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As filed with the Securities and Exchange Commission on May 6, 2002

Registration No. 333-83728

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 3
TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

OVERSTOCK.COM, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

5999
(Primary Standard Industrial
Classification Code Number)

87-0634302
(I.R.S. Employer
Identification Number)

Overstock.com, Inc.
6322 South 3000 East, Suite 100
Salt Lake City, Utah 84121
(801) 947-3100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Patrick M. Byrne
President and Chief Executive Officer
Overstock.com, Inc.
6322 South 3000 East, Suite 100
Salt Lake City, Utah 84121
(801) 947-3100
(Name and address, including zip code, of agent for service)

Copies to:

Robert G. O'Connor, Esq.
Randy Lewis, Esq.
David R. Bowman, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
2795 E. Cottonwood Parkway, Suite 300
Salt Lake City, Utah 84121
(801) 993-6400

Robert S. Townsend, Esq.
Russell J. Wood, Esq.
Harrison S. Clay, Esq.
Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105
(415) 268-7000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 145 under the Securities Act of 1933, check the following box. / /

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / /

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered Proposed	Amount to be Registered(1)(2)	Proposed Maximum Offering Price Per Share(3)	Maximum Aggregate Offering Price(3)	Amount of Registration Fee(3)(4)


Common stock, par value $.0001	3,450,000 shares	$16.00	$55,200,000	$5,079

(1): Includes 845,000 shares, which are being sold by the selling stockholder.
(2): Includes 450,000 shares which the Underwriters have the option to purchase to cover over-allotments, if any.
(3): Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a).
(4): $4,232 of this fee has been previously paid.

Overstock.com, Inc. hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until Overstock.com, Inc. shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

SUBJECT TO COMPLETION, DATED MAY 6, 2002.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Overstock.com, Inc.
3,000,000 Shares
of Common Stock



This is our initial public offering and no public market currently exists for our shares. We expect that the public offering price will be between $12.00 and $16.00 per share. This price may not reflect the market price of our shares after our offering.
THE OFFERING	PER SHARE		TOTAL
Public Offering Price	$	$
Underwriting Discount	$	$
Proceeds to Overstock	$	$
Proceeds to Selling Stockholder	$	$
Of the 3,000,000 shares being offered, we are selling 2,155,000 shares and the selling stockholder identified in this prospectus is selling 845,000 shares. We will not receive any of the proceeds from the sale of shares by the selling stockholder. We have granted the underwriter the right to purchase up to 450,000 additional shares from us within 30 days after the date of this prospectus to cover any over-allotments. The underwriter expects to deliver shares of common stock to purchasers on , 2002.
Proposed Nasdaq National Market Symbol: OSTK
OpenIPO®: The method of distribution being used by the underwriter in this offering differs somewhat from that traditionally employed in firm commitment underwritten public offerings. In particular, the public offering price and allocation of shares will be determined primarily by an auction process conducted by the underwriter. A more detailed description of this process, known as an OpenIPO, is included in "Plan of Distribution."

This offering involves a high degree of risk. You should purchase shares only if you can afford a complete loss of your investment. See "Risk Factors" beginning on page 7.

Neither the Securities and Exchange Commission nor any other state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is , 2002

You should rely only on the information contained in this prospectus. We have not, and the underwriter has not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriter is not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.

TABLE OF CONTENTS

		Page
Prospectus Summary		3
The Offering		5
Summary Financial Data		6
Risk Factors		7
Special Note Regarding Forward-Looking Statements		23
Use of Proceeds		24
Dividend Policy		24
Capitalization		25
Dilution		27
Selected Financial Data		28
Management's Discussion and Analysis of Financial Condition and Results of Operations		30
Business		43
Management		53
Certain Relationships and Related Transactions		62
Principal and Selling Stockholders		68
Description of Capital Stock		71
Shares Eligible For Future Sale		75
Plan of Distribution		78
Legal Matters		85
Experts		85
Where You Can Find More Information		85
Index To Financial Statements		F-1

Overstock.com and Overstockb2b.com are trademarks of Overstock.com, Inc. The Overstock.com logo is also a trademark of Overstock.com, Inc.

OpenIPO is a registered service mark of WR Hambrecht+Co, LLC.

Other service marks, trademarks and trade names referred to in this prospectus are property of their respective owners.

PROSPECTUS SUMMARY

The following prospectus summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and our Financial Statements and Notes thereto appearing elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully.

Overstock.com, Inc.

We are an online "closeout" retailer offering discount, brand-name merchandise for sale over the Internet. Our merchandise offerings include bed-and-bath goods, kitchenware, watches, jewelry, electronics, sporting goods and designer accessories. We offer our customers an opportunity to shop for bargains conveniently, while offering our suppliers an alternative inventory liquidation distribution channel. We typically offer approximately 4,000 products in 13 categories on our Websites, www.overstock.com and www.overstockb2b.com. We continually add new, limited-inventory products to our Websites in order to create an atmosphere that encourages customers to visit frequently and purchase products before our inventory sells out.

Closeout merchandise is typically available in inconsistent quantities and prices and often is only available to consumers after it has been purchased and resold by disparate liquidation wholesalers. We believe the traditional liquidation market is therefore characterized by fragmented supply and fragmented demand. Overstock utilizes the Internet to aggregate both supply and demand and create a more efficient market for closeout merchandise. We originally incorporated in May 1997 and began posting a list of our merchandise on our Website in August 1998. In March 1999, we launched the first version of our Website through which customers could purchase products.

Overstock's business platform has four components. We have a "direct" business, in which we buy and take possession of excess inventory for resale. We also have our "commission" business, in which we receive a commission for selling other parties' inventory on our Websites. We currently have commission-based relationships with approximately 130 third parties that post over 2,000 products on our Websites. For both our direct and commission models we have a consumer and a business-to-business ("B2B") sales channel. Therefore, our business consists of four combinations of these components: direct consumer, direct B2B, commission consumer and commission B2B. During 2001, approximately 9.9% of our revenue was attributable to our commission-based business and approximately 90.1% of our revenues was attributable to our direct business.

We believe our business offers liquidation advantages for our manufacturers and shopping advantages for our customers, as listed below:

	Advantages for Manufacturers		Advantages for Customers
	• Limited sales channel conflict		• Discount prices
	• Single point of distribution		• High quality and broad selection
	• Improved control of distribution		• Convenient access
	• Improved transaction experience		• Dedicated customer service

Our objective is to leverage the Internet to become the dominant closeout solution for holders of brand-name merchandise, allowing them to dispose of that excess merchandise discreetly and with high recovery values. We are pursuing this objective through the following key strategies:

•: Establish strong relationships with manufacturers;
•: Optimize inventory management through the use of technology;
•: Optimize marketing initiatives through the use of technology;

•: Maintain low customer acquisition costs;
•: Aggressively grow our B2B business; and
•: Provide responsive customer service.

Our products are organized into 13 different departments. As of March 31, 2002 these were:

Apparel & Accessories
Bed, Bath & Linens
Computer & Home Office
DVD's, Books & Music
Electronics & Cameras
Gifts & Gadgets
Home & Garden Décor

Housewares & Appliances
Jewelry & Watches
Luggage & Business
Sports Gear
Toys & Dolls
Worldstock Global Designs

Each of these departments has multiple categories and subcategories that further organize the products offered within that department.

When customers place orders on our Websites, orders are fulfilled either directly from our Salt Lake City, Utah warehouse or from one of our commission-based third-party relationships. We monitor both sources for accurate order fulfillment and timely shipment. We generally charge $4.95 for basic ground shipping, but customers can also choose from various expedited shipping services at their expense.

Historically, we have not focused our marketing efforts on national print and media campaigns. Instead, we have focused primarily on online campaigns that we believe are the most cost-effective means to direct visitors to our Websites. We have also recently established a B2B sales force to grow this part of our business aggressively.

We have a limited operating history, a history of significant losses and we expect to encounter risks and uncertainties frequently faced by early stage companies in rapidly evolving markets. The online liquidation services market is new, rapidly evolving, intensely competitive and has relatively low barriers to entry, as new competitors can launch new Websites at relatively low cost. In addition, we typically purchase our merchandise from manufacturers, suppliers and liquidation wholesalers using purchase orders rather than term contracts. We believe that competition in the online liquidation market is based predominantly on price, product quality and selection, shopping convenience, customer service, and brand recognition, all of which are difficult to achieve and maintain. Our liquidation services compete with other online retailers and traditional liquidation "brokers," some of which may specifically adopt our methods and target our customers.

We intend to use approximately $3.0 million of the proceeds of this offering to repay, in full, the outstanding indebtedness to High Meadows Finance L.C. which is owned by High Plains Investments, LLC, an entity controlled by Patrick M. Byrne, our President and Chief Executive Officer; John J. Byrne Jr., a member of our board of directors; and Cirque Properties, Inc., an entity owned by John J. Byrne III, the brother of Patrick M. Byrne.

Our principal executive offices are at 6322 South 3000 East, Suite 100, Salt Lake City, Utah 84121 and our telephone number is (801) 947-3100. We were initially formed as a limited liability company in Utah under the name D2-Discounts Direct, LLC in May 1997. In December 1998, we reorganized as a Utah corporation under the name D-2 Discounts Direct, Inc. In May 1999, we changed our name to Deals.com, Inc. In October 1999, we changed our name to Overstock.com, Inc. In April 2002, we reincorporated in the State of Delaware. Our Website addresses are www.overstock.com and www.overstockb2b.com. The information contained on our Websites is not part of this prospectus.

The Offering


Common stock offered by Overstock		2,155,000 shares
Common stock offered by the selling stockholder		845,000 shares
Common stock to be outstanding after this offering		14,292,404 shares
Selling stockholder		Amazon.com NV Investment Holdings, Inc.
Use of proceeds		We expect to use the net proceeds from the offering for marketing and related expenditures to expand our business, capital expenditures, working capital, debt reduction and other general corporate purposes.
Proposed Nasdaq National Market symbol		OSTK

The number of shares of common stock to be outstanding after this offering is based on 12,137,404 shares outstanding as of March 31, 2002. This number does not include the following:

•: 1,478,709 shares of our common stock subject to options issued at a weighted average exercise price of $4.87 under our 1999 Stock Option Plan and the Gear.com, Inc. Restated 1998 Stock Option Plan as of March 31, 2002;
•: 101,122 shares of our common stock subject to options issued at a weighted average exercise price of $11.90 under our 2002 Stock Option Plan as of May 3, 2002;
•: 1,122,200 shares of our common stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $5.60 per share as of March 31, 2002;
•: 366,597 shares of our common stock reserved for issuance under our 1999 Stock Option Plan as of March 31, 2002;
•: 333,009 shares of common stock reserved for issuance under our 2000 Stock Purchase Plan as of March 31, 2002;
•: 537,558 shares of common stock reserved for issuance under our 2002 Stock Plan as of May 3, 2002; and
•: up to 450,000 shares that could be sold to the underwriters upon exercise of their option to purchase additional shares to cover over-allotments.

Unless otherwise specifically stated, information throughout this prospectus assumes:

•: a one-for-28.34 reverse stock split of the common stock and the Series A preferred stock immediately prior to the effectiveness of this offering;
•: conversion of all shares of Series A preferred stock into 958,612 shares of common stock not later than the completion of this offering, based on the current conversion price for the Series A preferred stock;
•: the filing of an Amended and Restated Certificate of Incorporation after the closing of this offering; and
•: no exercise of the underwriters' over-allotment option to purchase 450,000 shares from us.

This offering will be made through the OpenIPO process, in which the allocation of shares and the public offering price are primarily based on an auction in which prospective purchasers are required to bid for the shares. This process is described under "Plan of Distribution." Except as otherwise indicated, the information in this prospectus assumes no exercise of the underwriter's over-allotment option.

The terms "Overstock," "we," "us" and "our" as used in this prospectus refer to Overstock.com, Inc.

Summary Financial Data

The following table sets forth summary consolidated, pro forma and other financial information of Overstock.

		Year ended December 31,									Three months ended March 31, (unaudited)
		1999			2000			2001			2001			2002
		(in thousands, except per share data)
Consolidated Statement of Operations Data:
Direct revenue		$	1,835		$	21,762		$	35,243		$	8,282		$	10,029
Commission revenue			—			867			3,965			501			1,659
Warehouse revenue			—			2,894			795			795			379

	Total revenue		1,835			25,523			40,003			9,578			12,067
Cost of goods sold(1)			2,029			27,812			34,640			8,549			9,990

Gross profit (loss)			(194	)		(2,289	)		5,363			1,029			2,077

Operating expenses:
	Selling, general and administrative expenses(2)		8,178			18,932			15,225			3,541			4,021
	Amortization of goodwill		—			226			3,056			774			—
	Amortization of stock-based compensation		—			—			649			67			846

Operating loss		$	(8,372	)	$	(21,447	)	$	(13,567	)	$	(3,353	)	$	(2,790	)

Net loss		$	(8,357	)	$	(21,312	)	$	(13,806	)	$	(3,336	)	$	(3,007	)

Net loss attributable to common shares		$	(8,361	)	$	(21,522	)	$	(14,210	)	$	(3,436	)	$	(9,725	)

Net loss per common share		$	(4.63	)	$	(3.63	)	$	(1.29	)	$	(0.32	)	$	(0.87	)
Weighted average common shares outstanding			1,804			5,922			10,998			10,596			11,171

(1) Amounts include stock-based compensation of:			—			—			78			5			102
(2) Amounts exclude stock-based compensation of:			—			—			649			67			846

	As of March 31, 2002 (unaudited)
	Actual		Pro Forma		Pro Forma As Adjusted
			(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	7,902	$	7,902	$	32,192
Working capital		7,487		7,487		34,777
Total assets		25,256		25,256		49,546
Total indebtedness		3,227		3,227		227
Redeemable securities		11,977		5,395		5,395
Stockholders' equity		4,044		10,626		37,916

The pro forma information above gives effect to the conversion of our Series A preferred stock into common stock upon the completion of this offering.

The pro forma as adjusted information above gives effect to our receipt of the estimated proceeds from the sale of 2,155,000 shares of common stock in this offering by us at an assumed price of $14.00 per share after deducting estimated underwriting discounts and commissions and estimated offering expenses.

RISK FACTORS

Any investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, and all other information contained in this prospectus, before you decide whether to purchase our common stock. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also become important factors that may harm our business. The occurrence of any of the following risks could harm our business. The trading price of our common stock could decline due to any of these risks and uncertainties, and you may lose part or all of your investment.

Risks Relating to Overstock

Because we have a limited operating history, it is difficult to evaluate our business and future operating results.

We originally incorporated in May 1997 and began posting a list of our merchandise on our Website in August 1998. In March 1999, we launched the first version of our Website through which customers could purchase products. Our limited operating history makes it difficult to evaluate our business and future operating results.

We have a history of significant losses. If we do not achieve profitability, our financial condition and our stock price could suffer.

We have a history of losses and we may continue to incur operating and net losses for the foreseeable future. We incurred net losses of $13.8 million for the year ended December 31, 2001 and $3.0 million for the quarter ended March 31, 2002. As of December 31, 2001 and March 31, 2002, our accumulated deficit was $44.1 million and $53.8 million respectively. We will need to generate significant revenues to achieve profitability, and we may not be able to do so. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate, or if our operating expenses exceed our expectations, our financial results would be severely harmed.

We will continue to incur significant operating expenses and capital expenditures as we:

•: enhance our distribution and order fulfillment capabilities;
•: further improve our order processing systems and capabilities;
•: develop enhanced technologies and features;
•: expand our customer service capabilities to better serve our customers' needs;
•: increase our general and administrative functions to support our operations; and
•: increase our sales and marketing activities.

Because we will incur many of these expenses before we receive any revenues from our efforts, our losses may be greater than the losses we would incur if we developed our business more slowly. Further, we base our expenses in large part on our operating plans and future revenue projections. Many of our expenses are fixed in the short term, and we may not be able to quickly reduce spending if our revenues are lower than we project. Therefore, any significant shortfall in revenues would likely harm our business, operating results and financial condition. In addition, we may find that these efforts are more expensive than we currently anticipate, which would further increase our losses. Also, the timing of these expenses may contribute to fluctuations in our quarterly operating results.

Our quarterly operating results are volatile and may adversely affect our stock price.

Our future revenues and operating results are likely to vary significantly from quarter to quarter due to a number of factors, many of which are outside our control, and any of which could severely harm our business . As a result, we believe that quarterly comparisons of our operating results are not necessarily meaningful and that you should not rely on the results of one quarter as an indication of our future performance. In addition to the risk factors described in this prospectus, additional factors that could cause our quarterly operating results to fluctuate include:

•: increases in the cost of advertising;
•: our inability to retain existing customers or encourage repeat purchases;
•: difficulties developing our B2B operations;
•: the existence of one or more warehouse sales;
•: price competition that results in lower profit margins or losses;
•: the amount and timing of operating costs and capital expenditures relating to the expansion of our business operations and infrastructure;
•: our inability to manage distribution operations or provide adequate levels of customer service; and
•: our ability to successfully integrate operations and technologies from acquisitions or other business combinations.

If we fail to accurately forecast our expenses and revenues, our business, operating results and financial condition may suffer and the price of our stock may decline.

Our limited operating history and the rapidly evolving nature of our industry make forecasting quarterly operating results difficult. We may not be able to quickly reduce spending if our revenues are lower than we project. Therefore, any significant shortfall in revenues would likely harm our business, operating results and financial condition and cause our results of operation to fall below the expectations of public market analysts and investors. If this occurs, the price of our common stock may decline.

We have grown quickly and if we fail to manage our growth, our business will suffer.

We have rapidly and significantly expanded our operations, and anticipate that further significant expansion will be required to address potential growth in our customer base and market opportunities. This expansion has placed, and is expected to continue to place, a significant strain on our management, operational and financial resources. From December 1999 to March 31, 2002, we expanded from 40 to 163 employees. James Hyde, our Vice President of Operations, joined us within the last year, and some of our officers have no prior senior management experience at public companies. Our new employees include a number of key managerial, technical and operations personnel who have not yet been fully integrated into our operations, and we expect to add additional key personnel in the near future. To manage the expected growth of our operations and personnel, we will be required to improve existing and implement new transaction-processing, operational and financial systems, procedures and controls, and to expand, train and manage our already growing employee base. If we are unable to manage growth effectively, our business, prospects, financial condition and results of operations will be seriously harmed.

The loss of key personnel or any inability to attract and retain additional personnel could affect our ability to successfully grow our business.

Our performance is substantially dependent on the continued services and on the performance of our senior management and other key personnel, particularly Patrick M. Byrne, our President, Chief Executive Officer and Chairman of the Board. Our performance also depends on our ability to retain and motivate other officers and key employees. The loss of the services of any of our executive officers or other key employees for any unforeseen reason, including without limitation, illness or call to military service could harm our business, prospects, financial condition and results of operations. We do not have long-term employment agreements with any of our key personnel and we do not maintain "key person" life insurance policies. Our future success also depends on our ability to identify, attract, hire, train, retain and motivate other highly-skilled technical, managerial, editorial, merchandising, marketing and customer service personnel. Competition for such personnel is intense, and we cannot assure you that we will be able to successfully attract, assimilate or retain sufficiently qualified personnel. Our failure to retain and attract the necessary technical, managerial, editorial, merchandising, marketing and customer service personnel could harm our business, prospects, financial condition and results of operations.

Our operating results may fluctuate depending on the season, and such fluctuations may affect our stock price.

We expect to experience fluctuations in our operating results because of seasonal fluctuations in traditional retail patterns. Sales in the retail and wholesale industry tend to be significantly higher in the fourth calendar quarter of each year than in the preceding three quarters due primarily to increased shopping activity during the holiday season. As a result, securities analysts and investors may inaccurately estimate the effects of seasonality on our results of operations in one or more future quarters and, consequently, our operating results may fall below expectations, causing our stock price to decline.

We depend on our relationships with third parties for a large portion of the products that we offer for sale on our Websites. If we fail to maintain these relationships, our business will suffer.

During 2001 we had commission-based relationships with approximately 130 third parties whose products we offer for sale on our Websites. During 2001, these products accounted for approximately 45% of the products available on our Websites. We do not have any long-term agreements with any of these third parties. Our agreements with third parties are terminable at will by either party immediately upon notice. In general, we agree to offer the third parties' products on our Websites and these third parties agree to provide us with information about their products, honor our customer service policies and ship the products directly to the customer. If we do not maintain our existing or build new relationships with third parties on acceptable commercial terms, we may not be able to offer a broad selection of merchandise, and customers may refuse to shop at our Websites. In addition, manufacturers may decide not to offer particular products for sale on the Internet. If we are unable to maintain our existing or build new commission-based relationships or if other product manufacturers refuse to allow their products to be sold via the Internet, our business would suffer severely.

We are partially dependent on third parties to fulfill a number of our customer service and other retail functions. If such parties are unwilling or unable to continue providing these services, our business could be seriously harmed.

In our commission business we rely on third parties to conduct a number of other traditional retail operations with respect to their respective products that we offer for sale on our Websites, including maintaining inventory, preparing merchandise for shipment to individual customers and timely distribution of purchased merchandise. We have no effective means to ensure that these third parties

will continue to perform these services to our satisfaction or on commercially reasonable terms. In addition, because we do not take possession of these third parties' products, we are unable to fulfill these traditional retail operations ourselves. Our customers could become dissatisfied and cancel their orders or decline to make future purchases if these third parties are unable to deliver products on a timely basis. If our customers become dissatisfied with the services provided by these third parties, our reputation and the Overstock brand could suffer.

We rely on our relationships with manufacturers, retailers and other suppliers to obtain sufficient quantities of quality merchandise on acceptable terms. If we fail to maintain our supplier relationships on acceptable terms, our sales and profitability could suffer.

To date, we have not entered into contracts with manufacturers or liquidation wholesalers that guarantee the availability of merchandise for a set duration. Our contracts or arrangements with suppliers do not provide for the continuation of particular pricing practices and may be terminated by either party at any time. Our current suppliers may not continue to sell their excess inventory to us on current terms or at all, and we may not be able to establish new supply relationships. In most cases, our relationships with our suppliers do not restrict the suppliers from selling their respective excess inventory to other traditional or online merchandise liquidators, which could in turn limit the selection of products available on our Websites. If we are unable to develop and maintain relationships with suppliers that will allow us to obtain sufficient quantities of merchandise on acceptable commercial terms, such inability could harm our business, results of operation and financial condition.

Our business may be harmed by the listing or sale of pirated, counterfeit or illegal items by third parties.

We have received in the past, and we anticipate we will receive in the future, communications alleging that certain items listed or sold through our Websites infringe third-party copyrights, trademarks and tradenames or other intellectual property rights. For example, in February 2002, Microsoft Corporation filed a complaint against us alleging that we have distributed counterfeit and otherwise unauthorized Microsoft software in violation of federal copyright and trademark law and related state laws. These and future claims could result in increased costs of doing business through legal expenses, adverse judgment or settlement or require us to change our business practices in expensive ways. In addition, litigation could result in interpretations of the law that require us to change our business practices or otherwise increase our costs.

In addition, we may be unable to prevent third parties from listing unlawful goods, and we may be subject to allegations of civil or criminal liability for unlawful activities carried out by third parties through our Websites. In the future, we may implement measures to protect against these potential liabilities that could require us to spend substantial resources and/or to reduce revenues by discontinuing certain service offerings. Any costs incurred as a result of liability or asserted liability relating to the sale of unlawful goods or the unlawful sale of goods could harm our business.

