10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2010

Or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File No. 001-34061

HSN, INC.

(Exact name of registrant as specified in its charter)

Delaware	26-2590893
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1 HSN Drive, St. Petersburg, Florida 33729

(Address of principal executive offices, including zip code)

(727) 872-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of August 2, 2010, the registrant had 57,539,916 shares of common stock outstanding.

HSN, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

		Page
Part I—Financial Information		3
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009	3
	Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009	4
	Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2010 and Year Ended December 31, 2009	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
Part II—Other Information		22
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Removed and Reserved	22
Item 5.	Other Information	22
Item 6.	Exhibits	22
Signatures		24

2

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

HSN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Net sales	$	689,992		$	640,083		$	1,373,205		$	1,269,703
Cost of sales		431,331			408,212			878,060			826,608
Gross profit		258,661			231,871			495,145			443,095
Operating expenses:
Selling and marketing		129,997			124,396			250,496			246,912
General and administrative		56,131			53,009			110,570			104,719
Production and programming		14,432			13,957			28,532			27,461
Amortization of intangible assets		141			140			282			281
Depreciation		9,610			9,629			19,420			19,080
Total operating expenses		210,311			201,131			409,300			398,453
Operating income		48,350			30,740			85,845			44,642
Other (expense) income:
Interest income		165			54			247			88
Interest expense		(8,226	)		(8,799	)		(16,602	)		(17,749	)
Total other expense, net		(8,061	)		(8,745	)		(16,355	)		(17,661	)
Income from continuing operations before income taxes		40,289			21,995			69,490			26,981
Income tax provision		(15,583	)		(8,357	)		(27,116	)		(10,361	)
Income from continuing operations		24,706			13,638			42,374			16,620
Loss from discontinued operations, net of tax		—			(28	)		(15	)		(56	)
Net income	$	24,706		$	13,610		$	42,359		$	16,564
Income from continuing operations per share:
Basic	$	0.43		$	0.24		$	0.74		$	0.29
Diluted	$	0.42		$	0.24		$	0.72		$	0.29
Net income per share:
Basic	$	0.43		$	0.24		$	0.74		$	0.29
Diluted	$	0.42		$	0.24		$	0.72		$	0.29
Shares used in computing earnings per share:
Basic		57,420			56,355			57,112			56,347
Diluted		59,430			57,171			59,239			56,976

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

3

HSN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

	June 30, 2010			December 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	279,934		$	269,921
Accounts receivable, net of allowance of $11,499 and $11,608, respectively		118,929			182,746
Inventories		293,679			261,473
Deferred income taxes		21,055			21,960
Prepaid expenses and other current assets		57,650			47,152
Total current assets		771,247			783,252
Property and equipment, net		153,068			157,051
Intangible assets, net		260,904			261,185
Other non-current assets		15,483			17,162
TOTAL ASSETS	$	1,200,702		$	1,218,650
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade	$	195,293		$	222,787
Current maturities of long-term debt		12,698			4,762
Accrued expenses and other current liabilities		174,497			222,739
Total current liabilities		382,488			450,288
Long-term debt, net of current maturities		321,359			333,960
Deferred income taxes		75,077			76,413
Other long-term liabilities		17,127			13,959
Total liabilities		796,051			874,620
Commitments and contingencies (Note 11)
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.01 par value; 25,000,000 authorized shares; no issued shares		—			—
Common stock, $0.01 par value; 300,000,000 authorized shares; 57,473,915 and 56,503,163 issued shares at June 30, 2010 and December 31, 2009, respectively		575			565
Additional paid-in capital		2,437,945			2,419,765
Retained deficit		(2,033,687	)		(2,076,046	)
Accumulated other comprehensive loss		(182	)		(254	)
Total shareholders’ equity		404,651			344,030
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,200,702		$	1,218,650

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

4

HSN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Preferred Stock			Common Stock			Additional Paid-in Capital		Retained Deficit			Accumulated Other Comprehensive Loss			Total
	Shares	Amount		Shares	Amount
Balance as of December 31, 2008	—	$	—	56,222	$	562	$	2,406,503	$	(2,148,534	)	$	(246	)	$	258,285
Comprehensive income:
Net income	—		—	—		—		—		72,488			—			72,488
Foreign currency translation	—		—	—		—		—		—			(8	)		(8	)
Total comprehensive income																72,480
Stock-based compensation expense for equity awards	—		—	—		—		11,264		—			—			11,264
Adjustment to capitalization as a result of the spin-off	—		—	—		—		406		—			—			406
Board of Directors deferred compensation	—		—	—		—		127		—			—			127
Issuance of common stock upon exercise of stock options and release of restricted stock units	—		—	281		3		1,465		—			—			1,468
Balance as of December 31, 2009	—		—	56,503		565		2,419,765		(2,076,046	)		(254	)		344,030
Comprehensive income:
Net income	—		—	—		—		—		42,359			—			42,359
Foreign currency translation	—		—	—		—		—		—			72			72
Total comprehensive income																42,431
Stock-based compensation expense for equity awards	—		—	—		—		7,370		—			—			7,370
Board of Directors deferred compensation	—		—	—		—		65		—			—			65
Issuance of common stock upon exercise of stock options and release of restricted stock units	—		—	971		10		10,745		—			—			10,755
Balance as of June 30, 2010	—	$	—	57,474	$	575	$	2,437,945	$	(2,033,687	)	$	(182	)	$	404,651

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

5

HSN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2010			2009
Cash flows from operating activities attributable to continuing operations:
Net income	$	42,359		$	16,564
Less: Loss from discontinued operations, net of tax		(15	)		(56	)
Income from continuing operations		42,374			16,620
Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing operations:
Depreciation		19,420			19,080
Amortization of intangible assets		282			281
Stock-based compensation expense		9,310			5,027
Amortization of cable and satellite distribution fees		1,679			1,680
Amortization of debt issuance costs		1,285			1,271
Loss on disposition of fixed assets		488			305
Deferred income taxes		(431	)		(31	)
Bad debt expense		8,265			8,540
Excess tax benefits from stock-based awards		(965	)		—
Changes in current assets and liabilities:
Accounts receivable		55,587			36,700
Inventories		(32,206	)		36,321
Prepaid expenses and other current assets		(11,686	)		(14,591	)
Accounts payable, accrued expenses and other current liabilities		(74,472	)		(37,160	)
Net cash provided by operating activities attributable to continuing operations		18,930			74,043
Cash flows from investing activities attributable to continuing operations:
Capital expenditures		(15,854	)		(19,121	)
Net cash used in investing activities attributable to continuing operations		(15,854	)		(19,121	)
Cash flows from financing activities attributable to continuing operations:
Repayment under revolving credit facility		—			(20,000	)
Repayment of long-term debt		(4,762	)		(7,500	)
Proceeds from issuance of common stock, net of withholding taxes		10,719			—
Excess tax benefits from stock-based awards		965			—
Net cash provided by (used in) financing activities attributable to continuing operations		6,922			(27,500	)
Total cash provided by continuing operations		9,998			27,422
Total cash provided by operating activities attributable to discontinued operations		15			1,034
Net increase in cash and cash equivalents		10,013			28,456
Cash and cash equivalents at beginning of period		269,921			177,463
Cash and cash equivalents at end of period	$	279,934		$	205,919

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

6

HSN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—ORGANIZATION

Company Overview

HSN, Inc. (“HSNi”) is an interactive multi-channel retailer that markets and sells a wide range of third party and private label merchandise directly to consumers through (i) television home shopping programming broadcast on the HSN television network; (ii) catalogs, which consist primarily of the Cornerstone portfolio of leading print catalogs including Frontgate, Garnet Hill, Ballard Designs, Improvements, Smith+Noble, The Territory Ahead and TravelSmith; (iii) websites, which consist primarily of HSN.com and the seven branded websites operated by Cornerstone; and (iv) retail stores. HSNi’s television home shopping business and related internet commerce is referred to herein as “HSN” and all catalog operations, including related internet commerce and retail stores, are collectively referred to herein as “Cornerstone.”

HSN offerings primarily consist of jewelry, fashion, beauty & wellness and home & other. Merchandise offered by Cornerstone primarily consists of home furnishings (including indoor/outdoor furniture, window treatments and other home related goods) and apparel & accessories.

Basis of Presentation

HSNi was incorporated in Delaware in May 2008 in connection with the spin-off of several businesses previously owned by IAC/InterActiveCorp, or IAC. The spin-off from IAC occurred August 20, 2008 concurrent with the spin-offs from IAC of Interval Leisure Group, Inc., Ticketmaster Entertainment, Inc., and Tree.com, Inc. Throughout these financial statements, the separation transaction is referred to as the “spin-off” and each of these companies as “Spincos.” Effective August 21, 2008, HSNi’s shares began trading on the NASDAQ Global Select Market under the symbol “HSNI.”

HSNi has accounted for its international subsidiaries as discontinued operations. The results of operations and cash flows of these subsidiaries have been presented as discontinued operations within the consolidated statements of operations and consolidated statements of cash flows for all periods presented.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of HSNi’s management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for a full year. The accompanying unaudited consolidated financial statements should be read in conjunction with HSNi’s audited consolidated financial statements and notes thereto for the year ended December 31, 2009. The consolidated balance sheet as of December 31, 2009 and the consolidated statement of shareholders’ equity for the year ended December 31, 2009 were derived from the audited consolidated financial statements at that date but may not include all disclosures required by GAAP. Intercompany transactions and accounts have been eliminated in consolidation.

NOTE 2—SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

HSNi’s management is required to make certain estimates and assumptions during the preparation of its consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates. In the opinion of HSNi’s management, the assumptions underlying these interim unaudited financial statements are reasonable.

Significant estimates underlying the accompanying consolidated financial statements include: the determination of the lower of cost or market adjustment for inventory; sales returns and other revenue allowances; the allowance for doubtful accounts; the recoverability of long-lived and intangible assets; the determination of deferred income taxes, including related valuation allowances; the accrual for actual, pending or threatened litigation, claims and assessments; and assumptions related to the determination of stock-based compensation.

7

NOTE 3—PROPERTY AND EQUIPMENT

The balance of property and equipment, net, is as follows (in thousands):

	June 30, 2010			December 31, 2009
Capitalized software	$	199,744		$	190,331
Computer and broadcast equipment		88,822			89,001
Buildings and leasehold improvements		85,318			81,937
Furniture and other equipment		68,853			66,861
Projects in progress		12,305			13,207
Land and land improvements		10,922			11,847
		465,964			453,184
Less: accumulated depreciation and amortization		(312,896	)		(296,133	)
Total property and equipment, net	$	153,068		$	157,051

NOTE 4—SEGMENT INFORMATION

HSNi has determined to represent its operating segments and related financial information in a manner consistent with how the chief operating decision maker and executive management view the businesses, how the businesses are organized as to segment management, and the focus of the businesses with regards to the types of products or services offered or the target market. HSNi has two operating segments, HSN and Cornerstone. Entities included in discontinued operations are excluded from the schedules below. The accounting policies of the segments are the same as those described in Note 2 – Summary of Significant Accounting Policies included in HSNi’s Annual Report on Form 10-K for the year ended December 31, 2009. Intercompany accounts and transactions have been eliminated in consolidation.

HSNi’s primary metric is Adjusted EBITDA, which is defined as operating income excluding, if applicable: (i) stock-based compensation expense and amortization of non-cash marketing, (ii) amortization of intangibles, (iii) depreciation and gains and losses on asset dispositions, (iv) goodwill, long-lived asset and intangible asset impairments, (v) pro forma adjustments for significant acquisitions, and (vi) one-time items. Adjusted EBITDA is not a measure determined in accordance with GAAP, and should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with GAAP. Adjusted EBITDA is used as a measurement of operating efficiency and overall financial performance and HSNi believes it to be a helpful measure for those evaluating companies in the retail and media industries. Adjusted EBITDA measures the amount of income generated each period that could be used to service debt, pay taxes and fund capital expenditures. Adjusted EBITDA has certain limitations in that it does not take into account the impact to HSNi’s consolidated statements of operations of certain expenses, including stock-based compensation, amortization of non-cash marketing, amortization of intangibles, depreciation, gains and losses on asset dispositions, asset impairment charges, acquisition-related accounting and one-time items.

