Exhibit 10.1

 

Seventh Modification to Credit Agreement

 

This Seventh Modification to Credit Agreement Note (this “Modification”) is
entered into as of December 31, 2005, by and between OVERSTOCK.COM, INC., a
Delaware corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Bank”).

 

Recitals:

 

A.    Bank has agreed to extend credit to Borrower in the maximum principal
amount of $30,000,000.00 pursuant to the terms and conditions of that certain
Credit Agreement dated as of February 13, 2004 and a related Revolving Line of
Credit Note dated December 22, 2004, executed by Borrower and payable to the
order of Bank, as amended most recently by a Sixth Amendment to Credit Agreement
dated October 18, 2005 (as amended, the “Agreement” and the “Note”).

 

B.    The obligations of Borrower under the Agreement and the Note are secured
by the security interests and liens granted by Borrower pursuant to (1) a
Security Agreement: Securities Account, (2) an Addendum to Securities Agreement:
Securities Account, and (3) a Securities Account Control Agreement, all dated as
of October 18, 2005 (which, together with all other security agreements and
control agreements in favor of Bank, shall be referred to as the “Security
Agreement”).  The Agreement, the Note and the Security Agreement shall be
referred to collectively as the “Loan Documents.”

 

C.    The security interests granted by the Security Agreement includes a
security interest in two (2) fixed income securities bearing the guaranty of
Bayerische Landesbank, with respective maturity dates of September 20, 2006 and
November 1, 2006 (collectively the “Fixed Income Investments”).

 

D.    Bank and Borrower have agreed (1) to extend the termination date of the
line of credit represented by the Agreement and the maturity date of the Note to
December 31, 2007 and (2) to provide for pricing and funding adjustments upon
the substitution of collateral for the Fixed Income Investments encumbered by
the Security Agreement.

 

Agreement:

 

Now, therefore, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree that the Note shall
be modified as follows:

 

1.                                       Subsection (a) of the “Borrowing and
Repayment” section of the Note shall be amended to read as follows:

 

(a)                                  Borrowing and Repayment:  Borrower may from
time to time during the term of this Note borrower, partially or wholly repay
its outstanding borrowings, and reborrow, subject to all of the limitations,
terms and conditions of this Note and of any document executed in connection
with

 

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or governing this Note; provided however, that the total outstanding borrowings
under this Note shall not at any time exceed the principal amount stated above. 
The unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder.  The outstanding principal balance of
this Note shall be due and payable in full on January 1, 2008.

 

2.                                       Borrower hereby agrees to replace the
Fixed Income Investments upon their respective maturities with replacement
collateral that satisfies all required qualifications and valuations set forth
in the Security Agreement.  Upon a determination by Lender that such replacement
and substitution has been completed and that the interest of Lender therein has
attached and has been perfected, Lender hereby agrees to modify the Note to
provide that interest under both the Fixed Rate Term LIBOR option and the Daily
LIBOR rate option shall accrue at an increment equal to one-half of one percent
(0.50%) above the applicable LIBOR determination.

 

3.                                       Upon completion of the collateral
substitution set forth in paragraph 2 above, the definition of “Collateral
Value” in the Addendum to Security Agreement: Securities Account, which is
included in the definition of  “Security Agreement” and which governs the
amounts that may be disbursed under the Agreement and the Note, shall be amended
to read as follows:

 

“Collateral Value” means the percentage set forth below of the lower of the face
or market value, or the lower of the face or redemption value, as appropriate,
for each type of investment property held in the Securities Account at the time
of computation, with such value and the classification of any particular
investment property in all instances determined by Bank in its sole discretion,
and excluding from such computation (a) all WF Securities and Collective
Investment Funds, (b) any stock with a market value of $10.00 or less, and (c)
all investment property from an issuer if Bank determines such issuer to be
ineligible.

 

Type of Investment Property

 

Percentage

 

 

 

 

 

Cash and Cash Equivalents

 

100

%

 

 

 

 

U.S. Government Bills, Notes and U.S. Government Sponsored Agency Securities:

 

 

 

 

 

 

 

(a)   with maturities less than or equal to 5 years

 

90

%

(b)   with maturities greater than 5 years but less than or equal to 10 years

 

85

%

(c)   with maturities greater than 10 years

 

80

%

 

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Type of Investment Property

 

Percentage

 

 

 

 

 

Corporate and Municipal Bonds and Notes:

 

 

 

 

 

 

 

(a)   rated AAA/Aaa, AA/Aa or SP-1 by a nationally recognized rating agency with
maturities less than or equal to 5 years

 

85

%

(b)   rated AAA/Aaa, AA/Aa or SP-1 by a nationally recognized rating agency with
maturities greater than 5 years but less than or equal to 10 years

 

80

%

(c)   rated AAA/Aaa, AA/Aa or SP-1 by a nationally recognized rating agency with
maturities grater than 10 years

