Overstock.com 2009 Annual Report Download - page 77

Table of Contents
Redeemable common stock
In June 2009, we discovered that we had inadvertently issued 203,737 more shares of our common stock in connection with our 401(k) plan than had
been registered with the Securities and Exchange Commission for offer in connection with the 401(k) plan. These shares were contributed to or otherwise
acquired by participants in the 401(k) plan between August 16, 2006, and June 17, 2009. As a result, certain participants in the 401(k) plan may have or have
had rescission rights relating to the unregistered shares, although we believe that the federal statute of limitations applicable to any such rescission rights
would be one year, and that the statute of limitations had already expired at June 30, 2009 with respect to most of the inadvertent issuances. At December 31,
2008 and 2009, approximately 98,000 shares or $1.3 million and 65,000 shares or $744,000 of our common stock plus interest were classified outside
stockholders' equity because of the potential rescission rights.
On August 31, 2009, we entered into a Tolling and Standstill Agreement (the "Agreement") with our Employee Benefits Committee (the "Committee")
relating to the Overstock.com, Inc. 401(k) plan (the "Plan"). We entered into the Agreement in order to preserve certain rights, if any, of Plan participants who
acquired shares of our common stock in the Plan between July 1, 2008 and June 30, 2009. We intend to make a rescission offer to affected participants in the
Plan who acquired shares of our common stock between July 1, 2008 and June 30, 2009, subject to compliance with applicable regulatory requirements.
Based on the closing price of Overstock common stock of $13.56 at December 31, 2009, we anticipate that of the $744,000 of affected stock outstanding
as of December 31, 2009, it would be uneconomical for participants to attempt to rescind their acquisitions of more than $163,000 of the stock.
Stock and Debt Repurchase Program
On January 14, 2008, our Board of Directors authorized a repurchase program that allowed us to purchase up to $20.0 million of our common stock and /
or our 3.75% Senior Convertible Notes due 2011 ("Senior Notes") through December 31, 2009.
Under this repurchase program, we repurchased approximately 1.2 million shares of our common stock in open market purchases for $13.4 million
during the year ended December 31, 2008. These common stock repurchases were executed at approximately $11.31 per share which was at the low end of
our 52-week historical trading range. We made the repurchases because we believed that the stock was trading at attractively low prices, that we had sufficient
cash on hand for all reasonably possible contingencies, and that the use of the cash to repurchase shares was in the best interest of the Company and the
stockholders.
In addition, during the third quarter of 2008, we retired $9.5 million of the Senior Notes for $6.6 million in cash at an approximate 16% yield to maturity.
As a result of the Senior Notes retirements, we recognized a gain of $2.8 million, net of the associated unamortized discount of $142,000. We had fully
utilized the authorized $20.0 million repurchase program as of December 31, 2008.
On February 17, 2009, our Board of Directors approved a debt repurchase program that authorized us to utilize up to $20.0 million to repurchase
additional 3.75% Senior Notes. Under this repurchase program, we retired a total of $7.4 million of our Senior Notes for $4.6 million in cash and recorded a
$2.8 million gain, net of amortization of debt discount of $92,000, during the year ended December 31, 2009 at an approximate 23% yield to maturity (see
Item 1 of Part I, "Financial Statements"—Note 19—"Stock and Debt Repurchase Program").
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