Overstock.com 2004 Annual Report Download - page 83

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purchaser upon exercise of its 30-day purchase option to cover over-allotments. Proceeds to the Company were $116,199, net of $3,801 of initial purchaser's
discount and debt issuance costs. The discount and debt issuance costs are being amortized using the straight-line method which approximates the interest
method. During 2004, the Company recorded amortization of discount and debt issuance costs related to this offering totaling $52. Interest on the Senior
Notes is payable semi-annually on June 1 and December 1 of each year, beginning June 1, 2005. The Senior Notes mature on December 1, 2011 and are
unsecured and rank equally in right of payment with all existing and future unsecured, unsubordinated debt and senior in right of payment to any existing and
future subordinated indebtedness.
The Senior Notes are convertible at any time prior to maturity into the Company's common stock at the option of the note holders at a conversion price of
$76.23 per share or approximately 1,574 shares in aggregate (subject to adjustment in certain events, including stock splits, dividends and other distributions
and certain repurchases of the Company's stock, as well as certain fundamental changes in the ownership of the Company). Beginning December 1, 2009, the
Company has the right to redeem the Senior Notes, in whole or in part, for cash at 100% of the principal amount plus accrued and unpaid interest. Upon the
occurrence of a fundamental change (including the acquisition of a majority interest in the Company, certain changes in the Company's board of directors or
the termination of trading of the Company's stock) meeting certain conditions, holders of the Senior Notes may require the Company to repurchase for cash all
or part of their notes at 100% of the principal amount plus accrued and unpaid interest.
The indenture governing the Senior Notes requires the Company to comply with certain affirmative covenants, including making principal and interest
payments when due, maintaining our corporate existence and properties, and paying taxes and other claims in a timely manner. The Company was in
compliance with these covenants at December 31, 2004.
11. COMMITMENTS AND CONTINGENCIES
The Company leases 43 square feet of office space under an operating lease which was originally scheduled to expire in January 2007. However, this
lease will be terminated and replaced with a lease agreement the Company entered into in December 2004 for a new office building in the Old Mill Corporate
Center III in Salt Lake City, Utah. Pursuant to this agreement, the Company will lease approximately 143 rentable square feet for a term of 10 years beginning
when the Company occupies the premises, which the Company expects to be in the summer of 2005 when construction is completed. On February 11, 2005,
the Company and Old Mill Corporate Center III, LLC (the "Lessor") entered into a Tenant Improvement Agreement (the "OMIII Agreement") relating to the
office building. The OMIII Agreement sets forth the terms on which the Company will pay the costs of certain improvements to the leased office space. The
amount of the costs is estimated to be approximately $2,000. The OMIII Agreement requires the Company to reimburse the Lessor for the amount of the costs
within 30 days after presentation of invoices or written requests for reimbursement. The OMIII Agreement also requires the Company to provide either a cash
deposit or a letter of credit in the amount of $500 to the Lessor to provide funds for the removal of the improvements upon the termination of the lease.
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