 

75

%

(d)   rated A, Baa, BBB or SP-2 by a nationally recognized rating agency with
maturities less than or equal to 5 years

 

80

%

(e)   rated A, Baa, BBB or SP-2 by a nationally recognized rating agency with
maturities greater than 5 years but less than or equal to 10 years

 

75

%

(f)    rated A, Baa, BBB or SP-2 by a nationally recognized rating agency with
maturities greater than 10 years

 

70

%

 

 

 

 

Commercial Paper:

 

 

 

 

 

 

 

(a)   rated A1 or P1 by a nationally recognized rating agency

 

80

%

(b)   rated A2 or P2 by a nationally recognized rating agency

 

70

%

 

 

 

 

Common and Preferred Stock:

 

 

 

 

 

 

 

(a)   traded on the New York Stock Exchange

 

75

%

(b)   traded on NASDAQ, the American Stock Exchange or a regional exchange:

 

 

 

(i)    with a market capitalization grater than $7.5B and

 

 

 

**   rated A+, A or A- by a nationally recognized rating agency

 

75

%

**   rated B+ by a nationally recognized rating agency

 

60

%

**   rated B, B- or C by a nationally recognized rating agency

 

50

%

(ii)   with a market capitalization greater than $1B but less than or equal to
$7.5B and

 

 

 

**   rated A+, A or A- by a nationally recognized rating agency

 

60

%

**   rated B+ by a nationally recognized rating agency

 

50

%

 

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Type of Investment Property

 

Percentage

 

 

 

 

 

**   rated B, B- or C by a nationally recognized rating agency

 

40

%

(iii)  with a market capitalization grater than or equal to $500MM but less than
$1B and

 

 

 

**   rated A+, A or A- by a nationally recognized rating agency

 

50

%

**   rated B+ by a nationally recognized rating agency

 

40

%

**   rated B, B- or C by a nationally recognized rating agency

 

30

%

 

 

 

 

Mutual Funds:

 

 

 

 

 

 

 

(a)   Listed Money Market

 

95

%

(b)   Short Term Taxable or Tax Exempt Bonds

 

90

%

(c)   Intermediate Term Taxable or Tax Exempt Bonds

 

85

%

(d)   General Taxable Bonds

 

80

%

(e)   Municipal Bonds, Single State Bonds or Long Term Corporate Taxable Bonds

 

75

%

(f)    Balanced Stock and Bond Funds (includes flexible portfolio

 

75

%

(g)   Domestic Large Cap Stock

 

70

%

(h)   Domestic Equity Income Stock

 

70

%

(i)    Domestic Mortgage Taxable Bonds

 

70

%

(j)    Multi Cap Growth, Value and Core Stock

 

60

%

(k)   Mid Cap Growth, Value and Core Stock

 

60

%

(l)    Small Cap Growth, Value and Core Stock

 

50

%

(m)  Specialty Equity Stock

 

50

%

(n)   Sector, International, High Yield Taxable and Tax Exempt Stocks and Bonds

 

50

%

(o)   Listed NASDAQ Mutual Funds

 

50

%

 

4.                                       In consideration for the changes set
forth herein and as a condition to the effectiveness hereof, Borrower shall pay
herewith a non-refundable fee equal to $37,500, (one eight of one percent of the
LOC commitment amount of $30,000,000).

 

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5.                                       Except as expressly set forth herein,
all terms and conditions of the Loan Documents remain in full force and effect. 
All terms defined in the Loan Agreement shall have the same meaning when used in
this Modification.  This Modification and the Loan Documents shall be read
together as one document.

 

6.                                       Borrower certifies that as of the date
of this Modification (a) there exists no Event of Default under the Loan
Documents, nor any condition, act or event which with the giving of notice or
the passage of time or both would constitute any such Event of Default, and (b)
Borrower has no defense offset or counterclaim with respect to Borrower’s
obligations under the Loan Documents.

 

7.                                       All security interests and liens
granted pursuant to the Loan Documents, including without limitation the
Security Agreement, and any related document shall continue to secure the Note. 
Wells Fargo Institutional Trust Services, the designated “Intermediary” in the
Securities Account Control Agreement, is a division of Bank, and the execution
of such Account Control Agreement is intended to evidence the control that Bank
has with respect to the collateral granted by the Security Agreement.

 

IN THE WITNESS WHEREOF, the parties hereto have caused this Modification to be
executed as of the day and year first written above.

 

 

OVERSTOCK.COM, INC.

 

By:

/s/ David K. Chidester

 

 

David K. Chidester

 

 

Senior Vice President, Finance

 

 

 

WELLS FARGO BANK,

NATIONAL ASSOCIATION

 

By:

/s/ Lisbeth M. Hopper

 

 

Lisbeth M. Hopper

 

 

Vice President,

 

 

Relationship Manager

 

 

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