Our business may be harmed by fraudulent activities on our Websites.

We have received in the past, and anticipate that we will receive in the future, communications from customers who did not receive goods that they purchased. We also periodically receive complaints from our customers as to the quality of the goods purchased and services rendered. Negative publicity generated as a result of fraudulent or deceptive conduct by third parties could damage our reputation, harm our business and diminish the value of our brand name. We expect to continue to receive from customers requests for reimbursement or threats of legal action against us if no reimbursement is made.

We depend upon third-party delivery services to deliver our products to our customers on a timely and consistent basis. A deterioration in our relationship with any one of these third parties could decrease our ability to track shipments, cause shipment delays, and increase our shipping costs and the number of damaged products.

Although we operate our own fulfillment center, we rely upon multiple third parties for the shipment of our products. Because we do not have a written long-term agreement with any of these third parties, we cannot be sure that these relationships will continue on terms favorable to us, if at all. Unexpected increases in shipping costs or delivery times, particularly during the holiday season, could harm our business, prospects, financial condition and results of operations. If our relationships with these third parties are terminated or impaired or if these third parties are unable to deliver products for us, whether through labor shortage, slow down or stoppage, deteriorating financial or business condition, responses to terrorist attacks or for any other reason, we would be required to use alternative carriers for the shipment of products to our customers. We may be unable to engage alternative carriers on a timely basis or upon terms favorable to us. Changing carriers would likely have a negative effect on our business, operating results and financial condition. Potential adverse consequences include:

•: reduced visibility of order status and package tracking;
•: delays in order processing and product delivery;
•: increased cost of delivery, resulting in reduced gross margins; and
•: reduced shipment quality, which may result in damaged products and customer dissatisfaction.

Our operating results depend on our Websites, network infrastructure and transaction-processing systems. Capacity constraints or system failures would harm our business, results of operations and financial condition.

Any system interruptions that result in the unavailability of our Websites or reduced performance of our transaction systems would reduce our transaction volume and the attractiveness of the services that we provide to suppliers and third parties and would seriously harm our business, operating results and financial condition.

We use internally developed systems for our Websites and certain aspects of transaction processing, including customer profiling and order verifications. We have experienced periodic systems interruptions due to server failure, which we believe will continue to occur from time to time. If the volume of traffic on our Websites or the number of purchases made by customers substantially increases, we will need to further expand and upgrade our technology, transaction processing systems and network infrastructure. We have experienced and expect to continue to experience temporary capacity constraints due to sharply increased traffic during sales or other promotions, which cause unanticipated system disruptions, slower response times, degradation in levels of customer service, impaired quality and delays in reporting accurate financial information.

Our transaction processing systems and network infrastructure may be unable to accommodate increases in traffic in the future. We may be unable to project accurately the rate or timing of traffic increases or successfully upgrade our systems and infrastructure to accommodate future traffic levels on our Websites. In addition, we may be unable to upgrade and expand our transaction processing systems in an effective and timely manner or to integrate any newly developed or purchased functionality with our existing systems. Any inability to do so may cause unanticipated system disruptions, slower response times, degradation in levels of customer service, impaired quality and speed of order fulfillment or delays in reporting accurate financial information.

We may be unable to manage expansion into new business areas which could harm our business operations and reputation.

Our long-term strategic plan involves expansion into the B2B merchandise liquidation market, entering into agreements to provide products and services to retail chains and other businesses, such as our agreement with Safeway Stores, Inc. and possible expansion into additional markets. We cannot assure you that our efforts to expand our business in this manner will succeed. To date, we have expended significant financial and management resources developing our B2B operations, and our failure to succeed in this market or other markets may harm our business, prospects, financial condition and results of operation. Furthermore, the exclusivity provisions of our Safeway agreement preventing us from providing similar products to stores having greater than 400 stores in the drug, mass merchandising, grocery, club or warehouse store categories may adversely affect our ability to grow and expand our B2B business. In addition, we may choose to expand our operations by developing new Websites, promoting new or complementary products or sales formats, expanding the breadth and depth of products and services offered or expanding our market presence through relationships with third parties. In addition, we may pursue the acquisition of new or complementary businesses or technologies, although we have no present understandings, commitments or agreements with respect to any material acquisitions or investments. We cannot assure you that we would be able to expand our efforts and operations in a cost-effective or timely manner or that any such efforts would increase overall market acceptance. Furthermore, any new business or Website we launch that is not favorably received by consumers could damage our reputation or the Overstock brand. Expansion of our operations in this manner would also require significant additional expenses and development and would strain our management, financial and operational resources. The lack of market acceptance of such efforts or our inability to generate satisfactory revenues from such expanded services or products to offset their cost could harm our business, prospects, financial condition and results of operations.

We may not be able to compete successfully against existing or future competitors.

The online liquidation services market is new, rapidly evolving and intensely competitive. Barriers to entry are minimal, and current and new competitors can launch new Websites at a relatively low cost. Our consumer Website currently competes with:

•: other online liquidation e-tailers, such as SmartBargains;
•: traditional liquidators, such as Ross Stores, Inc. and TJX Companies, Inc.; and
•: online retailers and marketplaces such as Amazon.com., Inc., Buy.com., Inc. and eBay, Inc. which have discount departments.

Our B2B Website competes with liquidation "brokers" and retailers and online marketplaces such as eBay, Inc.

We expect the online liquidation services market to become even more competitive as traditional liquidators and online retailers continue to develop services that compete with our services. In addition, manufacturers and retailers may decide to create their own Websites to sell their own excess inventory and the excess inventory of third parties. Competitive pressures created by any one of our competitors, or by our competitors collectively, could severely harm our business, prospects, financial condition and results of operations.

Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service or marketing decisions or acquisitions that could harm our business, prospects, financial condition and results of operations. For example, to the extent that we enter new lines of businesses such as third-party logistics, online auction services or discount brick and mortar retail, we would be competing with large established businesses such as APL Logistics, Ltd., eBay, Inc., Ross Stores, Inc. and TJX Companies, Inc., respectively.

Many of our current and potential competitors described above have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we do. In addition, online retailers and liquidation e-tailers may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies. Some of our competitors may be able to secure merchandise from manufacturers on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing or inventory availability policies and devote substantially more resources to Website and systems development than we do. Increased competition may result in reduced operating margins, loss of market share and a diminished brand franchise. We cannot assure you that we will be able to compete successfully against current and future competitors.

A significant number of merchandise returns could harm our business, financial condition and results of operations.

We allow our customers to return products. Our ability to handle a large volume of returns is unproven. In addition, any policies intended to reduce the number of product returns may result in customer dissatisfaction and fewer return customers. If merchandise returns are significant, our business, financial condition and results of operations could be harmed.

If the products that we offer on our Websites do not reflect our customers' tastes and preferences, our sales and profit margins would decrease.

Our success depends in part on our ability to offer products that reflect consumers' tastes and preferences. Consumers' tastes are subject to frequent, significant and sometimes unpredictable changes. Because the products that we sell typically consist of manufacturers' and retailers' excess inventory, we have limited control over the specific products that we are able to offer for sale. If our merchandise fails to satisfy customers' tastes or respond to changes in customer preferences, our sales could suffer and we could be required to mark down unsold inventory which would depress our profit margins. In addition, any failure to offer products in line with customers' preferences could allow our competitors to gain market share. This could have an adverse effect on our business, results of operations and financial condition.

If we fail to attract customers to our Websites on cost-effective terms, our business, financial condition and operating results will suffer.

Our success depends on our ability to attract customers on cost-effective terms. We have relationships with online services, search engines, directories and other Websites and e-commerce businesses to provide content, advertising banners and other links that direct customers to our Websites. We expect to rely on these relationships as significant sources of traffic to our Websites and to generate new customers. Current economic conditions have reduced the demand for these advertising-related services. As a result, we have been able to negotiate these online relationships on terms we consider cost effective. As general economic conditions improve, we anticipate that similar relationships with search engines and online services will become more expensive. If we are unable to develop or maintain these relationships on acceptable terms, our ability to attract new customers and our financial condition could be harmed. Further, many of the parties with which we may have online-advertising arrangements could provide advertising services for other online or traditional retailers and merchandise liquidators. As a result, these parties may be reluctant to enter into or maintain relationships with us. Failure to achieve sufficient traffic or generate sufficient revenue from purchases originating from third parties may result in termination of these relationships by these third parties. Without these relationships, our revenues, business, financial condition and results of operations could suffer.

If the single facility where substantially all of our computer and communications hardware are located fails, our business, results of operations and financial condition will be harmed.

Our success, and, in particular, our ability to successfully receive and fulfill orders and provide high-quality customer service, largely depends on the efficient and uninterrupted operation of our computer and communications hardware systems. Substantially all of our computer and communications hardware is located at a single leased facility in Salt Lake City, Utah. Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, break-ins, earthquake and similar events. We do not presently have redundant systems in multiple locations or a formal disaster recovery plan and our business interruption insurance may be insufficient to compensate us for losses that may occur. Despite the implementation of network security measures, our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays, loss of critical data or the inability to accept and fulfill customer orders. The occurrence of any of the foregoing risks could harm our business, prospects, financial condition and results of operations.

We may be unable to protect our proprietary technology or keep up with that of our competitors.

Our success depends to a significant degree upon the protection of our software and other proprietary intellectual property rights. We may be unable to deter misappropriation of our proprietary information, detect unauthorized use and take appropriate steps to enforce our intellectual property rights. In addition, our competitors could, without violating our proprietary rights, develop technologies that are as good as or better than our technology.

Our failure to protect our software and other proprietary intellectual property rights or to develop technologies that are as good as our competitors' could put us at a disadvantage to our competitors. In addition, the failure of the third parties whose products we offer for sale on our Websites to protect their intellectual property rights, including their domain names, could impair our operations. These failures could harm our business, results of operations and financial condition.

If we do not respond to rapid technological changes, our services could become obsolete and we could lose customers.

To remain competitive, we must continue to enhance and improve the functionality and features of our e-commerce businesses. We may face material delays in introducing new services, products and enhancements. If this happens, our customers may forgo the use of our Websites and use those of our competitors. The Internet and the online commerce industry are rapidly changing. If competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our existing Websites and our proprietary technology and systems may become obsolete. Our failure to respond to technological change or to adequately maintain, upgrade and develop our computer network and the systems used to process customers' orders and payments could harm our business, prospects, financial condition and results of operations.

Issuances of our securities are subject to federal and state securities laws, and certain holders of common stock issued by us in prior offerings may be entitled to rescind their purchases.

Issuances of securities are subject to federal and state securities laws. From November 1999 through September 2000, we offered and sold common stock to investors in various states. Certain of those offerings may not have complied with various requirements of applicable state securities laws. In such situations a number of remedies may be available to regulatory authorities and the investors who purchased common stock in those offerings, including, without limitation, a right of rescission, civil penalties, seizure of our assets, a restraining order or injunction, and a court order to pay restitution and costs. As a result, certain investors in our common stock may be entitled to return their shares to

Overstock and receive back from us the full price they paid, plus interest, which we estimate to be an aggregate amount of approximately $5.4 million (based on interest calculated through March 31, 2002).

We face risks relating to our inventory.

We directly purchase some of the merchandise that we sell on our Websites. We assume the inventory damage, theft and obsolescence risks, as well as price erosion risks for products that we purchase directly. These risks are especially significant because some of the merchandise we sell at our Websites are characterized by rapid technological change, obsolescence and price erosion (for example, computer hardware, software and consumer electronics). In addition, we often do not receive warranties on the merchandise we purchase.

In the recent past, we have recorded charges for obsolete inventory and have had to sell certain merchandise at a discount or loss. It is impossible to determine with certainty whether an item will sell for more than the price we pay for it. Because we rely heavily on purchased inventory, our success will depend on our ability to liquidate our inventory rapidly, the ability of our buying staff to purchase inventory at attractive prices relative to its resale value and our ability to manage customer returns and the shrinkage resulting from theft, loss and misrecording of inventory. If we are unsuccessful in any of these areas, we may be forced to sell our inventory at a discount or loss.

We may be liable if third parties misappropriate our customers' personal information.

If third parties are able to penetrate our network security or otherwise misappropriate our customers' personal information or credit card information, or if we give third parties improper access to our customers' personal information or credit card information, we could be subject to liability. This liability could include claims for unauthorized purchases with credit card information, impersonation or other similar fraud claims. This liability could also include claims for other misuses of personal information, including unauthorized marketing purposes. These claims could result in litigation. Liability for misappropriation of this information could adversely affect our business. In addition, the Federal Trade Commission and state agencies have been investigating various Internet companies regarding their use of personal information. We could incur additional expenses if new regulations regarding the use of personal information are introduced or if government agencies investigate our privacy practices.

We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure transmission of confidential information such as customer credit card numbers. We cannot assure you that advances in computer capabilities, new discoveries in the field of cryptography or other events or developments will not result in a compromise or breach of the algorithms that we use to protect customer transaction data. If any such compromise of our security were to occur, it could harm our reputation, business, prospects, financial condition and results of operations. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches. We cannot assure you that our security measures will prevent security breaches or that failure to prevent such security breaches will not harm our business, prospects, financial condition and results of operations.

We may expand our business internationally, causing our business to become increasingly susceptible to numerous international business risks and challenges that could affect our profitability.

In the future, we may expand into international markets. International sales and transactions are subject to inherent risks and challenges that could adversely affect our profitability, including:

•: the need to develop new supplier and manufacturer relationships;

•: unexpected changes in international regulatory requirements and tariffs;
•: difficulties in staffing and managing foreign operations;
•: longer payment cycles from credit card companies;
•: greater difficulty in accounts receivable collection;
•: potential adverse tax consequences;
•: price controls or other restrictions on foreign currency; and
•: difficulties in obtaining export and import licenses.

To the extent we generate international sales and transactions in the future, any negative impact on our international business could negatively impact our business. In particular, gains and losses on the conversion of foreign payments into United States dollars may contribute to fluctuations in our results of operations and fluctuating exchange rates could cause reduced gross revenues and/or gross margins from non-dollar-denominated international sales.

We are subject to intellectual property litigation.

Third parties have, from time to time, claimed and may claim in the future that we have infringed their past, current or future intellectual property rights. We may become more vulnerable to such claims as laws such as the Digital Millennium Copyright Act are interpreted by the courts. We may be increasingly subject to infringement claims as the number of services and competitors in our segment grow. These claims, whether meritorious or not, could be time-consuming, result in costly litigation, cause service upgrade delays, require expensive changes in our methods of doing business or require us to enter into costly royalty or licensing agreements, if available. As a result, these claims could harm our business.

We may be subject to product liability claims that could be costly and time consuming.

We sell products manufactured by third parties, some of which may be defective. If any product that we sell were to cause physical injury or injury to property, the injured party or parties could bring claims against us as the retailer of the product. Our insurance coverage may not be adequate to cover every claim that could be asserted. If a successful claim were brought against us in excess of our insurance coverage, it could adversely affect our business. Even unsuccessful claims could result in the expenditure of funds and management time and could have a negative impact on our business.

We may not be able to obtain trademark protection for our marks, which could impede our efforts to build brand identity.

We have received Patent and Trademark Office actions in response to several of our trademark applications, indicating that several of our marks, including "Overstock Sports and Outdoors" and "Overstock Computers and Home Office," are descriptive, which means that the Patent and Trademark Office considers the marks as merely "descriptive" of the nature, quality or intended use of the goods or services. If our responses to these office actions are not successful, we would likely not be able to obtain registrations for these marks on the principal register, and this could impede our ability to protect these marks from use by other businesses or our competitors. In general, there can be no assurance that we will be able to secure significant protection for all of our service marks or trademarks, or that our applications will be successful. Our competitors or others could adopt product or service marks similar to our marks, or try to prevent us from using our marks, thereby impeding our ability to build brand identity and possibly leading to customer confusion. Any claim by another party against us or customer confusion related to our trademarks, or our failure to obtain trademark registration, would negatively affect our business.

Because we have not yet completed the goodwill impairment tests required as part of our adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," (SFAS 142) we may need to restate our March 31, 2002 financial statements to record an impairment charge shortly after the offering has been completed, which would adversely affect our operating results.

We have not completed our evaluation of the recoverability of the carrying value of our goodwill, which totaled approximately $2,784,000 as of March 31, 2002. Although we have adopted SFAS 142 as of January 1, 2002, the standard allows us six months from the date of adoption to complete this evaluation and determine whether any impairment of our goodwill may exist. If we determine that impairment of our goodwill exists, we will be required to restate our financial statements for the three months ended March 31, 2002 in order to record an impairment charge, which would adversely affect our recorded operating results for that period.

Risks Relating to the Internet Industry

Our success is tied to the continued use of the Internet and the adequacy of the Internet infrastructure.

Our future revenues and profits, if any, substantially depend upon the continued widespread use of the Internet as an effective medium of business and communication. Factors which could reduce the widespread use of the Internet include:

•: actual or perceived lack of security of information or privacy protection;
•: possible disruptions, computer viruses or other damage to the Internet servers or to users' computers; and
•: excessive governmental regulation.

Customers may be unwilling to use the Internet to purchase goods.

Our long-term future depends heavily upon the general public's willingness to use the Internet as a means to purchase goods. The failure of the Internet to develop into an effective commercial tool would seriously damage our future operations. E-commerce is a relatively new concept, and large numbers of customers may not begin or continue to use the Internet to purchase goods. The demand for and acceptance of products sold over the Internet are highly uncertain, and most e-commerce businesses have a short track record. If consumers are unwilling to use the Internet to conduct business, our business may not develop profitably.

The security risks of e-commerce may discourage customers from purchasing goods from us.

In order for the e-commerce market to develop successfully, we and other market participants must be able to transmit confidential information securely over public networks. Third parties may have the technology or know-how to breach the security of customer transaction data. Any breach could cause customers to lose confidence in the security of our Websites and choose not to purchase from our Websites. If someone is able to circumvent our security measures, he or she could destroy or steal valuable information or disrupt our operations. Concerns about the security and privacy of transactions over the Internet could inhibit the growth of the Internet and e-commerce. Our security measures may not effectively prohibit others from obtaining improper access to our information. Any security breach could expose us to risks of loss, litigation and liability and could seriously disrupt our operations.

Credit card fraud could adversely affect our business.

We do not carry insurance against the risk of credit card fraud, so the failure to adequately control fraudulent credit card transactions could reduce our net revenues and our gross margin. We have implemented technology to help us detect the fraudulent use of credit card information. However, we may in the future suffer losses as a result of orders placed with fraudulent credit card data even though the associated financial institution approved payment of the orders. Under current credit card practices, we are liable for fraudulent credit card transactions because we do not obtain a cardholder's signature. If we are unable to detect or control credit card fraud, our liability for these transactions could harm our business, results of operation or financial condition.

If one or more states successfully assert that we should collect sales or other taxes on the sale of our merchandise or the merchandise of third parties that we offer for sale on our Websites, our business could be harmed.

We do not currently collect sales or other similar taxes for physical shipments of goods into states other than Utah. One or more local, state or foreign jurisdictions may seek to impose sales tax collection obligations on us and other out-of-state companies that engage in online commerce. Our business could be adversely affected if one or more states or any foreign country successfully asserts that we should collect sales or other taxes on the sale of our merchandise.

Existing or future government regulation could harm our business.

We are subject to the same federal, state and local laws as other companies conducting business on the Internet. Today there are relatively few laws specifically directed towards conducting business on the Internet. However, due to the increasing popularity and use of the Internet, many laws and regulations relating to the Internet are being debated at the state and federal levels. These laws and regulations could cover issues such as user privacy, freedom of expression, pricing, fraud, quality of products and services, taxation, advertising, intellectual property rights and information security. Applicability to the Internet of existing laws governing issues such as property ownership, copyrights and other intellectual property issues, taxation, libel, obscenity and personal privacy could also harm our business. For example, United States and foreign laws regulate our ability to use customer information and to develop, buy and sell mailing lists. The vast majority of these laws were adopted prior to the advent of the Internet, and do not contemplate or address the unique issues raised thereby. Those laws that do reference the Internet, such as the Digital Millennium Copyright Act, are only beginning to be interpreted by the courts and their applicability and reach are therefore uncertain. These current and future laws and regulations could harm our business, results of operation and financial condition.

Laws or regulations relating to privacy and data protection may adversely affect the growth of our Internet business or our marketing efforts.

We are subject to increasing regulation at the federal, state and international levels relating to privacy and the use of personal user information. For example, we are subject to various telemarketing laws that regulate the manner in which we may solicit future suppliers and customers. Such regulations, along with increased governmental or private enforcement, may increase the cost of growing our business. In addition, several states have proposed legislation that would limit the uses of personal user information gathered online or require online services to establish privacy policies. The Federal Trade Commission has adopted regulations regarding the collection and use of personal identifying information obtained from children under 13. Bills pending in Congress would extend online privacy protections to adults. Moreover, proposed legislation in this country and existing laws in foreign countries require companies to establish procedures to notify users of privacy and security policies, obtain consent from users for collection and use of personal information, and/or provide users with the

ability to access, correct and delete personal information stored by us. We could become a party to a similar enforcement proceeding. These data protection regulations and enforcement efforts may restrict our ability to collect demographic and personal information from users, which could be costly or harm our marketing efforts.

Risks Relating to this Offering of Our Securities

Our management has broad discretion as to the use of the net proceeds from this offering.

Our management has broad discretion as to the use of the net proceeds that we will receive from this offering. We cannot assure you that management will apply these funds effectively, nor can we assure you that the net proceeds from this offering will be invested in a manner yielding a favorable return. We intend to use approximately $3.0 million of the net proceeds of this offering to repay, in full, all outstanding indebtedness under a line of credit, with High Meadows Finance L.C. High Meadows Finance L.C. is owned by High Plains Investments, LLC, an entity controlled by Patrick M. Byrne, our President and Chief Executive Officer; John J. Byrne Jr., a member of our Board of Directors and the father of Patrick M. Byrne; and Cirque Properties, Inc., an entity owned by John J. Byrne, III, a brother of Patrick M. Byrne.

New investors in our common stock will experience immediate and substantial dilution of approximately $11.17 per share.

The initial public offering price is substantially higher than the book value per share of our common stock. Investors purchasing common stock in this offering will, therefore, incur immediate dilution of $11.17 in net tangible book value per share of common stock. This dilution figure deducts the estimated underwriting discounts and commissions and estimated offering expenses payable from the initial public offering price. Investors will incur additional dilution upon the exercise of outstanding stock options.

Securities analysts may not initiate coverage of our common stock and this may have a negative impact on our common stock's market price.

This offering is managed by only one underwriter, and there is no guarantee that securities analysts will cover our common stock after the completion of this offering. If securities analysts do not cover our common stock after the completion of this offering, the lack of research coverage may adversely affect our common stock's market price. As a result, you may be unable to sell your shares of common stock at or above the initial public offering price.

Market prices of technology and e-commerce companies have been highly volatile and the market for our stock may be volatile as well.

The stock markets have experienced significant price and trading volume fluctuations, and the market prices of technology and e-commerce companies generally have been extremely volatile and have recently experienced sharp share price and trading volume changes in the first days and weeks after the securities were released for public trading. Investors may not be able to resell their shares at or above the initial public offering price. In the past, following periods of volatility in the market price of a public company's securities, securities class action litigation has often been instituted against that company. Such litigation could result in substantial cost and a diversion of management's attention and resources.

