Overstock.com 2015 Annual Report Download - page 27
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In 2010, we attempted to associate our brand globally with the domain address: www.O.co. We did this in part because in many foreign markets the
word “Overstock” lacked a good foreign cognate. Following a period of testing for the O.co brand and domain address, we returned to the Overstock.com
name as our primary brand domestically because domestic consumer acceptance did not occur as quickly as we had hoped. While we have returned
domestically to the Overstock.com brand and principal domain address, we continue to use the O.co address and brand outside of the United States and plan
to use it or another domain address and brand domestically as well. There is no assurance that the use of Overstock.com or O.co will gain acceptance or have
success in foreign markets or that other domain addresses or brands we may use domestically will be successful. Any such difficulties with any of our brands
could have a material adverse effect on our business.
In the third quarter of 2014, we purchased land in Salt Lake City, Utah in preparation for our construction of our future headquarters. In purchasing
the land, we became subject to the risks of owning real estate, including the risks of environmental liabilities and the requirements for compliance with
applicable laws, rules, regulations, ordinances and other requirements. The land we purchased is part of the Midvale Slat Superfund Site (“Site”), a former
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") superfund site that was remediated pursuant to CERCLA prior to our
purchase. As purchaser of the property, O.com Land, LLC is required to follow certain requirements of the CERCLA statute and the consent decree governing
remediation of the Site. Its failure to do so could expose us to environmental liabilities which could be material. Further, in connection with the credit facility
we entered into with U.S. Bank and other banks, we entered into a broad environmental indemnity agreement pursuant to which we made detailed
representations about the environmental status of the land and agreed to indemnify and defend U.S. Bank and other banks and other persons against a broad
array of potential environmental claims, liabilities and exposures relating to the property we purchased and the headquarters we are building. Any such
environmental liabilities, and any liabilities under the environmental indemnity agreement, could be material and could have a material adverse effect on our
business.
We are building our new headquarters in Salt Lake City, and are incurring the risks and expense of doing so. The design and construction of the
headquarters are complicated. We may encounter unanticipated developments affecting our estimates regarding the expense of the project. We may also
encounter delays in the construction of the facility. Any such difficulties could result in our default under the Loan Agreement and related agreements we
have entered into with U.S. Bank and other banks, and could result in material liabilities and expense and could have a material adverse effect on our
business.
Our current estimate of the total cost of the development and construction and related equipment and furniture of our new headquarters is
approximately $99 million. We have entered into a syndicated senior secured credit facility with U.S. Bank and other banks that is intended to provide us
with construction and term financing of $45.8 million. The facility is designed to convert to an approximately 6.75-year term loan upon completion of
construction. We will need to maintain compliance with the requirements governing the facility, including compliance with financial and other covenants,
certain of which may be subject to events outside of our control. If we fail to comply with any of such covenants, we may be unable to obtain or utilize the
financing contemplated by the facility. If the financing we anticipate under the facility is not fully available to us for any reason, it would have a material
adverse effect on our liquidity and could have a material adverse effect on our business.
We have pledged all of our assets relating to the new headquarters and the site on which it is to be located, as well as our inventory, accounts
receivable and related assets, and most of our deposit accounts, to secure our obligations under the syndicated senior secured credit facility. The real estate
loan and the revolving loan facilities included within the facility are
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