EXHIBIT 10.16


 


WELLS FARGO BANK, NA.


TRADE SERVICES DIVISION — NORTHERN CALIFORNIA


525 MARKET STREET, 25TH FLOOR


SAN FRANCISCO, CA 94105


Contact Phone: 1(800) 798-2815 Option 1


 


IRREVOCABLE LETTER OF CREDIT


 


Date: August 24, 2001


Letter of Credit No.: NZS410048


 


Wells Fargo Merchant Services, LLC


265 Broad Hollow Road


Melville, NY 11747


Attention: Risk Management


 


Ladies and Gentlemen:


 


                At
the request and for the account of Patrick M. Byrne (the “Account Party”) we
hereby establish our irrevocable Letter of Credit in your favor in the amount
of Two Million United States Dollars (U.S. $2,000,000.00) available with us by
sight payment of your draft(s) drawn on us at sight accompanied by your signed
and dated statement containing the wording below of (1) or (2) or (3) alone or
(1) and (2) combined:


 


(1)                                  “This demand
covers (a) amounts payable to Wells Fargo Merchant Services, LLC and/or any of
its affiliates (individually and collectively, “Wells Fargo”) from
Overstock.Com, Inc. (the “Company”) under or in connection with Merchant
Services provided by Wells Fargo to the Company (the “Services”), including,
without limitation, chargebacks, adjustments, fees and other charges due to
Wells Fargo or incurred by the Company under or in connection with the Wells
Fargo Merchant Application executed by the Company as of July 14, 2001 and the
Wells Fargo Merchant Agreement and Operating Procedures Guide, as any of the
foregoing may have been amended, substituted or replaced from time to time, and
any other amounts for which the Company is or may become indebted or obligated,
currently or contingently, to Wells Fargo under or in connection with the
Services, and/or (b) losses, liabilities, claims, demands, judgments, costs,
and/or expenses suffered or incurred by Wells Fargo in connection with the
Services.”


                                                        and/or


(2)                                  “This demand
covers amounts paid to Wells Fargo Merchant Services, LLC and/or any of its
affiliates (individually and collectively, “Wells Fargo”) from Overstock.Com,
Inc. (the “Company”) under or in connection with Merchant Services provided by
Wells Fargo to the Company (the “Services”), including without limitation,
chargebacks, 


 

















 


adjustments,
fees and other charges due to Wells Fargo or incurred by the Company under or
in connection with the Wells Fargo Merchant Application executed by the Company
as of July 14, 2001 and the Wells Fargo Merchant Agreement and Operating
Procedures Guide, as any of the foregoing may have been amended from time to
time, and any other amounts for which the Company is or may become indebted or
obligated, currently or contingently, to Wells Fargo under or in connection
with the Services, and/or (b) to cover losses, liabilities, claims, demands,
judgments, costs, and/or expenses suffered or incurred by Wells Fargo in connection
with the Services.  The amounts covered
by this demand were paid to Wells Fargo within 90 calendar days before the
Company made a general assignment for the benefit of creditors or a petition
was filed by or against the Company under the United States Bankruptcy Code or
under similar state or federal law relating to bankruptcy, reorganization or
other relief for debtors.”


 


or


 


(3)                                  “Wells Fargo
Merchant Services, LLC and/or any of its affiliates (individually and
collectively, “Wells Fargo”) has received notice that Letter of Credit No.
NZS410048 issued by Wells Fargo Bank, N.A. will not be extended beyond its
current expiration date.  This demand
covers amounts which in the future will or may be payable to Wells Fargo by
Overstock.Com, Inc. (the “Company”), as well as amounts which have been paid to
Wells Fargo by the Company within the 90 calendar days preceding the date of
this demand, (a) under or in connection with Merchant Services provided by
Wells Fargo to the Company (the “Services”), including, without limitation,
chargebacks, adjustments, fees and other charges due to Wells Fargo or incurred
by the Company under or in connection with the Wells Fargo Merchant Application
executed by the Company as of July 14, 2001 and the Wells Fargo Merchant Agreement
and Operating Procedures Guide, as any of the foregoing may have been or may be
amended from time to time, and any other amounts for which the Company is or
may become indebted or obligated, currently or contingently, to Wells Fargo
under or in connection with the Services, and/or (b) to cover losses,
liabilities, claims, demands, judgments, costs, and/or expenses suffered or
incurred by Wells Fargo in connection with the Services.