Our directors, executive officers and significant stockholders will continue to hold a substantial portion of our stock after this offering, which may lead to conflicts with other stockholders over corporate governance.

Following the completion of this offering, our directors, executive officers and holders of 5% or more of our outstanding common stock will beneficially own approximately 56.2% of our outstanding common stock, including warrants and stock options exercisable within 60 days after May 3, 2002. High Plains Investments, LLC, an entity controlled by Patrick M. Byrne, our President and Chief Executive Officer, will beneficially own approximately 36.8% of our outstanding common stock after this offering. These stockholders, acting together, and High Plains Investments, LLC, acting alone, will be able to significantly influence all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as mergers or other business combinations. This control may delay, deter or prevent a third party from acquiring or merging with us, which in turn could reduce the market price of our common stock.

Our stock price may be volatile and you may lose all or a part of your investment.

Our shares have not previously been publicly traded. Following this offering, the market price of our common stock may experience a substantial decline. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which are beyond our control, including:

•: changes in securities analysts' recommendations or estimates of our financial performance;
•: changes in market valuations of similar companies;
•: announcements by us or our competitors of significant contracts, new products, acquisitions, commercial relationships, joint ventures or capital commitments;
•: actual or anticipated fluctuations in our operating results; and
•: intellectual property or litigation developments.

In addition, it is possible that in some future periods our results of operations may be below the expectations of public market analysts and investors. If this occurs, our stock price may decline.

We may need additional financing and may not be able to raise additional financing on favorable terms or at all, which could increase our costs and limit our ability to grow.

We anticipate that we may need to raise additional capital in the future to continue our longer-term expansion plans, to respond to competitive pressures or to respond to unanticipated requirements. We cannot be certain that we will be able to obtain additional financing on commercially reasonable terms or at all. Our failure to obtain additional financing or our inability to obtain financing on acceptable terms could require us to limit our plans for expansion, incur indebtedness that has high rates of interest or substantial restrictive covenants, issue equity securities that will dilute your holdings or discontinue a portion of our operations.

We do not intend to pay dividends on our non-redeemable common stock, and you may lose the entire amount of your investment.

We have never declared or paid any cash dividends on our non-redeemable common stock and do not intend to pay dividends on our non-redeemable common stock for the foreseeable future. We intend to invest our future earnings, if any, to fund our growth. Therefore, you will not receive any funds without selling your shares. We cannot assure that you will receive a positive return on your investment when you sell your shares or that you will not lose the entire amount of your investment.

Our Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws and the Delaware General Corporation Law contain anti-takeover provisions which could discourage or prevent a takeover, even if an acquisition would be beneficial to our stockholders.

Several provisions of our Amended and Restated Certificate of Incorporation and Amended and Restated bylaws could discourage potential acquisition proposals and could delay or prevent a change in control of our company even if that change in control would be beneficial to our stockholders. For example, only one-third of our board of directors will be elected at each of our annual meetings of stockholders, which will make it more difficult for a potential acquirer to change the management of our company, even after acquiring a majority of the shares of our common stock. These provisions, which cannot be amended without the approval of two-thirds of our stockholders, could diminish the opportunities for a stockholder to participate in tender offers, including tender offers at a price above the then current market value of our common stock. In addition, our board of directors, without further stockholder approval, may issue preferred stock, with such terms as the board of directors may determine, that could have the effect of delaying or preventing a change in control of our company. The issuance of preferred stock could also adversely affect the voting powers of the holders of common stock, including the loss of voting control to others. We are also afforded the protections of Section 203 of the Delaware General Corporation Law, which could delay or prevent a change in control of our company or could impede a merger, consolidation, takeover or other business combination involving our company or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company.

There may be sales of substantial amounts of our common stock after this offering, which could cause our stock price to fall.

Our current stockholders hold a substantial number of shares, which they will be able to sell in the public market in the near future. After this offering, 14,292,404 shares of common stock will be outstanding, excluding exercises of options or warrants after March 31, 2002. All of the shares sold in this offering will be freely tradable, except for shares purchased by holders subject to lock-up agreements or our registration rights agreement or by any of our existing "affiliates," as that term is defined in Rule 144 under the Securities Act, which generally includes officers, directors or 10% stockholders. The remaining shares of common stock outstanding after this offering will be restricted as a result of securities laws, our registration rights agreement or lock-up agreements with WR Hambrecht+Co. that restrict holders' ability to transfer their stock for 180 days after the date of this prospectus. Of these shares, 121,591 will be available for sale in the public market as of the date of this prospectus; 590,337 will be available for sale in the public market 90 days after the date of this prospectus; 9,389,170 will be available for sale in the public market 180 days after the date of this prospectus; and 1,191,306 will be available for sale in the public market at various times thereafter. WR Hambrecht+Co. may, however, waive the 180-day lock-up period at any time for any stockholder. Sales of a substantial number of shares of our common stock within a short period of time after this offering could cause our stock price to fall. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional stock.

under applicable securities laws. Under Rule 144, commencing ninety days after the completion of this offering, Amazon would be able to sell all of such shares, subject to the volume restrictions described in "Shares Eligible for Future Sale." Further, commencing on November 17, 2002, Amazon would be able to sell all such shares without regard to the volume restrictions. Sales by Amazon of its shares in the public trading market, or the perception that such shares are available for sale, could have a depressant effect on our stock price.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance and include, but are not limited to, statements concerning:

•: the anticipated benefits and risks of our commission-based third party relationships, business relationships and acquisitions;
•: our ability to attract certain retail and business customers;
•: the anticipated benefits and risks associated with our business strategy;
•: our future operating results and the future value of our common stock;
•: the anticipated size or trends of the market segments in which we compete and the anticipated competition in those markets;
•: potential government regulation;
•: our future capital requirements and our ability to satisfy our capital needs;
•: the anticipated use of the proceeds realized from this offering;
•: the anticipated addition of key personnel;
•: possible expansion into international markets;
•: the potential for additional issuances of our securities;
•: the possibility of future warehouse sales;
•: our plans to devote substantial resources to our sales and marketing teams;
•: our belief that our current investors will continue to support the business if and when cash needs arise;
•: the possibility of future acquisitions of businesses, products or technologies;
•: our belief that we can continue to attract customers in a cost-efficient manner;
•: our strategy to develop strategic business relationships with additional wholesalers and distributors;
•: our belief that current or future litigation will likely not have a material adverse effect on our business; and
•: our belief that certain of our stockholders are unlikely to exercise any rights of recission or certain other remedies that they may possess.

Furthermore, in some cases, you can identify forward-looking statements by terminology such as may, will, could, should, expect, plan, intend, anticipate, believe, estimate, predict, potential or continue, the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined in the Risk Factors section above. These factors may cause our actual results to differ materially from any forward-looking statement.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of our 2,155,000 shares of common stock in this offering will be approximately $27.3 million, based on an assumed initial public offering price of $14.00 per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, or $33.3 million if the underwriters' over-allotment option is exercised in full.

The principal purpose of this offering is to create a public market for our common stock. We intend to use approximately $3.0 million of the net proceeds of this offering to repay, in full, all outstanding indebtedness under a line of credit, to High Meadows Finance L.C., which matures on June 1, 2002 and bears a per annum interest rate equal to 3.5% plus the rate of interest announced from time to time by Wells Fargo Bank & Company (or any successor bank thereto) as its "Prime Rate". High Meadows Finance L.C. is owned by High Plains Investments, LLC, an entity controlled by Patrick M. Byrne, our President and Chief Executive Officer; John J. Byrne Jr., a member of our Board of Directors and the father of Patrick M. Byrne; and Cirque Properties, Inc., an entity owned by John J. Byrne, III, the brother of Patrick M. Byrne. We expect to use the balance of the net proceeds of this offering as follows:

•: An estimated $3 million to $6 million for expansion of our marketing and sales activity;
•: An estimated $1 to $2 million for capital expenditures; and
•: The remainder of the net proceeds will be used for opportunistic inventory purchases as well as general corporate purposes and working capital. In addition, we may use a portion of the net proceeds to acquire complementary technologies or businesses. However, we currently have no commitments or agreements and are not involved in any negotiations with respect to any such transactions.

The amounts we actually expend for working capital and other general corporate purposes will vary significantly depending on a number of factors, including future revenue growth, if any, and the amount of cash that we generate from operations. As a result, we will retain broad discretion over the allocation of the net proceeds of this offering. Pending the uses listed above, we intend to invest the net proceeds of this offering in short-term, interest-bearing, investment-grade securities. We cannot predict whether the proceeds invested will yield a favorable return.

DIVIDEND POLICY

We have never declared or paid any cash dividends on shares of our non-redeemable common stock. We currently intend to retain our earnings for future growth and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our results of operations, financial conditions, contractual and legal restrictions and other factors the board deems relevant.

Certain offerings of our common stock may not have complied with various requirements of applicable state securities laws. As such, certain investors in our common stock may be entitled to return their shares to us and receive back from us the full price they paid, plus interest. Although no investors have attempted to exercise a right of rescission, and although we have never declared or paid any cash dividends on shares of our common stock that may be subject to rescission, we have recorded "interest," which may be payable on these securities if the rescission rights are exercised, as a deemed dividend in our financial statements. If an investor does attempt to exercise a right of rescission, the interest attributable to their securities would likely become payable in cash.

CAPITALIZATION

The following table sets forth our capitalization at March 31, 2002:

•

On an actual basis;

•

On a pro forma basis which includes the conversion of all of our outstanding shares of Series A preferred stock into common stock upon the completion of this offering; and

•

On a pro forma as adjusted basis to reflect:

•: the receipt of the net proceeds from the sale of 2,155,000 shares of common stock offered by us at an assumed initial public offering price of $14.00 per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses;
•: the repayment of existing indebtedness in the amount of approximately $3.0 million; and
•: the conversion of all of our outstanding shares of Series A preferred stock into common stock upon the completion of this offering.

You should read the information below in conjunction with the Consolidated Financial Statements and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

			As of March 31, 2002 (unaudited)
			Actual			Pro Forma			Pro Forma As Adjusted
						(in thousands)
Cash and cash equivalents			$	7,902		$	7,902		$	32,192

Total indebtedness			$	3,227		$	3,227		$	227

Redeemable securities:
	Series A redeemable preferred stock, $0.0001 par value, 1,764,000 shares authorized, 959,000, zero and zero shares issued and outstanding		$	6,582		$	—		$	—
	Redeemable common stock, $0.0001 par value, 851,000 shares issued and outstanding			5,395			5,395			5,395

		Total redeemable securities		11,977			5,395			5,395

Stockholders' equity:
	Common stock, $0.0001 par value, 15,879,000 shares authorized, 10,363,000, 11,322,000 and 13,477,000 shares issued and outstanding			1			1			1
	Additional paid-in capital			62,994			69,576			96,866
	Accumulated deficit			(53,818	)		(53,818	)		(53,818	)
	Unearned stock-based compensation			(5,033	)		(5,033	)		(5,033	)
	Treasury stock, 35,000 shares at cost			(100	)		(100	)		(100	)

		Total stockholders' equity	$	4,044		$	10,626		$	37,916

	Total capitalization		$	19,248		$	19,248		$	43,538

The shares of common stock to be outstanding in the pro forma and pro forma as adjusted column exclude:

•: 1,478,709 shares of our common stock subject to options issued at a weighted average exercise price of $4.87 under our 1999 Stock Option Plan and the Gear.com, Inc. Restated 1998 Stock Option Plan as of March 31, 2002;
•: 1,122,200 shares of our common stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $5.60 per share as of March 31, 2002;
•: 101,122 shares of our common stock subject to options issued at a weighted average exercise price of $11.90 under our 2002 Stock Option Plans as of May 3, 2002.
•: 366,597 shares of our common stock reserved for issuance under our 1999 Stock Option Plan as of March 31, 2002;
•: 333,009 shares of common stock reserved for issuance under our 2000 Stock Purchase Plan as of March 31, 2002;
•: 537,558 shares of common stock reserved for issuance under our 2002 Stock Plan as of May 3, 2002; and
•: up to 450,000 shares that could be sold to the underwriters upon exercise of their option to purchase additional shares to cover over-allotments.

DILUTION

Our net tangible book value at March 31, 2002, was approximately $13.1 million, or $1.18 per share. Net tangible book value per share is equal to our total tangible assets less our total liabilities, divided by the total number of shares of our common stock outstanding.

After giving effect to the conversion of 958,612 shares of our Series A preferred stock upon the completion of this offering, our net tangible book value at March 31, 2002, was approximately $1.08 per share.

After giving effect to the sale of 2,155,000 shares of our common stock in this offering at an assumed initial public offering price of $14.00 per share, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value at March 31, 2002 would have been approximately $40.4 million, or $2.83 per share. This represents an immediate increase in net tangible book value of $1.75 per share to existing stockholders and an immediate dilution of $11.17 per share to new investors purchasing shares of our common stock in this offering.

The following table illustrates the per share dilution to the new investors:


Assumed public offering price per share				$	14.00
	Pro forma net tangible book value per share as of March 31, 2002	$	1.08
	Increase in net tangible book value per share attributable to this offering		1.75

Pro forma net tangible book value per share as adjusted after offering					2.83
Dilution per share to new investors in this offering				$	11.17

If the underwriters exercise their over-allotment option in full, there will be an increase in pro forma as adjusted net tangible book value to $3.15 per share to existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value of $10.85 to new investors.

The following table summarizes, on a pro forma basis as of March 31, 2002, the total number of stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid by the existing stockholders and by the new investors in this offering before deducting the underwriting commissions and discounts and estimated offering expenses payable by us:

	Shares Purchased			Total Consideration
	Shares Purchased			Total Consideration				Average Price Per Share
	Number	Percent		Amount		Percent		Average Price Per Share
Existing stockholders	12,137,404	84.9	%	$	49,728,000	62.2	%	$	4.10
New investors	2,155,000	15.1			30,170,000	37.8			14.00

Total	14,292,404	100.0	%	$	79,898,000	100.0	%

If the underwriters exercise their over-allotment option in full, our existing stockholders would own 82.3% and our new investors would own 17.7% of the total number of shares of our common stock outstanding after this offering.

Assuming the exercise in full of all options and warrants outstanding and exercisable as of March 31, 2002, the average price per share paid by our existing stockholders would be increased by $0.19 per share to $4.29 per share.

SELECTED FINANCIAL DATA

The following selected consolidated financial data as of December 31, 2000 and 2001 and for each of the three years in the period ended December 31, 2001, are derived from our consolidated financial statements that have been audited by PricewaterhouseCoopers LLP, independent accountants, and are included elsewhere in this prospectus. The consolidated financial data as of December 31, 1997, 1998 and 1999 and for each of the two years in the period ended December 31, 1998, are derived from consolidated financial statements, which have been audited but are not contained herein. We derived the consolidated financial data as of March 31, 2001 and 2002 and for each of the three months then ended, from our unaudited interim consolidated financial statements included elsewhere in this prospectus. In management's opinion, these unaudited statements have been prepared on substantially the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the consolidated financial information for the periods presented. The historical results do not necessarily indicate results expected for any future period. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and the related notes thereto included elsewhere in this prospectus.

		Year ended December 31,															Three months ended March 31, (unaudited)
		1997			1998			1999			2000			2001			2001			2002
		(in thousands, except per share data)
Consolidated Statement of Operations Data:
Direct revenue		$	739		$	584		$	1,835		$	21,762		$	35,243		$	8,282		$	10,029
Commission revenue			—			—			—			867			3,965			501			1,659
Warehouse revenue			—			—			—			2,894			795			795			379

	Total revenue		739			584			1,835			25,523			40,003			9,578			12,067
Cost of goods sold(1)			665			525			2,029			27,812			34,640			8,549			9,990

Gross profit (loss)			74			59			(194	)		(2,289	)		5,363			1,029			2,077

Operating expenses:
	Sales and marketing expenses(2)		68			340			4,948			11,376			5,784			1,413			1,219
	General and administrative expenses(2)		651			1,099			3,230			7,556			9,441			2,128			2,802
	Amortization of goodwill		—			—			—			226			3,056			774			—
	Amortization of stock-based compensation		—			—			—			—			649			67			846

	Total operating expenses		719			1,439			8,178			19,158			18,930			4,382			4,867

Operating loss			(645	)		(1,380	)		(8,372	)		(21,447	)		(13,567	)		(3,353	)		(2,790	)
Interest income			—			—			52			241			461			72			22
Interest expense			(16	)		(55	)		(37	)		(73	)		(729	)		(62	)		(240	)
Other income (expense), net			—			26			—			(33	)		29			7			1

Net loss			(661	)		(1,409	)		(8,357	)		(21,312	)		(13,806	)		(3,336	)		(3,007	)
Deemed dividend related to redeemable common stock			—			—			(4	)		(210	)		(404	)		(100	)		(111	)
Deemed dividend related to beneficial conversion feature of preferred stock			—			—			—			—			—			—			(6,607	)

Net loss attributable to common shares		$	(661	)	$	(1,409	)	$	(8,361	)	$	(21,522	)	$	(14,210	)	$	(3,436	)	$	(9,725	)

Net loss per common share			—		$	(1.57	)	$	(4.63	)	$	(3.63	)	$	(1.29	)	$	(0.32	)	$	(0.87	)
Weighted average common shares outstanding			—			897			1,804			5,922			10,998			10,596			11,171
Net loss as reported		$	(661	)	$	(1,409	)	$	(8,357	)	$	(21,312	)	$	(13,806	)	$	(3,336	)	$	(3,007	)
Add back amortization of goodwill(3)			—			—			—			226			3,056			774			—

Adjusted net loss		$	(661	)	$	(1,409	)	$	(8,357	)	$	(21,086	)	$	(10,750	)	$	(2,562	)	$	(3,007	)
Net loss per common share as reported		$	—		$	(1.57	)	$	(4.63	)	$	(3.63	)	$	(1.29	)	$	(0.32	)	$	(0.87	)
Add back amortization of goodwill(3)			—			—			—			0.04			0.28			0.07			—

Adjusted net loss per common share		$	—		$	(1.57	)	$	(4.63	)	$	(3.59	)	$	(1.01	)	$	(0.25	)	$	(0.87	)

(1) Amounts include stock-based compensation of		—	—	—	—	78	5	102

(2) Amounts exclude stock-based compensation as follows:
	Sales and marketing expenses	—	—	—	—	14	1	22
	General and administrative expenses	—	—	—	—	635	66	824

		—	—	—	—	649	67	846

(3): Reflects non-amortization of goodwill provision of SFAS 142.

	As of December 31,												As of March 31,
	1997			1998			1999		2000		2001		2001		2002
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	25		$	—		$	2,563	$	8,348	$	3,729	$	1,511	$	7,902
Working capital		(707	)		(639	)		1,253		6,440		3,071		8,375		7,487
Total assets		71			104			5,735		30,401		21,714		24,515		25,256
Total indebtedness		432			300			378		3,591		4,677		536		3,227
Redeemable securities		—			—			505		4,930		5,284		5,030		11,977
Stockholders' equity		(661	)		(839	)		1,835		12,349		5,980		14,163		4,044

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and the related Notes thereto. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions, as set forth under "Special Note Regarding Forward-Looking Statements." Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth in the following discussion and under "Risk Factors," "Business" and elsewhere in this prospectus.

Overview

We are a leading online "closeout" retailer offering discount brand name merchandise, including bed-and-bath goods, kitchenware, watches, jewelry, electronics, sporting goods and designer accessories. Our company, based in Salt Lake City, Utah, was founded in 1997, and we launched our first Website in March 1999.

Our revenue is comprised of direct revenue, commission revenue and warehouse revenue. No single customer accounts for more than 1% of our total revenue. Direct revenue includes sales made to individual consumers and businesses, which are fulfilled from our warehouse in Salt Lake City, Utah. We generate business-to-business (B2B) sales when we contact retailers by phone and offer them our merchandise below wholesale prices, allowing them an opportunity to be more price-competitive in their local markets. After we establish a relationship with a B2B client, the client sometimes places subsequent orders directly through our B2B Website. Our B2B calling effort began in October 2001, so our historical direct revenue has predominantly been based on individual consumer purchases made directly through our consumer Website. In February 2002, we implemented a policy intended to reduce the number of returned products. This new policy provides that we will not accept product returns initiated more than fifteen days after purchase.

Our commission revenue is derived from two sources, consumer commission revenue and B2B commission revenue. Consumer commission revenue is generated when we receive commissions for selling the merchandise of other retailers, cataloguers or manufacturers through our consumer Website. We do not own or physically handle the merchandise for these transactions, as the entities with which we have a commission-based, third-party relationship ship the products directly to the end customer. Similar to the manner in which we generate consumer commission revenue, we generate B2B commission revenue when we receive commissions for selling the merchandise of third parties through our B2B Website. No third party accounts for more than 10% of the commission products sold through our Websites.

Our warehouse revenue is derived from sales that liquidate residual products from large bulk purchases of inventory. These products cannot be economically sold on our Websites due to their low price points, bulk, irregular size or other factors. Warehouse sales are held in various physical locations when sufficient residual product has been accumulated. We held our first warehouse sale from November 2000 to January 2001, primarily to liquidate residual products from the purchase of the entire inventory of a distressed toy retailer. We initiated a second warehouse sale in February 2002, primarily to liquidate residual products from our acquisition of Gear.com. These sales have occurred in Salt Lake City, Utah, and may occur in other locations in the future.

Cost of goods sold for direct revenue primarily consists of the cost of the product, as well as inbound and outbound freight, fixed warehouse costs, warehouse handling costs, credit card fees, and customer service costs. For commission revenue, cost of goods sold includes credit card fees and customer service costs. As commission revenue grows in relation to direct sales, gross margins improve

because third party commissions have higher gross margins than direct sales. However, B2B gross margins are typically less than individual consumer gross margins. Therefore, future overall gross margins will be impacted by the blend of net revenues from these sales channels. Cost of goods sold also includes stock-based compensation for each related period.

Sales and marketing expenses consist primarily of advertising, public relations and promotional expenditures, as well as payroll and related expenses for personnel engaged in marketing and selling activities.

General and administrative expenses consist of wages and benefits for executive, accounting and administrative personnel, rents and utilities, travel and entertainment, depreciation and amortization and other general corporate expenses.

Amortization of goodwill results from the acquisition of Gear.com, Inc. in November 2000. We acquired Gear.com, an online sporting goods company that was based in Seattle, Washington in November 2002 for 2.1 million shares of our common stock and the assumption of $2.1 million in liabilities. The acquisition of Gear.com was accounted for using the purchase method of accounting, for which we recorded goodwill of approximately $6.1 million. The assets we acquired included cash, inventory, prepaid expenses, property and equipment of $3.5 million, $3.6 million, $495,000 and $787,000, respectively. Following the acquisition date, we directed the traffic from the Gear.com Website to the sporting goods section of the Overstock.com Website, the warehouse operations of Gear.com were closed and the inventory was moved to our warehouse facility in Salt Lake City. Subsequent to the acquisition date, the operations of Gear.com ceased, and Gear.com was dissolved.

