Overstock.com 2015 Annual Report Download - page 109

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Agreement and Schedule we entered into a lease pursuant to which we sold certain assets (the "Leased Assets") to the Lessor, which we simultaneously leased
back for a period of 60 months and financed certain software licenses (inclusive in the "Leased Assets") for a period of 60 months for proceeds totaling
approximately $5.7 million. We have the right to repurchase the Leased Assets at the end of the term for $1.00. We have the right to repurchase the Leased
Assets and terminate the Master Lease Agreement twelve months following the initial term. Payments on the Master Lease Agreement are due monthly. The
weighted average effective interest rate of our leases under the Master Lease Agreement was 3.62% at December 31, 2015. We have accounted for the Master
Lease Agreement as a financing transaction and amounts owed are included in Finance Obligations, current and non-current in the consolidated balance
sheets. We recorded no gain or loss as a result of this transaction. The Master Lease Agreement allows for lease financing of up to $20 million. Our liability
under the Master Lease Agreement approximates fair value.
In connection with the Master Lease Agreement, and as long as any obligations remain outstanding under the Master Lease Agreement, we are
required to maintain compliance with the same financial covenants as the Term Loan agreement with U.S. Bank described above. At December 31, 2015 we
were in compliance with these financial covenants.
Future principal payments of finance obligations as of December 31, 2015, are as follows (in thousands):

2016
$ 1,059
2017
1,098
2018
1,138
2019
1,179
2020
1,120
Thereafter
—
$ 5,594

In June 2015, as part of an initial demonstration of the fintech and crypto software that Medici has developed, our Chief Executive Officer, Dr.
Patrick M. Byrne purchased a $500,000 privately-placed “cryptobond” from us for $500,000 in cash. In November 2015, we redeemed the debt for principal
plus accrued interest. Dr. Byrne waived his right to receive a redemption premium from us. The terms of the bond included a fixed annual interest rate of
7.0%.
In July 2015, as an additional step in demonstrating the viability of the technology, we issued an additional privately-placed cryptobond debt to an
unaffiliated purchaser for $5.0 million in cash and concurrently made a $5.0 million loan to the purchaser. Both of these instruments were subsequently
repaid. The debt we issued had a 7.0% annual interest rate and put and call rights that allowed us to redeem the debt at 105.0% of the principal amount, and
allow the holder to require us to repurchase the debt at 102.5% of the principal amount. The $5.0 million loan we made to the purchaser had a 3.0% annual
interest rate, resulting in an effective net interest rate payable of 4.0%. Both instruments had 5-year terms. The terms of our loan to the purchaser required
concurrent settlement of both instruments, whether at maturity or pursuant to the exercise of the put or call features. In November 2015, we repaid the
cryptobond debt and offset that repayment with our $5.0 million loan. The net interest and redemption premium due to the unaffiliated purchaser was
approximately $312,000. At December 31, 2015, no amounts were outstanding to either party.

At December 31, 2015 and 2014, letters of credit totaling $430,000 and $580,000, respectively, were issued on our behalf collateralized by
compensating cash balances held at U.S. Bank, which are included in Restricted cash in the accompanying consolidated balance sheets.

We have a commercial purchasing card (the “Purchasing Card”) agreement with U.S. Bank. We use the Purchasing Card for business purpose
purchasing and must pay it in full each month. At December 31, 2015, $641,000 was outstanding and $4.4 million was available under the Purchasing Card.
At December 31, 2014, $803,000 was outstanding and $4.2 million was available under the Purchasing Card.
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