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Table of Contents
HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Plan. The purpose of the Plan is to assist HSNi in attracting, retaining and motivating officers, employees, directors and consultants, and to
provide HSNi with the ability to provide incentives more directly linked to the profitability of HSNi’s business and increases in shareholder
value.
HSNi can grant restricted stock units (“RSUs”), stock options, stock appreciation rights (“SARs”) and other stock-based awards under the
Plan. Stock-based awards have a maximum term of 10 years. The exercise price of options and SARs granted under the Plan are required to be
priced at, or above, the fair market value of HSNi’s stock on the date of grant.
Modification of Stock-Based Compensation Awards
In conjunction with the spin-off, IAC share-based awards were converted to equivalent share-based awards (“Adjusted Awards”) as
follows:
The adjustments to the number of shares subject to each award and the stock option exercise prices were based on the relative market
capitalization of IAC and each of the Spincos following the spin-
off. The conversion was accounted for as a modification under the provisions of
accounting guidance related to share-based payments, and resulted in additional fair value that was recognized immediately for fully vested
awards and is being amortized over the remaining service period for unvested awards. These modifications affected all current and former
employees of HSNi, HSN and Cornerstone who were holding vested and unvested stock-based compensation awards on August 11, 2008.
These modifications resulted in additional compensation expense of $10.2 million which is being amortized ratably over the vesting
period. For the years ended December 31, 2010, 2009 and 2008, $0.5 million, $0.9 million and $8.3 million, respectively, of the additional
compensation expense was recognized in the accompanying consolidated statements of operations.
Restricted Stock Units
RSUs are awards that are denominated in a hypothetical equivalent number of shares of HSNi’s common stock. At the time of grant, HSNi
determines if the RSUs will be settled in cash, stock or both. The value to the
60
•
All unexercised stock option awards granted on or prior to December 31, 2007 to purchase shares of IAC common stock, whether
vested or unvested, converted into an option to purchase shares of common stock of each of the five publicly-traded companies
resulting from the spin
-
off (the
“
Spincos
”
).
•
Certain unvested RSUs were accelerated immediately prior to the spin
-
off, with awards thereafter settled in shares of common stock
of each of the Spincos.
•
Performance-based RSUs granted in 2007 were converted into non-performance based RSUs with the same vesting schedules, with
awards that will settle in shares of common stock of each of the Spincos.
•
Unvested RSUs granted by IAC that provide for vesting of 100% of the award following passage of a multi-year period (cliff vesting
awards) will settle in shares of common stock of each of the Spincos.
•
All other IAC RSUs held by HSNi employees that did not convert or vest as described above converted into an RSU award of HSNi
at the spin
-
off date.
•
All equity
-
based awards granted after December 31, 2007 to employees of HSNi converted into awards of common stock of HSNi.