We have recorded no provision or benefit for federal and state income taxes as we have incurred net operating losses for each period since inception. As of December 31, 2001, we had $54.4 million of net operating loss carryforwards, of which $18.2 million is subject to limitation. These net operating loss carryforwards will begin to expire in 2018. We have provided a full valuation allowance on the deferred tax asset, consisting primarily of net operating loss carryforwards, because of uncertainty regarding its realizability (see Note 17 of Notes to Financial Statements).

During the three months ended March 31, 2002, we recorded a deemed dividend of $6.6 million representing the beneficial conversion feature related to the issuance of 958,612 shares of Series A preferred stock. The amount of the beneficial conversion feature was established at the date of issuance resulting from the difference between the accounting conversion price and the deemed fair value of common shares on the date of issuance.

Both direct and commission revenue are seasonal, with revenues historically being the highest in the fourth quarter, reflecting higher consumer holiday spending. We anticipate this will continue in the foreseeable future. With the exception of our acquisition of Gear.com, we have achieved our historical growth from internal operations.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the

basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies are as follows:

•: revenue recognition;
•: estimating valuation allowances and accrued liabilities, specifically, the reserve for returns and the allowance for obsolete and damaged inventory;
•: accounting for income taxes; and
•: valuation of long-lived and intangible assets and goodwill.

Revenue recognition. We derive our revenue from three sources: (i) direct revenue, which are individual sales made to consumers and businesses; (ii) commission revenue, which includes consumer commission revenue and B2B commission revenue; and (iii) warehouse revenue, derived from liquidation sales of residual products from large bulk purchases of inventory. Both direct revenue and commission revenue are recorded net of returns as well as coupons redeemed by customers. As described below, significant management judgments and estimates must be made and used in connection with the revenue recognized in any accounting period.

For sales transactions, we comply with the provisions of Staff Accounting Bulletin 101 "Revenue Recognition" which states that revenue should be recognized when the following four revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) the product has been shipped and the customer takes ownership and assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. We generally require payment by credit card at the point of sale. Any amounts received prior to when we ship the goods to customers are deferred.

Reserve for returns and the allowance for obsolete and damaged inventory. Our management must make estimates of potential future product returns related to current period revenue. Management analyzes historical returns, current economic trends and changes in customer demand and acceptance of our products when evaluating the adequacy of the sales returns and other allowances in any accounting period. The reserve for returns was $496,000 as of December 31, 2001.

Overstock writes down its inventory for estimated obsolescence or damage equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Our inventory balance was $7.6 million, net of allowance for obsolescence or damaged inventory of $943,000 as of December 31, 2001.

Accounting for income taxes. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. As of December 31, 2001, we have recorded a full valuation allowance of $21.8 million against our net deferred tax asset balance due to uncertainties related to our deferred tax assets as a result of our history of operating losses. The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to change the valuation allowance, which could materially impact our financial position and results of operations.

Valuation of long-lived and intangible assets and goodwill. Overstock records an asset impairment charge when it believes an asset has experienced a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of underlying investments could result

in losses or an inability to recover the carrying value of the asset that may not be reflected in an asset's current carrying value, thereby possibly requiring an impairment charge in the future. Net intangible assets, long-lived assets and goodwill amounted to $8.4 million as of December 31, 2001.

Results of Operations

The following table sets forth our results of operations expressed as a percentage of total revenue for 1999, 2000 and 2001.

		Year ended December 31,						Three months ended March 31, (unaudited)
		1999		2000		2001		2001		2002
		(as a percentage of total revenue)
Direct revenue		100.0	%	85.3	%	88.1	%	86.5	%	83.2	%
Commission revenue		—		3.4		9.9		5.2		13.7
Warehouse revenue		—		11.3		2.0		8.3		3.1

	Total revenue	100.0		100.0		100.0		100.0		100.0
Cost of goods sold		110.6		109.0		86.6		89.3		82.8

Gross profit (loss)		(10.6	)	(9.0	)	13.4		10.7		17.2

Operating expenses:
	Sales and marketing expenses	269.6		44.6		14.5		14.8		10.1
	General and administrative expenses	176.0		29.6		23.6		22.1		23.2
	Amortization of goodwill	—		0.9		7.6		8.1		—
	Amortization of stock-based compensation	—		—		1.6		0.7		7.0

	Total operating expenses	445.6		75.1		47.3		45.7		40.3

Operating loss		(456.2	)	(84.1	)	(33.9	)	(35.0	)	(23.1	)
Interest income		2.8		0.9		1.2		0.8		0.2
Interest expense		(2.0	)	(0.3	)	(1.8	)	(0.6	)	(2.0	)
Other income (expense), net		—		(0.1	)	0.1		0.1		0.0

Net loss		(455.4	)	(83.6	)	(34.4	)	(34.7	)	(24.9	)

Comparison of Three Months Ended March 31, 2001 and 2002

Revenue

"Direct revenue" refers to the selling price of merchandise that we sell and fulfill. "Commission revenue" refers to the commissions we receive for selling third party merchandise through our Websites. "Warehouse revenue" refers to the sales that liquidated the residual products from large bulk purchases. Both direct revenue and commission revenue are recorded net of returns and net of coupons redeemed by customers. Total revenue (sum of direct revenue, commission revenue and warehouse revenue) grew from $9.6 million during the first quarter of 2001, to $12.1 million during the first quarter of 2002, representing growth of 26%. During this same period, direct revenue increased from $8.3 million to $10.0 million, or a 21% growth. A portion of this increase is due to the commencement of B2B sales in the latter portion of 2001. Additionally, our returns decreased in dollar value and as a percentage of sales, as a result of a new returns policy. Commission revenue grew from $501,000 to $1.7 million, representing growth of 231% due to the increased volume of our commission business. During the first quarter of 2001, warehouse revenue was $795,000 compared to $379,000 during the same period in 2002. This decrease was due to the amount of inventory available and the

respective size of the warehouse sales. For the warehouse sale in 2001, we liquidated the remnants of an inventory purchase from Toytime.com. This compares to the smaller liquidation of the remnants of the Gear.com inventory in 2002. The gross merchandise sales of goods sold directly by us and on behalf of third parties were $15.9 million in the first quarter of 2001 and $21.7 million in the first quarter of 2002, an increase of 36%.

Cost of Goods Sold

Cost of goods sold consists primarily of the costs of merchandise sold to customers, fixed warehouse costs, warehouse handling costs, inbound and outbound shipping costs, credit card fees and customer service costs. Cost of goods sold increased in absolute dollars from $8.5 million, or 89% of total revenue for the first quarter of 2001, to $10.0 million, or 83% of total revenue during the first quarter of 2002. The decrease in cost of goods sold as a percentage of total revenue was a result of efficiencies and improvements in our warehouse operations and lower product related costs due to larger quantities of products purchased as our business has grown. Cost of goods sold also includes stock-based compensation of $5,000 and $102,000 for the three months ended March 31, 2001 and 2002, respectively.

Operating Expenses

Sales and marketing. Sales and marketing expenses decreased from $1.4 million, or 15% of total revenue during the first quarter of 2001, to $1.2 million, or 10% of total revenue during the first quarter of 2002. This decrease in absolute dollars and as a percentage of total revenue was due to more targeted marketing spending and a decrease in online advertising rates.

General and administrative. General and administrative expenses increased from $2.1 million during the first three months of 2001, to $2.8 million during the first quarter of 2002, representing 22% and 23% of total revenue, respectively. The increase in absolute dollars was due primarily to the increase of our operations necessary to manage our continued growth.

Amortization of goodwill. Amortization of goodwill was $774,000 during the first quarter of 2001. Effective January 2002, under Statement of Financial Accounting Standards (SFAS) No. 142, we will no longer amortize goodwill, but will evaluate it periodically for impairment.

Amortization of stock-based compensation. Stock-based compensation increased by $779,000 to $846,000 for the three months ended March 31, 2002, from $67,000 for the three months ended March 31, 2001. The increase in stock-based compensation is due to the increase in the number of options granted during the first quarter of 2002, compared to the options granted during first quarter of 2001, plus the amortization of stock based compensation related to options granted during 2001 with strike prices near or less than the fair value of the underlying stock. We expect amortization of stock-based compensation in future periods to remain at high levels compared with historic periods due to increased stock option activity during the fourth quarter of 2001 and the first quarter of 2002 that resulted in the recording of significant stock-based compensation.

Comparison of Years Ended December 31, 2000 and 2001

Revenue

Total revenue grew from $25.5 million in 2000, to $40.0 million in 2001, representing growth of 57%. During this same period, direct revenue increased from $21.8 million to $35.2 million or a 61% growth, and commission revenue grew from $867,000 to $4.0 million representing growth of 361%. Warehouse revenue was $2.9 million in 2000 and $795,000 in 2001, resulting from a warehouse sale we held from November 2000 to January 2001. The decrease in warehouse revenue from 2000 to 2001 was due to the fact that two months of the warehouse sale occurred in 2000 compared to only one month

during 2001. We initiated a second warehouse sale in February 2002, primarily to liquidate residual products from our acquisition of Gear.com. The increase in total revenue was due primarily to an increase in the number of both direct and commission orders and in the average order size. Also, since we began making commission sales in May 2000, there are four additional months of commission revenue in 2001 compared to 2000. The gross merchandise sales of goods sold directly by us and on behalf of third parties were $36.1 million in 2000 and $69.3 million in 2001, an increase of 92%.

Cost of Goods Sold

Cost of goods sold increased in absolute dollars from $27.8 million, or 109% of total revenue in 2000, to $34.6 million, or 87% of total revenue in 2001. The decrease in cost of goods sold as a percentage of total revenue in 2001 compared to 2000 was a result of economies of scale achieved through an increased number of sales transactions and efficiencies in operations. These efficiencies include, but are not limited to, efficiencies in the actual costs paid to suppliers for goods, freight and handling costs, the costs of customer service and returns. In 2001, cost of goods sold also includes $78,000 of stock-based compensation.

Operating Expenses

Sales and marketing. Sales and marketing expenses decreased from $11.4 million in 2000, to $5.8 million in 2001. The decrease in marketing costs in both absolute dollars and as a percentage of total revenue as compared to 2000 was due to more effective and targeted marketing spending, reduced off-line spending and a decrease in online advertising rates. Sales and marketing expenses were 45% and 15% of total revenue for 2000 and 2001, respectively.

General and administrative. General and administrative expenses increased from $7.6 million in 2000, to $9.4 million in 2001 representing 30% and 24% of total revenue, respectively. The increase in absolute dollars was due primarily to new business development and the staffing necessary to manage and support our growth. General and administrative personnel increased from 46 employees at the end of 2000, to 65 employees at the end of 2001. The decrease in general and administrative expense as a percentage of total revenue was a result of economies of scale achieved through increased sales volume and the allocation of general and administrative expenses over a substantially larger revenue base.

Amortization of goodwill. Amortization of goodwill increased from $226,000, in 2000, to $3.1 million in 2001. This increase was due to a full year of amortization in 2001, compared to just one month's amortization in 2000. From November 28, 2000, the date of the Gear.com acquisition, to December 2001, $3.3 million of the total goodwill of $6.1 million was amortized. Effective January 2002, under Statement of Financial Accounting Standards (SFAS) No. 142, the remaining goodwill will no longer be amortized but will be evaluated periodically for impairment.

Other Expenses

Income taxes. We incurred net operating losses in 2000 and 2001, and consequently paid insignificant amounts of federal, state and foreign income taxes. As of December 31, 2001, we had $54.4 million of net operating loss carryforwards, of which $18.2 million is subject to limitation. These net operating loss carryforwards will begin to expire in 2018.

Comparison of Years Ended December 31, 1999 and 2000

The trends discussed in the comparisons of operating results for 2000 and 2001 generally apply to the comparison of results of operations for 1999 and 2000, except for differences discussed below.

Revenue

Our direct revenue increased from $1.8 million in 1999, to $21.8 million in 2000. Commission revenue commenced in May of 2000. Warehouse revenue was $2.9 million and resulted from the warehouse sale that commenced in November 2000. No warehouse sales were held in 1999. The gross merchandise sales of goods sold directly by us and on behalf of third parties were $1.8 million in 1999, and $36.1 million in 2000.

Cost of Goods Sold

Cost of goods sold. Our cost of goods sold increased from $2.0 million in 1999, to $27.8 million in 2000. As a percentage of total revenue, cost of goods sold decreased slightly from 111% to 109%.

Operating Expenses

Sales and marketing. Our sales and marketing expenses increased from $4.9 million in 1999, to $11.4 million in 2000. The increase reflects the hiring of additional sales and marketing personnel in connection with the building of our operations. Sales and marketing expenses accounted for 270% of total revenue in 1999 and 45% of total revenue in 2000. The increase in the aggregate dollar value of advertising expenses was primarily attributable to expansion of our online and print advertising, public relations, other promotional expenditures and related expenses required in promoting the Overstock brand, as well as increased personnel.

General and administrative. General and administrative expenses increased from $3.2 million in 1999 to $7.6 million in 2000. These costs represented 176% of total revenue in 1999 and 30% of total revenue in 2000.

Quarterly Results of Operations

The following tables set forth our unaudited quarterly results of operations data for the nine most recent quarters for the period ended March 31, 2002, as well as such data expressed as a percentage of our total revenue for the periods presented. The information in the table below should be read in conjunction with our Financial Statements and the Notes thereto included elsewhere in this prospectus. We have prepared this information on the same basis as the Financial Statements and the information includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair statement of our financial position and operating results for the quarters presented. Our quarterly operating results have varied substantially in the past and may vary substantially in the future. You should not draw any conclusions about our future results from the results of operations for any particular quarter.

		Three months ended
		Mar. 31, 2000			Jun. 30, 2000			Sept. 30, 2000			Dec. 31, 2000			Mar. 31, 2001			Jun. 30, 2001			Sept. 30, 2001			Dec. 31, 2001			Mar. 31, 2002
		(in thousands, except per share data)
Consolidated Statement of Operations Data:
Direct revenue		$	2,257		$	3,737		$	4,106		$	11,662		$	8,282		$	6,709		$	7,860		$	12,392		$	10,029
Commission revenue			—			58			233			576			501			698			884			1,882			1,659
Warehouse revenue			—			—			—			2,894			795			—			—			—			379

	Total revenue		2,257			3,795			4,339			15,132			9,578			7,407			8,744			14,274			12,067
Cost of goods sold(1)			2,835			4,531			5,031			15,415			8,549			6,658			7,744			11,689			9,990

Gross profit (loss)			(578	)		(736	)		(692	)		(283	)		1,029			749			1,000			2,585			2,077

Operating expenses:
	Sales and marketing expenses(2)		4,376			1,581			2,279			3,140			1,413			1,710			1,230			1,431			1,219
	General and administrative expenses(2)		1,532			1,810			1,592			2,622			2,128			2,170			2,402			2,741			2,802
	Amortization of goodwill		—			—			—			226			774			764			759			759			—
	Amortization of stock-based compensation		—			—			—			—			67			113			145			324			846

	Total operating expenses		5,908			3,391			3,871			5,988			4,382			4,757			4,536			5,255			4,867

Operating loss			(6,486	)		(4,127	)		(4,563	)		(6,271	)		(3,353	)		(4,008	)		(3,536	)		(2,670	)		(2,790	)
Interest income			23			61			67			90			72			315			26			48			22
Interest expense			(8	)		(11	)		(17	)		(37	)		(62	)		(104	)		(278	)		(285	)		(240	)
Other income (expense), net			3			6			(34	)		(8	)		7			14			(2	)		10			1

Net loss			(6,468	)		(4,071	)		(4,547	)		(6,226	)		(3,336	)		(3,783	)		(3,790	)		(2,897	)		(3,007	)
Deemed dividend related to redeemable common stock			(16	)		(36	)		(57	)		(101	)		(100	)		(101	)		(101	)		(102	)		(111	)
Deemed dividend related to beneficial conversion feature of preferred stock			—			—			—			—			—			—			—			—			(6,607	)

Net loss attributable to common shares		$	(6,484	)	$	(4,107	)	$	(4,604	)	$	(6,327	)	$	(3,436	)	$	(3,884	)	$	(3,891	)	$	(2,999	)	$	(9,725	)

Net loss per common share		$	(1.90	)	$	(0.88	)	$	(0.72	)	$	(0.69	)	$	(0.32	)	$	(0.35	)	$	(0.35	)	$	(0.27	)	$	(0.87	)
Weighted average common shares outstanding			3,408			4,660			6,361			9,216			10,596			11,036			11,172			11,178			11,171
Net loss as reported		$	(6,468	)	$	(4,071	)	$	(4,547	)	$	(6,226	)	$	(3,336	)	$	(3,783	)	$	(3,790	)	$	(2,897	)	$	(3,007	)
Add back amortization of goodwill(3)			—			—			—			226			774			764			759			759			—

Adjusted net loss		$	(6,468	)	$	(4,071	)	$	(4,547	)	$	(6,000	)	$	(2,562	)	$	(3,019	)	$	(3,031	)	$	(2,138	)	$	(3,007	)
Net loss per common share as reported		$	(1.90	)	$	(0.88	)	$	(0.72	)	$	(0.69	)	$	(0.32	)	$	(0.35	)	$	(0.35	)	$	(0.27	)	$	(0.87	)
Add back amortization of goodwill(3)			—			—			—			0.02			0.07			0.07			0.07			0.07			—

Adjusted net loss per common share		$	(1.90	)	$	(0.88	)	$	(0.72	)	$	(0.67	)	$	(0.25	)	$	(0.28	)	$	(0.28	)	$	(0.20	)	$	(0.87	)

(1) Amounts include stock-based compensation of		—	—	—	—	5	15	19	39	102

(2) Amounts exclude stock-based compensation as follows:
	Sales and marketing expenses	—	—	—	—	1	3	3	7	22
	General and administrative expenses	—	—	—	—	66	110	142	317	824

		—	—	—	—	67	113	145	324	846

(3): Reflects non-amortization of goodwill provision of SFAS 142.

	Three months ended
	Mar. 31, 2000		Jun. 30, 2000		Sept. 30, 2000		Dec. 31, 2000		Mar. 31, 2001		Jun. 30, 2001		Sept. 30, 2001		Dec. 31, 2001		Mar. 31, 2002
Additional Operating Data(1):
Gross merchandise sales (in thousands)(2)	$	3,009	$	5,205	$	7,401	$	20,531	$	15,889	$	12,899	$	15,634	$	24,925	$	21,436
Number of orders(3)		41,398		64,092		77,584		155,229		151,039		111,520		131,237		222,522		177,339
Number of new customers(4)		34,710		43,109		53,192		108,211		98,889		67,981		81,331		136,744		104,989
Average customer acquisition cost(5)	$	126.07	$	36.67	$	42.84	$	29.02	$	14.29	$	25.15	$	15.12	$	10.46	$	8.68

(1): The additional operating data sets forth certain operating data relating to our business for the nine most recent quarters for the period ended March 31, 2002. While we believe that the information in the table below facilitates an understanding of our business and results of operations for the periods presented, such information is not in accordance with generally accepted accounting principles and should be read in conjunction with the quarterly results of operations data set forth above.
(2): Gross merchandise sales represents total cash received by us for sales of merchandise through our Websites. Gross merchandise sales varies significantly from revenue in accordance with generally accepted accounting principles.
(3): Number of orders represents the number of individual orders for merchandise through our Websites excluding B2B orders.
(4): Number of new customers represents the number of persons that established a new account in our Websites and purchased merchandise on our Websites excluding new B2B customers.
(5): Average customer acquisition cost represents total sales and marketing expense excluding related stock-based compensation charges and B2B sales force compensation divided by the number of new customers for the period presented.

		Three months ended
		Mar. 31, 2000		Jun. 30, 2000		Sept. 30, 2000		Dec. 31, 2000		Mar. 31, 2001		Jun. 30, 2001		Sept. 30, 2001		Dec. 31, 2001		Mar. 31, 2002
		(as a percentage of total revenue)
Consolidated Statement of Operations Data:
Direct revenue		100.0	%	98.5	%	94.6	%	77.1	%	86.5	%	90.6	%	89.9	%	86.8	%	83.2	%
Commission revenue		—		1.5		5.4		3.8		5.2		9.4		10.1		13.2		13.7
Warehouse revenue		—		—		—		19.1		8.3		—		—		—		3.1

	Total revenue	100.0		100.0		100.0		100.0		100.0		100.0		100.0		100.0		100.0
Cost of goods sold		125.6		119.4		115.9		101.9		89.3		89.9		88.6		81.9		82.8

Gross profit (loss)		(25.6	)	(19.4	)	(15.9	)	(1.9	)	10.7		10.1		11.4		18.1		17.2

Operating expenses:
	Sales and marketing expenses	193.9		41.7		52.5		20.8		14.8		23.1		14.1		10.0		10.1
	General and administrative expenses	67.9		47.7		36.7		17.3		22.1		29.3		27.5		19.3		23.2
	Amortization of goodwill	—		—		—		1.5		8.1		10.3		8.7		5.3		—
	Amortization of stock-based compensation	—		—		—		—		0.7		1.5		1.6		2.2		7.0

	Total operating expenses	261.8		89.4		89.2		39.6		45.7		64.2		51.9		36.8		40.3

Operating loss		(287.4	)	(108.8	)	(105.1	)	(41.5	)	(35.0	)	(54.1	)	(40.5	)	(18.7	)	(23.1	)
Interest income		1.0		1.6		1.5		0.6		0.8		4.3		0.3		0.3		0.2
Interest expense		(0.4	)	(0.3	)	(0.4	)	(0.2	)	(0.6	)	(1.4	)	(3.2	)	(2.0	)	(2.0	)
Other income (expense), net		0.1		0.2		(0.8	)	(0.1	)	0.1		0.2		(0.0	)	0.1		0.0

Net loss		(286.7	)	(107.3	)	(104.8	)	(41.2	)	(34.7	)	(51.0	)	(43.4	)	(20.3	)	(24.9	)

Our direct revenue and commission revenue have increased in every quarter on a year-over-year basis. Warehouse revenue that occurred in the quarters ended December 31, 2000 and March 31, 2001 was the result of a single warehouse sale that began in November 2000 and ended in January 2001. We initiated another warehouse sale in February 2002 resulting in warehouse revenue in the quarter ended March 31, 2002. The general increase in total revenue is due to the expansion of our customer base as we attracted more visitors to our Websites, as well as repeat purchases from these customers. We have experienced significant seasonality in our business, reflecting a combination of seasonal fluctuations in

Internet usage and traditional retail seasonality patterns. Internet usage and the rate of Internet growth may be expected to decline during the summer. Further, sales in the traditional retail industry are significantly higher in the fourth calendar quarter of each year than in the preceding three quarters. Commission revenue increased during the past several quarters due to the implementation and expansion of our commission program.

Cost of goods sold as a percentage of total revenue has decreased on a quarterly basis from 126% to 83% of total revenue during the nine quarters ended March 31, 2002. This improvement is a result of efficiencies in the cost paid to suppliers for products and the economies of scale resulting from the increased number of sales transactions as well as efficiencies in operations.

Total operating expenses as a percentage of total revenue have decreased on a year-over-year basis each quarter during 2001 as compared to 2000 as a result of economies of scale achieved through increased sales volume. In the near future, we expect to continue to devote substantial resources to the expansion of our sales and marketing efforts, and expect that total operating expenses may increase in absolute dollars in future periods. These expenses as a percentage of total revenue will vary depending on the level of revenue obtained.

Due to the foregoing factors, in one or more future quarters our operating results may fall below the expectations of securities analysts and investors. In such an event, the trading price of our common stock would likely be materially adversely affected.