8

The following tables reconcile Adjusted EBITDA to operating income (loss) for HSNi’s operating segments and to HSNi’s consolidated net income (in thousands):

	Three Months Ended June 30, 2010									Three Months Ended June 30, 2009
	HSN			Cornerstone			Total			HSN			Cornerstone			Total
Adjusted EBITDA	$	45,064		$	18,489		$	63,553		$	38,355		$	4,900		$	43,255
Stock-based compensation expense		(2,771	)		(2,196	)		(4,967	)		(2,044	)		(436	)		(2,480	)
Amortization of intangible assets		(141	)		—			(141	)		(140	)		—			(140	)
Depreciation		(7,262	)		(2,348	)		(9,610	)		(7,160	)		(2,469	)		(9,629	)
Loss on disposition of fixed assets		(426	)		(59	)		(485	)		(261	)		(5	)		(266	)
Operating income	$	34,464		$	13,886			48,350		$	28,750		$	1,990			30,740
Other expense, net								(8,061	)								(8,745	)
Income from continuing operations before income taxes								40,289									21,995
Income tax provision								(15,583	)								(8,357	)
Income from continuing operations								24,706									13,638
Loss from discontinued operations, net of tax								—									(28	)
Net income							$	24,706								$	13,610

	Six Months Ended June 30, 2010									Six Months Ended June 30, 2009
	HSN			Cornerstone			Total			HSN			Cornerstone			Total
Adjusted EBITDA	$	95,378		$	19,967		$	115,345		$	73,614		$	(4,279	)	$	69,335
Stock-based compensation expense		(6,042	)		(3,268	)		(9,310	)		(3,999	)		(1,028	)		(5,027	)
Amortization of intangible assets		(282	)		—			(282	)		(281	)		—			(281	)
Depreciation		(14,867	)		(4,553	)		(19,420	)		(14,134	)		(4,946	)		(19,080	)
Loss on disposition of fixed assets		(428	)		(60	)		(488	)		(299	)		(6	)		(305	)
Operating income (loss)	$	73,759		$	12,086			85,845		$	54,901		$	(10,259	)		44,642
Other expense, net								(16,355	)								(17,661	)
Income from continuing operations before income taxes								69,490									26,981
Income tax provision								(27,116	)								(10,361	)
Income from continuing operations								42,374									16,620
Loss from discontinued operations, net of tax								(15	)								(56	)
Net income							$	42,359								$	16,564

The net sales for each of HSNi’s reportable segments are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Net sales:
HSN	$	466,411	$	454,227	$	985,330	$	929,155
Cornerstone		223,581		185,856		387,875		340,548
Total	$	689,992	$	640,083	$	1,373,205	$	1,269,703

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NOTE 5—COMPREHENSIVE INCOME

Comprehensive income is comprised of (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2010		2009			2010		2009
Net income	$	24,706	$	13,610		$	42,359	$	16,564
Other comprehensive income (loss)		42		(28	)		72		2
Total comprehensive income	$	24,748	$	13,582		$	42,431	$	16,566

Accumulated other comprehensive loss included in the consolidated balance sheets at June 30, 2010 and December 31, 2009 is solely related to foreign currency translation and is recorded net of tax.

NOTE 6—STOCK-BASED AWARDS

The Second Amended and Restated 2008 Stock and Annual Incentive Plan, as amended (the “Plan”), authorizes the issuance of 8.0 million shares of HSNi common stock for new awards granted by HSNi. As of June 30, 2010, there were approximately 3.5 million shares of common stock available for grants under the 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.

During the six months ended June 30, 2010, HSNi granted approximately 441,000 RSUs and 507,000 stock-settled SARs. The RSUs have a weighted average fair value of $20.80 and they primarily vest over three years. The stock-settled SARs have a weighted average exercise price of $20.30, have a fair value of $8.79 and primarily vest ratably over three years. The following are the assumptions used in the Black-Scholes option pricing model to value SARs for the six months ended June 30, 2010: volatility factor of 46.51%, risk-free interest rate of 2.39%, expected term of 5 years and a dividend yield of zero.

Additionally, 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 June 30, 2010, a liability of approximately $1.9 million was recorded for these awards.

Stock-based compensation expense is included in the following line items in the accompanying consolidated statements of operations (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Selling and marketing	$	650		$	407		$	1,478		$	861
General and administrative		4,099			1,916			7,357			3,859
Production and programming		218			157			475			307
Stock-based compensation expense before income taxes		4,967			2,480			9,310			5,027
Income tax benefit		(1,823	)		(937	)		(3,397	)		(1,930	)
Stock-based compensation expense after income taxes	$	3,144		$	1,543		$	5,913		$	3,097

As of June 30, 2010, there was approximately $25.6 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is currently expected to be recognized over a weighted average period of approximately 2.12 years.

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NOTE 7—INCOME TAXES

HSNi calculates its interim income tax provision in accordance with the accounting guidance for income taxes in interim periods. At the end of each interim period, HSNi makes its best estimate of the annual expected effective tax rate and applies that rate to its ordinary year-to-date income or loss. The tax or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.

In addition, the effect of changes in enacted tax laws or rates, tax status, or judgment on the realizability of a beginning-of-the-year deferred tax asset in future years is recognized in the interim period in which the change occurs.

The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is acquired, additional information is obtained or the tax environment changes. To the extent that the estimated annual effective tax rate changes during a quarter, the effect of the change on prior quarters is included in tax expense for the current quarter.

For the three and six months ended June 30, 2010, HSNi recorded a tax provision from continuing operations of $15.6 million and $27.1 million, respectively, which represents effective tax rates of 38.7% and 39.0%, respectively. For the three and six months ended June 30, 2009, HSNi recorded a tax provision from continuing operations of $8.4 million and $10.4 million, respectively, which represents effective tax rates of 38.0% and 38.4%, respectively. The effective tax rates exceed the federal statutory rate of 35.0% due principally to state income taxes.

As a result of the spin-off, HSNi entered into a Tax Sharing Agreement with IAC in which, among other things, each of the Spincos has indemnified 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 shareholder 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 Internal Revenue Service (“IRS”) private letter ruling and/or tax opinions. Additionally, under the Tax Sharing Agreement, with respect to the consolidated federal income tax return of IAC and its subsidiaries for any taxable year that includes HSNi, IAC shall determine in its sole discretion whether to elect ratable allocation under applicable U.S. Treasury Regulations. HSNi shall, and shall cause each member of its group to, take all actions necessary to give effect to such election. In the event an adjustment with respect to a pre-spin-off period for which IAC is responsible results in a tax benefit to HSNi in a post-spin-off period, HSNi will be required to pay such tax benefit to IAC. In general, IAC controls all audits and administrative matters and other tax proceedings relating to the consolidated federal income tax return of the IAC group and any other tax returns for which the IAC group is responsible. The provisions set forth in the Tax Sharing Agreement could subject HSNi to future tax contingencies.

HSNi is routinely under audit by federal, state, local and foreign tax authorities. These audits include questioning the timing and the amount of deductions and the allocation of income among various tax jurisdictions. Income taxes payable include amounts considered sufficient to pay assessments that may result from examination of prior year returns; however, the amount paid upon resolution of issues raised may differ from the amount provided. Differences between the reserves for tax contingencies and the amounts owed by HSNi are recorded in the period they become known.

The IRS is currently examining the IAC consolidated tax returns for the years ended December 31, 2001 through 2006, which includes the operations of HSNi. The statute of limitations for these years has been extended to December 31, 2010. Various IAC consolidated tax returns filed with state, local and foreign jurisdictions are currently under examination, the most significant of which are California, New York and New York City, for various tax years after December 31, 2003. These examinations are expected to be completed by 2011. By virtue of the Tax Sharing Agreement with IAC, HSNi is indemnified with respect to additional tax liabilities for consolidated or combined federal tax returns prepared and filed by IAC prior to the spin-off, but is liable for any additional tax liabilities for HSNi separately filed state income tax returns.

NOTE 8—EARNINGS PER SHARE

HSNi computes basic earnings per share using the weighted average number of common shares outstanding for the period. HSNi computes diluted earnings per share using the treasury stock method or as if converted method, as applicable, which includes the weighted average number of common shares outstanding for the period plus the potential dilution that could occur if various equity awards to issue common stock were exercised or restricted equity awards were vested resulting in the issuance of common stock that could share in HSNi’s earnings.

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The following table presents HSNi’s basic and diluted earnings per share (in thousands, except per share data):

	Three Months Ended June 30,					Six Months Ended June 30,
	2010		2009			2010			2009
Net income:
Continuing operations	$	24,706	$	13,638		$	42,374		$	16,620
Discontinued operations		—		(28	)		(15	)		(56	)
Net income	$	24,706	$	13,610		$	42,359		$	16,564
Weighted average number of shares outstanding:
Basic		57,420		56,355			57,112			56,347
Dilutive effect of stock-based compensation awards		2,010		816			2,127			629
Diluted		59,430		57,171			59,239			56,976
Net income per share—basic:
Continuing operations	$	0.43	$	0.24		$	0.74		$	0.29
Discontinued operations		—		(0.00	)		(0.00	)		(0.00	)
Net income	$	0.43	$	0.24		$	0.74		$	0.29
Net income per share—diluted:
Continuing operations	$	0.42	$	0.24		$	0.72		$	0.29
Discontinued operations		—		(0.00	)		(0.00	)		(0.00	)
Net income	$	0.42	$	0.24		$	0.72		$	0.29
Unexercised employee stock options and stock appreciation rights and unvested restricted stock units excluded from the diluted EPS calculation because their effect would have been antidilutive		1,570		4,964			1,964			5,649

NOTE 9—LONG-TERM DEBT

	June 30, 2010			December 31, 2009
Secured credit agreement expiring July 25, 2013:
Term loan	$	95,238		$	100,000
Revolving credit facility		—			—
11.25% Senior Notes due August 1, 2016; interest payable each February 1st and August 1st which commenced February 1, 2009		240,000			240,000
Unamortized original issue discount on Senior Notes		(1,181	)		(1,278	)
Total long-term debt		334,057			338,722
Less: current maturities		(12,698	)		(4,762	)
Long-term debt, net of current maturities	$	321,359		$	333,960

On July 25, 2008, HSNi entered into a secured credit agreement with a syndicate of banks relating to a $150 million term loan and a $150 million revolving credit facility, each having a five-year maturity. Certain HSNi subsidiaries have unconditionally guaranteed HSNi’s obligations under the credit agreement, which is secured by substantially all of HSNi’s assets. The credit agreement bears interest based on HSNi’s financial leverage and, as of June 30, 2010, the term loan interest rate was equal to LIBOR plus 2.00% (2.35%). The credit agreement contains two principal financial covenants consisting of a maximum leverage ratio of 2.75x and a minimum interest coverage ratio of 3.00x, among other covenants. HSNi was in compliance with all such covenants

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as of June 30, 2010, with a leverage ratio of 1.33x and an interest coverage ratio of 8.11x. The amount available to HSNi under the credit agreement is reduced by the amount of commercial and standby letters of credit issued under the revolving credit facility portion of the agreement. As of June 30, 2010, there were $34.3 million of outstanding commercial and standby letters of credit issued under the revolving credit facility. The ability to draw funds under the revolving credit facility is dependent upon meeting the aforementioned financial covenants, which may limit HSNi’s ability to draw the full amount of the facility. As of June 30, 2010, the additional amount that could be borrowed under the revolving credit facility, in consideration of the financial covenants and outstanding letters of credit, was approximately $115.7 million. HSNi capitalized $7.3 million in financing costs related to the credit agreement and will amortize these costs to interest expense over the credit agreement’s five-year life. The annual fee to maintain the revolving credit facility is 50 basis points on the revolving credit facility portion of the credit agreement.

On July 28, 2008, HSNi issued $240 million of 11.25% senior notes due 2016 (the “Senior Notes”). The Senior Notes are unsecured and subordinated to all of HSNi’s secured debt. The Senior Notes were issued at a discount of $1.6 million which, along with other issuance expenses of $7.3 million, are being amortized to interest expense over the eight-year term of the Senior Notes.

NOTE 10—FAIR VALUE MEASUREMENTS

Fair value accounting, as prescribed by GAAP, defines fair value and establishes a framework for measuring fair value based on a three-level hierarchy:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting HSNi’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these items. The following table summarizes the fair value of HSNi’s financial assets and liabilities which are carried at cost (in millions):

	June 30, 2010
					Fair Value Measurement Category
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Senior Notes	$	240.0	$	268.8	$	268.8	$	—	$	—
Term Loan		95.2		91.0		—		—		91.0

	December 31, 2009
					Fair Value Measurement Category
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Senior Notes	$	240.0	$	264.0	$	264.0	$	—	$	—
Term Loan		100.0		96.1		—		—		96.1

The fair value of the Senior Notes was based upon quoted market information (level 1 criteria) and the fair value of the term loan was based upon discounted cash flows (level 3 criteria).

HSNi measures certain assets, such as intangible assets and property and equipment, at fair value on a non-recurring basis. These assets are recognized at fair value if they are deemed to be impaired. During the six months ended June 30, 2010 and 2009, there were no assets that were required to be recorded at fair value since no impairment indicators were present.

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NOTE 11—COMMITMENTS AND CONTINGENCIES

HSNi received a preliminary assessment notification from a state alleging that one of HSNi’s subsidiaries was required to collect and remit sales tax to the state. HSNi does not believe that its subsidiary is obligated to collect and remit these taxes, and intends to vigorously defend its position if the state’s notification results in an assessment. At this time, no assurances can be given as to the outcome nor can a reasonable estimate of liability, if any, be made.

In the ordinary course of business, HSNi is a party to various audits and lawsuits. These audits or litigation may relate to claims involving property, personal injury, contract, intellectual property, sales tax, regulatory compliance and other claims. HSNi establishes reserves for specific legal or tax compliance matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where it believes an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that an unfavorable resolution of claims against HSNi, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of HSNi, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. HSNi also evaluates other contingent matters, including tax contingencies, to assess the probability and estimated extent of potential loss. See Note 7 for discussion related to income tax contingencies.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Information

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), which are based on management’s exercise of business judgment, as well as assumptions made by and information currently available to management. When used in this document, the words “may,” “will,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” and words of similar import, are intended to identify any forward-looking statements. These forward-looking statements include, among other things, statements relating to the following: HSNi’s future financial performance, HSNi’s business prospects and strategy, anticipated trends and prospects in the various markets in which HSNi’s businesses operate and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.

