Overstock.com 2007 Annual Report Download - page 116

Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
11. 3.75% CONVERTIBLE SENIOR NOTES (Continued)
amortized using the straight-line method which approximates the interest method. The Company recorded amortization of discount and debt issuance costs
related to this offering totaling $620,000, $417,000 and $344,000 during the years ended December 31, 2005, 2006 and 2007, 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 the Company's common stock at the option of the note holders at a conversion price of
$76.23 per share or, approximately 1,010,000 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 the Company's corporate existence and properties, and paying taxes and other claims in a timely manner.
In June and November 2005, the Company retired $33.0 million and $10.0 million of the Senior Notes for $27.9 million and $7.8 million in cash for each
respective retirement. As a result of the note retirements in June and November, the Company recognized a gain of $6.2 million, net of the associated
unamortized discount of $1.2 million during the year ended December 31, 2005. As of December 31, 2007, $77.0 million of the Senior Notes remained
outstanding.
12. COMMITMENTS AND CONTINGENCIES
Commitments
Corporate office space
Through July 2005, the Company leased 43,000 square feet of office space at Old Mill Corporate Center I for its principal executive offices under an
operating lease which was originally scheduled to expire in January 2007. Beginning July 2005, this lease was terminated and replaced with a lease for
approximately 154,000 rentable square feet in the Old Mill Corporate Center III in Salt Lake City, Utah for a term of ten years. The total lease obligation over
the ten-year term of the new lease is $42.4 million, of which approximately $7.6 million is payable in the next twelve months.
The Company entered into a Tenant Improvement Agreement (the "OMIII Agreement") with Old Mill Corporate Center III, LLC (the "Lessor") relating
to the office building in February 2005. The OMIII Agreement sets forth the terms on which the Company paid the costs of certain improvements to the
leased office space. The amount of the costs was approximately $2.0 million. The OMIII Agreement also required the Company to provide a letter of credit in
the amount of $500,000 to the Lessor to provide funds for the removal of certain improvements upon the termination of the lease.
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