Overstock.com 2008 Annual Report Download - page 103

Table of Contents
14. COMMITMENTS AND CONTINGENCIES
Commitments
Corporate office space
In July 2005, the Company leased approximately 154,000 rentable square feet in the Old Mill Corporate Center III in Salt Lake
City, Utah for a term of 10 years. The total lease obligation over the remaining term of this lease is $29.4 million, of which
approximately $4.0 million is payable in the next twelve months. $7.7 million of the total lease obligation is offset by estimated
sublease payments, of which $1.1 million is anticipated to be received in the next twelve months.
In the fourth quarter of 2006, the Company commenced implementation of a facilities consolidation and restructuring program.
Under the program, the Company recorded $638,000 of accelerated amortization of leasehold improvements related to its subleased
office facilities, and $450,000 of costs incurred to return its office facilities to their original condition as required by the lease
agreement.
During fiscal year 2007, the Company recorded an additional $6.2 million of restructuring costs related to its marketing for sub-
lease office and data center space in its current corporate office facilities. The Company also recorded an additional $2.2 million of
restructuring charges related to accelerated depreciation of leasehold improvements located in the abandoned office and co-location
data center space and $200,000 of other miscellaneous restructuring charges (see Note 3—"Restructuring Expense"). The company
did not record any restructuring costs during the year ended December 31, 2008.
Logistics and warehouse space
In July 2004, the Company entered into a logistics service agreement (the "Logistics Agreement") wherein the handling, storage
and distribution of some of its prepackaged products were performed by a third party. The Logistics Agreement and subsequent
amendment set forth terms on which the Company paid various fixed fees based on square feet of storage and various variable costs
based on product handling costs for a term of five years.
In December 2005, the Company entered into a warehouse facilities service and lease agreement (the "License Agreement") to
license approximately 400,000 square feet of warehouse space in Indiana and purchase fulfillment services. The License Agreement
was subsequently amended, reducing the amount of lease space to approximately 300,000 square feet and extending the term to 2011.
In the first quarter of 2007, the Company terminated the Logistics Agreement and gave notice of intent to sublease the Indiana
warehouse facilities under the License Agreement. During the second quarter of 2007, the Company reached an agreement to
terminate the Indiana warehouse facilities lease effective August 15, 2007. As a result of the termination of the License Agreement
and warehouse lease, the Company incurred $3.7 million of related restructuring charges in 2007 (see Note 3 —"Restructuring
Expense").
The Company currently leases 795,000 square feet for its warehouse facilities in Utah under operating leases which expire in
August 2012 and August 2015.
On April, 8, 2008, the Company entered into a lease agreement with Natomas Meadows, LLC (the "Natomas Lease"). The
Natomas Lease is for a 686,865 square foot warehouse facility located in Salt Lake City, Utah (the "New warehouse"). The Natomas
Lease provides that the Company will lease the new warehouse in stages: on October 15, 2008, the Company leased the initial 232,900
square feet of the New Warehouse; on February 1, 2009, the Company leased a total of 435,400 square feet; and, on September 1,
2009, the Company will lease the remainder, for a total of 686,865 square feet. The Natomas Lease term is seven years, and specifies
rent, exclusive of common area maintenance fees, at a variable rate over the course of the staged lease term, ranging from $0.3300 per
square foot for the first stage, to $0.3950 per square foot for the last year of the Natomas Lease term. Including the space now leased
in the new warehouse, the Company currently has warehouse operations in two facilities in Salt Lake City, Utah. The Company
constructed a 40,000 square foot customer service facility in the new warehouse and commenced use of the facility on November 3,
2008.
Co-location data center
In July 2005, the Company entered into a Co-location Center Agreement (the "Co-location Agreement") to build out and lease
11,289 square feet of space at Old Mill Corporate Center II for an IT co-location data center. The Co-location Agreement set forth the
terms on which the Lessor would incur the costs to build out the IT co-location data center and the Company would commence to
lease the space upon its completion for a term of ten years. However, during the fourth quarter of 2006, the Company made the
determination to consolidate its facilities and to not occupy the IT co-location data center, and the Co-location Agreement was
terminated effective December 29, 2006, for which the Company incurred a $4.6 million restructuring charge (see Note 3
—"Restructuring Expense").
In December 2006, the Company entered into a Data Center Agreement (the "OM I Agreement") to lease 3,999 square feet of
space at Old Mill Corporate Center I for an IT data center to allow the Company to consolidate other IT data center facilities.
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