Overstock.com 2014 Annual Report Download - page 96

Table of Contents
our new corporate headquarters (the "Project"). The Facility is governed by a Loan Agreement dated as of October 24, 2014 which 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 Project and (ii) a three-year $10 million senior secured revolving credit facility (the “Revolving Loan”) for working capital and capital expenditures, but
not for the Project. We must satisfy a number of conditions at least 60 days prior to any funding under the Facility, including making cash contributions of
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 begin borrowing under the Facility in the second half of 2015.
On or about January 1, 2017, 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 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 lending
banks and must be in compliance with the covenants under the Loan Agreement; the Real Estate Loan 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. 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 one-month LIBOR plus 2.00% or an
Alternate Base Rate plus 1.00%. However, we have entered into interest rate swap agreements designed to fix our interest rate on the Real Estate Loan and the
Term Loan at approximately 4.6% annually (see  in Note 2. Accounting Policies). Monthly payments of interest only will be
due and payable on the Real Estate Loan prior to conversion. Following conversion, we are required to make monthly payments of principal estimated to be
$1.1 million annually plus interest, with a balloon payment of all unpaid principal (estimated to be $38 million) and interest 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. Notwithstanding, the Loan
Agreement permits us to incur up to $20 million 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.
Unless it terminates earlier or is extended with the consent of the Administrative Bank and all of the Banks, the Revolving Loan facility will
terminate on October 24, 2017.
As of December 31, 2014 we had not borrowed any amounts under either the Real Estate Loan or the Revolving Loan.
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