Should one or more of these uncertainties, risks or changes in circumstances materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to the following: the impact of the continued macroeconomic environment on consumer confidence and spending levels; whether national economic stimulus initiatives and measures to stabilize financial institutions and the economy will be successful in achieving their objectives within the expected timeframes; other changes in political, business and economic conditions, particularly those that affect consumer confidence, consumer spending or internet growth; any technological or regulatory developments that could negatively impact the way we do business; changes in the interest rate environment and developments in the overall credit markets; HSNi’s business prospects and strategy, including whether HSNi’s initiatives will be effective; changes in our relationships with pay television operators, vendors, manufacturers and other third parties; the loss of any key member of our senior management team; our ability to offer new or alternative products and services in a cost effective manner and consumer acceptance of these products and services; and changes in product delivery costs. Certain of these and other risks and uncertainties are discussed in HSNi’s filings with the SEC, including the “Risk Factors” section in our Annual Report on Form 10-K filed with the SEC on March 4, 2010. Other unknown or unpredictable factors that could also adversely affect HSNi’s business, financial condition and results of operations may arise from time to time.

You should not place undue reliance on these forward-looking statements. We undertake no obligation, and do not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize. Historical results should not be considered an indication of future performance.

Results of Operations

Net Sales

Net sales primarily relate to the sale of merchandise and are reduced by incentive discounts and actual and estimated sales returns. Revenue is recorded when delivery to the customer has occurred. Delivery is considered to have occurred when the customer takes title and assumes the risks and rewards of ownership, which is generally on the date of shipment. HSNi’s sales policies allow customers to return virtually all merchandise for a full refund or exchange, subject to pre-established time restrictions and, in some cases, restocking fees.

	Three Months Ended June 30,					Six Months Ended June 30,
	2010		% Change	2009		2010		% Change	2009
	(Dollars in thousands)					(Dollars in thousands)
HSN	$	466,411	3%	$	454,227	$	985,330	6%	$	929,155
Cornerstone		223,581	20%		185,856		387,875	14%		340,548
Total net sales	$	689,992	8%	$	640,083	$	1,373,205	8%	$	1,269,703

HSNi net sales for the three months ended June 30, 2010 increased 8%, or $49.9 million, as compared to the prior year due to a 3% increase at HSN and a 20% increase at Cornerstone. The number of units shipped in the second quarter of 2010 increased 8% to 12.7 million as compared 11.7 million in the prior year and the average price point was relatively flat at $60.53 as compared to $60.60 in the prior year. Internet sales as a percentage of total net sales for the quarter represented 38.5% of HSNi net sales compared to 35.8% in the prior year.

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HSNi net sales for the six months ended June 30, 2010 increased 8%, or $103.5 million, as compared to the same period in 2009 due to a 6% increase at HSN and a 14% increase at Cornerstone. The number of units shipped in the first half of 2010 increased 7% to 25.3 million from 23.6 million and the average price point increased 1% to $60.16 from $59.53. Internet sales as a percentage of total net sales continued to grow in the first half of 2010 representing 38.1% of HSNi net sales as compared to 36.3% in the prior year.

HSN

HSN merchandise categories primarily consist of jewelry, fashion (including apparel & accessories), beauty & wellness and home & other (including housewares, home fashions, electronics, fitness and other). Divisional product mix at HSN is provided in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Jewelry	16.1	%	17.7	%	15.0	%	16.3	%
Fashion (apparel & accessories)	14.0	%	10.2	%	13.2	%	10.8	%
Beauty & wellness	20.6	%	20.6	%	19.8	%	19.6	%
Home & other	49.3	%	51.5	%	52.0	%	53.3	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

Net sales for HSN for the second quarter of 2010 increased 3% to $466.4 million compared to $454.2 million in the prior year. Due primarily to a strategic shift in product mix towards the fashion and wellness categories, units shipped increased 6% and the average price point decreased 2% compared to the prior year. HSN.com sales grew 10% over the prior year representing 30.4% of HSN’s net sales, up from 28.4% in the prior year.

Net sales for HSN for the six months ended June 30, 2010 increased 6% to $985.3 million from $929.2 million in the prior year. Shipped units increased by 6% and the average price point increased by 1% to $58.03 compared to the same period in the prior year. HSN.com net sales grew 13% over the prior year representing 31.0% of HSN’s total net sales, up from 29.2% in the prior year.

Cornerstone

Net sales for Cornerstone for the second quarter of 2010 increased 20% to $223.6 million compared to the prior year. The sales growth is attributable to an increase in demand for luxury and outdoor products, the execution of strategic merchandising and marketing initiatives and our investment in catalog circulation in Cornerstone’s three largest brands, Frontgate, Ballard Designs and Garnet Hill. The number of units shipped increased 16% and the average price point increased 2% to $71.81 compared to the prior year. Internet sales penetration increased 140 basis points and represents 55.4% of Cornerstone’s net sales.

Net sales for Cornerstone for the six months ended June 30, 2010 increased 14% to $387.9 million compared to $340.5 million in the prior year. As discussed previously, the increase is attributable to the increase in consumer demand for luxury and outdoor products, the execution of strategic merchandising and marketing initiatives and our investment in catalog circulation in Cornerstone’s three largest brands, Frontgate, Ballard Designs and Garnet Hill. The average price point and units shipped increased 1% and 11%, respectively, in the first half of 2010 as compared to the prior year. Internet sales represented 55.9% of net sales in 2010 as compared to 55.5% in 2009.

Cost of Sales and Gross Profit

Cost of sales consists primarily of the cost of products sold, shipping and handling costs, compensation and other employee-related costs (including stock-based compensation) for personnel engaged in warehouse functions and certain warehousing and fulfillment costs.

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	Three Months Ended June 30,							Six Months Ended June 30,
	2010			% Change	2009			2010			% Change	2009
	(Dollars in thousands)							(Dollars in thousands)
Gross profit:
HSN	$	162,189		6%	$	152,773		$	333,798		10%	$	304,742
HSN gross profit margin		34.8	%	120 bp		33.6	%		33.9	%	110 bp		32.8	%
Cornerstone	$	96,472		22%	$	79,098		$	161,347		17%	$	138,353
Cornerstone gross profit margin		43.1	%	50 bp		42.6	%		41.6	%	100 bp		40.6	%
HSNi	$	258,661		12%	$	231,871		$	495,145		12%	$	443,095
HSNi gross profit margin		37.5	%	130 bp		36.2	%		36.1	%	120 bp		34.9	%

bp = basis points

HSN

Gross profit for HSN for the second quarter of 2010 increased 6% to $162.2 million compared to $152.8 million in the prior year. Gross profit margin improved 120 basis points to 34.8% compared to 33.6% in the prior year. The improvement in gross profit margin was mainly driven by the product mix shift towards fashion and wellness which typically carry lower price points and higher margins.

Gross profit for HSN for the six months ended June 30, 2010 increased 10% to $333.8 million from $304.7 million in the prior year. Gross profit margin improved 110 basis points to 33.9% from 32.8% in the prior year. The improvement in gross profit margin was mainly driven by the product mix shift towards fashion and wellness and improved product margins due to less promotional activity.

Cornerstone

Gross profit for Cornerstone increased 22% to $96.5 million in the second quarter of 2010 compared to $79.1 million in the prior year. Gross profit margin improved 50 basis points to 43.1% from 42.6% and was attributable to reduced promotional activity and leverage over warehousing costs due to the revenue growth and warehouse efficiencies.

Gross profit for Cornerstone for the six months ended June 30, 2010 increased 17% to $161.3 million compared to $138.4 million in the prior year. Gross profit margin improved 100 basis points to 41.6% from 40.6%. The margin improvement was attributable to reduced promotional activity and leverage over warehousing costs due to the revenue growth and warehouse efficiencies.

Selling and Marketing Expense

Selling and marketing expense consists primarily of advertising and promotional expenditures, compensation and other employee-related costs (including stock-based compensation) for personnel engaged in customer service, sales and merchandising functions and on-air distribution costs. Advertising and promotional expenditures primarily include catalog production and distribution costs and online marketing, including fees paid to search engines and third party distribution partners.

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	Three Months Ended June 30,							Six Months Ended June 30,
	2010			% Change	2009			2010			% Change	2009
	(Dollars in thousands)							(Dollars in thousands)
HSN	$	66,872		4%	$	64,478		$	137,668		4%	$	132,039
As a percentage of HSN net sales		14.3	%	10 bp		14.2	%		14.0	%	(20 bp)		14.2	%
Cornerstone	$	63,125		5%	$	59,918		$	112,828		(2%)	$	114,873
As a percentage of Cornerstone net sales		28.2	%	(400 bp)		32.2	%		29.1	%	(460 bp)		33.7	%
HSNi	$	129,997		5%	$	124,396		$	250,496		1%	$	246,912
As a percentage of HSNi net sales		18.8	%	(60 bp)		19.4	%		18.2	%	(120 bp)		19.4	%

HSNi’s selling and marketing expense for the second quarter of 2010 increased $5.6 million to $130.0 million and represents 18.8% of net sales as compared to 19.4% in the prior year. The increase in expense is primarily due to an increase in compensation and other employee-related costs due to increased headcount and an increase in Cornerstone’s catalog costs associated with a 16% increase in circulation.

HSNi’s selling and marketing expense for the six months ended June 30, 2010 increased $3.6 million to $250.5 million and represents 18.2% of net sales as compared to 19.4% in the prior year. The increase in the expense is primarily due to an increase in compensation and other employee-related costs due to increased headcount and an increase in HSN’s on-air distribution costs associated with additional subscribers in certain markets, partially offset by a decrease in Cornerstone’s catalog costs. The decrease in catalog costs was primarily attributable to the timing of the catalog mailings as catalog costs are amortized over the expected future revenue stream.

General and Administrative Expense

General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in finance, legal, tax, human resources, information technology and executive management functions, bad debts, facilities costs and fees for professional services.

	Three Months Ended June 30,							Six Months Ended June 30,
	2010			% Change	2009			2010			% Change	2009
	(Dollars in thousands)							(Dollars in thousands)
HSN	$	39,019		2%	$	38,287		$	78,691		4%	$	75,925
As a percentage of HSN net sales		8.4	%	0 bp		8.4	%		8.0	%	(20 bp)		8.2	%
Cornerstone	$	17,112		16%	$	14,722		$	31,879		11%	$	28,794
As a percentage of Cornerstone net sales		7.7	%	(20 bp)		7.9	%		8.2	%	(30 bp)		8.5	%
HSNi	$	56,131		6%	$	53,009		$	110,570		6%	$	104,719
As a percentage of HSNi net sales		8.1	%	(20 bp)		8.3	%		8.1	%	(10 bp)		8.2	%

HSNi’s general and administrative expense for the second quarter of 2010 increased 6% to $56.1 million compared to $53.0 million in the prior year. This increase is primarily attributable to compensation expense related to performance-driven incentives and stock-based compensation for performance-based awards.

HSNi’s general and administrative expense for the six months ended June 30, 2010 increased 6% to $110.6 million compared to $104.7 million in the prior year. This increase is primarily due to compensation expense related to performance-driven incentives and stock-based compensation for performance-based awards.

Production and Programming Expense

Production and programming expense includes costs related to the production of HSN’s television network. These costs consist primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in production and programming at HSN. Expenses associated with on-air distribution of HSN, including expenses relating to pay television operators, are included in selling and marketing expense.

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	Three Months Ended June 30,							Six Months Ended June 30,
	2010			% Change	2009			2010			% Change	2009
	(Dollars in thousands)							(Dollars in thousands)
Production and programming expense	$	14,432		3%	$	13,957		$	28,532		4%	$	27,461
As a percentage of HSN net sales		3.1	%	0 bp		3.1	%		2.9	%	(10 bp)		3.0	%

Production and programming expense for the second quarter of 2010 increased 3% to $14.4 million compared to $14.0 million in the prior year. As a percentage of HSN’s net sales, production and programming expense was 3.1% for the three months ended June 30, 2010 and 2009, respectively.

Production and programming expense for the six months ended June 30, 2010 increased 4% to $28.5 million compared to $27.5 million in the prior year. As a percentage of HSN’s net sales, production and programming expense was 2.9% compared to 3.0% in the prior year period.

Depreciation

	Three Months Ended June 30,							Six Months Ended June 30,
	2010			% Change	2009			2010			% Change	2009
	(Dollars in thousands)							(Dollars in thousands)
HSN	$	7,262		1%	$	7,160		$	14,867		5%	$	14,134
Cornerstone		2,348		(5%)		2,469			4,553		(8%)		4,946
HSNi	$	9,610		(0%)	$	9,629		$	19,420		2%	$	19,080
As a percentage of HSNi net sales		1.4	%	(10 bp)		1.5	%		1.4	%	(10 bp)		1.5	%

HSNi’s depreciation for the second quarter of 2010 and 2009 was $9.6 million. Depreciation for the six months ended June 30, 2010 was $19.4 million compared to $19.1 million in the prior year and represents 1.4% of net sales compared to 1.5% in the prior year.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure and is defined in Note 4 of Notes to Consolidated Financial Statements.