 


Each draft presented
hereunder must be marked “DRAWN UNDER LETTER
OF CREDIT NO. NZS410048 ISSUED BY WELLS FARGO BANK, N.A.


 


Partial and multiple
drawings are permitted under this Letter of Credit.


 


This Letter of Credit
expires at our above specified office on July 5, 2003, but shall be
automatically extended, without written amendment, to January 5 in each


 

















 


succeeding calendar year unless you have
received at your address above written notice from us sent by registered mail
or express courier that we elect not to renew this Letter of Credit beyond the
date specified in such notice (the “Final Expiration Date”), which Final
Expiration Date will be July 5, 2003 or any subsequent July 5 and be at least
60 calendar days after the date you receive such notice.


 


The Final Expiration Date
shall be automatically extended to that Banking Day (a day on which we are open
at our above-specified office to conduct our letter of credit business) which
is 10 Banking Days after the Final Expiration Date if (1) the Final Expiration
Date falls on a day which is not a Banking Day for any reason referred to in
Article 17 of the UCP (as defined below) or (2) the Final Expiration Date falls
on a day which is not a Banking Day for any reason other than those referred to
in such Article 17 and the next day which would normally be a Banking Day is not
a Banking Day for any reason referred to in Article 17.


 


This Letter of Credit is
transferable one or more times, but in each instance to a single transferee and
only in the full amount available to be drawn under this Letter of Credit at
the time of such transfer.  Any such
transfer may be affected only through ourselves and only upon payment or our
usual transfer fee and upon presentation to us at our above-specified office of
a duly executed instrument of transfer in form and substance acceptable to us
together with the original of this Letter of Credit.  Any transfer of this Letter of Credit may not change the place of
expiration of this Letter of Credit from our above-specified office.  Each transfer shall be evidenced by our
endorsement on the reverse of the original of this Letter of Credit, and we
shall deliver the original of this Letter of Credit so endorsed to the
transferee.


 


Except to the extent that
our obligation to make payment of any drawing presented under this Letter of
Credit which complies with the requirements of this Letter of Credit (the
“Obligation”) may be affected by a court order, the Obligation shall be
absolute and shall not be affected by (1) any lack of enforceability of, or any
claim of the unenforceability of, the Wells Fargo Merchant Agreement referenced
in the quoted drawing statements in this Letter of Credit or (2) any defense
(real or personal), setoff or counterclaim of Overstock.Com, Inc. or any other
person or entity raised, made or alleged in connection with such Wells Fargo
Merchant Agreement, it being understood that with respect to the Obligation we
are a primary obligor and not a surety or guarantor.


 


This Letter of Credit sets
forth in full the terms of our undertaking, and such undertaking shall not in
any way be modified, amended, amplified or limited by (1) any facts now known
to us or hereafter made known to us which are not referred to or stated in this
Letter of Credit, (2) any reference in this Letter of Credit to any document,
instrument or agreement whatsoever, other than the UCP, or (3) any document,
instrument or agreement in which this Letter of Credit is referred to or to
which this Letter of Credit relates. 
Reference to any document, instrument or agreement in any statement,
certificate, or transfer instrument referred to in this Letter of Credit will
not be deemed to incorporate into this Letter of Credit such document,
instrument or agreement.


 

















 


Except as otherwise herein
provided, this Letter of Credit is subject to the Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, (the “UCP”) and engages us in accordance with the terms
thereof.


 


All bank charges in
connection with this Letter of Credit are for the account of the Account Party.


 


 


	
   

  	
  Very truly yours,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WELLS
  FARGO BANK, N.A.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Wells Fargo Bank, N.A.

  	
   

  
	
   

  	
   

  	
  Title: Assistant Vice
  President