Effect of Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. SFAS No. 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination and the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142 provides that intangible assets with finite useful lives be amortized and that goodwill and intangible assets with indefinite lives will not be amortized, but will rather be tested at least annually for impairment. We will adopt SFAS No. 142 for the fiscal year beginning January 1, 2002. Adoption of this statement is not expected to have a material impact on our financial position or results of operations. Under this pronouncement, the remaining goodwill will not be amortized, but will be evaluated periodically for impairment.

FASB also issued SFAS No. 143, Accounting for Asset Retirement Obligations, that is applicable to financial statements issued for fiscal years beginning after June 15, 2002. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets. We anticipate the provisions of this Standard will not have a significant effect on our financial position or operating results.

In August 2001, the FASB issued SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement is effective for fiscal years beginning after December 15, 2001. The Company will adopt SFAS No. 144 on January 1, 2002. Adoption of this statement is not expected to have a material impact on our financial position or results of operations.

Liquidity and Capital Resources

We have funded our operations through December 31, 2001 primarily through private sales of equity securities, warrants to purchase our common stock and promissory notes totaling $43.0 million, lines-of-credit with related parties and capital equipment leases.

In March 2001, we entered into a loan agreement with High Meadows Finance L.C. In connection with the loan agreement, High Meadows Finance purchased 197,459 shares of common stock for an aggregate consideration of $1.0 million. We plan to use a portion of the proceeds of this offering to pay off the outstanding balance under this agreement and plan to terminate this agreement immediately thereafter. The loan agreement provides for a special purpose line of credit to purchase inventory under a revolving promissory note with a maximum principal amount of $6.0 million. Amounts borrowed under the agreement bear interest at 3.5 percentage points above the prime rate of interest as announced by Wells Fargo Bank & Co. and are secured by substantially all of our assets. As of March 31, 2002, the interest rate applicable to this loan agreement was equal to 8.25%. The loan agreement expires on June 1, 2002, unless renewed. As of March 31, 2002, we had an outstanding principal balance of approximately $3.0 million under the revolving promissory note held by High Meadows Finance. High Meadows Finance L.C. is owned by High Plains Investments, LLC, an entity controlled by Patrick M. Byrne, our President and Chief Executive Officer; John J. Byrne Jr., a member of our Board of Directors and the father of Patrick M. Byrne; and Cirque Properties, Inc., an entity owned by John J. Byrne, III, the brother of Patrick M. Byrne. See —"Certain Relationships and Related Transactions" for additional information related to the High Meadows Finance loan agreement.

In September 2001, we entered into a loan agreement with Norwich Associates L.C., which is owned by related entities as follows: 40% by Haverford-Utah; 40% by High Meadows Finance and 10% by Cirque Property L.C. Dorothy M. Byrne and John B. Pettway own approximately 64% and 8.9% of the interests in Haverford-Utah respectively. We plan to terminate this agreement immediately after the closing of this offering. Patrick M. Byrne, and John J. Byrne Jr. each own approximately 33% of High Meadows Finance and Cirque Properties, Inc., an entity wholly owned by John J. Byrne, III, the brother of Patrick M. Byrne owns approximately 34% of High Meadows Finance. Cirque Property, L.C. is an entity controlled by Cirque Properties, Inc, a corporation wholly owned by John J. Byrne, III, the brother of Patrick M. Byrne and the son of John J. Byrne Jr. Amounts borrowed under the loan agreement are secured by substantially all of our assets and may be used solely to purchase inventory. The loan agreement provides for a revolving promissory note with a maximum principal amount of $7.0 million that bears simple interest at 2% per month, subject to certain default conditions and negative covenants. The promissory note has a maturity date of June 1, 2002, unless renewed. In connection with this loan agreement and as part of the transaction, we issued 10,586 shares of our common stock to Norwich Associates. As of March 31, 2002, no amounts were outstanding under this loan agreement. See —"Certain Relationships and Related Transactions" for additional information related to the Norwich Associates loan agreement.

Our operating activities resulted in net cash outflows of $22.4 million for the year ended December 31, 2000 and in net cash outflows of $10.5 million for the year ended December 31, 2001. Uses of cash during the year ended December 31, 2000 were principally for net losses, as well as changes in accounts receivable, inventory and accounts payable. Uses of cash for the year ended December 31, 2001 were principally for net losses, offset by depreciation and amortization, and changes in inventory, prepaid expenses, accounts payable and accrued liabilities.

Our investing activities resulted in net cash inflows of $236,000 for the year ended December 31, 2000, with $3.5 million received in the Gear.com acquisition offset by $3.3 million in capital asset expenditures. Investing activities resulted in net cash outflows of $1.7 million for capital and long-term asset expenditures during the year ended December 31, 2001.

Financing activities provided cash of $27.9 million in the year ended December 31, 2000, primarily related to issuance of common stock for cash of $25.1 million and borrowings of $3.0 million from a bank. For the fiscal year ended December 31, 2001, financing activities provided net cash of $7.5 million principally from the issuance of common stock for cash of $6.3 million and borrowings of $4.5 million from a related party, offset by a $3.0 million repayment of a note payable.

On March 4, 2002, we sold 958,612 shares of our Series A redeemable, convertible, preferred stock at $6.89 per share for $6,582,000, net of issuance costs. As the fair value of the common stock to be received upon conversion of the preferred stock is greater than the conversion price of the preferred stock at the date the preferred stock was issued, a beneficial conversion feature results in a non-cash charge of approximately $6.6 million to be recorded in the first quarter of 2002. This non-cash charge will be recorded as a deemed dividend, of which $3.7 million is attributable to shares sold to the following related parties; John J. Byrne Jr., a director of Overstock; Contex Limited, an entity controlled by Mark Byrne, a brother of Patrick M. Byrne; Haverford Internet LLC, an entity controlled by Patrick M. Byrne; The Gordon S. Macklin Family Trust, a trust of a director of Overstock; and Rope Ferry Associates, Ltd., an entity owned by John J. Byrne III and Dorothy M. Byrne, the brother and mother of Patrick M. Byrne. The remaining purchasers of our Series A preferred stock are unrelated parties that are friends and acquaintances of our officers and directors.

The following tables summarize our contractual obligations and other commercial commitments as of December 31, 2001, and the effect such obligations and commitments are expected to have on our liquidity and cash flows in future periods.

	Payments Due by Period (in thousands)
Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Long-term debt	$	—	$	—	$	—	$	—	$	—
Capital lease obligations		469		290		179		—		—
Operating leases		4,798		1,260		3,210		303		25

Total contractual cash obligations	$	5,267	$	1,550	$	3,389	$	303	$	25

	Amount of Commitment Expiration Per Period (in thousands)
Other Commercial Commitments	Total Amounts Committed		Less than 1 year		1-3 years		4-5 years		Over 5 years
Lines of credit	$	13,000	$	13,000	$	—	$	—	$	—
Redeemable common stock		5,284		1,231		1,448		2,605		—

Total commercial commitments	$	18,284	$	14,231	$	1,448	$	2,605	$	—

The estimated amount of redeemable common stock is based solely on the statute of limitations of the various states in which stockholders may have rescission rights and may not reflect the actual results. We do not have any unconditional purchase obligations, other long-term obligations, standby letters of credit, guarantees, standby repurchase obligations or other commercial commitments.

In July 2001, Patrick M. Byrne, our President and Chief Executive Officer, who is also a significant beneficial owner of our stock, agreed to personally guarantee our merchant account with a bank. The bank agreed to accept this personal guarantee in lieu of a demand deposit of $1,000,000 with the bank. If Dr. Byrne were to revoke his guarantee, we may be required to post a demand deposit with the bank.

We believe that the cash currently on hand, as supplemented by the March 2002 proceeds from the sale of Series A preferred stock and the available lines of credit, will be sufficient to continue

operations for the next twelve months. While we anticipate that, beyond the next twelve months, our cash flows from operations will be sufficient to fund our operational requirements, we may require additional financing. However, there can be no assurance that if additional financing is necessary it will be available, or, if available, that such financing can be obtained on satisfactory terms. We believe that the current investors will continue to support the business if and when cash needs arise. However, failure to generate sufficient revenues or raise additional capital could have a material adverse effect on our ability to continue as a going concern and to achieve our intended business objectives.

A portion of our cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we may evaluate potential acquisitions of businesses, products or technologies. We have no current plans, agreements or commitments, and are not currently engaged in any negotiations with respect to any such transaction.

Quantitative and Qualitative Disclosures about Market Risk

We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents, trade accounts and contracts receivable, accounts payable and long-term obligations. We consider investments in highly-liquid instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents. Our exposure to market risk for changes in interest rates relates primarily to our short-term investments and short-term obligations; thus, fluctuations in interest rates would not have a material impact on the fair value of these securities.

At March 31, 2002, we had $7.9 million in cash and cash equivalents. At that same date, we also had total notes payable of $2.9 million. A hypothetical 10% increase or decrease in interest rates would not have a material impact on our earnings or loss, or the fair market value or cash flows of these instruments.

BUSINESS

The following description of our business contains forward-looking statements relating to future events or our future financial or operating performance that involve risks and uncertainties, as set forth under "Special Note Regarding Forward-Looking Statements." Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under the heading "Risk Factors" and elsewhere in this prospectus.

Overview

We are an online "closeout" retailer offering discount, brand-name merchandise for sale over the Internet. Our merchandise offerings include bed-and-bath goods, kitchenware, watches, jewelry, electronics, sporting goods and designer accessories. We offer our customers an opportunity to shop for bargains conveniently, while offering our suppliers an alternative inventory liquidation distribution channel. We typically offer approximately 4,000 products in 13 categories on our Websites, www.overstock.com and www.overstockb2b.com. We continually add new, limited inventory products to our Websites in order to create an atmosphere that encourages customers to visit frequently and purchase products before our inventory sells out.

We have a "direct" business, in which we buy and take possession of excess inventory for resale. We also have our "commission" business, in which we receive a commission for selling other parties' excess inventory on our Websites. We currently have commission-based relationships with approximately 130 third parties that post over 2,000 products on our Websites. For both our direct and commission models we have a consumer and a business-to-business ("B2B") sales channel. Therefore, our business consists of four combinations of these components: direct consumer, direct B2B, commission consumer and commission B2B.

Industry Overview

Manufacturers and retailers traditionally hold inventory to buffer against uncertain demand within their normal, "inline" sales channels. Inline sales channels are manufacturers' primary distribution channels, which are characterized by regularly placed orders by established retailers at or near wholesale prices. In recent years, several dynamics have shifted inventory risk from retailers to manufacturers, including:

•: dominant retailers insist on just-in-time deliveries from manufacturers;
•: dominant retailers often demand to cancel orders mid-production and return unsold merchandise;
•: style, color or model changes can quickly turn inventory into closeout merchandise;
•: incorrect estimates of consumer demand which can lead to overproduction; and
•: changes in a retailer's financial situation or strategy results in cancelled orders.

The disposal of excess, or overstock, inventory represents a substantial burden for many manufacturers, especially those who produce high-quality branded merchandise. Manufacturers seek to avoid liquidating through traditional retail channels where the manufacturer's discounted products may be sold alongside other full-price products. This can result in weaker pricing and decreased brand

strength, and is known as channel conflict or sales channel pollution. As a result, many manufacturers turn to liquidation wholesalers and discount retailers. These liquidation channels provide manufacturers limited control of distribution and are, we believe, unreliable and expensive to manage when compared with their inline channels.

Despite the challenges encountered by manufacturers in the liquidation market, the proliferation of outlet malls, wholesale clubs and discount chains is evidence of the strong level of consumer demand for discount and closeout merchandise. However, consumers face several difficulties in shopping for closeout and overstock merchandise. For example, many traditional merchandise liquidation outlets are located in remote locations and have limited shopping hours, which we believe makes shopping burdensome and infrequent for many consumers. In addition, the space available in a traditional merchandise liquidation outlet constrains the number of products that a traditional merchandise liquidation outlet can offer at any given time.

However, we believe that the market for online liquidation is still early in its development and is characterized by only a limited number of competitors, some of which utilize an auction model to price their goods. Furthermore, we believe that there are no dominant companies in the online liquidation market, and many of the companies that do offer overstock or liquidation merchandise are focused on single product lines.

Lastly, small retailers are under competitive pressure from large national retailers. Small retailers generally do not have purchasing leverage with manufacturers; consequently, they are more likely to pay full wholesale prices and are more likely to receive inferior service. We believe that small retailers generally do not have access to the liquidation market because liquidation wholesalers are most often interested in liquidating large volumes of merchandise, rather than the small quantities appropriate for small, local retailers.

The Overstock Solution

Overstock utilizes the Internet to create a more efficient market for liquidation merchandise. We provide consumers and businesses with quick and convenient access to high-quality, brand-name merchandise at discount prices. We believe we are unlike other online liquidators because we focus on multiple product lines, offer a single price (as opposed to an auction format), and serve both businesses and consumers.

Overstock's platform consists of four business components. We have a "direct" business, in which we buy and take possession of excess inventory for resale. We also have a "commission" business, in which we allow holders of excess inventory to post products electronically on our Websites, where their appearance is indistinguishable from our direct products. In such commission-based arrangements, Overstock processes the sale, while order fulfillment is performed by third parties. We receive a commission for products of third parties sold through our Websites. For both our direct and commission models we have a consumer and B2B sales channel. Therefore, our business consists of four components: direct consumer, direct B2B, commission consumer and commission B2B.

Overstock provides manufacturers with a one-stop liquidation channel to sell both large and small quantities of excess and closeout inventory without disrupting sales through traditional channels. Key advantages for manufacturers liquidating their excess inventory through Overstock include:

•: Resolution of channel conflict . Channel conflicts arise when a manufacturer's excess inventory is sold through the same channel as their other product offerings. Since excess inventory is usually sold at a discount, sales of the manufacturer's other product offerings may be impacted as a consumer in a retail store may opt for the excess product or become confused by the pricing and model discrepancies. By using Overstock, manufacturers have an alternative and independent

channel where they can sell excess inventory without the fear of hindering the sale of their other products.

•: Single point of distribution . Manufacturers often use multiple liquidation sources to clear their excess inventory. Multiple sources create additional logistics issues that they would rather avoid. By using Overstock, manufacturers have a single source for the distribution of excess inventory.
•: Improved control of distribution . By using Overstock, manufacturers can monitor what kind of customer, whether individual consumer or small retailer, ultimately purchases their merchandise. In addition, a manufacturer can request that its products be offered in only one of our sales channels in order to avoid sales channel pollution.
•: Improved transaction experience . By having a reliable inventory clearing channel, manufacturers are able to more quickly and easily dispense of their excess merchandise.

Overstock also offers consumers a compelling alternative for bargain shopping. Key advantages for consumers include:

•: High quality and broad product selection . Most of the merchandise offered on our Websites is from well-known, brand-name manufacturers. We typically have approximately 4,000 product offerings, divided among 13 categories.
•: Convenient access on a secure site. Our customers are able to access and purchase our products 24 hours a day from the convenience of their home or office. Further, we do not sell any personal information about our customer base to third parties.
•: Responsive customer service and positive shopping experience. We employ 35 customer service representatives to assist customers by telephone and email. The average wait time for customer phone inquiries is 35 seconds, and our customer service staff responds to 90% of its emails within 24 hours. For our consumer business, we include a return shipment label in our customer's shipment to facilitate product returns and, subject to certain conditions, we allow customers up to 15 days to return purchased merchandise. In addition, we continually update and monitor our Websites to enhance the shopping experience for our customers.

We also offer small businesses and retailers a compelling method for obtaining products for resale. We believe that small businesses and retailers can secure lower prices and better service through us than they typically receive from manufacturers or other distributors. We believe we are able to offer these advantages because, unlike many small businesses and retailers, we have the ability to access the liquidation market to buy merchandise in bulk quantities for which we often receive volume-based price discounts. Accordingly, we have designed our shipping and receiving operations with the flexibility to accommodate both the receipt of large shipments of inventory purchases, and the distribution of small bulk loads to our small business customers.

Business Strategy

Our objective is to leverage the Internet to become the dominant closeout solution for holders of brand-name merchandise, allowing them to dispose of that merchandise discreetly and with high recovery values. We are pursuing this objective through the following key strategies:

•: Establish strong relationships with manufacturers . With the growth in the scale of our operations, we believe we are becoming an efficient liquidation channel for manufacturers and distributors. With scale comes the ability to buy in size, and we believe manufacturers appreciate our ability to liquidate their products without disturbing their traditional channels. Generally, manufacturers do not want their product offerings sold as heavily discounted, closeout products in brick-and-mortar retailers, as is common today. We believe that as manufacturers learn of our capabilities,

they will increasingly recognize the attractiveness of Overstock as an efficient liquidation solution.

•: Optimize inventory management through the use of technology . Our merchandise buyers are supported by proprietary software that provides nearly instantaneous information on product sales, margins and inventory levels. This technology enables us to make informed decisions and quickly change prices in an effort to maximize sales volume, gross profits and return on inventory capital.
•: Optimize marketing initiatives through the use of technology . Our marketing team is supported by proprietary software that enhances the level of service provided to our customers and takes advantage of the unique characteristics of online distribution. Our software provides us immediate feedback on the effectiveness of various marketing campaigns, allowing us to optimize our marketing expenditures. We have begun increasing the personalization of our Websites to each individual customer in order to enhance their shopping experience.
•: Maintain low customer acquisition costs . We believe that by focusing the vast majority of our marketing budget on targeted online campaigns such as banner ad and email campaigns, the results of which we are able to quantify, we will further reduce our per customer acquisition costs.
•: Aggressively grow our B2B business . We believe we offer our B2B customers a compelling opportunity for purchasing bulk inventory online at low prices with high-quality service. We are discovering that the small retail market is underserved by existing liquidators and we are quickly working to take advantage of this significant opportunity. We have a dedicated B2B Website, as well as a dedicated B2B sales team, whose sole purpose is to further develop this business. We have grown the sales team from 5 members as of December 31, 2001, to 21 members as of January 31, 2002.
•: Provide responsive customer service . Overstock maintains the infrastructure necessary to process and fulfill orders on an accurate, timely and reliable basis. In 2000, we opened a 219,450 square foot leased warehouse in Salt Lake City, Utah to help ensure the highest level of customer service. We strive to improve our product offerings, the look and feel of our Websites and the quality of our customers' shopping experience.

Key Relationships

Manufacturer and Supplier Relationships. It is difficult to establish closeout buying relationships with manufacturers. Trust and experience gained through past interactions are important. We believe our business model reduces the risk to the manufacturer that its discounted products are sold alongside its full-priced products. Our supplier relationships provide us with recognized, brand-name products. The table below identifies the three brand names that generate the largest revenues in each of our product categories.

AOL Time Warner
Bissell
Blueridge Home Fashions
Brooks
Cuisinart
Fuji
Gund
Helly Hanson
Hewlett-Packard
Kelty

Kenneth Cole
Krups
M. Tiffany
Madame Alexander
Mai
Marin
Marmott
Movado
Nicole Miller
Novica

Oriental Weavers
Panasonic
Philips
Playhut
Random House
RCA
Samsonite
Seiko
Simon & Schuster
Vera Wang

To date, we have not entered into contracts with manufacturers or liquidation wholesalers that guarantee the availability of merchandise for a set duration. Our manufacturer and supplier relationships are based on historical experience with manufacturers and liquidation wholesalers and do not obligate or entitle us to receive merchandise on a long-term or short-term basis. In our direct business, we purchase the products from manufacturers or liquidation wholesalers using standard purchase orders. Generally, suppliers do not control any of the terms under which products are sold over our Websites.

In addition, we have an agreement with Safeway Inc. to provide discounted merchandise to be sold within their stores. Currently, we are supplying certain stores in California, Oregon and Washington. During the term of our agreement with Safeway, we are prevented from selling the same or similar goods to any store that has more than 400 retail stores in the following categories: drug, mass merchandising, grocery, club or warehouse. We hope this relationship will expand to include more merchandise within more stores. In the future, we hope to develop similar relationships with other retailers.

Commission business. We currently have commission-based relationships with approximately 130 third parties that post approximately 2,000 products on our Websites. These third parties, whether e-tailers, catalogers or manufacturers, have their own fulfillment capabilities and utilize our "discount" channel to liquidate their products without disturbing their own "full-price" distribution channel. As compensation for our services, we receive a commission. As part of this program, we tightly monitor the performance of these third parties, assist them with fulfillment procedures and, when necessary, remove the products of poorly performing third parties from the site. Our commission program has enabled us to increase our product offerings, expand our customer base and earn sales commissions.

In our commission business, although the third party is the primary obligor under the commission arrangement, we negotiate the price that we will pay to the third party for the cost of the product and its delivery to the customer. We do not take possession of or title to the product or assume inventory risk. However, we set the price posted on our Website. The difference between the price negotiated with the third party and the price for which we sell the product on our Website is our commission.

For both our direct and commission businesses, suppliers may limit the distribution of their products to consumers or businesses by electing to list their products on the consumer Website or B2B Website or both.

Sales and Marketing

B2B. As of March 31, 2002, we had a dedicated sales force of 23 people who primarily interact with small, regional or local retailers by telephone or through email to alert them to the opportunity they have to purchase merchandise at prices that are below wholesale, and which we believe are often lower than the prices paid by the larger retailers with whom they compete.

Consumer. We focus on cost-effective methods to target our consumer audience. Almost all of our advertising budget is spent on online campaigns, such as banner ad and email campaigns, and we are able to monitor and evaluate the results of our online campaigns. We seek to identify and eliminate campaigns that do not meet our expectations.

Products

Online Products

Our products are organized into 13 different product departments. As of March 31, 2002, our product departments were:

Apparel & Accessories
Bed, Bath & Linens
Computer & Home Office
DVD's, Books & Music
Electronics & Cameras
Gifts & Gadgets
Home & Garden Décor

Housewares & Appliances
Jewelry & Watches
Luggage & Business
Sports Gear
Toys & Dolls
Worldstock Global Designs

Each of these departments has multiple categories that more specifically define the products offered within that department. For example, as of March 31, 2002, we had the following product categories within the "Electronics & Cameras" department:

Audio		Telephones
Cameras		Video
Optics

Each category has several subcategories that further detail the product contained within. For example, under the "Video" category, we have the subcategories of "Camcorders", "Televisions", "VCRs & DVDs" and "View All Video".

Individual products can be accessed and viewed from the category or subcategory pages. These specific product pages include detailed product descriptions, a color picture and pricing information.

The number of total products we offer has grown from less than 100 in 1999, to more than 4,000 products, as of December 31, 2001 (excluding media products such as books, DVDs and CDs). As the number of products and product categories change throughout the year, we periodically reorganize our departments and/or categories to better reflect our current product availability.

Fulfillment Operations

When customers place orders on our Websites, orders are fulfilled either by a third party on a commission basis or directly from our Salt Lake City, Utah warehouse. We monitor both sources for accurate order fulfillment and timely shipment. We currently charge $4.95 for basic ground shipping, but customers can choose from various expedited shipping services at their expense.