	Three Months Ended June 30,							Six Months Ended June 30,
	2010			% Change	2009			2010			% Change	2009
	(Dollars in thousands)							(Dollars in thousands)
HSN	$	45,064		17%	$	38,355		$	95,378		30%	$	73,614
As a percentage of HSN net sales		9.7	%	130 bp		8.4	%		9.7	%	180 bp		7.9	%
Cornerstone	$	18,489		277%	$	4,900		$	19,967		567%	$	(4,279	)
As a percentage of Cornerstone net sales		8.3	%	570 bp		2.6	%		5.1	%	640 bp		(1.3	%)
HSNi	$	63,553		47%	$	43,255		$	115,345		66%	$	69,335
As a percentage of HSNi net sales		9.2	%	240 bp		6.8	%		8.4	%	290 bp		5.5	%

HSNi’s Adjusted EBITDA for the second quarter of 2010 increased 47% or $20.3 million from 2009 and represents 9.2% of net sales compared to 6.8% in the prior year. The increase in Adjusted EBITDA is primarily due to the increase in net sales and the 130 basis point improvement in gross profit margin, offset slightly by increases in compensation and employee-related costs and investments in Cornertone’s catalog circulation.

HSNi’s Adjusted EBITDA for the six months ended June 30, 2010 increased 66% or $46.0 million from 2009 and represents 8.4% of net sales as compared to 5.5% in the prior year. The increase in Adjusted EBITDA is primarily due to the increase in net sales and the 120 basis point improvement in gross profit margin, offset slightly by increases in compensation and employee-related costs and HSN’s on-air distribution costs.

19

Operating Income (Loss)

	Three Months Ended June 30,							Six Months Ended June 30,
	2010			% Change	2009			2010			% Change	2009
	(Dollars in thousands)							(Dollars in thousands)
HSN	$	34,464		20%	$	28,750		$	73,759		34%	$	54,901
As a percentage of HSN net sales		7.4	%	110 bp		6.3	%		7.5	%	160 bp		5.9	%
Cornerstone	$	13,886		598%	$	1,990		$	12,086		218%	$	(10,259	)
As a percentage of Cornerstone net sales		6.2	%	510 bp		1.1	%		3.1	%	610 bp		(3.0	%)
HSNi	$	48,350		57%	$	30,740		$	85,845		92%	$	44,642
As a percentage of HSNi net sales		7.0	%	220 bp		4.8	%		6.3	%	280 bp		3.5	%

HSNi’s operating income for the second quarter of 2010 increased 57% or $17.6 million to $48.4 million compared to $30.7 million in the prior year. The operating margin in 2010 improved to 7.0% compared 4.8% in 2009. The improvement is due to the increase in net sales and the 130 basis point increase in gross profit margin, offset slightly by increases in compensation and employee-related costs, including stock-based compensation, and investments in Cornerstone’s catalog circulation.

HSNi’s operating income for the six months ended June 30, 2010 increased 92% or $41.2 million to $85.8 million as compared to $44.6 million in the prior year. The operating margin in 2010 improved to 6.3% compared to 3.5% in 2009. The increase is primarily due to the increase in net sales and the 120 basis point increase in gross profit margin, offset slightly by increases in compensation and employee-related costs, including stock-based compensation, and HSN’s on-air distribution costs.

Other (Expense) Income

	Three Months Ended June 30,							Six Months Ended June 30,
	2010			% Change	2009			2010			% Change	2009
	(Dollars in thousands)							(Dollars in thousands)
Interest income	$	165		206%	$	54		$	247		181%	$	88
Interest expense		(8,226	)	7%		(8,799	)		(16,602	)	6%		(17,749	)
Other (expense) income, net	$	(8,061	)	8%	$	(8,745	)	$	(16,355	)	7%	$	(17,661	)
As a percentage of HSNi net sales		(1.2	%)	(20 bp)		(1.4	%)		(1.2	%)	(20 bp)		(1.4	%)

Interest expense primarily relates to the $240 million of Senior Notes and the five-year term loan. The decrease in interest expense for the three and six months ended June 30, 2010 compared to 2009 is due to the repayment of the term loan and a decrease in the average interest rate of the term loan.

Income Tax Provision

For the three and six months ended June 30, 2010, HSNi recorded a tax provision from continuing operations of $15.6 million and $27.1 million, respectively, which represents effective tax rates of 38.7% and 39.0%, respectively. For the three and six months ended June 30, 2009, HSNi recorded a tax provision from continuing operations of $8.4 million and $10.4 million, respectively, which represents effective tax rates of 38.0% and 38.4%, respectively. The effective tax rates for all periods presented are higher than the federal statutory rate of 35% due principally to state income taxes.

Liquidity and Capital Resources

As of June 30, 2010, HSNi had $279.9 million of cash and cash equivalents, up from $269.9 million as of December 31, 2009.

Net cash provided by operating activities attributable to continuing operations for the six months ended June 30, 2010 was $18.9 million compared to $74.0 million in the same period last year, a decrease of $55.1 million. This variance is principally due to an increase in inventories to support sales growth and increased payments of trade payables and income taxes, partially offset by the improved operating performance and collection of accounts receivables at HSN.

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Net cash used in investing activities attributable to continuing operations for the six months ended June 30, 2010 of $15.9 million resulted from capital expenditures. The capital expenditures were for investments in information technology, campus renovations and broadcasting-related investments. Net cash used in investing activities attributable to continuing operations in 2009 of $19.1 million was primarily at HSN and was for investments in high-definition television programming, campus renovations and other information technology and broadcasting-related investments.

Net cash provided by financing activities attributable to continuing operations for the six months ended June 30, 2010 was $6.9 million due to cash proceeds of $10.7 million received from the issuance of common stock pursuant to stock-based awards, net of withholding taxes, partially offset by the repayment of $4.8 million of long-term debt. As of June 30, 2010, $95.2 million was outstanding under the term loan and no amounts were outstanding under the revolving credit facility, except for letters of credit. Net cash used in financing activities attributable to continuing operations in 2009 was $27.5 million due to repayments of $20.0 million for the revolving credit facility and $7.5 million of long-term debt.

The credit agreement contains two principal financial covenants consisting of a maximum leverage ratio of 2.75x and a minimum interest coverage ratio of 3.00x, among other covenants. HSNi was in compliance with all such covenants as of June 30, 2010, with a leverage ratio of 1.33x and an interest coverage ratio of 8.11x. The amount available under the credit agreement is reduced by the amount of commercial and standby letters of credit issued under the revolving credit facility portion of the agreement. As of June 30, 2010, there were $34.3 million of outstanding commercial and standby letters of credit issued under the revolving credit facility. The ability to draw funds under the revolving credit facility is dependent upon meeting the aforementioned financial covenants, which may limit HSNi’s ability to draw the full amount of the facility. As of June 30, 2010, the additional amount that could be borrowed under the revolving credit facility, in consideration of the financial covenants and outstanding letters of credit, was approximately $115.7 million.

HSNi does not currently have any material commitments for capital expenditures; however, management does anticipate that HSNi will need to make capital and other expenditures in connection with the development and expansion of its operations. HSNi’s ability to fund its cash and capital needs will be affected by its ongoing ability to generate cash from operations, the overall capacity and terms of its financing arrangements as discussed above, and access to the capital markets. HSNi believes that its cash on hand, its anticipated operating cash flows, its available unused portion of the revolving credit facility and its access to capital markets will be sufficient to fund its operating needs, capital, investing and other commitments and contingencies for the foreseeable future.

Seasonality

HSNi is affected by seasonality, although historically our business has exhibited less seasonality than many other retail businesses. Our sales levels are generally higher in the fourth quarter.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For a description of HSNi’s market risks, see “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in HSNi’s Annual Report on Form 10-K for the year ended December 31, 2009. No material changes have occurred in HSNi’s market risks since December 31, 2009.

Item 4. Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of June 30, 2010. Based on that evaluation, management has concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2010 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

21

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we are involved in various legal matters arising out of our operations. These matters may relate to claims involving property, personal injury, contract, intellectual property, sales tax, regulatory compliance and other claims. At August 4, 2010, we are not a party to any legal proceedings that are reasonably expected to have a material adverse effect on our business, results of operations, financial condition or cash flows. The results of these matters cannot be predicted with certainty and an unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows.

Rules of the SEC require the description of material pending legal proceedings, other than ordinary, routine litigation incident to the company’s business, and advise that proceedings ordinarily need not be described if they primarily involve damage claims for amounts (exclusive of interest and costs) not exceeding 10% of the current assets of the company and its subsidiaries on a consolidated basis. In the judgment of management, none of the pending litigation matters which HSNi and its subsidiaries are defending involves or is likely to involve amounts of that magnitude.

Item 1A. Risk Factors

See Part I, Item 1A., “Risk Factors,” of HSNi’s Annual Report on Form 10-K for the year ended December 31, 2009, for a detailed discussion of the risk factors affecting HSNi. There have been no material changes from the risk factors described in the annual report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Removed and Reserved

Item 5. Other Information

None

Item 6. Exhibits

Exhibit Number	Description	Location
4.1	Second Supplemental Indenture dated as of January 1, 2010 between HSN, Inc., as Issuer, and The Bank of New York Mellon, as Trustee	Filed herewith
10.1	Form of Performance Cash Award Agreement *	Filed herewith
10.2	Amendment No. 1 to the Second Amended and Restated 2008 Stock and Annual Incentive Plan dated as of February 24, 2010 *	Filed herewith
10.3	Employee Stock Purchase Plan	Filed herewith
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.	Filed herewith
* Reflects management contracts and management and director compensation plans.

22

31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.	Filed herewith
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.	Filed herewith
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.	Filed herewith

23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 4, 2010

HSN, INC.
By:	/s/ JUDY A. SCHMELING
	Judy A. Schmeling Executive Vice President and Chief Financial Officer

24

EX-4.1

Exhibit 4.1

SECOND SUPPLEMENTAL INDENTURE

This SECOND SUPPLEMENTAL INDENTURE dated as of January 1, 2010, is between HSN, Inc., a Delaware corporation (the “Issuer”), and The Bank of New York Mellon, a New York banking corporation, as Trustee (the “Trustee”).

RECITALS

WHEREAS, the Issuer and the Trustee entered into an Indenture dated July 28, 2008 (the “Indenture”), pursuant to which the Issuer originally issued $240,000,000 in originally issued 11.25% Senior Notes due 2016 (the “Notes”);

WHEREAS, Section 4.13 of the Indenture provides the method by which the Issuer may amend the Indenture to add a new Domestic Subsidiary as an additional Guarantor under the Indenture;

WHEREAS, the Issuer has designated Cornerstone Services, Inc., a Delaware corporation, as a Domestic Subsidiary under the Indenture; and

WHEREAS, all acts and things prescribed by the Indenture and by law necessary to make this Second Supplemental Indenture a valid instrument legally binding on the Company and the Domestic Subsidiary, in accordance with its terms, have been duly done and performed.

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the mutual agreements hereinafter set forth, the Domestic Subsidiary and Trustee have agreed and do hereby agree as follows:

ARTICLE 1

Section 1.01 This Second Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02 This Second Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Domestic Subsidiary and the Trustee.

Section 1.03 Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

ARTICLE 2

Section 2.01 From this date, in accordance with Section 4.13 of the Indenture and by executing this Second Supplemental Indenture, Cornerstone Services, Inc., a Delaware corporation “CSI”), will be a Domestic Subsidiary and Guarantor under the Indenture, and subject to the provisions of the Indenture and as a Guarantor to the extent provided under Section 10 of the Indenture.

Section 2.02 CSI, jointly and severally, with the Guarantors, hereby conditionally guarantees to each Holder all of Issuer’s obligations under the Notes and the Indenture on the terms set forth in the Indenture.

Section 2.03 THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SECOND SUPPLEMENTAL INDENTURE, THE INDENTURE, THE NOTES AND GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPALS OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

Section 2.04 The parties may sign any number of copies hereof. Each signed copy shall be an original, but all of them together represent the same instrument.

IN WITNESS WHEREOF, the parties hereto have cause this Second Supplement Indenture to be duly executed as of the day and year first above written.

HSN, INC., as the Issuer
By:
	Arthur Singleton, Vice President and Treasurer
THE BANK OF NEW YORK MELLON, as Trustee
By:
Name:
Title:

Acknowledged and Accepted
as of the date first written above:
Cornerstone Services, Inc.
By:
	Michael Attinella
	Assistant Treasurer

2

EX-10.1

Exhibit 10.1

PERFORMANCE CASH AWARD AGREEMENT

THIS PERFORMANCE CASH AWARD AGREEMENT (this “Agreement”), dated as of «award_date» (the “Award Date”) is between HSN, Inc., a Delaware corporation (the “Company”), and «Participant» (the “Participant”). Capitalized terms used, but not otherwise defined, herein shall have the meanings ascribed to such terms in the Company’s Second Amended and Restated 2009 Stock and Annual Incentive Compensation Plan, as amended (the “Plan”).

1. Award and Vesting of Cash Award

(a) In order to encourage Participant’s continued contribution to the successful performance of the Company, the Company hereby grants to the Participant, as of the Award Date, a performance cash award in the amount of «Award Amount» (the “Cash Award”), pursuant to the Company’s Long-Term Incentive Program promulgated under the Plan (the “LTIP”). The Participant hereby acknowledges and accepts such Cash Award upon the terms and subject to the performance requirements and other conditions, restrictions and limitations contained in this Agreement.

(b) Subject to Sections 5 and 6 of this Agreement, the total Cash Award shall vest and become payable to the Participant on December 31, 2011 (the “Vesting Date”).

