Overstock.com 2009 Annual Report Download - page 135

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Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
16. COMMITMENTS AND CONTINGENCIES (Continued)
that allegedly exceed the allowable lead content limits specified in California Proposition 65. Our supplier of the goods specified in the complaint is providing
for our defense in the action pursuant to its contractual indemnification obligations. We have not yet answered the complaint. The parties have entered into a
proposed stipulated settlement to be submitted to the court for approval, which would resolve the case without requirement of financial contribution from the
Company. The nature of the loss contingencies relating to claims that have been asserted against us are described above. However no estimate of the loss or
range of loss can be made. The suit is in its early stages, and the Company intends to vigorously defend this action should the court not approve the settlement
proposed.
On or about January 15, 2010 Nancy Davis LLC filed suit against the Company in the United States District Court in the Central District of California
for trademark infringement for heart-shaped, peace sign jewelry. The Company believes that certain third party vendors of such products sold to the Company
are contractually obligated to indemnify the Company in this action. The Company has answered the complaint. The case is in its early stages. The nature of
the loss contingencies relating to claims that have been asserted against us are described above. However no estimate of the loss or range of loss can be made.
The Company intends to vigorously defend this action and pursue its indemnification rights with its vendors.
The Company has received a notice from the Securities and Exchange Commission ("SEC") stating that the SEC is conducting an investigation
concerning the Company's previously-announced financial restatements of 2006 and 2008 and other matters. The subpoena accompanying the notice covers
documents related to the restatements and also to the Company's billings to its partners in the fourth quarter of 2008 and related collections, and its accounting
for and implementation of software relating to its accounting for customer refunds and credits, including offsets to partners, and related matters. The Company
has been and will continue cooperating fully with the investigation.
We establish liabilities when a particular contingency is probable and estimable. We believe the amounts provided in our consolidated financial
statements are adequate in light of the probable and estimable liabilities. We have certain contingencies which are reasonably possible, with exposures to loss
which are in excess of the amount accrued. However, the remaining reasonably possible exposure to loss cannot currently be estimated.
The Company recognized a reduction in legal expenses during the year ended December 31, 2009 totaling $7.1 million related to the settlement of legal
matters.
17. INDEMNIFICATIONS AND GUARANTEES
During its normal course of business, the Company has made certain indemnities, commitments, and guarantees under which it may be required to make
payments in relation to certain transactions, events or contingencies. These indemnities include, but are not limited to, indemnities to various lessors in
connection with facility leases for certain claims arising from such facility or lease, indemnities to directors and officers of the Company to the maximum
extent permitted under the laws of the State of Delaware, and various other indemnities undertaken in connection with a variety of service contracts. The
duration of these indemnities, commitments, and guarantees varies, and in certain cases, is indefinite. In addition, the majority of these indemnities,
commitments, and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. As such,
the Company is unable to estimate with any reasonableness its potential exposure under these items. The Company has not recorded any liability for these
indemnities, commitments, and guarantees
F-40