment of cash dividends is subject
to certain restrictions.