(c) Nothing in this Agreement shall confer upon the Participant any right to continue in the employ or service of the Company or any of its affiliates or interfere in any way with the right of the Company or any such Affiliates to terminate the Participant’s service at any time, with or without cause.

2. Settlement of Cash Award

Except as provided in Sections 5 and 6 below, the Cash Award shall be payable to the Participant within thirty (30) days following the Vesting Date. To the extent required by federal, state or local law, the Company shall have the right to withhold and deduct from the payments due to Participant pursuant to the Cash Award, amounts that would otherwise be delivered pursuant hereto for the payment of taxes or other amounts required by law and to take such other action as may be necessary in the option of the Company to satisfy all obligations for withholding of such taxes.

3. Non-Transferability of the Award

The Cash Award shall not be transferable by the Participant by means of sale, assignment, exchange, encumbrance, pledge, attachment or otherwise transferred or encumbered and any such purported assignment, exchange, encumbrance, pledge or attachment shall be void and unenforceable against the Company.

4. Rights as a Stockholder

The Participant shall not be entitled to any rights of a stockholder.

5. Forfeiture

Notwithstanding the provisions of Section 1(b) and except as provided in Section 6, in the event of termination of the Participant’s service with the Company prior to the Vesting Date for any reason, including by reason of death or Disability, the entire amount of the unvested Cash Award shall be forfeited by the Participant and canceled in its entirety effective immediately upon such termination.

6. Adjustment in the Event of Change in Control

(a) In the event that a Change in Control, as defined in Section 10(c) of the Plan, occurs prior to the Vesting Date and provided Participant is employed on the effective date of the Change in Control, Participant will receive the Cash Award, discounted as

provided in (b) below. Such payout shall be made as soon as practical after the effective date of the Change in Control, but in no event later than March 15^th of the year following the year in which the Change in Control occurs.

(b) In order to reflect the time value of the earlier payment of the Performance Cash payout and to satisfy IRS Regulation §1.162-27(e)(2)(iii)(B), the amount of the Performance Cash payout shall be equal to the present value of the amount that would have been payable had the Participant been employed on the Vesting Date, based upon the whole number of months between the first day of the month in which the Change in Control occurs and the Vesting Date, and the Federal short-term rate determined by the IRS pursuant to §1274 of the Internal Revenue Code for the month in which the Change in Control occurs, compounded monthly.

7. Other Agreements and Acknowledgments

(a) By accepting the grant evidenced by of this Agreement, the Participant acknowledges and agrees that: (i) the LTIP is established voluntarily by the Company; it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time unless otherwise provided in the Plan or this Agreement; (ii) the grant of the award is voluntary and occasional and does not create any contractual or other right to receive future grants of cash awards, or benefits in lieu of cash awards, even if cash awards have been granted in the past; (iii) all decisions with respect to future grants, if any, will be at the sole discretion of the Company; (iv) the future value of the Cash Award is unknown and cannot be predicted with certainty; (v) in consideration of the grant of the Cash Award, no claim of entitlement to compensation or damages shall arise from termination of the Cash Award or diminution in value of the Cash Award resulting from a termination of the Participant’s employment by the Company or Change in Control, and the Participant irrevocably releases the Company from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting the terms of this Agreement, the Participant shall be deemed irrevocably to have waived any entitlement to pursue such claim; and (vi) notwithstanding any terms or conditions of the Plan to the contrary, in the event of involuntary termination of the Participant’s employment (whether or not in breach of local labor laws), the Participant’s right to receive awards or vest in awards under the Plan, if any, will terminate effective as of the date that the Participant is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of involuntary termination of employment (whether or not in breach of local labor laws), the Committee shall have the exclusive discretion to determine when Participant is no longer actively employed for purposes of the Cash Award.

(b) The Cash Award currently consists of a bookkeeping entry representing the right to receive cash on a date determined in accordance with this Agreement. Nothing in this Agreement shall create or be deemed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Subsidiary and the Participant.

8. Notices

All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by facsimile, overnight courier, or registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Participant: at the address last provided by the Participant to the Company’s Human Resources Department.

If to the Company:	HSN, Inc.
	1 HSN Drive
	St. Petersburg, FL 33729
	Attention: General Counsel
	Facsimile: (727) 872-1000

or to such other address or facsimile number as any party shall have furnished to the other in writing in accordance with this Section 8. Notice and communications shall be effective when actually received by the addressee. Notwithstanding the foregoing, the Participant consents to electronic delivery of documents required to be delivered by the Company under the securities laws.

2

9. Effect of Agreement

Except as otherwise provided hereunder, this Agreement shall be binding upon and shall inure to the benefit of any successor or successors of the Company.

10. Laws Applicable to Construction; Consent to Jurisdiction

The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without reference to principles of conflict of laws, as applied to contracts executed in and performed wholly within the State of Delaware. In addition to the terms and conditions set forth in this Agreement and the Summary of Award, the RSUs are subject to the terms and conditions of the Plan, which are hereby incorporated by reference.

Any and all disputes arising under or out of this Agreement, including without limitation any issues involving the enforcement or interpretation of any of the provisions of this Agreement, shall be resolved by the commencement of an appropriate action in the state or federal courts located within the State of Florida, which shall be the exclusive jurisdiction for the resolution of any such disputes. The Participant hereby agrees and consents to the personal jurisdiction of said courts over the Participant for purposes of the resolution of any and all such disputes.

11. Severability

The invalidity or enforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

12. Conflicts and Interpretation

In the event of any conflict between this Agreement, the LTIP and the Plan, the Plan shall control. In the event of any ambiguity in this Agreement, or any matters as to which this Agreement is silent, the Plan shall govern including, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to (i) interpret the Plan, (ii) prescribe, amend and rescind rules and regulations relating to the Plan, and (iii) make all other determinations deemed necessary or advisable for the administration of the Plan.

13. Amendment

The Company may modify, amend or waive the terms of the award, prospectively or retroactively, but no such modification, amendment or waiver shall impair the rights of the Participant without his or her consent, except as required by applicable law, NASDAQ or stock exchange rules, tax rules or accounting rules. The waiver by either party of compliance with any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement.

14. Headings

The headings of paragraphs herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any of the provisions of this Agreement.

15. Counterparts

This Agreement may be executed in counterparts, which together shall constitute one and the same original.

3

16. Data Protection

The Participant authorizes the release from time to time to the Company (and any of its subsidiaries or affiliated companies) and to the Agent (together, the “Relevant Companies”) of any and all personal or professional data that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). Without limiting the above, Participant permits his or her employing company to collect, process, register and transfer to the Relevant Companies all Relevant Information (including any professional and personal data that may be useful or necessary for the purposes of the administration of the Plan and/or this Agreement and/or to implement or structure any further grants of equity awards (if any)). Participant hereby authorizes the Relevant Information to be transferred to any jurisdiction in which the Company, his or her employing company or the Agent considers appropriate. Participant shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

IN WITNESS WHEREOF, as of the date first above written, the Company has caused this Agreement to be executed on its behalf by a duly authorized officer. Electronic acceptance of this Agreement pursuant to the Company’s instructions to Participant (including through an online acceptance process managed by the Agent) is acceptable.

HSN, INC.
By:
	Lisa Letizio
	Executive Vice President –
	Human Resources

4

EX-10.2

Exhibit 10.2

AMENDMENT NO. 1

TO THE

SECOND AMENDED AND RESTATED

2008 STOCK AND ANNUAL INCENTIVE PLAN

This Amendment No. 1 (this “Amendment”) to the HSN, Inc. Second Amended and Restated 2008 Stock and Annual Incentive Plan (the “Plan”) is dated as of February 24, 2010.

R E C I T A L S

WHEREAS, the Plan provides for the treatment of Adjusted Awards upon a Change in Control of the Company;

WHEREAS, the Company wishes to amend the Plan to conform to the original intent of the adjustments made to the Adjusted Awards to have the change in control triggering event for such awards be a change in control of the Participant’s employer, rather than a Change in Control of the Company;

WHEREAS, the Company wishes to further amend the Plan in accordance with Section 12(c) of the Plan to allow for the implementation of the short-term and long-term incentive programs of the Company under the Plan approved by the Compensation Committee; and

WHEREAS, the Plan may be amended by the Board, subject to the provisions of Section 12(c) of the Plan.

NOW, THEREFORE, the Plan is hereby amended as follows:

SECTION 1. Defined Terms. Terms used but not defined herein have the meanings assigned to them in the Plan.

SECTION 2. Amendment to Section 1. The definition of “Award” included in Section 1 of the Plan shall be deleted in its entirety and replaced with the following:

“Award” means an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or other award (stock-based or otherwise) granted or assumed pursuant to the terms of this Plan, including Adjusted Awards.

SECTION 3. Amendment to Section 1 and the Plan. The definition of “Plan Year” included in Section 1 of the Plan shall be deleted in its entirety and replaced with the definition “Performance Period” set forth below. In addition, any and all references in the Plan to “Plan Year” shall be deleted and replaced with the term “Performance Period.”

“Performance Period” means such period of time over which performance of the Company, an Eligible Individual or business unit of the Company shall be measured, which may include, but not necessarily be limited to, a calendar year or the Company’s fiscal year or such other period as the Committee shall determine.

SECTION 4. Amendment to Section 10. Section 10 of the Plan is hereby deleted in its entirety and replaced with the following:

“Section 10. Change in Control Provisions

(a) Adjusted Awards. With respect to all Adjusted Awards, subject to paragraph (e) of this Section 10, unless otherwise provided in the applicable Award Agreement, notwithstanding any other provision of this Plan to the contrary, upon a Participant’s Termination of Employment, during the two-year period following a Change in Control (as defined in the long term incentive plan of IAC or the applicable SpinCo (as defined in the Employee Matters Agreement), from the Company for which the

Participant worked immediately following the Separation (the applicable employer referred to as the “Employer”)), by the Participant’s Employer other than for Cause or Disability or by the Participant for Good Reason (as defined below):

(i) any Options outstanding as of such Termination of Employment which were outstanding as of the date of such Change in Control shall be fully exercisable and vested and shall remain exercisable until the later of (i) the last date on which such Option would be exercisable in the absence of this Section 10(a) and (ii) the earlier of (A) the first anniversary of such Change in Control and (B) expiration of the Term of such Option;

(ii) the restrictions and deferral limitations applicable to any Restricted Stock shall lapse, and such Restricted Stock outstanding as of such Termination of Employment which were outstanding as of the date of such Change in Control shall become free of all restrictions and become fully vested and transferable; and

(iii) all Restricted Stock Units outstanding as of such Termination of Employment which were outstanding as of the date of such Change in Control shall be considered to be earned and payable in full, and any restrictions shall lapse and such Restricted Stock Units shall be settled as promptly as is practicable in (subject to Section 3(d)) the form set forth in the applicable Award Agreement.

(b) Impact of Event on Awards other than Adjusted Awards. Subject to paragraph (e) of this Section 10, and paragraph (d) of Section 12, unless otherwise provided in any applicable Award Agreement and except as otherwise provided in paragraph (a) of this Section 10, in connection with a Change of Control, the Committee may make such adjustments and/or settlements of outstanding Awards as it deems appropriate and consistent with the Plan’s purposes, including, without limitation, the acceleration of vesting of Awards either upon a Change of Control or upon a termination of employment following a Change of Control. The Committee may provide for such adjustments as a term of the Award or may make such adjustments following the granting of the Award.

(c) Definition of Change in Control. For purposes of the Plan, unless otherwise provided in an option agreement or other agreement relating to an Award, a “Change in Control” shall mean the happening of any of the following events:

(i) The acquisition by any individual, entity or Group (a “Person”), other than the Company, of Beneficial Ownership of equity securities of the Company representing more than 50% of the voting power of the then outstanding equity securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that any acquisition that would constitute a Change in Control under this subsection (i) that is also a Business Combination shall be determined exclusively under subsection (iii) below; or

(ii) Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the Incumbent Directors at such time shall become an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii) Consummation of a reorganization, merger, consolidation, sale or other disposition of all or substantially all of the assets of the Company, the purchase of assets or stock of another entity, or other similar corporate transaction (a “Business Combination”), in each case, unless immediately following such Business Combination, (A) more than 50% of the Resulting Voting Power shall reside in Outstanding Company Voting Securities retained by the Company’s stockholders in the Business Combination and/or voting securities received by such stockholders in the Business Combination on account of Outstanding Company Voting Securities, and (B) at least a majority of the members of the board of directors (or equivalent governing

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body, if applicable) of the entity resulting from such Business Combination were Incumbent Directors at the time of the initial agreement, or action of the Board, providing for such Business Combination; or

(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

Notwithstanding the foregoing, the Separation shall not constitute a Change in Control. For the avoidance of doubt, with respect to an Adjusted Award held by a Participant, any reference in the Plan to Change in Control and any reference in an Award Agreement or the applicable IAC Long Term Incentive Plan to a “change in control,” “change of control” or similar definition shall be deemed to refer to a Change of Control as defined in the long term incentive plan of the Participant’s Employer.

