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King Henry meets with the Percy family (Hotspur, Northumberland, and Worcester) and tells them he's been acting too soft lately because the Percys are totally out of control. From here on out, though, Henry's putting the kibosh on their insubordination.
Worcester (Hotspur's uncle) mouths off to Henry and reminds him that his family helped him become king.
King Henry tells Worcester to shut his face and get out of his sight before he lays a smack down on him. Henry will let him know when he's allowed to talk.
Worcester leaves in a huff and Northumberland (Hotspur's dad) tries to smooth things over for his kid. He doesn't deny that Hotspur refused to give the king his war prisoners but he says it's not as bad as it sounds. The whole thing is just a big misunderstanding.
Hotspur, who can hardly contain himself, chimes in and comes up with an excuse for disrespecting the king. He says he didn't deny the prisoners to the king, per se, but he did yell at the guy who came to collect them.
This guy, a "certain lord," ticked him off because he showed up on Hotspur's battlefield "fresh as a bridegroom," clean shaven, smelling like perfume, and acting all haughty at the sight of dead bodies scattered around.
The guy also talked like a woman and complained about the smell of the corpses, which got on Hotspur's nerves. Hotspur admits he wasn't thinking when he told the guy to scram – he says didn't mean any disrespect to the king.
Sir Walter Blunt tries to help smooth things over too, but King Henry isn't having it. He points out that Hotspur still refuses to give up his prisoners unless the king agrees to pay for Mortimer's ransom. (Remember, Mortimer, who is Hotspur's brother-in-law, was captured by the Welsh Glendower back in Act one, scene one.)
Henry says he won't ransom Mortimer because the guy's a traitor to England – Henry claims that Mortimer let the Welsh army slaughter 1,000 English soldiers on purpose. Henry also points out that Mortimer has since married a Welsh woman, the daughter of the rebel leader Glendower. There's no way Henry's going to pay Mortimer's ransom.
Hotspur's outraged at the king's accusation that Mortimer's a traitor. According to Hotspur, Mortimer is a war hero and was wounded in battle against Glendower when he fought in man-to-man combat for over an hour. Mortimer's wounds are proof that he's not a traitor and it's totally not cool for the king to slander him this way.
King Henry says Hotspur's full of bologna – according to Henry, Mortimer never fought Glendower. Henry forbids Hotspur from uttering Mortimer's name ever again.
And another thing, says Henry, hand over the war prisoner, pronto.
After the king leaves the room, Hotspur tells his dad he'll never give the king his prisoners. Northumberland says Hotspur's out of his mind but the young Percy insists that he'd die for Mortimer. He calls the king an "ingrate."
Worcester reenters and says that when King Richard II was alive, he named Mortimer as the heir to the throne.
Northumberland says it's true – he heard it with his own ears, but later, when Richard was returning to England from fighting in Ireland, Henry (a.k.a. Bolingbroke) intercepted him and seized the crown. He then had Richard murdered.
Worcester says the Percy family has been blamed and scandalized for Richard's death and repeats that he heard Richard say Mortimer should be the heir to the throne.
Hotspur seems not to have known that Richard II named Mortimer heir to the throne before he died. It's no wonder, he says, King Henry doesn't want to ransom Mortimer from the Welsh. As long as Mortimer's out of the picture, there's no immediate threat to the legitimacy of Henry's reign.
Hotspur delivers a long speech about how the Percys have been dishonored by helping to depose King Richard II and place an inferior king on the throne. Now, said king is making the Percys look like a bunch of chumps. They should try to redeem their honor.
Worcester cuts off Hotspur and says he's got a plan, but Hotspur is all fired up and keeps interrupting to talk about honor.
Worcester threatens to leave since Hotspur won't pipe down and listen.
Northumberland tells his son that he's a hothead and acts like a mouthy woman in a bad mood who won't listen to anyone. (Don't get mad at us. Northumberland really does say that.)
Hotspur says he can't help it – the two-faced king has him all riled up. The king was nice when he needed their help but now he's a jerk.
Worcester reveals a plan – Hotspur will immediately release his prisoners without any ransom, but he'll keep one, who will be used to bargain with the Scots, who they want on their side. Worcester will send Hotspur a letter with specific instructions.
Meanwhile, Northumberland will talk to the Archbishop of York, Richard Scroop about joining forces to overthrow King Henry.
Worcester says the Archbishop will be down with the rebellion because Henry killed his brother for being one of King Richard's favorites. (Technically, Shakespeare's confused here. Richard II killed the Archbishop's cousin, not his brother, but we get the point.)
Eventually, the men agree, Worcester will also hook up with Glendower and Mortimer to raise a massive army against Henry's forces. In the meantime, they'll play it cool and pretend to be loyal subjects so the king doesn't get suspicious.
Hotspur says he can't wait to get his battle on. He lives for war.