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The “Applicable Percentage” is Liberty’s ownership percentage upon the Spin-off of HSNi, based on voting power
(approximately 30%), plus 5%, but in no event more than 35%. Notwithstanding the foregoing, Liberty’s beneficial ownership
may increase (and has increased) above the Applicable Percentage as a result of HSNi’s share repurchase program. Following
the Spin-off, the Applicable Percentage for the Spinco is 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 were 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:
• 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;
• 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.
Competing Offers
During the period when Liberty continues to have the right to nominate directors to HSNi’s Board of Directors, if the
Board of Directors 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 of Directors 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 HSNi’s 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.
Registration Rights Agreement
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 with respect to 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.