(d) For purposes of this Section 10, “Good Reason” means (i) “Good Reason” as defined in any Individual Agreement or Award Agreement to which the applicable Participant is a party, or (ii) if there is no such Individual Agreement or if it does not define Good Reason, without the Participant’s prior written consent: (A) a material reduction in the Participant’s rate of annual base salary from the rate of annual base salary in effect for such Participant immediately prior to the Change in Control, (B) a relocation of the Participant’s principal place of business more than 35 miles from the city in which such Participant’s principal place of business was located immediately prior to the Change in Control or (C) a material and demonstrable adverse change in the nature and scope of the Participant’s duties from those in effect immediately prior to the Change in Control. In order to invoke a Termination of Employment for Good Reason, a Participant shall provide written notice to the Company of the existence of one or more of the conditions described in clauses (A) through (C) within 90 days following the Participant’s knowledge of the initial existence of such condition or conditions, and the Company shall have 30 days following receipt of such written notice (the “Cure Period”) during which it may remedy the condition. In the event that the Company fails to remedy the condition constituting Good Reason during the Cure Period, the Participant must terminate employment, if at all, within 90 days following the Cure Period in order for such Termination of Employment to constitute a Termination of Employment for Good Reason.

(e) Notwithstanding the foregoing, if any Award is subject to Section 409A of the Code, this Section 10 shall be applicable only to the extent specifically provided in the Award Agreement and as permitted pursuant to Section 14(k).”

SECTION 3. Effect of Amendment. Except as expressly set forth herein, this Amendment shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations or agreements contained in the Plan, all of which are hereby ratified and affirmed in all respects and shall continue in full force and effect.

SECTION 4. Effective Date of Amendment. This Amendment shall be effective as of the later of (i) the date first set forth above and (ii) the latest date that an amendment covering the matters referred to in Section 2 above to the incentive plans of IAC and the other Spincos (or Adjusted Awards thereunder) is adopted by any such company.

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EX-10.3

Exhibit 10.3

HSN, INC.

EMPLOYEE STOCK PURCHASE PLAN

The following constitute the provisions of the HSN, Inc. Employee Stock Purchase Plan (the “Plan”), as adopted by HSN, Inc. (“HSNi”) and its Designated Subsidiaries described in Section 2 of this Plan (collectively, with HSNi, the “Company”).

1. Introduction.

(a) Purpose. The purpose of the Plan is to enable the Company to obtain and retain the services of employees. In addition, the Plan provides a convenient, meaningful opportunity for eligible Employees to purchase Common Stock of HSNi, thereby increasing participating Employees’ personal interest in the Company’s success.

(b) Portion of Plan to Comply with Code Section 423. The Company intends to have a portion of the Plan qualify as an “employee stock purchase plan” within the meaning of Code section 423; and intends that such portion of the Plan be treated as a separate plan. Such portion of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner that is consistent with Code section 423.

(c) Portions of Plan Not Complying with Code Section 423. Section 20 of this Plan, and any additional provisions adopted by the Committee pursuant thereto, are intended by HSNi to allow creation of separate portions of the Plan providing for the offering of Common Stock other than through the portion of the Plan governed by Code section 423, for purchase by individuals who are either (i) generally not subject to income taxation by the United States, or (ii) employed by non-corporate Subsidiaries that are not eligible to be Designated Subsidiaries because they are described in clause (ii) of the definition of Subsidiary below.

2. Definitions.

(a) “Account” means an account established pursuant to Section 6(b) and maintained on the books and records of the Company to record the amount of all remaining Contributions accumulated with respect to a Participant as a result of deductions made from such Participant’s paychecks for the purpose of purchasing Shares under the Plan.

(b) “Applicable Laws” shall mean all applicable laws, rules, regulations and requirements, including, but not limited to, corporate and securities laws of any of the United States, United States federal securities laws, the Code, the rules of any stock exchange or quotation system on which Shares are listed or quoted; and the applicable laws, rules, regulations and requirements of any other country or jurisdiction where Options are granted under the Plan or where Employees reside or provide services, as such laws, rules, regulations and requirements shall be in effect from time to time.

(c) “Board” means the Board of Directors of HSNi.

(d) “Business Day” means any day (other than a Saturday or Sunday) on which the Nasdaq Global Select Market is permitted to be open for trading.

(e) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

(f) “Commencement Date” means the first calendar day of each Contribution Period of the Plan.

(g) “Committee” means the Compensation and Human Resources Committee of the Board, or any successor committee of the Board with similar responsibilities; provided, however, that the Board shall have the power to take any action that may be taken by the Committee under this Plan, except to the extent such action would not comply with any Applicable Laws.

(h) “Common Stock” means the common stock, par value $0.01 per share, of HSNi.

(i) “Company” means collectively, HSNi and the Designated Subsidiaries (but only while a Designated Subsidiary is so designated).

(j) “Compensation” means total cash compensation received by a Participant from the Company. Compensation shall be limited to amounts received by a Participant during the period he or she is participating in the Plan and includes salary, wages, overtime premiums, bonuses and other incentive payments, amounts contributed by the Participant to any benefit plan maintained by the Company (including any Code section 125 plan, Code section 401(k) plan or any other deferred compensation plan), overtime pay, commissions, draws against commissions, shift differentials, sick pay, vacation pay, holiday pay, and shutdown pay, except to the extent that the exclusion of any such item (or a subset of any such items) is specifically directed by the Plan Administrator for all Participants in a manner that does not violate Code section 423. “Compensation” does not include any remuneration paid in a form other than cash, fringe benefits (including car allowances, tuition assistance and relocation payments), employee discounts, expense reimbursement or allowances, long-term disability payments, workers’ compensation payments, welfare benefits, and any contributions that the Company or any other Subsidiary makes to any benefit plan (including any 401(k) plan or any other welfare or retirement plan), nor income realized as a result of participation in any stock option, restricted stock, stock purchase or similar plans of the Company or any other Subsidiary.

(k) “Continuous Status as an Employee” means, with respect to an Employee, a period of employment by the Company without any interruption or termination of his or her service as an Employee of the Company. Continuous Status as an Employee shall not be considered interrupted in the case of (i) medical leave; (ii) leave allowed under the Family and Medical Leave Act; (iii) personal leave; (iv) military leave; (v) jury duty; (vi) any other leave of absence approved by the Plan Administrator; provided, however, that such leave does not exceed the respective time period designated by Company policy, unless re-employment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (vii) transfers between locations of the Company, between HSNi and any of the Designated Subsidiaries, or between any of the Designated Subsidiaries. See the definition of “Employee” for the effect of any Designated Subsidiary ceasing to be a Designated Subsidiary.

(l) “Contribution Period” means any period of six consecutive months specified in Section 4(a), which shall be subject to change pursuant to Section 4(b); provided, however, that no Contribution Period shall exceed 27 months.

(m) “Contributions” means all amounts credited to the Account of a Participant pursuant to the Plan.

(n) “Designated Subsidiaries” means all Subsidiaries that are either corporations described in clause (i) of the definition of Subsidiary below, or are treated as corporations under the Code as described in clause (iii) of that definition; and in either case have been designated by the Committee from time to time in its sole discretion as employers that are eligible to participate in the portion of the Plan that is subject to Code section 423. This definition of Designated Subsidiaries shall be interpreted consistently with Code section 424(f).

(o) “Employee” means any individual who is a common-law employee of the Company for purposes of tax withholding under Code section 3401(c), including an officer or director who is also such an employee, but excluding any individual whose customary employment is (i) less than 20 hours per week or (ii) for not more than 5 months in any calendar year. If the Committee determines that any Designated Subsidiary shall no longer be a Designated Subsidiary, or a Designated

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Subsidiary ceases to be a Designated Subsidiary because it is no longer a Subsidiary, the employees of such Designated Subsidiary shall automatically cease to be Employees or Participants as of the effective date of such event.

(p) “ESPP Broker” means the licensed broker-dealer or other financial services firm designated from time to time by the Plan Administrator in accordance with Section 9(a) to assist in administering this Plan.

(q) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(r) “Fair Market Value” means, with respect to the Common Stock on a given date, the last reported sale price for the Common Stock for such date, or if such date is not a Business Day, the last reported sale price for the Common Stock for the last Business Day preceding such date, as quoted on the Nasdaq Global Select Market; provided, however, that if the Common Stock ceases to be listed for trading on the Nasdaq Global Select Market or another exchange, “Fair Market Value” of the Common Stock for a given date shall mean the value determined in good faith by the Committee.

(s) “Financial Hardship” means an immediate and heavy financial need of the Participant (including the Participant’s spouse or other dependents) as determined by the Plan Administrator, in its sole and absolute discretion, which may include, but are not limited to, the following: (i) certain medical expenses; (ii) costs relating to the purchase of a principal residence; (iii) tuition and related educational fees and expenses; (iv) payments necessary to prevent eviction from, or foreclosure on, a principal residence; (v) burial or funeral expenses; and (vi) certain expenses for the repair of damage to the Participant’s principal residence. A financial need may be immediate and heavy even if it was reasonably foreseeable or voluntarily incurred by the Participant.

(t) “HSNi” means HSN, Inc., a Delaware corporation.

(u) “New Purchase Date” shall have the meaning set forth in Section 13.

(v) “Option” shall mean a right granted to a Participant under Section 7, as of the Commencement Date of a Contribution Period, to purchase Shares as of the Purchase Date in that Contribution Period.

(w) “Participant” means any Employee who is eligible and has elected to participate in the Plan accordance with Sections 3 and 5, and who has not withdrawn from the Plan or whose participation in the Plan is not otherwise terminated.

(x) “Plan” means this HSN, Inc. Employee Stock Purchase Plan, as it may be amended from time to time.

(y) “Plan Administrator” means the Committee, or if and to the extent the Committee designates one or more employees of the Company to administer the Plan in accordance with Section 14, such employee(s) shall be the Plan Administrator; provided, however, that, notwithstanding any such delegation, the Committee shall have the power to take any action that may be taken by the Plan Administrator under this Plan, except to the extent such action would not comply with any Applicable Laws.

(z) “Purchase Date” means the last calendar day of each Contribution Period of the Plan.

(aa) “Purchase Price” means, with respect to a Contribution Period, an amount equal to 85% (or such other percentage as the Committee may establish from time to time before any Commencement Date, though in no case may such percentage be less than 85%) of the Fair Market Value of a Share on the Commencement Date or on the Purchase Date, whichever

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is lower, subject to such additional limitations which may be set by the Committee from time to time.

(bb) “Reserves” means the sum of (i) the number of Shares covered by Options granted under the Plan that have not yet been exercised and (ii) the number of Shares that have been authorized for issuance under the Plan but have not yet been placed under an Option.

(cc) “Share” means a share of Common Stock, as adjusted in accordance with Section 12.

(dd) “Subsidiary” means any of the following entities:

(i) a corporation, domestic or foreign, of which not less than 50% of the total combined voting power of all classes of stock is held by HSNi or any such corporate subsidiary of HSNi, whether or not such corporation now exists or is hereafter organized or acquired by HSNi or another such subsidiary of HSNi;

(ii) an unincorporated business entity, domestic or foreign, such as a limited liability company or partnership, in which HSNi or another Subsidiary holds directly or indirectly not less than 50% of the total combined voting power with respect to all classes of equity ownership of such entity; or

(iii) an unincorporated business entity described in the preceding clause (ii) that either (A) has duly elected under applicable Treasury Regulations to be an association treated as a corporation for United States federal income tax purposes, and such election continues in effect; or (B) is disregarded as a separate entity for United States federal income tax purposes, has not made an election described in the preceding clause (A) and, pursuant to applicable Treasury Regulations, its assets are considered to be owned by HSNi or another Subsidiary that is a corporation or is treated as one under the preceding clause (A); whether or not such unincorporated business entity now exists or is hereafter organized or acquired by HSNi or another Subsidiary of HSNi.

3. Eligibility.

(a) Eligible Employees. Any individual who is an Employee, immediately after he or she has completed 90 calendar days of Continuous Status as an Employee, shall become eligible to participate in the Plan on the first day of the month coincident with or next following completion of such period of service, subject to the requirements of the following paragraph (b), Sections 5(a) and 11, and the limitations imposed by Code section 423(b). Except as otherwise provided in the following paragraph (b), each Employee who is eligible to participate in this Plan shall have the same rights and privileges under the Plan.

(b) Limitations on Option Grants to Eligible Employees. Notwithstanding any contrary provisions of the Plan, no Employee shall be granted an Option under the Plan (except for Options granted under any portion of the Plan not intended to be subject to the requirements of Code section 423):

(i) if, immediately after the grant, such Employee (together with any other person whose HSNi stock would be attributed to such Employee pursuant to section 424(d) of the Code) would own capital stock of HSNi or of any Subsidiary that is a corporation (or is treated as one under the Code) and/or hold outstanding options to purchase stock possessing in the aggregate 5% or more of the total combined voting power or value of all classes of issued and outstanding stock of HSNi or of any such Subsidiary; or

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(ii) if such Option would permit his or her rights to purchase stock under all employee stock purchase plans (described in section 423 of the Code) of HSNi or of any Subsidiary that is a corporation (or is treated as one under the Code) to accrue at a rate that exceeds $25,000 of the Fair Market Value of such stock (determined at the time such Option is granted), or that exceeds 5,000 Shares, for each calendar year in which such Option is outstanding at any time. The annual 5,000 share limitation in the preceding sentence shall be further measured as of each Contribution Period that may be then in effect for the Plan (for example, the limit would be 2,500 shares per Contribution Period in the case of two six month Contribution Periods in a calendar year).