Returns Policy. Our returns policy for consumer purchases requires that consumers initiate the return of a product within 15 days of the date we ship the product and we must receive the product within 30 days. Upon receipt of the product, we refund the amount of the order, less a handling fee of $4.95 and the original shipping charges. For returned items from the Computer & Home Office and Electronics & Cameras departments, we charge a 15% restocking fee instead of the $4.95 handling fee. The returns policy for our B2B purchasers depends on the type of item returned. For jewelry items, B2B purchasers must return the purchased items within 14 days of purchase. Non-jewelry products must be returned within 5 days of purchase. Software products must be returned in their original condition, including packaging, documentation, warranty cards, manuals, and accessories, including the product's original factory seal. Defective software products are eligible for exchange only.

Payment Terms. As a general policy, we require verification of receipt of payment or credit card authorization before we ship products to consumers or B2B purchasers.

Direct Fulfillment. During 2001, we fulfilled approximately 55% of all orders through our leased 219,450 square foot Salt Lake City, Utah warehouse where we store approximately 2,000 products. We operate the warehouse with an automated warehouse management system that tracks the receipt of the inventory items, distributes order-fulfillment assignments to warehouse workers and obtains rates for various shipping options to ensure low-cost outbound shipping. Our Websites relay orders to the warehouse management system throughout each business day, and the warehouse management system in turn confirms to our Websites shipment of each order. Customers track the shipping status of their packages through links we provide on our Websites. We guarantee order shipments within two business days of order placement, but most orders ship within one business day. The warehouse team ships between 8,000 and 10,000 orders each week using a single shift, five days per week. We also process returns of direct merchandise in the Salt Lake City, Utah warehouse. We estimate we could increase our capacity in the warehouse by at least 3-5 times if necessary, through the use of additional shifts and additional staff on each shift.

Commission Fulfillment. During 2001, approximately 45% of our orders was for inventory owned and shipped by third parties who pay us a commission for the sale of their products on our Websites. We currently manage approximately 130 entities that collect their orders through our Websites. These third parties perform essentially the same operations as our core warehouse: order picking, shipping, and reverse logistics processing. These third parties relay shipment confirmations to our Websites, where customers can review shipping and tracking information. From a customer's point of view, shipping from our warehouse or from the warehouse of one of these third parties is indistinguishable.

Customer Service

We are committed to superior customer service. We staff our customer service department with dedicated professionals who respond to phone and email inquiries on products, ordering, shipping status, and returns. Our customer service staff process 3,000 to 5,000 calls per week. The same staff processes 8,000 to 12,000 email messages each week, with less than a 24-hour turnaround time. We use automated email and phone systems to route traffic to appropriate customer service representatives.

Technology

We use our internally developed Websites and a combination of proprietary technologies and commercially available licensed technologies and solutions to support our operations. We use the services of XO Communications, Inc. and Genuity Inc. to obtain connectivity to the Internet over two DS-3 lines. We currently store our data on an Oracle database running on Hewlett-Packard "N Class' computer hardware, which is backed up by a high-speed redundant EMC Corporation storage system. Currently, we use twenty-six Dell PowerEdge servers, which are connected to the Oracle database and operate in a multi-processing Linux environment designed to accommodate large volumes of Internet traffic. During the 2001 holiday shopping season, our Internet systems operated at 25% of their capacity. In addition, we have installed 12 Web servers and implemented "relief valve" functionality with technology provided by Akamai Technologies, Inc. to off-load transactions during extreme loads.

We are currently enhancing the reporting capabilities of our Websites to improve our understanding of our customers' needs and site behavior. Our Internet systems include redundant hardware on mission critical components and are located in our Salt Lake City, Utah facility.

Competition

The online liquidation services market is new, rapidly evolving, intensely competitive and has relatively low barriers to entry, as new competitors can launch new Websites at relatively low cost. We believe that competition in the online liquidation market is based predominantly on:

•: price;
•: product quality and selection;
•: shopping convenience;
•: customer service; and
•: brand recognition.

Our liquidation services compete with other online retailers and traditional liquidation "brokers," some of which may specifically adopt our methods and target our customers. We currently or potentially compete with a variety of companies that can be divided into several broad categories:

•: liquidation e-tailers such as SmartBargains;
•: online retailers with discount tabs such as Amazon.com, Inc., eBay, Inc. and Buy.com, Inc.; and
•: traditional liquidators such as Ross Stores, Inc. and TJX Companies, Inc.

As the market for online liquidation grows, we believe that companies involved in online retail, as well as traditional retailers and liquidation brokers, will increase their efforts to develop services that compete with our online services. We also face potential competition from Internet companies not yet focused on the liquidation market, and from retail companies not yet operating online. We are unable to anticipate which other companies are likely to offer services in the future that will compete with the services we provide.

In addition, many of our current and potential competitors have greater brand recognition, longer operating histories, larger customer bases and significantly greater financial, marketing and other resources than us, and may enter into strategic or commercial relationships with larger, more established and well-financed companies. Some of our competitors could enter into exclusive distribution arrangements with our vendors and deny us access to their products, devote greater resources to marketing and promotional campaigns and devote substantially more resources to their Website and systems development than our company. New technologies and the continued enhancement of existing technologies also may increase competitive pressures on our company. We cannot assure you that we will be able to compete successfully against current and future competitors or address increased competitive pressures. See "Risk Factors."

Intellectual Property

We regard our domain names and similar intellectual property as critical to our success. We rely on a combination of laws and contractual restrictions with our employees, customers, suppliers, affiliates and others to establish and protect our proprietary rights. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our intellectual property without authorization. In addition, we cannot assure you that others will not independently develop substantially similar intellectual property. Although we are pursuing the registration of our key trademarks in the United States, some of our trade names are not eligible to receive trademark protection. In addition, effective trademark protection may not be available or may not be sought by us in every country in which our products and services are made available online, including the United States.

From time to time, we may be subject to legal proceedings and claims in the ordinary course of our business, including claims of alleged infringement of the trademarks and other intellectual property

rights of third parties by our company. For example, in February 2002, Microsoft Corporation filed a complaint against us in the United States District Court for the Northern District of California alleging that we have distributed counterfeit and otherwise unauthorized Microsoft software in violation of federal copyright and trademark law and related state laws. The complaint seeks damages in an unspecified amount and injunctive relief. Although we believe we have defenses to the allegations and intend to pursue them vigorously, the Microsoft lawsuit is in its early stages, and we do not have sufficient information to assess the validity of the claims or the amount of potential damages.

In addition, litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. This litigation, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could materially harm our business. See "Risk Factors."

Government Regulation

All of our services are subject to federal and state consumer protection laws including laws protecting the privacy of consumer non-public information and regulations prohibiting unfair and deceptive trade practices. In particular, under federal and state financial privacy laws and regulations, we must provide notice to consumers of our policies on sharing non-public information with third parties, must provide advance notice of any changes to our policies and, with limited exceptions, must give consumers the right to prevent sharing of their non-public personal information with unaffiliated third parties. Furthermore, the growth and demand for online commerce could result in more stringent consumer protection laws that impose additional compliance burdens on online companies. These consumer protection laws could result in substantial compliance costs and could interfere with the conduct of our business.

Moreover, in many states, there is currently great uncertainty whether or how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet and commercial online services. These issues may take years to resolve. For example, tax authorities in a number of states, as well as a Congressional advisory commission, are currently reviewing the appropriate tax treatment of companies engaged in online commerce, and new state tax regulations may subject us to additional state sales and income taxes. New legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business or the application of existing laws and regulations to the Internet and commercial online services could result in significant additional taxes on our business. These taxes could have an adverse effect on our cash flows and results of operations. Furthermore, there is a possibility that we may be subject to significant fines or other payments for any past failures to comply with these requirements.

Employees

As of March 31, 2002, we had 163 full-time employees, including 46 in customer service, 33 in order fulfillment, 10 in information technology and Web store production, 6 in sales and marketing, 27 in merchandising, 7 in finance, 23 in B2B sales, 7 in business development and 4 in our general and administrative department. We have never had a work stoppage, and none of our employees is represented by a labor union. We consider our employee relationships to be positive.

Facilities

We lease 22,000 square feet of office space for our corporate headquarters and customer service operations in Salt Lake City, Utah, and we lease a 219,450 square foot warehouse and distribution facility also in Salt Lake City, Utah. We believe these facilities will be sufficient for our needs for at least the next twelve months.

Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Our operations are subject to federal, state and local laws and regulations.

In February 2002, Microsoft Corporation filed a complaint against us in the United States District Court for the Northern District of California alleging that we have distributed counterfeit and otherwise unauthorized Microsoft software in violation of federal copyright and trademark law and related state laws. The complaint seeks damages in an unspecified amount and injunctive relief. Although we believe we have defenses to the allegations and intend to pursue them vigorously, the Microsoft lawsuit is in its early stages, and we do not have sufficient information to assess the validity of the claims or the amount of potential damages.

MANAGEMENT

The following table sets forth certain information with respect to our executive officers and directors as of May 3, 2002:

Executive Officers And Directors	Age	Position
Patrick M. Byrne	38	President, CEO, and Chairman of the Board of Directors
Jason C. Lindsey	32	Chief Financial Officer, Assistant Secretary and Director
Douglas Greene	41	Chief Technology Officer
James Hyde	34	Vice President of Operations
Trey Baker	43	Vice President of Merchandising
John B. Pettway	39	Secretary and Director
John J. Byrne Jr. (2)	69	Director
Gordon S. Macklin (1)(2)	73	Director
Allison H. Abraham (1)	39	Director
John A. Fisher (1)(2)	54	Director

(1): Member of the Audit Committee
(2): Member of the Compensation Committee

Dr. Patrick M. Byrne has served as our President, Chief Executive Officer and a Director since October 1999, and as Chairman of the Board since February 2001. From September 1997 to May 1999, Dr. Byrne served as President and Chief Executive Officer of Fechheimer Brothers, Inc., a manufacturer and distributor of uniforms. From 1995 until its sale in September 1999, Dr. Byrne was Chairman, President and Chief Executive Officer of Centricut, LLC, a manufacturer and distributor of industrial torch parts. From 1994 to the present, Dr. Byrne has served as a Manager of the Haverford Group, an investment company and an affiliate of Overstock. Dr. Byrne currently serves as a Director of White Mountains Insurance Group, an insurance company and has served in such capacity since 1997. Dr. Byrne has a Bachelor of Arts degree in Chinese studies from Dartmouth College, a Master's degree from Cambridge University as a Marshall Scholar, and a Ph.D. in philosophy from Stanford University. Dr. Byrne is the son of John J. Byrne Jr., who is a member of our Board of Directors.

Jason C. Lindsey has served as our Chief Financial Officer and as a Director since June 1999, and as Assistant Secretary since October 1999. From June 1998 to January 2001, Mr. Lindsey served as Controller of the Haverford Group, an investment company and an affiliate of Overstock. Prior to joining the Haverford Group, Mr. Lindsey was an auditor with PricewaterhouseCoopers LLP from January 1996 to June 1998. Mr. Lindsey has a Bachelor of Arts and a Master's degree in accounting from Utah State University.

Douglas Greene has served as our Chief Technology Officer since June 2000, and Vice President of Software Development since April 1999. From February 1996 to November 1998, Mr. Greene served as Manager of Internet Development for Human Affairs International, an insurance company. Mr. Greene served as President of Great Lakes Software, Inc., a software company, from 1994 to 1996.

James Hyde has served as our Vice President of Operations since June 2001. Prior to joining the Company, Dr. Hyde served as Vice President of Applications Development at TenFold Corporation, a software applications company, from October 1998 to June 2001. From July 1995 to September 1998, Dr. Hyde was a Project Manager with Sarcos Research Corporation, a robotics research company. Dr. Hyde holds B.S. and Ph.D. degrees in Mechanical Engineering from Stanford University and a M.S. degree in Mechanical Engineering from Massachusetts Institute of Technology.

Trey Baker has served as our Vice President of Merchandising since December 1999. From October 1998 to August 1999, Mr. Baker served as President of Seven Seas Home Accents, a home furnishings supplier to department and specialty stores. Mr. Baker held buying positions with Tuesday Morning, a closeout retailer from December 1997 to October 1998 and with Wal-Mart Stores from June 1996 to October 1997. Mr. Baker served as Vice President of Merchandise for 50-Off Stores, an apparel and home goods closeout retailer, from July 1991 to May 1996. Mr. Baker has a Bachelor of Science degree in Business Management from the University of Central Florida.

John B. Pettway has served part-time as our Secretary since October 23, 1999 and has been a Director since June 22, 1999. Mr. Pettway has also been a Manager, Chief Financial Officer and in-house counsel of the Haverford Group, an investment company and an affiliate of Overstock, since 1994. Mr. Pettway is a CPA with a Bachelor of Science in accounting from the University of Maryland and a J.D. from the University of Baltimore.

John J. Byrne Jr. has served as a Director of Overstock since October 1999. Mr. Byrne has served as Chairman of the Board of White Mountains Insurance Group, Ltd., a financial services holding company, since 1985 and was its Chief Executive Officer and President from 1985 until his retirement in 1997. Prior to that he served as Chairman and Chief Executive Officer of GEICO from 1976 to 1985. Earlier in his career, Mr. Byrne spent eight years with the Travelers Insurance Companies, most recently as Executive Vice President. Mr. Byrne has also served as a director of American Express Company, Martin Marietta Corporation, Lehman Brothers, Inc., MidOcean Group of Companies, Zurich Re, and Terra Nova (Bermuda) Holdings. Mr. Byrne currently serves as a Director of OneBeacon Insurance Group, Folksamerica Reinsurance Company, Fund American, and Financial Security Assurance Holdings Ltd. and as Chairman of Montpelier Re. Mr. Byrne has served as an Overseer of the Amos Tuck School of Business Administration of Dartmouth College and the Rutgers University Foundation and was a member of the Stanford Graduate School of Business Advisory Council and the Standard Research Institute Advisory Council. Mr. Byrne has a Bachelor of Science from Rutgers University, a graduate degree in Mathematics from the University of Michigan and is a Member of the American Academy of Actuaries. John J. Byrne Jr. is the father of Patrick M. Byrne, who is a Director, President, and Chief Executive Officer of the Company.

Gordon S. Macklin has served as a Director of Overstock since October 1999. Mr. Macklin served as Chairman, President and Chief Executive Officer of White River Corporation, an information services company, from October 1993 to July 1998. Mr. Macklin was Chairman of Hambrecht and Quist Group, a venture capital and investment banking company, from 1987 until 1992. From 1970 to 1987 Mr. Macklin served as President of the National Association of Securities Dealers, Inc. Mr. Macklin serves as a director for Martek Biosciences Corporation; MedImmune, Inc.; White Mountains Insurance Group, Ltd.; Worldcom, Inc.; Spacehab, Inc.; and is a director, trustee or managing general partner of 48 of the investment companies in the Franklin Templeton Group of Funds. Mr. Macklin has a Bachelor of Arts in Economics from Brown University.

John A. Fisher has served as a director of Overstock since May 2002. John A. Fisher has served as Managing Director of Fisher & Company LLC, an investment banking advisor to international branded consumer growth companies since October 1996. From 1987 to 1996, Mr. Fisher was Managing Director of Hambrecht & Quist Group, a venture capital and investment banking company, responsible for leading all services to branded consumer growth companies. From 1984 to 1987, he served as chief executive of Bechtle Fisher & Company, Inc., a private investment bank. From 1976 to 1984, he served as vice president of corporate finance of The Crocker Bank. From 1973 to 1976, he served as a member of the White House staff (Office of Management & Budget), and from 1971 to 1973, as management consultant with Touche Ross & Co. Mr. Fisher has a Bachelor of Arts Degree in Economics from Yale College and an MBA from Stanford University.

Allison H. Abraham has served as a Director of Overstock since March 2002. Ms. Abraham served as President and as a director of LifeMinders, Inc., an online direct marketing company, from May 2000 until the acquisition of LifeMinders by Cross Media Marketing Corp. in October 2001. Prior to joining LifeMinders, Ms. Abraham served as Chief Operating Officer of iVillage Inc., an online media company, from May 1998 to May 2000. From February 1997 to April 1998, Ms. Abraham was President, Chief Operating Officer and a director of Shoppers Express, an online grocery service, and also served as Vice President of Sales and Marketing for several months prior to her promotion. From 1992 to 1996, Ms. Abraham held several marketing and management positions at Ameritech Corporation. She was employed at American Express Travel Related Services in New York City from 1988 to 1992, focusing on the launch of new products and loyalty programs. Ms. Abraham holds a MBA degree from the Darden School at the University of Virginia and a Bachelor of Arts in Economics from Tufts University.

Our board of directors appoints our executive officers who serve until their successors have been duly elected and qualified. Other than between Patrick M. Byrne and John J. Byrne Jr., there are no family relationships among any of our directors or officers.

Classified Board

Following the completion of this offering, our Amended and Restated Certificate of Incorporation will be amended and restated to provide for a board of directors consisting of three classes of directors, each serving staggered three-year terms. As a result, a portion of our board of directors will be elected each year. To implement the classified structure, prior to the consummation of the offering, three of the nominees to the board will be elected to a one-year term, two will be elected to a two-year term and two will be elected to a three-year term. Thereafter, directors will be elected for three-year terms.

Mr. Lindsey, Mr. Fisher and Dr. Byrne have been designated Class I directors whose terms expire at the 2003 annual meeting of stockholders. Mr. Pettway and Mr. Macklin have been designated Class II directors whose terms expire at the 2004 annual meeting of stockholders. Ms. Abraham and Mr. John J. Byrne have been designated Class III directors whose terms expire at the 2005 annual meeting of stockholders. The authorized number of directors may be changed only by resolution of our board of directors or a majority vote of the stockholders. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors may have the effect of delaying or preventing changes in control or management.

Audit Committee

We have established an audit committee, which consists of Ms. Abraham, Mr. Fisher and Mr. Macklin. The audit committee is responsible for reviewing and monitoring our financial statements and internal accounting procedures, recommending the selection of independent auditors by our board, evaluating the scope of the annual audit, reviewing audit results, consulting with management and our independent auditor prior to presentation of financial statements to stockholders and, as appropriate, initiating inquiries into aspects of our internal accounting controls and financial affairs.

Compensation Committee Interlocks and Insider Participation

Our Compensation Committee consists of Mr. Fisher, Mr. Macklin and Mr. John J. Byrne Jr. The Compensation Committee is responsible for determining salaries, incentives and other forms of compensation for our directors, officers and other employees and administering various incentive compensation and benefit plans. No interlocking relationship exists between any member of our Compensation Committee and any member of any other company's board of directors or compensation committee.

Director Compensation

We reimburse our non-employee directors for out-of-pocket expenses incurred in connection with attending board and committee meetings. No member of our board of directors currently receives any additional cash compensation. In the past, we have granted non-employee directors options to purchase our common stock under our 1999 Stock Option Plan for their service on our board of directors. Historically, our non-employee directors have received an initial option to purchase 21,172 shares of our common stock and a secondary option to purchase an additional 7,058 shares of our common stock. We currently plan to grant new non-employee directors an initial option to purchase 15,000 shares of our common stock under our 2002 Stock Option Plan and an additional grant for 10,000 shares for each year of service on our board of directors thereafter.

Executive Compensation

The following table summarizes information concerning the compensation awarded to, earned by, or paid for services rendered to Overstock in all capacities during the year ended December 31, 2001, by our Chief Executive Officer and our four other most highly compensated executive officers whose salary and bonus for fiscal 2001 exceeded $100,000. We refer to these executives as our named executive officers elsewhere in this prospectus.

Summary Compensation Table

							Long Term Compensation
		Annual Compensation					Long Term Compensation
Name and Principal Position		Annual Compensation					Securities Underlying Options	All Other Compensation
Name and Principal Position	Year	Salary			Bonus		Securities Underlying Options	All Other Compensation
Patrick M. Byrne President and Chief Executive Officer	2001 2000	$	— —		$	— —	35,286 21,172	$	— —
Jason C. Lindsey (1) Chief Financial Officer and Assistant Secretary	2001 2000 1999		116,363 76,925 10,625	(2)		— — —	95,272 0 3,529		2,550(6 3,050(6 —	) )
Douglas Greene Chief Technology Officer	2001 2000 1999		137,500 109,583 66,000	(3)		— — —	81,158 14,116 3,532		— — —
James Hyde Vice President of Operations	2001		71,634	(4)		—	24,701		—
Trey Baker Vice President of Merchandising	2001 2000 1999		86,950 78,787 22,750	(5)		— — —	49,401 2,118 1,413		2,790(6 1,879(6 —	) )

(1): During each of 1999, 2000 and 2001, Mr. Lindsey was employed by Overstock and Haverford Internet, L.C. During each of 2000 and 2001 Mr. Lindsey devoted substantially all of his time to Overstock. During 1999, 2000 and 2001, Mr. Lindsey received other compensation from Haverford Valley, L.C. of approximately $210,000, $230,000 and $211,000, respectively.
(2): Mr. Lindsey's annual salary as of December 31, 2001 was $140,000.
(3): Mr. Greene's annual salary as of December 31, 2001 was $145,000.
(4): Mr. Hyde's annual salary as of December 31, 2001 was $150,000.
(5): Mr. Baker's annual salary as of December 31, 2001 was $100,000.
(6): Amounts represent our matching contributions to the 401(k) plan account for such executive officers.

2001 Option Grants

The following table summarizes the stock options granted to each named executive officer during the year ended December 31, 2001, including the potential realizable value over the 10-year term of the options, which is based on assumed rates of stock appreciation of 5% and 10%, compounded annually and subtracting from that result the aggregate option exercise price. These assumed rates of appreciation comply with the rules of the SEC and do not represent our estimate of future stock price. Actual gains, if any, on stock option exercises will depend on the future performance of our common stock.

During the year ended December 31, 2001, we granted options to purchase up to an aggregate of 1,020,465 shares to employees, directors and consultants under our Amended and Restated 1999 Stock Option Plan.

	Individual Grants
	Number of Securities Underlying Options Granted						Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Options Terms
					Market Value at Date of Grant(1)
Name		Percent of Total Options Granted to Employees		Exercise Price Per Share		Expiration Date
Name		Percent of Total Options Granted to Employees		Exercise Price Per Share		Expiration Date	0%(1)	5%		10%
Patrick M. Byrne	35,286	3.5	%	$5.07	9.20	07/30/11	145,731	$	349,890	$	663,110
Jason C. Lindsey	84,686 10,586	8.3 1.0		5.07 2.84	6.62 10.75	02/21/06 10/29/06	131,263 83,735		286,153 115,176		473,528 153,211
Douglas Greene	70,572 10,586	6.9 1.0		5.07 2.84	6.62 10.75	02/21/06 10/29/06	109,387 83,735		238,462 115,176		394,609 153,211
James Hyde	17,643 7,058	1.7 0.7		5.07 2.84	9.20 10.75	07/30/06 10/29/06	72,866 55,829		117,710 76,791		171,961 102,150
Trey Baker	28,229 21,172	2.8 2.1		5.07 2.84	9.20 10.75	07/30/06 10/29/06	116,586 167,471		188,338 230,352		275,139 306,422

(1): Based upon a subsequent review of the fair value of our common stock at the option grant dates, we determined the value of the common stock to be as reflected in the "Market Value at Date of Grant" column. The amount shown in the "0%" column reflects the difference between the exercise price and the deemed fair market value as of the date of option grant.

Aggregate Option Exercises and Option Values

The following table sets forth certain information regarding unexercised options held as of December 31, 2001, by each of the named executive officers. None of the named executive officers exercised any stock options during the year ended December 31, 2001.

