Overstock.com 2010 Annual Report Download - page 77

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amount of federal, state, local and/or foreign income taxes accrued less declared dividends less 50% of depreciation expense divided by our (rental expense
plus interest expense plus required principal payments including capitalized leases on a trailing twelve-month basis).
The Master Lease Agreement, in connection with the US Bank Financing Agreement, also requires us to maintain minimum liquidity (defined as cash
plus marketable securities) of $30.0 million in the aggregate (which amount includes any minimum liquidity required under the Financing) at all times on
deposit with U.S. Bank until all amounts owed under the Master Lease Agreement are paid in full, but provides that we are permitted to withdraw the funds
on deposit with U.S. Bank at the our discretion, although our failure to maintain minimum liquidity of $30.0 million would be an Event of Default under the
Master Lease Agreement. As of December 31, 2010, we had $30.0 million in compensating cash balances held at U.S. Bank.
U.S. Bank Purchasing Card Agreement
We have a commercial purchasing card agreement (the "Purchasing Card") with U.S. Bank. We use the Purchasing Card for business purpose purchasing
and must pay it in full each month. At December 31, 2010 and December 31, 2009, $2.7 million and $0 was outstanding and $2.3 million and $5.0 million
was available under the Purchasing Card, respectively.
3.75% Convertible Senior Notes
In November 2004, we completed an offering of $120.0 million of 3.75% Convertible Senior Notes (the "Senior Notes"). Proceeds to us were
$116.2 million, net of $3.8 million 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. We recorded amortization of discount and debt issuance costs related to this offering totaling
$228,000, $331,000 and $334,000 during the years ended December 31, 2010, 2009 and 2008, respectively. Interest on the Senior Notes is payable semi-
annually on June 1 and December 1 of each year. 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 our common stock at the option of the note holders at a conversion price of $76.23 per
share or approximately 454,000 shares in aggregate (subject to adjustment in certain events, including stock splits, dividends and other distributions and
certain repurchases of our stock, as well as certain fundamental changes in the ownership of us). Beginning December 1, 2009, we have 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 us, certain changes in our board of directors or the termination of trading of our stock) meeting certain
conditions, holders of the Senior Notes may require us to repurchase for cash all or part of their notes at 100% of the principal amount plus accrued and
unpaid interest.
At present we do not have any plan to redeem the outstanding Senior Notes in accordance with their redemption provisions but we may acquire
additional Senior Notes in future open market or privately negotiated purchases. To the extent the Senior Notes remain outstanding at maturity, we intend to
pay them at maturity either with proceeds from operations or from financing activities.
The indenture governing the Senior Notes requires us 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. Wilmington Trust Company currently
serves as Trustee under the indenture.
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