Without limiting the Committee’s authority under Section 19, it shall have the power to amend the Plan by changing the conditions for eligibility to participate in the Plan with respect to future grants of Options, without shareholder approval, if such change is announced at least 20 Business Days before the next Commencement Date on which Options are to be granted, and only if such eligibility conditions comply with the requirements of Code section 423(b)(4).

4. Contribution Periods.

(a) Initial Contribution Periods. Subject to the following paragraph (b), the Plan shall be implemented by a series of consecutive Contribution Periods commencing on January 1 and July 1 each year and ending on the following June 30 and December 31, respectively. The first Contribution Period under this Plan shall commence on July 1, 2010, and shall end on December 31, 2010. The Plan shall continue until terminated in accordance with Section 13 or Section 19.

(b) Changes. The Committee shall have the power to change the duration and/or frequency of Contribution Periods with respect to future purchases of Shares, without shareholder approval, if such change is announced to all Employees who are eligible under Section 3 at least five Business Days before the Commencement Date of the first Contribution Period to be affected by the change; provided, however, that no Contribution Period shall exceed 27 months.

5. Participation.

(a) Enrollment Process. An eligible Employee may become a Participant by following the established enrollment procedure as directed by the Plan Administrator, or any other entity designated by the Plan Administrator, before the Commencement Date of the applicable Contribution Period, unless an earlier or later time for completing the enrollment procedure is set by the Plan Administrator for all eligible Employees with respect to a given Contribution Period. Each eligible Employee who elects to participate for a Contribution Period shall determine the percentage of his or her future Compensation, subject to the limits in Sections 3(b)(ii) and 6(a), to be deducted from his or her paychecks after the Commencement Date for that Contribution Period and allocated to his or her Account as Contributions pursuant to the Plan.

(b) Payroll Contributions. Any such payroll deductions for a Contribution Period shall commence from the first payroll following its Commencement Date and shall end on the last payroll paid on or before the Purchase Date of the Contribution Period, unless sooner terminated as provided in Section 10. A Participant who has elected to participate during a Contribution Period shall automatically participate in future Contribution Periods at the same rate of Contributions until the Participant’s rate of Contributions is changed pursuant to Section 6, or the Participant withdraws from the Plan or ceases to be an Employee as provided in Section 10.

6. Method of Payment of Contributions.

(a) Contribution Amounts. Subject to the limitations of Sections 3(b) and 11, a Participant shall elect to have Contributions made as payroll deductions on each payday during the Contribution Period in any percentage of his or her

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Compensation that is not less than 1% and not more than 15% (or such other maximum percentage as the Committee may establish from time to time before any Commencement Date) of such Participant’s Compensation on each payday during the Contribution Period. Contribution amounts shall be withheld in whole percentages only.

(b) Accounts. Accounts will be maintained for each Participant in the Plan. All payroll deductions made by a Participant as Contributions shall be credited to his or her Account. A Participant may not make any additional payments into his or her Account. A Participant’s Account balance shall remain the property of the Participant at all times, subject to the limitations of Sections 16 and 17, but the funds deducted from his or her paychecks may be commingled with the general funds of the Company, except to the extent such commingling may be prohibited by any Applicable Laws. No interest shall accrue on the Contributions or the Account balance of a Participant in the Plan, unless otherwise determined necessary by the Plan Administrator for the Accounts of Participants in the portion of the Plan that is not intended to qualify under Code section 423.

(c) Contribution Changes by a Participant. A Participant may discontinue his or her participation in the Plan as provided in Section 10.

(i) Unless otherwise provided by the Plan Administrator, a Participant may decrease the rate of his or her Contributions once during a Contribution Period by following the established administrative procedures as directed by the Plan Administrator to authorize a decrease in the payroll deduction rate. The decrease in rate shall be effective as soon as administratively feasible following the date the rate change election is received by the Company or any other entity designated by the Plan Administrator. However, any decrease in a Participant’s rate of Contributions for a Contribution Period must be made at least 20 Business Days before the end of the Contribution Period, or it will not be effective until the next following Contribution Period.

(ii) Unless otherwise provided by the Plan Administrator, a Participant may not increase the rate of his or her Contributions during a Contribution Period. A Participant may only increase the rate of his or her Contributions with respect to a future Contribution Period by following the established administrative procedures as directed by the Plan Administrator to authorize an increase in the payroll deduction rate of Contributions. Any such rate increase shall be effective as of the Commencement Date of the next Contribution Period following a reasonable period (set by the Plan Administrator) after the date of its receipt by the Company, or any other entity designated by the Plan Administrator.

(d) Contribution Changes by the Company. Notwithstanding the foregoing, to the extent necessary to comply with Section 3(b), Section 11 and Code section 423(b)(8), the Plan Administrator may in its sole discretion direct the Company to reduce a Participant’s payroll deductions for Contributions during any Contribution Period. If that occurs, any such Participant’s payroll deductions shall re-commence, at the Contributions rate provided in the Participant’s most recently submitted enrollment materials, at the beginning of the first Contribution Period that is scheduled to end in the next succeeding calendar year, unless any such limit continues to apply in that Contribution Period or the Participant terminates his or her payroll deductions as provided in Section 10.

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7. Grant of Options. On the Commencement Date of each Contribution Period, each eligible Employee participating in such Contribution Period shall be granted the right and option to purchase (an “Option”), on the next Purchase Date, a number of Shares determined by dividing (a) such Employee’s Contributions accumulated before such Purchase Date and retained in the Participant’s Account as of the Purchase Date, by (b) the applicable Purchase Price, subject to the limitations set forth in Sections 3(b) and 11.

No Participant shall have any interest or voting right in Shares covered by any Option granted to him or her under this Plan until the Option has been exercised.

8. Exercise of Options. Unless a Participant withdraws from the Plan or ceases to be an eligible Employee as provided in Sections 3 and Section 10, his or her Option for a Contribution Period shall be exercised automatically on the Purchase Date of the Contribution Period; and the maximum number of Shares (which may include a fractional Share) subject to the Option will be purchased at the applicable Purchase Price with the accumulated Contributions remaining in his or her Account. The Shares purchased upon exercise of an Option hereunder shall be deemed to be transferred to the Participant on the Purchase Date. During a Participant’s lifetime, his or her Options shall be exercisable only by the Participant; and shall not be exercisable after his or her death.

9. Delivery of Shares, Holding Periods and Dividends.

(a) Delivery of Shares to ESPP Broker. As promptly as practicable after the Purchase Date of each Contribution Period, the number of Shares purchased by each Participant upon exercise of his or her Option shall be issued by HSNi and deposited into a brokerage account established in the Participant’s name with the ESPP Broker, for and on behalf of the Participant, in accordance with procedures established from time to time by the Plan Administrator. The terms of such ESPP Broker account shall be as provided herein and at the sole discretion of the Plan Administrator; and a Participant’s participation in the Plan is expressly conditioned on his or her acceptance of such terms.

(b) Conditions Preceding Issuance of Shares. Shares shall not be issued with respect to an Option unless the exercise of the Option and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, applicable state securities laws and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for HSNi with respect to such compliance. As a further condition to the exercise of an Option, HSNi may require the Participant exercising the Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel HSNi, such a representation is required by any of the Applicable Laws mentioned above.

(c) Disposition of Shares; Holding Period under Code Section 423. Any ESPP Broker account established to hold a Participant’s Shares shall be titled solely in the name of the Participant, unless the Participant is notified by the Plan Administrator that the account may be titled or re-titled jointly with another person, consistent with the policies of the ESPP Broker and Applicable Law. After satisfying any holding period that may be required by Section 9(d), the Participant may dispose of the Shares in his or her ESPP Broker account, whether by sale, exchange, gift or other transfer of title, in which case applicable transaction fees will be charged. However, in the absence of such disposition or a transfer upon the Participant’s death pursuant to Section 15, the Shares must remain in the Participant’s ESPP Broker account for a period of at least 18 months from the Purchase Date for those Shares, regardless of the Participant’s Continuous Status as an Employee. After such time, the Participant, at his or her option, may elect to (i) keep the Shares in the ESPP Broker account; (ii) request a DRS transfer (book entry registration without a certificate) or (iii) transfer, at the Participant’s expense, all or some of the Shares credited to the Participant’s ESPP Broker account to an account with another broker chosen by the Participant.

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However, any Participant who is not subject to United States taxation may, at any time and without regard to the 18-month holding period specified in the preceding paragraph for any Shares, move any of his or her Shares from his or her ESPP Broker account to an account with another broker chosen by the Participant.

(d) Other Holding Periods. The Committee shall have the sole and absolute discretion to impose a minimum holding period on Shares purchased under this Plan, during which each Participant’s right to transfer or otherwise dispose of Shares will be restricted for a specified period of time. Any such holding period may be imposed or increased only for Shares purchased during Contribution Periods that begin after all eligible Employees have been given notice of the new or increased holding period, which notice shall be given at least five Business Days before the Commencement Date of the first Contribution Period in which Shares that will be subject to such new or increased holding period may be purchased. Commencing with the first Contribution Period beginning on July 1, 2010 and continuing until such time as the Committee shall determine otherwise, the Committee has instituted a six month holding period commencing on the Purchase Date and continuing for a period of six months thereafter. In the event of a Financial Hardship, a Participant may seek a waiver of such minimum holding period by making a written request to the Plan Administrator. Whether a Participant is granted a full or partial waiver under this provision shall be subject to the sole and absolute discretion of the Plan Administrator and would be based on the facts and circumstances of each situation.

(e) Dividends. Dividends paid in the form of cash, Shares or other non-cash consideration with respect to the Common Stock in a Participant’s ESPP Broker account established under this Section 9 shall be credited to such ESPP Broker account. However, if a Participant holding Shares in any ESPP Broker account is subject to United States withholding taxes on any dividends payable with respect to the Shares, all cash dividends payable on those Shares shall be paid by HSNi net of the applicable United States withholding taxes on such dividends, which taxes shall be withheld by HSNi and paid to the appropriate United States tax authorities. The Company or any other Subsidiary employing each Participant shall annually notify the Participant, as part of its periodic reporting obligations under Applicable Laws, of the amount of such withholding applicable to dividends on the Participant’s Shares in an ESPP Broker account, in order to enable the Participant to apply for any applicable tax credit in each country in which the Participant is subject to taxes on such dividends.

10. Withdrawal; End of Employee Status.

(a) Withdrawal. In the event of a Financial Hardship, a Participant may seek to withdraw from the Plan by making a written request to the Plan Administrator, or other entity designated by the Plan Administrator. Whether a withdrawal request is granted under this provision shall be subject to the sole and absolute discretion of the Plan Administrator and would be based on the facts and circumstances of each situation. However, any withdrawal request must be made at least 20 Business Days before the end of a Contribution Period, or such withdrawal request shall not be effective until the next following Contribution Period. If a withdrawal request is approved by the Plan Administrator during a Contribution Period, all of the Participant’s Contributions credited to his or her Account for that Contribution Period will be paid to him or her, his or her Option granted for that Contribution Period will be automatically terminated, and the Participant may not make any further Contributions for the purchase of Shares until he or she re-enrolls. Upon withdrawal from the Plan, a Participant may not re-enroll in the Plan until the next Contribution Period after the Contribution Period in which the withdrawal was effective. In order to re-enroll, a Participant must follow the procedures described in Section 5(a).

(b) End of Employee Status. Upon termination of the Participant’s Continuous Status as an Employee before the Purchase Date of a Contribution Period for any reason including his or her death or retirement, or if the Participant remains employed by a Subsidiary that ceases to be a Designated Subsidiary before that Purchase Date, the Contributions credited to his or her Account for that Contribution Period will be returned to him or her or, in the case of his or her death, to the person or persons entitled thereto under Section 15; and his or her Option for that Contribution Period will be automatically terminated. Whether the Participant’s Continuous Status as an Employee has been terminated shall be determined by the Plan Administrator in its sole discretion.

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(c) Other Plans. A Participant’s withdrawal from the Plan shall not have any effect upon his or her eligibility to participate in any similar plan that may hereafter be adopted by the Company or any other Subsidiary.

11. Limit on Shares Available under this Plan.

(a) Maximum Number. Subject to adjustment as provided in Section 12, the maximum number of Shares that may be offered and issued under the Plan shall be 750,000 Shares. If any Option granted under the Plan shall for any reason terminate without having been exercised, at a time when such maximum number of Shares has not been reached, the Shares not purchased under such Option shall again become available for offering and issuance under the Plan.

(b) Application of Limit. If the Plan Administrator determines that, on a given Purchase Date, the number of Shares with respect to which Options are to be exercised will exceed (i) the number of Shares that were available for sale under the Plan on the Commencement Date of the applicable Contribution Period, or (ii) the number of Shares available for sale under the Plan on such Purchase Date, the Plan Administrator may in its sole discretion provide that the Company shall make a pro rata allocation of the Shares available for purchase on such Commencement Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants on such Purchase Date. If such event occurs at the beginning of a Contribution Period, the Company shall appropriately reduce the payroll deductions to be made pursuant to the Participants’ authorizations for that Contribution Period, and the Company shall give notice of such reduction to each Participant affected thereby. If such event occurs at the end of a Contribution Period, the Company shall refund to each affected Participant any Contributions made for that Contribution Period that cannot be used to purchase Shares.