There was no public trading market for our common stock as of December 31, 2001. Accordingly, these values have been calculated on the basis of the initial public offering price of $14.00, less the applicable exercise price per share, multiplied by the number of shares issued or issuable, as the case may be, on the exercise of the option. All options were granted under our Amended and Restated 1999 Stock Option Plan or our 2001 Stock Plan.

	Number of Securities Underlying Unexercised Options at December 31, 2001		Value of Unexercised In-the- Money Options at December 31, 2001
Name
Name	Exercisable	Unexercisable	Exercisable		Unexercisable
Patrick M. Byrne	18,561	37,897	$	146,077	$	315,326
Jason C. Lindsey	1,977	96,824		20,383		890,387
Douglas Greene	7,901	90,905		67,383		831,893
James Hyde	0	24,701		0		236,319
Trey Baker	1,636	51,296		11,944		502,023

Agreements with Certain Executive Officers

We are a party to a Severance Package Agreement with Douglas Greene, our Chief Technology Officer, dated as of June 17, 1999. Pursuant to the terms of the agreement, Mr. Greene is entitled to a lump sum payment in the amount of $75,000 if (i) he is terminated without "Cause" (as defined in the agreement), or (ii) he terminates his employment with us following any reduction in his salary or duties and responsibilities. In the event of either (i) or (ii) above, Mr. Greene will continue to be covered under all of our health and major medical plans then in effect for a period of one year. In addition, all stock options granted to Mr. Greene will immediately vest and will be exercisable for a period of one year.

Benefit Plans

Gear.com, Inc. Restated 1998 Stock Option Plan

The Company acquired Gear.com, Inc. on November 20, 2000 and assumed the outstanding options under the Gear.com, Inc. Restated 1998 Stock Option Plan. The Plan provided for the grant of incentive stock options to Gear.com employees or the employees of Gear.com's parent or subsidiary, and the grant of nonstatutory stock options to Gear.com, or Gear.com parent's or subsidiary's employees, directors, consultants, agents, advisors, and independent contractors. As amended on February 22, 2001, 181,154 shares of common stock were reserved for issuance under this Plan and as of March 31, 2002 options to purchase 93,395 shares of common stock were outstanding. The Restated 1998 Stock Option Plan terminated on the close of our acquisition of Gear.com and we will not grant any additional options under the plan. However, the outstanding options issued pursuant to the plan continue to be governed by its terms. The Restated 1998 Stock Option Plan provides that after termination of employment or service other than by reason of death or Cause (as defined in the Plan), an optionee may exercise his or her option to the extent it was exercisable on the date of such termination within (i) one year if the termination is coincident with retirement, early retirement at the Company's request, or disability, or (ii) three months after termination for reasons other than retirement, early retirement at the Company's request, or disability. Generally, if termination is due to death, the option will remain exercisable for twelve (12) months from the date of such termination. If termination is for Cause (as defined in the Plan), the option will automatically terminate upon first notification to the optionee of such termination. In no event may an option be exercised after the expiration of the option term.

The Restated 1998 Stock Option Plan generally provides that in the event of (i) the consummation of a merger or consolidation in which we are not the surviving corporation or in which more than 33-1/3% of our total combined voting power is transferred to persons different from the persons holding those securities immediately prior to such merger or consolidation, (ii) the consummation of any sale, exchange or transfer of all or substantially all of our assets (other than a transfer to our majority-owned subsidiary corporation), or (iii) shareholder approval of a plan or proposal for our liquidation or dissolution, each outstanding option shall automatically accelerate so that immediately prior to the effective date of the corporate transaction each option shall become 100% vested and exercisable; provided, however, that options shall not accelerate if and to the extent the options are assumed or substituted by the successor corporation or parent thereof. If an executive officer's employment is terminated within two years following a corporate transaction in which options were assumed or substituted, other than a voluntary termination of the executive officer without Good Reason (as defined in the Plan) or a termination by the successor corporation for Cause (as defined in the Plan), then the executive officer's option shall accelerate and become fully vested. Except to the extent assumed or substituted by the successor corporation, all options will terminate and cease to be outstanding immediately following the consummation of a corporate transaction.

Amended and Restated 1999 Stock Option Plan

Our Amended and Restated 1999 Stock Option Plan was adopted by our board of directors on May 1, 1999, and approved by our stockholders in October 5, 1999. Our Amended and Restated 1999 Stock Option Plan provides for the grant of incentive stock options to our employees, and the grant of nonstatutory stock options to our employees, directors and consultants. We have reserved an aggregate of 1,764,291 shares of our common stock for issuance under this plan. As of March 31, 2002, 12,380 shares had been issued pursuant to the exercise of options, options to purchase 1,385,314 shares of common stock were outstanding, and 366,597 shares were available for future grant. Our Amended and Restated 1999 Stock Option Plan will terminate as of this initial public offering and we will not grant any additional options under the plan. Instead we will grant options under our 2002 Stock Plan. The Amended and Restated 1999 Stock Option Plan provides that after termination of service, an optionee may exercise his or her option to the extent it was exercisable on the date of such termination for a certain period of time. Generally, if termination is due to death or disability, the option will remain exercisable for twelve (12) months from the date of such termination. If termination is due to an optionee's misconduct, the option will terminate and cease to be outstanding. In all other cases, the option will generally remain exercisable for a period of three (3) months following termination.

The Amended and Restated 1999 Stock Option Plan provides that in the event of the sale, transfer or other disposition of all or substantially all of our assets in our complete liquidation or dissolution, or a merger or consolidation in which more than 50% of our total combined voting power is transferred to persons different from the persons holding those securities immediately prior to such merger or consolidation, the outstanding options under the plan may be assumed by the successor entity or, in the administrator's discretion, the vesting of all outstanding options may be accelerated so that the options become fully vested and exercisable immediately prior to such transaction. In addition, the administrator may accelerate the vesting of assumed options in the event the optionee is involuntarily terminated within eighteen (18) months following such transaction. After such an involuntary termination, the accelerated options will remain exercisable for one (1) year from the date of termination or the expiration of the option term, whichever is shorter. In the event of the direct or indirect acquisition by any person of beneficial ownership representing more than 50% of the total combined voting power of our outstanding securities, or a change in the composition of the board over a period of thirty-six (36) consecutive months, or less, in which a majority of the board members cease to be incumbent directors, or were not elected by at least a majority of the incumbent directors, the administrator has the discretion to accelerate the vesting of any outstanding options so that the options become fully vested and exercisable upon such occurrence, or to condition such option acceleration on an optionee's involuntary termination within a period of up to 18 months following such change in control.

2000 Stock Purchase Plan

Our 2000 Stock Purchase Plan was adopted by our board of directors on January 24, 2001. Our 2000 Stock Purchase Plan allows selected employees, directors and consultants to purchase shares of our stock. We have reserved an aggregate of 352,859 shares of our common stock for issuance under this plan. As of March 31, 2002, 19,850 shares had been purchased, and 333,009 shares were available for future purchase. Our 2000 Stock Purchase Plan will terminate as of this initial public offering and we will not grant any additional stock purchase rights under this plan. Instead we will grant options and stock purchase rights under our 2002 Stock Plan.

The 2000 Stock Purchase Plan provides that in the event of the sale, transfer or other disposition of all or substantially all of our assets in our complete liquidation or dissolution, or a merger or consolidation in which more than 50% of our total combined voting power is transferred to persons different from the persons holding those securities immediately prior to such merger or consolidation, or the direct or indirect acquisition by any person of beneficial ownership representing more than 50%

of the total combined voting power of our outstanding securities, the board, in its sole discretion, may elect to accelerate any unvested shares.

2002 Stock Option Plan.

Our 2002 Stock Option Plan was adopted by our board of directors on April 23, 2002. Our 2002 Stock Option Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Code, to our employees, and for the grant of nonstatutory stock options and stock purchase rights to our employees, directors and consultants.

Number of Shares of Common Stock Available under the 2002 Stock Option Plan. We have reserved a total of 638,680 shares of our common stock for issuance pursuant to the 2002 Stock Option Plan. As of May 3, 2002, 537,558 shares were available for future purchase.

Administration of the 2002 Stock Option Plan. Our board of directors or, with respect to different groups of optionees, different committees appointed by our board, will administer the 2002 Stock Option Plan. In the case of options intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the committee will consist of two or more "outside directors" within the meaning of Section 162(m) of the Code. The administrator has the power to determine the terms of the options and stock purchase rights granted, including the exercise price, the number of shares subject to each option or stock purchase right, the exercisability of the options and stock purchase rights and the form of consideration payable upon exercise.

Options. The administrator determines the exercise price of options granted under the 2002 Stock Option Plan, but with respect to nonstatutory stock options intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code and all incentive stock options, the exercise price must be at least equal to the fair market value of our common stock on the date of grant. The term of an incentive stock option may not exceed ten (10) years, except that with respect to any participant who owns 10% of the voting power of all classes of our outstanding capital stock, the term must not exceed five (5) years and the exercise price must equal at least 110% of the fair market value on the grant date. The administrator determines the term of all other options.

No optionee may be granted an option to purchase more than 423,430 shares in any fiscal year. In connection with his or her initial service as an employee, an optionee may be granted an additional option to purchase up to 423,430 shares.

After termination of one of our employees, directors or consultants, he or she may exercise his or her option for the period of time stated in the option agreement to the extent. Generally, if termination is due to death or disability, the option will remain exercisable for twelve (12) months. In all other cases, the option will generally remain exercisable for three (3) months. However, an option may never be exercised later than the expiration of its term.

Stock Purchase Rights. Stock purchase rights, which represent the right to purchase our common stock, may be issued under our 2002 Stock Option Plan. The administrator determines the purchase price of stock purchase rights granted under our 2002 Stock Option Plan. Unless the administrator determines otherwise, a restricted stock purchase agreement, an agreement between us and an optionee which governs the terms of stock purchase rights, will grant us a repurchase option that we may exercise upon the voluntary or involuntary termination of the purchaser's service with us for any reason, including death or disability. The purchase price for shares we repurchase will generally be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to us. The administrator determines the rate at which our repurchase option will lapse.

Transferability of Options and Stock Purchase Rights. Our 2002 Stock Option Plan generally does not allow for the transfer of options or stock purchase rights and only the optionee may exercise an option or stock purchase right during his or her lifetime.

Adjustments upon Change in Control. Our 2002 Stock Option Plan provides that in the event of a change of control, the successor corporation will assume or substitute each option or stock purchase right. If the outstanding options or stock purchase rights are not assumed or substituted, the administrator will provide notice to the optionee that he or she has the right to exercise the option or stock purchase right as to all of the shares subject to the option or stock purchase right, including shares which would not otherwise be exercisable, for a period of fifteen (15) days from the date of the notice. The option or stock purchase right will terminate upon the expiration of the fifteen (15)-day period. In addition, in the event that the optionee is involuntarily terminated without cause within eighteen months following a change of control, he or she will have the right to exercise the option or stock purchase right as to all of the shares subject to the option or stock purchase right, including the shares which would not otherwise be exercisable.

Amendment and Termination of our 2002 Stock Option Plan. Our 2002 Stock Option Plan will automatically terminate in 2012, unless we terminate it sooner. In addition, the administrator has the authority to amend, suspend or terminate the 2002 Stock Option Plan provided such amendment does not impair the rights of any optionee.

Limitations on Directors' Liability and Indemnification

Our Amended and Restated Certificate of Incorporation and Bylaws limit the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for any of the following acts:

•: any breach of their duty of loyalty to the corporation or its stockholders;
•: acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
•: unlawful payments of dividends or unlawful stock repurchases or redemptions; and
•: any transaction from which the director derived an improper personal benefit.

Such limitation of liability may not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

In addition and in accordance with Delaware law, our Bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether indemnification would be permitted under Delaware law.

Prior to the completion of this offering, we will enter into agreements to indemnify our directors and executive officers, in addition to the indemnification provided for in our Amended and Restated Certificate of Incorporation and Bylaws. These agreements, among other things, provide for indemnification of our directors and executive officers for certain expenses (including attorneys' fees), judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of Overstock, arising out of such person's services as a director or executive officer of ours, any subsidiary of ours or any other company or enterprise to which the person provided services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Securities Issuances to Haverford Internet LLC

The following table summarizes our sales of shares of common stock to Haverford Internet, LLC, prior to its dissolution on April 5, 2002. Immediately prior to its dissolution, Haverford Internet was owned and controlled by Patrick M. Byrne, our President, Chief Executive Officer and Chairman of our Board of Directors, John B. Pettway, our Secretary and a member of our Board of Directors, and Jason C. Lindsey, our Chief Financial Officer, Assistant Secretary and a member of our Board of Directors.

Date	Shares of Common Stock Subject to Warrants	Exercise Price per share		Number of Shares of Common Stock	Aggregate Consideration Paid		Value of stock based on $14 per share offering price
June 8, 1999	—		—	980,836	$	3,750,000	$	13,731,704
September 24, 1999	—		—	175,532	$	598,961	$	2,457,448
October 7, 1999	—		—	320,825	$	1,142,292	$	4,491,550
October 8, 1999	—		—	160,393	$	571,077	$	2,245,502
December 15, 1999	—		—	194,067	$	1,374,961	$	2,716,938
May 1, 2000	100,762	$	7.09	403,046	$	2,855,575	$	5,642,644
May 15, 2000	198,378		7.09	793,509	$	5,622,007	$	11,109,126
September 21, 2000	330,396		4.26	1,321,583	$	5,618,047	$	18,502,162
February 2, 2001	—		—	789,834	$	4,000,000	$	11,057,676

On March 4, 2002 Haverford Internet purchased 145,090 shares of our Series A preferred stock at a purchase price of $6.89 per share for an aggregate consideration of $1,000,000. The value of these shares based on a $14 per share offering price is $2,031,260. The price of $6.89 per share was based on a negotiation between us and an independent venture capital fund. After the execution of a non-binding term sheet between us and the venture capital fund, we and the venture capital fund mutually agreed to terminate our discussions. The fair value of the common stock to be received upon conversion of the Series A preferred stock was $14.17 on March 4, 2002. No warrants were issued in connection with the purchase of Series A preferred stock.

On occasion, Haverford-Valley, L.C. and certain affiliated entities make travel arrangements for our executives and pay the travel related expenses incurred by our executives on company business. In 1999, 2000 and 2001, we reimbursed Haverford-Valley, L.C. $120,000, $241,000 and $251,000, respectively, for these expenses.

On April 5, 2002, Haverford Internet was dissolved. Immediately prior to the dissolution, Haverford Internet owned 5,224,209 shares of our common stock, warrants for the purchase of 629,536 shares of our common stock, and 145,090 shares of our Series A preferred stock. Upon dissolution, the securities owned by Haverford Internet were distributed to the members of Haverford Internet, including 4,712,242 shares of our common stock to High Plains Investments LLC; 274,272 shares of our common stock to John B. Pettway and 222,029 shares of our common stock to Jason Lindsey. The 145,090 shares of Series A preferred stock, and warrants to purchase 629,536 shares of our common stock, were distributed in their entirety to High Plains Investments LLC.

Mr. Patrick M. Byrne owns 100% of the voting interests of High Plains Investments LLC and he is also a Manager of Haverford-Valley L.C., a limited liability company that manages the business and affairs of High Plains Investments.

Securities Issuances to Haverford-Utah, LLC

The following table summarizes private placement transactions in which we sold shares of common stock and warrants to purchase common stock to Haverford-Utah, LLC, an entity that is owned and controlled by John J. Byrne Jr., a member of our Board of Directors and the father of Patrick M.

Byrne, our President, Chief Executive Officer and Chairman of our Board of Directors. Dorothy M. Byrne, the wife of John J. Byrne Jr., owns approximately 64% of the interests in Haverford-Utah and John B. Pettway, our Secretary and a member of our Board of Directors, owns approximately 8.9%. Patrick M. Byrne also serves as a Vice President for Haverford-Utah.

Date	Shares of Common Stock Subject to Warrants	Exercise Price per share		Number of Shares of Common Stock	Aggregate Consideration Paid		Value of stock based on $14 per share offering price
November 24, 1999	—		—	31,758	$	225,000	$	444,612
May 1, 2000	7,822	$	7.09	31,288	$	221,672	$	438,032
May 15, 2000	16,506	$	7.09	66,022	$	467,764	$	924,308
September 21, 2000	27,252	$	4.26	109,005	$	463,380	$	1,526,070

Securities Issuances to John J. Byrne Jr. and Dorothy M. Byrne

John J. Byrne Jr. is a member of our Board of Directors and the father of Patrick M. Byrne. John J. Byrne Jr. and his wife, Dorothy M. Byrne purchased the following securities.

Date	Shares of Common Stock Subject to Warrants	Exercise Price per share		Number of Shares of Common Stock	Aggregate Consideration Paid		Value of stock based on $14 per share offering price
December 15, 1999	—		—	14,115	$	100,000	$	197,610
May 1, 2000	585	$	7.09	2,338	$	16,564	$	32,732
May 15, 2000	1,462		7.09	5,845	$	41,410	$	81,830
September 21, 2000	95,217		4.26	380,864	$	1,619,050	$	5,332,096

In addition, on March 4, 2002 John J. Byrne Jr. purchased 145,090 shares of our Series A preferred stock for aggregate consideration of $1,000,000. The value of these shares based on a $14 per share offering price is $2,031,260. No warrants were issued in connection with the purchase of Series A preferred stock.

Securities Issuances to John J. Byrne, III

The following table summarizes private placement transactions in which we sold shares of common stock and warrants to purchase common stock to John J. Byrne, III. John J. Byrne, III is the brother of Patrick M. Byrne, our President, Chief Executive Officer and Chairman of our Board of Directors and the son of John J. Byrne Jr., a member of our board of directors.

Date	Shares of Common Stock Subject to Warrants	Exercise Price per share		Number of Shares of Common Stock	Aggregate Consideration Paid		Value of stock based on $14 per share offering price
December 15, 1999	—		—	3,529	$	25,000	$	49,406
May 1, 2000	147	$	7.09	585	$	4,141	$	8,190
May 15, 2000	366		7.09	1,462	$	10,352	$	20,468
September 21, 2000	375		4.26	1,500	$	6,375	$	21,000

Securities Issuances to Contex Limited

The following table summarizes private placement transactions in which we sold shares of common stock to Contex Limited, an entity controlled by Mark Byrne, the brother of Patrick M. Byrne.

Date		Shares of Common Stock Subject to Warrants		Exercise Price per share			Number of Shares of Common Stock		Aggregate Consideration Paid			Value of stock based on $14 per share offering price
May 15, 2000		3,307		$	7.09		13,227		$	93,712		$	185,178
September 21, 2000		4,773		$	4.26		19,091		$	81,188		$	267,274

In addition, on March 4, 2002 Mark Byrne, through Contex Limited, purchased 72,545 shares of our Series A preferred stock for aggregate consideration of $500,000. The value of these shares based on a $14 per share offering price is $1,015,630. No warrants were issued in connection with the purchase of Series A preferred stock.

Securities Issuances to Rope Ferry Associates, Ltd.

The following table summarizes a private placement transaction in which we sold shares of common stock to Rope Ferry Associates, Ltd., a limited Partnership that is beneficially owned by John J. Byrne, III and Dorothy M. Byrne. John J. Byrne, III is the brother of Patrick M. Byrne, our President, Chief Executive Officer and Chairman of our Board of Directors, and is the son of John J. Byrne Jr., a member of our Board of Directors. Mr. Byrne, III's beneficial ownership of Rope Ferry Associates is established through his 100% ownership of Cirque Properties, Inc., which is the sole general partner of Rope Ferry Associates. Dorothy M. Byrne, the mother of Patrick M. Byrne, and the wife of John J. Byrne Jr., is the sole limited partner of Rope Ferry Associates.

Date		Shares of Common Stock Subject to Warrants		Exercise Price per share			Number of Shares of Common Stock		Aggregate Consideration Paid			Value of stock based on $14 per share offering price
May 1, 2000		35,286		$	7.09		141,144		$	1,000,000		$	1,976,016
September 21, 2000		14,982		$	4.26		59,925		$	254,739		$	838,950

In addition, on March 4, 2002, Rope Ferry Associates purchased 145,090 shares of our Series A preferred stock for aggregate consideration of $1,000,000. The value of these shares based on a $14 per share offering price is $2,031,260. No warrants were issued in connection with the purchase of Series A preferred stock.

Securities Issuances to Gordon S. Macklin and associated entities

Gordon S. Macklin is a member of our Board of Directors. Mr. Macklin, his wife and related entities purchased the following securities.

Date	Shares of Common Stock Subject to Warrants	Exercise Price per share		Number of Shares of Common Stock	Aggregate Consideration Paid		Value of stock based on $14 per share offering price
November 17, 1999	—		—	49,402	$	350,000	$	691,628
May 1, 2000	10,213	$	7.09	40,847	$	289,384	$	571,858
May 15, 2000	8,769		7.09	35,070	$	248,458	$	490,980
September 21, 2000	17,048		4.26	68,187	$	289,853	$	954,618

In addition, on March 4, 2002 the Gordon S. Macklin Family Trust purchased 29,018 shares of our Series A preferred stock for aggregate consideration of $200,000. The value of these shares based on a $14 per share offering price is $406,252. No warrants were issued in connection with the purchase of Series A preferred stock.

Securities Issuances to Gary D. Kennedy and Jane A. Kennedy

Gary D. Kennedy is a former member of our board of directors. Mr. Kennedy and his wife, Jane A. Kennedy, purchased the following securities.

Date	Common Shares Subject to Warrants	Exercise Price per share		Number of Shares of Common Stock	Aggregate Consideration Paid		Value of stock based on $14 per share offering price
December 14, 1999	—		—	141,144	$	1,000,000	$	1,976,016
May 1, 2000	9,374	$	7.09	37,494	$	265,639	$	524,916
September 21, 2000	18,961		4.26	75,843	$	322,407	$	1,061,802

Transactions with High Meadows Finance, LC

In March 2001, we entered into a loan agreement with High Meadows Finance L.C. Patrick M. Byrne, our President, Chief Executive Officer and the Chairman of our Board of Directors and John J. Byrne Jr., a member of our Board of Directors and Patrick M. Byrne's father, each own approximately 33% of High Meadows Finance. In addition, Cirque Properties, Inc., an entity wholly owned by John J. Byrne, III, the brother of Patrick M. Byrne owns approximately 34% of High Meadows Finance. In connection with the loan agreement, High Meadows Finance purchased 197,459 shares of common stock for an aggregate consideration of $1.0 million. The value of these shares based on a $14 per share offering price is $2,764,426. The loan agreement provides for a special purpose line of credit to purchase inventory under a revolving promissory note with a maximum principal amount of $6.0 million. Amounts borrowed under the agreement bear interest at 3.5 percentage points above the prime rate of interest as announced by Wells Fargo & Company and are secured by substantially all of our assets. The loan agreement provides for certain default conditions and negative covenants and expires on June 1, 2002, unless renewed. We paid High Meadows Finance an initial set-up fee of $5,000 and pay an annual servicing fee of $10,000, payable in installments of $2,500 quarterly in arrears. Pursuant to the operating agreement of High Meadows Finance, the set-up and servicing fees under this loan agreement are paid to Cirque Properties, Inc., which also receives a management fee, payable monthly in arrears, of 1% of the gross operating revenue of High Meadows Finance, for such month, prior to distributions to the other members of the limited liability company according to their interests. As of March 31, 2002, we had an outstanding principal balance of $3.0 million under the revolving promissory note held by High Meadows Finance. Since entering into the loan agreement, we have paid or accrued an aggregate of $222,436 in interest and $12,500 in fees. We plan to pay off the revolving promissory note in full with the proceeds of this offering.

