Overstock.com 2005 Annual Report Download - page 95

Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
10. BORROWINGS (Continued)
$15.0 million sub-limit used to obtain letters of credit to support inventory purchases remained the same. We have an option to renew
the Sixth Amended Credit Agreement annually. The Sixth Amendment increased the interest rate on fixed rate advances under the
credit facility to 1.35% above LIBOR on the first day of each fixed rate term.
On December 12, 2005, the Company entered into a Loan and Security Agreement (the "WFRF Agreement") with Wells Fargo
Retail Finance, LLC and related security agreements and other agreements described in the WFRF Agreement.
The WFRF Agreement provides for advances to the Company and for the issuance of letters of credit for its account of up to an
aggregate maximum of $40 million. The Company has the right to increase the aggregate maximum amount available under the
facility to up to $50 million during the first two years of the facility. The amount actually available to the Company may be less and
may vary from time to time, depending on, among other factors, the amount of its eligible inventory. The Company's obligations
under the WFRF Agreement and all related agreements are collateralized by all or substantially all of the Company's and its
subsidiaries' assets. The Company's obligations under the WFRF Agreement are cross-collateralized with its obligations under its $30
million credit facility with Wells Fargo Bank, National Association. The term of the WFRF Agreement is three years, expiring on
December 12, 2008. The WFRF Agreement contains standard default provisions.
Advances under the WFRF Agreement bear interest at either (a) the rate announced, from time to time, within Wells Fargo Bank,
National Association at its principal office in San Francisco as its "prime rate" or (b) a rate based on LIBOR plus a varying percentage
between 1.25% and 1.75%; however, the annual interest rate on advances under the WFRF Agreement will be at least 3.50%. The
WFRF Agreement includes affirmative covenants as well as negative covenants that prohibit a variety of actions without the lender's
approval, including covenants that limit the Company's ability to (a) incur or guarantee debt, (b) create liens, (c) enter into any merger,
recapitalization or similar transaction or purchase all or substantially all of the assets or stock of another person, (d) sell assets,
(e) change its name or the name of any of its subsidiaries, (f) make certain changes to its business, (g) optionally prepay, acquire or
refinance indebtedness, (h) consign inventory, (i) pay dividends on, or purchase, acquire or redeem shares of, its capital stock,
(j) change its method of accounting, (k) make investments, (l) enter into transactions with affiliates, or (m) store any of its inventory or
equipment with third parties.
At December 31, 2005, $0 was outstanding on the line and letters of credit totaling $9.5 million were issued on behalf of the
Company under the Amended Credit facility. There were no amounts drawn nor were there any outstanding letters of credit on the
WFRF Agreement.
Capital leases
The Company leases certain software and computer equipment under three non-cancelable capital leases that expire at various
dates through 2008. The Company expects that in the normal course of business, the leases will expire. Software and equipment
acquired relating to the capital leases were $1.8 million and $15.4 million at December 31, 2004 and 2005, respectively, with
accumulated depreciation and amortization of $395,000 and $10.1 million at those respective dates. Depreciation of assets recorded
under capital leases was $395,000 and $9.7 million for the years ended December 31, 2004 and 2005, respectively.
F-25