12. Adjustments Upon Changes in Capitalization.

(a) Adjustments. Subject to any required action by the shareholders of HSNi, and subject to Section 13, upon (or, as may be necessary to effect the adjustment, immediately prior to) a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock (including any such change in the number of Shares effected in connection with a change in domicile of HSNi), a merger, consolidation or reorganization or any spin-off, split-up, or similar extraordinary dividend distribution in respect of the Common Stock, or an exchange of Common Stock or other securities of HSNi, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock, the Committee shall equitably and proportionately adjust (i) the number of Shares constituting the Reserves, as well as the maximum number of Shares that may be purchased by a Participant in a calendar year pursuant to Section 3(b)(ii); (ii) the maximum number of Shares set forth in Section 11; (iii) the price per Share covered by each Option that has not yet been exercised; and/or (iv) the securities, cash or other property deliverable upon exercise or payment of any outstanding Options, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by the Plan and the then-outstanding Options and otherwise to account for the effects of the transaction. The Committee’s determination with respect to the adjustment shall be final, binding and conclusive. Except as expressly provided herein, no issue by HSNi of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares reserved hereunder or subject to an Option hereunder.

(b) Compliance with Applicable Laws. It is intended that, if possible, any adjustments contemplated by the preceding paragraph be made in a manner that satisfies Applicable Laws (including, without limitation and as applicable in the circumstances, Code sections 424 and 409A) and accounting requirements (so as to not trigger any charge to earnings with respect to such adjustment).

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(c) Authority of Committee. Without limiting the generality of Section 14, any good faith determination by the Committee as to whether an adjustment is required in the circumstances pursuant to this Section 12, and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.

13. Effect of Sale, Merger or Liquidation. If either (a) HSNi or its shareholders enter into an agreement to dispose of all or substantially all of the assets or outstanding capital stock of HSNi by means of a sale, merger or reorganization in which HSNi will not be the surviving corporation (other than a reorganization effected primarily to change the state in which HSNi is incorporated, a merger or consolidation with a wholly-owned Subsidiary that is a corporation (or is treated as one under the Code), or any other transaction in which there is no substantial change in the shareholders of HSNi or their relative stock holdings, regardless of whether HSNi is the surviving corporation) or (b) HSNi is liquidated, then the Contribution Period in progress at the time of such transaction or liquidation shall be shortened and a new Purchase Date shall be set (the “New Purchase Date”), as of which date the Contribution Period then in progress will terminate. The New Purchase Date shall be on or before the date of consummation of such transaction or liquidation, and the Plan Administrator shall notify each Participant in writing, at least 10 Business Days before the New Purchase Date, that the Purchase Date for his or her Option has been changed to the New Purchase Date and that his or her Option will be exercised automatically on the New Purchase Date, unless before such date, the Participant has withdrawn from the Plan for that Contribution Period as provided in Section 10.

14. Administration. The Plan Administrator shall supervise and administer the Plan and shall have full power to adopt, amend and rescind any rules deemed desirable and appropriate for the administration of the Plan and not inconsistent with the Plan, to construe and interpret the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The Plan Administrator may delegate ministerial duties to such of the Company’s other employees, outside entities and outside professionals as the Plan Administrator so determines.

15. Death of Participant. If Participant dies, the Company shall deliver any Shares and cash in the Participant’s Account to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

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16. Transferability. Neither Contributions credited to a Participant’s Account nor any rights with regard to the exercise of an Option may be assigned, transferred, pledged or otherwise disposed of in any way (other than as provided in Section 15) by the Participant or any person entitled to the Account balance or such rights under Section 15. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw the Account balance in accordance with Section 10. Furthermore, no balance in a Participant’s Account or Shares that have not been delivered shall be subject to any debts, contracts, liabilities, engagements or torts of the Participant or any person entitled to the Account balance or such Shares under Section 15.

17. Use of Funds. All Contributions received or held by the Company under the Plan may be used by the Company for any corporate purpose; and the Company shall not be obligated to segregate such Contributions. The Plan is unfunded and shall not create nor be construed to create a trust or separate fund of any kind or a fiduciary relationship among the Company, the Board, the Committee, the Plan Administrator and any Participant. To the extent a Participant acquires a right to receive payment from the Company pursuant to the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company.

18. Reports. Account statements will be made available (at times directed by the Plan Administrator) to participating Employees by the Company and/or the ESPP Broker. For each Contribution Period, those statements will set forth the amounts of Contributions, the per Share Purchase Price, the number of Shares purchased, the remaining Account balance, if any, and the balance of any ESPP Broker account.

19. Amendment or Termination of Plan.

(a) General Authority of Committee. The Committee may at any time terminate the Plan, or may from time to time amend the Plan in any manner it deems necessary or advisable; provided, however, that no such action shall adversely affect any Options then outstanding under the Plan unless such action is required to comply with Applicable Laws; and provided, further, that no such action of the Board shall be effective without the approval of HSNi’s shareholders if such approval is required by Applicable Laws. Upon the termination of the Plan, any balance in a Participant’s Account shall be refunded to him or her as soon as practicable thereafter, unless the Committee terminates the Plan on a Purchase Date or by the Committee’s setting a New Purchase Date with respect to a Contribution Period then in progress.

(b) Administrative Amendments and Similar Actions. Without shareholder approval and without regard to whether any Participant rights may be considered to have been adversely affected, the Committee shall be entitled to change the Contribution Periods, limit the frequency and/or number of changes in the amount deducted during a Contribution Period, establish the exchange ratio applicable to amounts deducted in a currency other than United States dollars, permit payroll deductions in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed payroll deduction elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts deducted from the Participant’s Compensation, and establish such other limitations or procedures as the Committee determines in its sole discretion to be advisable and consistent with the Plan.

(c) Exhaustion of Reserves. The Plan shall automatically terminate on the date when all of the Shares that were reserved under Section 11 for issuance under this Plan have been purchased by Participants under the Plan.

20. International Participants and Employees of Non-corporate Subsidiaries.

(a) Adoption of Special Provisions by Certain Subsidiaries. The Committee shall have the power and authority to allow any of HSNi’s Subsidiaries other than Designated Subsidiaries to adopt and join in one of the following portions of this Plan that is not intended to comply with Code section 423, as described in Section 1(c):

(i) A portion for employees of any such Subsidiary who are generally not subject to income taxation by the United States (the “Non-U.S. Portion”), or

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(ii) A portion for employees who are employed by any non-corporate Subsidiary that is not eligible to be a Designated Subsidiary because it is described in clause (ii) of the definition of Subsidiary (the “Non-corporate Portion”).

(b) Terms and Conditions for Any Non-U.S. Portion of the Plan. If the Committee allows any Subsidiary other than a Designated Subsidiary to adopt the Non-U.S. Portion of the Plan, the Committee may allow certain employees of such Subsidiaries who work or reside outside of the United States an opportunity to acquire Shares in accordance with such special terms and conditions as the Committee may adopt from time to time, which terms and conditions may modify the terms and conditions set forth elsewhere in this Plan, with respect to such employees, to the extent permitted under the following paragraph (d). Without limiting the authority of the Committee, the special terms and conditions that may be adopted with respect to any foreign country need not be the same for all foreign countries; and may include but are not limited to the right to participate, procedures for elections to participate, the payment of any interest with respect to amounts received from or credited to Accounts held for the benefit of such employees who elect to participate, the purchase price of any Shares to be acquired, the length of any Contribution Period, the maximum amount of contributions, credits or Shares that may be acquired by any such participating employees, and a participating employee’s rights in the event of his or her death, disability, withdrawal from participation in the purchase of Shares under the Non-U.S. Portion of the Plan, or termination of employment.

(c) Terms and Conditions for Any Non-corporate Portion of the Plan. If the Committee allows any non-corporate Subsidiary to adopt the Non-corporate Portion of the Plan, the Committee may allow certain employees of such Subsidiaries an opportunity to acquire Shares in accordance with such special terms and conditions as the Committee may adopt from time to time, which terms and conditions may modify the terms and conditions set forth elsewhere in this Plan, with respect to such employees, to the extent permitted under the following paragraph (d). Without limiting the authority of the Committee, the special terms and conditions that may be adopted with respect to any non-corporate Subsidiary need not be the same for all non-corporate Subsidiaries; and may include but are not limited to the right to participate, procedures for elections to participate, the payment of any interest with respect to amounts received from or credited to Accounts held for the benefit of such employees who elect to participate, the purchase price of any Shares to be acquired, the length of any Contribution Period, the maximum amount of contributions, credits or Shares that may be acquired by any such participating employees, and a participating employee’s rights in the event of his or her death, disability, withdrawal from participation in the purchase of Shares under the Non-corporate Portion of the Plan, or termination of employment.

(d) Compliance with Applicable Laws; Effect of Code Section 409A. Any purchases of Common Stock made pursuant to the provisions of this Section 20 shall not be subject to the requirements of Code section 423, but shall be made pursuant to any other Applicable Laws; provided, however, the granting of any Options under this Section 20 shall be completed and administered only in a manner that is intended to either (i) comply with Code section 409A, or (ii) be exempt from taxation imposed by Code section 409A(a)(1)(A) or (B), so as to prevent any such taxation being imposed on participants receiving any such grant. For example, Options granted under this Section 20 may either:

(i) comply with Code section 409A by either specifying exercise prices that are not less than the fair market value of the Common Stock at the date of grant, or specifying Purchase Dates that are fixed dates or made contingent upon the occurrence of certain earlier or later payment events permitted under Code section 409A, in either case when the Options are granted; or

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(ii) be exempt from Code section 409A if granted under the Non-U.S. Portion of the Plan to certain non-resident alien individuals employed by Subsidiaries that are not Designated Subsidiaries and operate outside the United States, to the extent the latter type of grant is treated under section 1.409A-1(b)(8) of the Treasury Regulations as not providing deferred compensation for such individuals.

21. Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

22. Term of Plan; Effective Date. The Plan shall become effective upon approval by HSNi’s shareholders and adoption by HSNi. It shall continue in effect until all of the Reserves are exhausted or such earlier time as the Plan is terminated pursuant to Section 19.

23. Governing Law. Except as otherwise explicitly stated in this Plan, the validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Florida and applicable United States federal laws.

24. Severability. If any provision of the Plan is or becomes invalid, illegal, or unenforceable in any jurisdiction or would disqualify the Plan under any law, such provision shall be construed or deemed amended to conform to Applicable Laws; or if it cannot be so construed or deemed amended without materially altering the intent of the Plan, such provision shall be stricken as to such jurisdiction, and the remainder of the Plan shall remain in full force and effect.

25. No Rights as an Employee. Nothing in the Plan shall be construed to give any individual (including an Employee or Participant) the right to remain in the employ of HSNi or any Subsidiary, nor to affect the right of HSNi or any Subsidiary to terminate the employment of any individual (including the Employee or Participant) at any time with or without cause. Nothing in this Plan shall confer on any person any legal or equitable right against HSNi or any Subsidiary, or give rise to any cause of action at law or in equity against HSNi or any Subsidiary. Neither the Options granted, any Shares purchased hereunder nor any other benefits conferred hereby, including the right to purchase Common Stock at a discount, shall form any part of the wages or salary of any eligible Employee for purposes of any severance pay or termination damages, irrespective of the reason for termination of employment. Under no circumstances shall any individual ceasing to be an Employee be entitled to any compensation for any loss of any right or benefit under this Plan that such Employee might otherwise have enjoyed, but for ceasing to be an Employee, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise.

26. Taxes. Participants are responsible for the payment of all income taxes, employment, social insurance, welfare and other taxes under Applicable Laws relating to any amounts deemed under the laws of the country of their residency or of the organization of the Subsidiary employing such Participant to constitute income arising out of the Plan, the purchase and sale of Shares pursuant to the Plan and the distribution of Shares or cash to the Participant in accordance with this Plan. Each Participant hereby authorizes HSNi or any Designated Subsidiary that pays Compensation to the Participant to make appropriate tax withholding deductions from that Compensation with respect to any Contributions authorized by the Participant, which deductions shall be in addition to any payroll deductions made as Contributions pursuant to Section 6, and to pay such withheld taxes to the appropriate tax authorities in the relevant country or countries in order to satisfy any of the above tax liabilities of the Participant under Applicable Laws.

27. Acceptance of Terms. By participating in the Plan, each Participant shall be deemed to have accepted all the conditions of the Plan and the terms and conditions of any rules and regulations adopted by the Committee or the Plan Administrator; and shall be fully bound thereby.

Approved by the Compensation and Human Resources Committee and Board of Directors of HSN, Inc. on February 24, 2010.

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EX-31.1

Exhibit 31.1

Certification

I, Mindy Grossman, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2010 of HSN, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 4, 2010

  /s/ MINDY GROSSMAN

  Mindy Grossman

  Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

I, Judy A. Schmeling, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2010 of HSN, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 4, 2010

  /s/ JUDY A. SCHMELING

  Judy A. Schmeling

  Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mindy Grossman, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:

(1) the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2010 of HSN, Inc. (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HSN, Inc.

Dated: August 4, 2010

/s/ MINDY GROSSMAN

Mindy Grossman

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Judy A. Schmeling, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:

(1) the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2010 of HSN, Inc. (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HSN, Inc.

Dated: August 4, 2010

/s/ JUDY A. SCHMELING

Judy A. Schmeling

Executive Vice President and Chief Financial Officer