Overstock.com 2014 Annual Report Download - page 58

Table of Contents
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On October 24, 2014, we entered into a syndicated senior secured credit facility (the “Facility”) with U.S. Bank National Association ("U.S. Bank" or
the "Administrative Bank") and certain other banks. The Facility is governed by a Loan Agreement dated as of October 24, 2014 and collateral and other
agreements. The Loan Agreement provides for an aggregate credit amount of $55.8 million, consisting of (i) a senior secured real estate loan of $45.8 million
(the “Real Estate Loan”) to be used to finance a portion of the development and construction of the Project described above, and (ii) a three-year $10 million
senior secured revolving credit facility (the “Revolving Loan”) for working capital and capital expenditures, but not construction of the Project. We must
satisfy a number of conditions at least 60 days prior to any funding under the Facility, including making cash contributions totaling approximately $37.4
million toward the Project. We may also be required to make additional cash contributions if necessary to maintain a loan to value ratio of 80% or less. The
Real Estate Loan and the Revolving Loan are both secured by the Project, our inventory and accounts receivable, substantially all of our deposit accounts
and related assets. We expect to satisfy the conditions to funding under the Facility in the second half of 2015.
The Real Estate Loan is intended initially to provide financing for a portion of the construction of the Project. On or about January 1, 2017 (subject
to one potential extension of up to three months, and subject to potential additional extensions of up to 30 days for force majeure), upon completion of the
Project, the Real Estate Loan is designed to convert into an approximately 6.75-year term loan due October 1, 2023 (the “Term Loan”). The conditions to
conversion of the Real Estate Loan to the Term Loan include, among others, requirements that the Project must have been completed in accordance with the
applicable plans, paid for in full, and be generally free of liens; completion must have been certified by the project architect and the inspecting architect;
certificates of occupancy must have been issued; we must have paid all amounts then due to the Banks and must be in compliance with the covenants under
the Loan Agreement; the Real Estate Loan must be or must be brought “in balance” as defined in the Loan Agreement, which may require us to contribute
additional cash to the Project; we must have paid the final amount of our cash contribution as required by the Loan Agreement; and if required by the
Administrative Bank, an updated appraisal must show that the Project is in compliance with an 80% loan to value ratio requirement (or we must pay down the
principal balance and/or agree to reduce the amount of the Term Loan commitment to reach the required ratio). If the conditions to conversion are not
satisfied in early 2017, all amounts outstanding under the Facility will become immediately due and payable.
Amounts outstanding under the Real Estate Loan and the Term Loan will carry an interest rate based on LIBOR plus 2.00% or an Alternate Base
Rate plus 1.00%. However, we have entered into interest rate swap agreements with U.S. Bank and Compass Bank designed to fix our interest rate on the Real
Estate Loan and the Term Loan at approximately 4.6% annually. Monthly payments of interest only will be due and payable on the Real Estate Loan prior to
conversion, after which monthly payments of principal in the amount of $1.1 million annually plus interest will be due and payable, with a balloon payment
of all then unpaid principal (estimated to be $38 million), interest and other amounts due and payable on the Term Loan due on October 1, 2023. Amounts
outstanding under the Revolving Loan will carry an interest rate based on LIBOR plus 2.00% or an Alternate Base Rate plus 1.00%.
We are required to maintain compliance as of the end of each calendar quarter beginning with the quarter ending December 31, 2014 with the
following financial covenants:
• a fixed charge coverage ratio on a trailing 12-month basis of no less than 1.15 to 1.00;
• a cash flow leverage ratio on a trailing 12-month basis not greater than 3.00 to 1.00 during the Construction Phase (as defined in the Loan
Agreement);
• a cash flow leverage ratio not greater than 2.50 to 1.00 following the Construction Phase, and
• minimum liquidity of at least $50 million.
At December 31, 2014, we were in compliance with the financial covenants. In addition to the financial covenants described above, we are required
to comply with a number of covenants relating to the Project and our business, including covenants limiting certain indebtedness, including senior-secured
indebtedness consisting of interest-bearing debt for borrowed money or for financed assets. However, the Loan Agreement permits us to incur up to $20
million principal amount of additional senior-secured indebtedness for equipment financing, and other senior-secured indebtedness provided that the
aggregate principal amount of such other senior-secured indebtedness does not exceed ten percent of our consolidated assets. The Loan Agreement includes
customary events of default in addition to events of default relating specifically to the Project. The Real Estate Loan and the Revolving Loan are cross-
defaulted and cross-collateralized. In the event of a default, the default rate of interest would be 2.00% above the otherwise applicable rate.
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