Overstock.com 2010 Annual Report Download - page 116

Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
13. BORROWINGS (Continued)
Base (as defined in the Financing Agreement). The Financing Agreement and the credit facility terminate on October 2, 2011.
Subject to certain interest rate floors and other exceptions, advances under the Financing Agreement bear interest at either (a) Libor plus 1% for cash-
collateralized financing, including letters of credit, or (b) Libor plus 2.5% for non cash-collateralized advances. The default rate of interest is 2.0% per annum
over the otherwise applicable interest rate. An unused line fee of 0.375% is payable monthly on the unused portion of the $10 million facility available for non
cash-collateralized advances.
The Financing Agreement includes affirmative covenants and negative covenants that prohibit a variety of actions without the approval of U.S. Bank,
including, without limitation, covenants that (subject to certain exceptions) limit our ability to (a) incur or guarantee debt or enter into indemnity agreements,
(b) create or permit liens, (c) enter into any merger or consolidation or purchase or otherwise acquire all or substantially all of the assets of another person or
the assets comprising any line of business or business unit of another person, (d) except for permitted acquisitions, purchase the securities of, create, invest in,
or form any subsidiary or other entity, (e) make loans or advances, (f) purchase, acquire or redeem shares of our capital stock or other securities, (g) change
our capital structure or issue any new class of capital stock, (h) change our business objectives, purposes or operations in a manner which could reasonably be
expected to have a material adverse effect, (i) change our fiscal year, (j) enter into transactions with affiliates, (k) sell assets except for the sale of inventory in
the ordinary course of business, (l) make payments except regularly scheduled interest payments on our convertible debt or, after the occurrence of a
triggering event, repurchase, redeem, defease, or acquire our convertible debt, (m) permit judgments to be rendered against us in excess of certain limits or
having specified effects, depending in part on whether a triggering event has occurred or would occur, (n) take certain actions regarding our receivables, and
(o) take certain actions regarding our inventory.
With certain exceptions, a termination fee of up to 0.75% of the non cash-collateralized portion of the facility is payable by us if we terminate the facility
prior to its stated termination date.
No amounts were outstanding under the Financing Agreement at December 31, 2010 and 2009, and letters of credit totaling $2.4 million and
$2.6 million, respectively, were issued on our behalf collateralized by compensating cash balances held at U.S. Bank, which are included in Restricted cash in
the accompanying consolidated balance sheets.
On September 17, 2010 we entered into a Master Lease Agreement and a Financial Covenants Rider (collectively, the "Master Lease Agreement") with
U.S. Bancorp Equipment Finance, Inc.—Technology Finance Group ("Lessor"), an affiliate of U.S. Bank. Under the Master Lease Agreement we entered into
four separate leases, pursuant to which we sold certain information technology hardware (the "IT Assets") to Lessor, which were simultaneously leased back
for a period of 48 months and financed certain software licenses for a period of 48 months for proceeds totaling approximately $16.4 million. We also entered
into two additional leases; whereby we leased $599,000 in IT Assets and financed certain software licenses for a period of 48 months directly from the Lessor.
We have the right to repurchase the IT Assets at the end of the 48-month term for $1.00. In addition, we have the right to repurchase the IT Assets and
terminate the Master lease Agreement twelve months following the initial term, or under certain situations where there is a change in control where the Lessor
sells substantially all of its assets, or another entity acquires more than 25% of the ownership interests of Lessor or Lessor's parent. Payments on the Master
Lease Agreement are due monthly. The
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