Overstock.com 2011 Annual Report Download - page 80

Table of Contents
Borrowings
U.S. Bank Financing Agreements
We are a party to a Financing Agreement with U.S. Bank National Association ("U.S. Bank") dated December 22, 2009 (as amended to date, the
"Financing Agreement"). The maximum credit potentially available under the revolving facility is $20 million. Our obligations under the Financing
Agreement and all related agreements are secured by all or substantially all of our assets, excluding our interest in certain litigation. Subject to certain
exceptions, the full amount of the revolving facility is expected to be available to us as long as $20 million in the aggregate is maintained on deposit with U.S.
Bank. At December 31, 2011 and at the date of this report we maintained $20 million on deposit with U.S. Bank. The obligation of U.S. Bank to make
advances under the Financing Agreement is subject to the conditions set forth in the Financing Agreement.
Our failure to keep at least $20 million on deposit in certain accounts with U.S. Bank would constitute a "triggering event" under the Financing
Agreement. If a triggering event occurs, we would become subject to financial covenants (i) limiting our capital expenditures to $20 million annually, and
(ii) requiring us to maintain a Financing Agreement defined fixed charges coverage ratio of at least 1.10 to 1.00 as of the end of any fiscal quarter for the
period of the prior four quarters. The occurrence of a triggering event could also result in a decrease in the amount available to us under the non cash-
collateralized portion of the facility, as availability would then depend, in part, on the Borrowing Base (as defined in the Financing Agreement).
The stated termination date of the Financing Agreement is December 31, 2012. The maximum amount potentially available under the Financing
Agreement is $20 million, limited to $3 million for cash-collateralized letters of credit and other financial accommodations, and $17 million for advances
supported by our non-cash collateral. As permitted by the Financing Agreement, during the year ended December 31, 2011, we used the entire $17 million
available for advances supported by our non-cash collateral to fund the redemption of our then-outstanding Senior Convertible Notes due December 1, 2011.
Advances under the Financing Agreement bear interest at one-month LIBOR plus 2.5%. The interest rate for borrowings under the Financing Agreement
was 2.75% at December 31, 2011. We have also entered into an interest rate cap agreement with U.S. Bank with an effective date of October 1, 2011 limiting
our exposure for one-month LIBOR at 0.5% for the term of the Financing Agreement.
The Financing Agreement includes affirmative covenants and negative covenants that prohibit a variety of actions without the approval of U.S. Bank,
including, without limitation, covenants that (subject to certain exceptions) limit our ability to (a) incur or guarantee debt or enter into indemnity agreements,
(b) create or permit liens, (c) enter into any merger or consolidation or purchase or otherwise acquire all or substantially all of the assets of another person or
the assets comprising any line of business or business unit of another person, (d) except for permitted acquisitions, purchase the securities of, create, invest in,
or form any subsidiary or other entity, (e) make loans or advances, (f) purchase, acquire or redeem shares of our capital stock or other securities, (g) change
our capital structure or issue any new class of capital stock, (h) change our business objectives, purposes or operations in a manner which could reasonably be
expected to have a material adverse effect, (i) change our fiscal year, (j) enter into transactions with affiliates, (k) sell assets except for the sale of inventory in
the ordinary course of business, (l) permit judgments to be rendered against us in excess of certain limits or having specified effects, depending in part on
whether a triggering event has occurred or would occur, (m) take certain actions regarding our receivables, and (n) take certain actions regarding our
inventory. During 2011, we were out of compliance with two covenants and obtained waivers from U.S. Bank for these covenant violations.
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