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HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average fair values of stock options and SARs granted from the Plan during the years ended
December 31, 2011, 2010 and 2009 at market prices equal to HSNi’s common stock on the grant date were
$12.84, $8.79 and $2.94, respectively.
At the date of the Spin-off, HSNi granted approximately 719,000 stock options to its Chief Executive
Officer at exercise prices greater than market value on the date of grant with a 10-year term and graded vesting
over four years. The weighted average exercise price and the weighted average fair value related to these grants
were $39.84 and $3.36, respectively. All other awards granted under the Plan have exercise prices based on the
fair market value of HSNi’s common stock at the date of grant.
As of December 31, 2011, there was approximately $5.3 million of unrecognized compensation cost, net of
estimated forfeitures, related to stock options and SARs, which is currently expected to be recognized on a
straight-line basis over a weighted average period of approximately 1.2 years.
The following table summarizes the information about stock options and SARs outstanding and exercisable
as of December 31, 2011:
Outstanding Exercisable
Number
Outstanding at
December 31,
2011
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term in Years
Number
Exercisable at
December 31,
2011
Weighted
Average
Exercise Price
$0.00 to $9.99 .................... 660,842 $ 5.23 6.9 493,397 $ 5.56
$10.00 to $19.99 .................. 1,115,810 16.16 6.3 627,229 15.81
$20.00 to $29.99 .................. 1,232,058 25.12 6.1 672,984 24.40
$30.00 to $34.99 .................. 424,298 33.01 4.5 388,667 33.25
$35.00 to $44.99 .................. 576,419 42.16 6.6 432,314 42.16
4,009,427 2,614,591
Performance-Based Awards
During the first quarter of 2010, HSNi implemented a performance-based equity compensation program for
certain key members of Cornerstone’s management. The amount payable is based on the extent to which certain
pre-established performance goals for Cornerstone are achieved during the three-year period ending
December 31, 2012. The amount earned pursuant to the award will be measured at the end of the requisite service
period and is expected to be settled in shares of HSNi common stock. These equity awards are accounted for as
liabilities which are remeasured each reporting period based on the probability of achievement of the
performance conditions. As of December 31, 2011, a liability of approximately $12.2 million was recorded for
these awards.
Employee Stock Purchase Plan
The HSN, Inc. 2010 Employee Stock Purchase Plan (“ESPP”) was approved May 2010 and 750,000 shares
of HSNi common stock were reserved for issuance under the ESPP. The ESPP permits employees to purchase
shares of HSNi’s common stock during semi-annual purchase periods. Under the terms of the ESPP, eligible
employees accumulate funds through payroll deductions and purchase shares at a price equal to the lesser of 85%
of the fair market value of the common stock at the grant date or purchase date, provided the resulting purchase
price cannot be less than 75% of the fair market value at the end of the purchase period. All shares purchased
under the ESPP must be held for a period of six months.
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