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HSNi also has funding commitments that could potentially require its performance in the event of demands by third
parties or contingent events, as follows (in thousands):
Amount of Commitments Expiration Per Period
Total Amounts
Committed
Less Than
1 Year 1 - 3 Years 3 - 5 Years
More Than
5 Years
Letters of credit and surety bonds . . . . . . . . . . . . . . $ 35,711 $ 35,561 $ 150 $ — $ —
Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . 141,678 73,610 68,016 52 —
Total commercial commitments. . . . . . . . . . . $ 177,389 $ 109,171 $ 68,166 $ 52 $ —
The letters of credit (“LOCs”) primarily consist of trade LOCs, which are used for inventory purchases. Trade LOCs are
guarantees of payment based upon the delivery of goods. The surety bonds primarily consist of customs bonds, which relate to
the import of merchandise into the United States.
The purchase obligations primarily relate to cable contracts and include obligations for future cable distribution and
commission guarantees.
NOTE 14—RELATED PARTY TRANSACTIONS
Relationship Between Liberty Media Corporation and HSNi
Spinco Agreement
In connection with the Spin-off, pursuant to a Spinco Assignment and Assumption Agreement (the “Spinco Agreement”),
dated as of August 20, 2008, among HSNi, IAC, Liberty Media Corporation (“Liberty”) and a subsidiary of Liberty that held
shares of IAC common stock and IAC Class B common stock (together with Liberty, the “Liberty Parties”), HSNi (i) assumed
from IAC all rights and obligations providing for post-Spin-off governance and other arrangements at HSNi under the Spinco
Agreement, dated May 13, 2008, among IAC, Liberty and affiliates of Liberty that held shares of IAC common stock and/or
Class B common stock at the time such Spinco Agreement was entered into, and (ii) as required by the Spinco Agreement,
entered into a registration rights agreement with the Liberty Parties. Following is a summary of the material terms of the Spinco
Agreement:
Representation of Liberty on the Spinco Boards of Directors
The Spinco Agreement generally provides that so long as Liberty beneficially owns securities of HSNi representing at
least 20% of the total voting power of HSNi’s equity securities, Liberty has the right to nominate up to 20% of the directors
serving on HSNi’s Board of Directors (rounded up to the nearest whole number). Any director nominated by Liberty must be
reasonably acceptable to a majority of the directors on HSNi’s Board who were not nominated by Liberty. All but one of
Liberty’s nominees serving on the Board of Directors must qualify as “independent” under applicable stock exchange rules. In
addition, the Nominating Committee of the Board may include only “Qualified Directors,” namely directors other than any who
were nominated by Liberty, are officers or employees of HSNi or were not nominated by the Nominating Committee of the
HSNi Board in their initial election to the Board and for whose election any Liberty Party voted shares.
Acquisition Restrictions
The Liberty Parties have agreed not to acquire beneficial ownership of any equity securities of HSNi (with specified
exceptions) unless:
• the acquisition was approved by a majority of the Qualified Directors;
• the acquisition is permitted under the provisions described in “Competing Offers” below; or
• after giving effect to the acquisition, Liberty’s ownership percentage of the equity securities of HSNi, based on
voting power, would not exceed the Applicable Percentage.