Transactions with Norwich Associates L.C.

In September 2001, we entered into a loan agreement with Norwich Associates L.C., which is owned by related entities described above as follows: 40% by Haverford-Utah; 40% by High Meadows Finance and 10% by Cirque Property L.C. Cirque Property, L.C. is an entity controlled by Cirque Properties, Inc, a corporation wholly owned by John J. Byrne, III, the brother of Patrick M. Byrne and the son of John J. Byrne Jr. This loan agreement is subject to certain financial and operational covenants and amounts borrowed under the loan agreement are secured by substantially all of our assets and may be used solely to purchase inventory. The loan agreement provides for a revolving promissory note with a maximum principal amount of $7.0 million that bears simple interest at 2% per month, subject to certain default conditions and negative covenants. The promissory note has a maturity date of June 1, 2002, unless renewed. In connection with this loan agreement and as part of the transaction, we issued 10,586 shares of our common stock to Norwich Associates as an origination fee. The value of these shares based on a $14 per share offering price is $148,204. We also paid to Norwich Associates a $5,000 setup fee and agreed to pay a $10,000 annual service fee, payable in monthly installments of $2,500 quarterly in arrears. Pursuant to the operating agreement of Norwich

Associates, the set-up and servicing fees under this loan agreement are paid to Cirque Properties, Inc., which also receives a management fee, payable monthly in arrears, of 1% of the gross operating revenue of Norwich Associates for such month, prior to distributions to the other members of the limited liability company according to their interests. Since origination we have borrowed an aggregate of $1,159,660 under this agreement. On March 18, 2002 we paid off the entire balance outstanding under this agreement. Since entering into this loan agreement we have paid or accrued an aggregate of $27,582 interest and $5,000 in fees.

In conjunction with its loan agreement with us, Norwich Associates entered into a loan agreement with Haverford-Utah. Amounts borrowed by Norwich Associates pursuant to the loan agreement between Norwich Associates and Haverford-Utah are unsecured and may be used solely to fund advances to us under our senior loan agreement with Norwich Associates and bear interest at 0.25 percentage points above the prime rate of interest as announced by Wells Fargo Bank, N.A. The loan agreement between Norwich Associates and Haverford-Utah provides for a revolving promissory note with a maximum principal amount of $7.0 million, with a maturity date of June 1, 2002, unless renewed. As described below, the following persons have provided to Haverford-Utah personal guarantees in respect of the repayment obligations of Norwich Associates:

•: Patrick M. Byrne, our President, Chief Executive Officer and Chairman of our Board of Directors provided a guarantee to Haverford-Utah of up to $924,000;
•: John J. Byrne Jr., one of our Directors and the father of Patrick M. Byrne provided a guarantee to Haverford-Utah of up to $924,000;
•: John J. Byrne, III, the brother of Patrick M. Byrne and the son of John J. Byrne Jr., a member of our Board of Directors, provided a guarantee to Haverford-Utah of up to $952,000; and
•: Cirque Property L.C., a entity controlled by John J. Byrne, III, the brother of Patrick M. Byrne and the son of John J. Byrne Jr., a member of our Board of Directors, provided a guarantee to Haverford-Utah of up to $700,000.

Stock Option Grants

From time to time since our incorporation, we have granted options to purchase an aggregate of 647,520 shares of our common stock to individuals that currently serve as our executive officers and directors. Such options were granted at exercise prices ranging from $2.84 to $11.91 per share, in each case reflecting the fair market value per share of our common stock as determined by our board of directors or its compensation committee.

Other Transactions

In February 2002, we entered into an intellectual property assignment agreement, as amended in April 2002, with Douglas Greene, our Chief Technology Officer, pursuant to which Mr. Greene assigned to us all right, title and interest to certain material technology relating to our Websites, transaction processing systems and network infrastructure in exchange for $500.

In July 2001, Patrick M. Byrne, our President and Chief Executive Officer, who is also a significant shareholder in the Company, agreed to personally guarantee our merchant account with a bank. The bank agreed to accept this personal guarantee in lieu of a demand deposit of $1,000,000 with the bank. In exchange for his personal guarantee, we compensated our Chief Executive Officer with options to purchase 35,286 shares of our common stock at an exercise price of $5.07 per share. These options vest over a three year period based on the renewal of the guarantee.

On November 1, 1999, we purchased the domain names "Overstock.com," "Overstocked.com," and "Over-stock.com" for $111,000 from Haverford-Valley, L.C. d/b/a/ The Haverford Group, which is

controlled by Patrick M. Byrne, our President, Chief Executive Officer and a member of our board of directors.

On October 1, 1999, we entered into a Separation Agreement and Release with Mr. Robert Brazell, our former President and Chief Executive Officer. Upon his resignation, we paid Mr. Brazell a severance amount of $100,000 and hired him as a consultant for approximately 18 months. We paid Mr. Brazell $270,500 for these consulting services. Also in connection with his resignation, we granted Mr. Brazell a right to purchase a total of 28,600 shares of common stock for a purchase price of $183,238 (which Mr. Brazell has exercised).

In May 2002, we entered into a Registration and Expenses Agreement with Amazon.com NV Investment Holdings, Inc., a holder of 845,000 shares of our common stock and a selling stockholder in the offering. Pursuant to this agreement, we have agreed to register all of Amazon's shares in this offering, and Amazon has agreed to sell all of its shares in this offering, subject to certain conditions. Under this agreement, we will pay all of the registration expenses associated with this offering. In addition, we will pay to Amazon the aggregate underwriting discount associated with the sale of such selling stockholder's shares in the offering. Amazon's obligation to sell all of its shares in this offering is conditioned upon an initial public offering price of at least $11.83 per share and the sale of not less than all of its shares. If the public offering price is less than $11.83 per share, Amazon will have the option, but not the obligation, to sell all of its shares in this offering. In addition, if market conditions require a decrease in the number of shares to be sold in this offering such that Amazon will not be able to sell all of its shares in this offering, then Amazon has the option, but not obligation, to sell its pro rata share of the numbers of shares to be sold in this offering. As a result, any decrease in the number of shares in this offering could result in a pro rata reduction of the number of shares that we may sell in this offering. For this purpose, our pro rata share is approximately 72.8% and Amazon's pro rata share is approximately 28.2%, in each case, of the number of shares to be sold in this offering. Except for the Registration and Expenses Agreement, we have no other agreements or commercial relationships with Amazon.com, Inc. or its affiliates.

In February 2002, High Plains Investments LLC assigned the trademarks Overstock.com and Over-Stock.com to us in exchange for $10. We have filed the assignment of these trademarks with the United States Patent and Trademark Office.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding the beneficial ownership of our common stock as of May 3, 2002, and as adjusted to reflect the sale of 2,155,000 shares of common stock offered by us and 845,000 shares by the Selling Stockholder, of the following individuals or groups:

•: Each person or entity who is known by us to own beneficially more than 5% of our outstanding common stock;
•: Each of the named executive officers;
•: Each of our directors; and
•: All directors and executive officers as a group.

Except as otherwise noted, the address for each holder of more than 5% of our common stock is c/o Overstock.com, Inc., 6322 South 3000 East, Suite 100, Salt Lake City, Utah 84121. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock held by them. Percentage ownership before the offering is based on 12,140,068 shares of common stock outstanding as of May 3, 2002. Percentage ownership after the offering includes the 14,295,068 common shares that will be outstanding immediately following the completion of this offering, including the conversion of 958,612 shares of Series A preferred stock into common stock. Shares of common stock subject to options, warrants or other rights to acquire stock that are currently exercisable or exercisable within 60 days of May 3, 2002 are deemed outstanding and beneficially owned by the person holding such options for the purpose of computing the percentage ownership of such person but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

	Shares Beneficially Owned Prior to Offering						Shares Beneficially Owned After the Offering
Beneficial Owner (Name and Address)	Shares Beneficially Owned Prior to Offering				Shares to be Sold in the Offering		Shares Beneficially Owned After the Offering
Beneficial Owner (Name and Address)	Number		Percent		Shares to be Sold in the Offering		Number	Percent
5% Stockholders
High Plains Investments LLC 700 Bitner Road Park City, Utah 84098	5,486,868	(1)	43.0	%	0		5,486,868	36.8	%
Dorothy M. Byrne 35 Rope Ferry Road Hanover, NH 03755	1,668,844	(2)	13.5	%	0		1,668,844	11.5	%
Amazon.com, Inc NV Investment Holdings, Inc. 1200 12 ^th Ave. S., Ste. #1200 Seattle, WA 98144	845,000		7.0	%	845,000	(3)	0	*
Directors and Named Executive Officers
Patrick M. Byrne	5,716,015	(4)	44.7	%	0		5,716,015	38.2	%
Jason C. Lindsey	255,706	(5)	2.1	%	0		255,706	1.8	%
John B. Pettway	895,951	(6)	7.3	%	0		895,951	6.2	%
John J. Byrne Jr.	1,668,844	(7)	13.5	%	0		1,668,844	11.5	%
Gordon S. Macklin	307,955	(8)	2.5	%	0		307,955	2.1	%
Allison H. Abraham	23,616	(9)	*		0		23,616	*
John A. Fisher	23,616	(10)	*		0		23,616	*
Douglas Greene	35,307	(11)	*		0		35,307	*
Trey Baker	10,295	(12)	*		0		10,295	*
James Hyde	395		*		0		395	*
Directors and Officers as a Group (10 persons)	8,110,376	(13)	61.6	%	0		8,110,376	52.9	%

*: Less than 1% of the outstanding shares of common stock.

(1): Includes 629,536 shares issuable upon exercise of currently exercisable warrants. Patrick M. Byrne, our President, Chief Executive Officer and Chairman of our board of directors, holds 100% of the voting interest in and controls High Plains Investments LLC.
(2): Ms. Byrne's shares include 4,414 shares issuable upon exercise of currently exercisable warrants. Ms. Byrne's shares also include 360,873 shares held by Haverford-Utah, LLC; 50,361 shares issuable upon exercise of currently exercisable warrants held by Haverford-Utah, LLC; 346,159 shares held by Rope Ferry Associates, Ltd.; 50,268 shares issuable upon exercise of currently exercisable warrants held by Rope Ferry Associates; 197,459 shares held by High Meadows Finance L.C.; 10,586 shares held by Norwich Associates L.C.; 516,487 shares held by John J. Byrne Jr.; 92,850 shares issuable upon exercise of currently exercisable warrants held by John J. Byrne Jr.; and 7,622 shares issuable upon exercise of options exercisable within 60 days of May 3, 2002 held by John J. Byrne Jr. Ms. Byrne disclaims beneficial ownership of the shares held by Haverford-Utah, LLC; Rope Ferry Associates, Ltd., High Meadows Finance L.C.; and Norwich Associates L.C.; except to the extent of her pecuniary interests in each entity respectively. Ms. Byrne also disclaims beneficial ownership of the shares held by John J. Byrne Jr. to the extent she does not exercise voting or dispositive control over the shares held by John J. Byrne Jr.
(3): Pursuant to a Registration and Expenses Agreement between Amazon.com NV Investment Holdings, Inc. and us, we have agreed to register all of Amazon's shares in this offering, and Amazon has agreed to sell all of its shares in this offering, subject to certain conditions. Amazon's obligation to sell all of its shares in this offering is conditioned upon an initial public offering price of at least $11.83 per share and the sale of not less than all of its shares. If the public offering price is less than $11.83 per share, Amazon will have the option, but not the obligation, to sell all of its shares in this offering. In addition, if market conditions require a decrease in the number of shares to be sold in this offering such that Amazon will not be able to sell all of its shares in this offering, then Amazon has the option, but not the obligation, to sell its pro rata share of the number of shares to be sold in this offering. As a result, any decrease in the number of shares in this offering could result in a pro rata reduction of the number of shares that we may sell in this offering. For this purpose, our pro rata share is approximately 72.8% and Amazon's pro rata share is approximately 28.2%, in each case, of the number of shares to be sold in this offering.
(4): Patrick M. Byrne's shares include 21,102 shares issuable upon exercise of options exercisable within 60 days of May 3, 2002. Patrick M. Byrne's shares also include 4,857,332 shares held by High Plains Investments LLC; 629,536 shares issuable upon exercise of currently exercisable warrants held by High Plains Investments LLC; 197,459 shares held by High Meadows Finance L.C.; and 10,586 shares held by Norwich Associates L.C. Dr. Byrne disclaims beneficial ownership of the shares held by High Plains Investments LLC; High Meadows Finance L.C.; and Norwich Associates L.C. except to the extent of his pecuniary interests in each entity respectively.
(5): Mr. Lindsey's shares include 32,887 shares issuable upon exercise of options exercisable within 60 days of May 3, 2002.
(6): Mr. Pettway's shares include 2,400 shares issuable upon exercise of options exercisable within 60 days of May 3, 2002; 360,873 shares held by Haverford-Utah, LLC; 50,361 shares issuable upon exercise of currently exercisable warrants held by Haverford-Utah, LLC; 197,459 shares held by High Meadows Finance L.C.; and 10,586 shares held by Norwich Associates L.C. Mr. Pettway disclaims beneficial ownership of the shares held by Haverford-Utah, LLC; High Meadows Finance L.C.; and Norwich Associates L.C. except to the extent of his pecuniary interest in each entity respectively.
(7): John J. Byrne Jr.'s shares include 7,622 shares issuable upon exercise of options exercisable within 60 days of May 3, 2002; 92,850 shares issuable upon exercise of currently exercisable warrants; 197,459 shares held by High Meadows Finance L.C.; 10,586 shares held by Norwich Associates L.C.; and 4,414 shares held by Dorothy Byrne. John J. Byrne Jr. disclaims beneficial ownership of the shares held by High Meadows Finance L.C. and Norwich Associates L.C. except to the extent of his pecuniary interest in each entity respectively. Mr. Byrne also disclaims beneficial ownership of the shares held by Dorothy Byrne to the extent he does not exercise voting or dispositive control over the shares held by Dorothy Byrne.
(8): Mr. Macklin's shares include 14,115 shares issuable upon exercise of options exercisable within 60 days of May 3, 2002 and an aggregate of 257,810 shares and warrants currently exercisable for an aggregate of 36,030 shares held by the the following entities: Macklin Family Limited Partnership I, the Macklin Family Limited Partnership III, the Gordon Macklin Family Trust and the Marilyn C. Macklin Family Trust.
(9): Ms. Abraham's shares include 23,616 shares issuable upon exercise of options exercisable within 60 days of May 3, 2002.

(10): Mr. Fisher's shares include 23,616 shares issuable upon exercise of options exercisable within 60 days of May 3, 2002.
(11): Mr. Greene's shares include 35,307 shares issuable upon exercise of options exercisable within 60 days of May 3, 2002.
(12): Mr. Baker's shares include 10,295 shares issuable upon exercise of options exercisable within 60 days of May 3, 2002.
(13): Includes a total of 170,960 shares issuable upon exercise of options granted to our executive officers and directors that are exercisable within 60 days of May 3, 2002 and 863,459 shares issuable upon exercise of currently exercisable warrants.

DESCRIPTION OF CAPITAL STOCK

General

Upon completion of this offering, our Amended and Restated Certificate of Incorporation will be amended to authorize the issuance of 100,000,000 shares of common stock, $0.0001 par value, and 5,000,000 shares of undesignated preferred stock, $0.0001 par value per share.

The following description of our capital stock is a summary, it is not complete and is subject to and qualified in its entirety by our Amended and Restated Certificate of Incorporation and Bylaws, a copy of each of which has been filed as an exhibit to the registration statement of which this prospectus forms a part, and the provisions of applicable Delaware law.

Our Amended and Restated Certificate of Incorporation and Bylaws contain certain provisions that are intended to enhance the likelihood of continuity and stability in the composition of the board of directors, which may have the effect of delaying, deferring or preventing a future takeover or change in control of Overstock unless such takeover or change in control is approved by our board of directors.

Common Stock

As of March 31, 2002, there were 11,178,792 shares of common stock outstanding, which were held of record by 275 stockholders. After this offering, there will be 14,292,404 shares of common stock outstanding, or 14,742,404 shares if the underwriters exercise their over-allotment option in full.

Holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Holders of common stock do not have cumulative voting rights, and, therefore, holders of a majority of the shares voting for the election of directors can elect all of the directors. In such event, the holders of the remaining shares will not be able to elect any directors. Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of common stock are entitled to receive such dividends as may be declared from time to time by our board of directors out of funds legally available therefore, subject to the terms of any existing or future agreements between Overstock and our debtholders. We have never declared or paid cash dividends on our capital stock. We expect to retain future earnings, if any, for use in the operation and expansion of our business, and do not anticipate paying any cash dividends in the foreseeable future.

In the event of liquidation, dissolution or winding up of Overstock, holders of common stock are entitled to share ratably in all assets legally available for distribution after payment of all debts and other liabilities and subject to the prior rights of the holders of any preferred stock then outstanding. Holders of common stock have no preemptive or other subscription or conversion rights, and there are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common are, and the common stock to be outstanding on completion of this offering will be fully paid and nonassessable.

In addition, we have accounted for approximately 851,000 shares of our common stock as redeemable common stock as a result of rescission rights that certain of our common stock holders may have as a result of the fact that we may have violated state securities laws in connection with offerings we made between November 1999 and September 2000. In such situations a number of remedies may be available to regulatory authorities and the investors who purchased common stock in those offerings, including, without limitation, a right of rescission, civil penalties, seizure of our assets, a restraining order or injunction, and a court order to pay restitution and costs. As a result, certain investors in our common stock may be entitled to return their shares to Overstock and receive back from us the full price they paid, plus interest, which we estimate to be an aggregate amount of approximately $5.4 million (based on interest calculated through March 31, 2002).

Preferred Stock

Effective immediately prior to the completion of this offering, each outstanding share of preferred stock will be converted into one share of common stock. Upon completion of this offering, we will amend and restate our Amended and Restated Certificate of Incorporation such that it will be amended to contain no references to the prior series of preferred stock, and will authorize 5,000,000 shares of undesignated preferred stock.

Our board of directors will have the authority, without any further vote or action by our stockholders, to issue from time to time the preferred stock in one or more series and to fix the price, rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting a series or the designation of such series. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could decrease the amount of earnings and assets available for distribution to holders of common stock or adversely affect the rights and powers, including voting rights, of the holders of common stock, and may have the effect of delaying, deferring or preventing a change in control of Overstock without further action by the stockholders. We have no current plans to issue any shares of preferred stock.

Registration Rights

After this offering, the holders of an aggregate of 993,807 shares of our common stock will be entitled to certain rights with respect to registration of such shares under the Securities Act of 1933, as amended, or the Securities Act. These shares are referred to as registrable securities. Such holders possess registration rights under the terms of an Investor Rights Agreement dated March 4, 2002. Under the terms of the Investor Rights Agreement and beginning 180 days after the completion of this offering, if we propose to register any shares of our capital stock under the Securities Act, holders of the then outstanding registrable securities will be entitled to notice of the registration and have the right to include their shares in the registration. However, the underwriters have the right to limit the number of shares included in any such registration. Holders of at least twenty percent of the outstanding registrable securities will also have the right to require us, on no more than two occasions, to file a registration statement under the Securities Act to register all or any part of their shares of common stock, subject to certain conditions and limitations. We may in certain circumstances defer these registrations, and the underwriters have the right to limit the number of shares included in these registrations. Further the holders may require us to register all or any portion of their registrable securities on Form S-3, when such form becomes available to us, subject to conditions and limitations.

Warrants

As of March 31, 2002 warrants to purchase an aggregate of 1,122,200 shares of our common stock at a weighted average exercise price per share of $5.60 were issued and outstanding.

Antitakeover Effects of Provisions of Our Amended and Restated Certificate of Incorporation and Bylaws and Delaware Law

Upon completion of this offering, our Amended and Restated Certificate of Incorporation and Bylaws will be amended to contain provisions that could make the following more difficult:

•: acquisition of Overstock by means of a tender offer;
•: acquisition of Overstock by means of a proxy contest or otherwise; and
•: the removal of our incumbent officers and directors.

These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of Overstock to first negotiate with our board of directors. We believe that the benefits of increased protection resulting from our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure Overstock outweigh the disadvantages of discouraging such proposals because we believe that the negotiation of such proposals could result in an improvement of their terms.

Stockholder Meetings. Our Bylaws provide that only the board of directors, the Chairman of the board, the Chief Executive Officer or the President of Overstock may call special meetings of stockholders.

Requirements for Advance Notification of Stockholder Nominations and Proposals. Our Bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.

Elimination of Stockholder Action By Written Consent. Our charter documents eliminate the right of stockholders to act by written consent without a meeting.

Election and Removal of Directors. Our board of directors is divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders. For more information on our classified board of directors, see the section entitled "Management—Classified Board." This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of Overstock because it generally makes it more difficult for stockholders to replace a majority of the directors.

Elimination of Cumulative Voting. Our charter documents do not provide for cumulative voting in the election of directors.

Undesignated Preferred Stock. The ability to authorize undesignated preferred stock makes it possible for the Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of Overstock. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of Overstock.

Delaware Anti-Takeover Statute. We are subject to Section 203 of the Delaware General Corporation Law, which prohibits persons deemed "interested stockholders" of certain Delaware corporations from engaging in a "business combination" with certain Delaware corporations, including those whose securities are listed for trading on the Nasdaq National Market, for three years following the date that such persons became interested stockholders. In general, an "interested stockholder" is any entity or person beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person. Generally, a "business combination" includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have the effect of delaying, deferring or preventing a change of control of Overstock with respect to transactions not approved in advance by our board of directors.

The provisions of Delaware law and our Amended and Restated Certificate of Incorporation and Bylaw could have the effect of discouraging others from attempting unsolicited takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored unsolicited takeover attempts. Such provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it

more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.

Nasdaq National Market Listing

We have been approved for listing our shares on the Nasdaq National Market under the symbol "OSTK"

Transfer Agent

The Transfer Agent and Registrar for the common stock is Equiserve Trust Company, N.A. The Transfer Agent's address is c/o Shareholder Services, 150 Royal Street, Canton, MA 02021.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock in the public market could adversely affect the market price of our common stock and could impair our future ability to raise capital through the sale of our equity securities.

Upon the completion of this offering, we will have 14,292,404 shares of our common stock outstanding, assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options or warrants. Of the outstanding shares, all of the shares sold in this offering will be freely tradable, except that any shares held by our "affiliates" as that term is defined in Rule 144 promulgated under the Securities Act, may only be sold in compliance with the limitations described below. The remaining shares of our common stock will be deemed "restricted securities" as defined under Rule 144. Restricted shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 or 701 promulgated under the Securities Act, which are summarized below. Subject to the lock-up agreements described in "Underwriting" and the provision of Rule 144 and 701, additional shares will be available for sale in the public market as follows:

Eligibility of Restricted Shares For Sale in Public Market

Days after Date of this Prospectus	Shares Eligible for Sale	Comment
Upon completion of offering	3,000,000	Shares sold in offering.
Upon completion of offering	121,591	Shares saleable under Rule 144(k) that are not subject to lock-up.
90 days	590,337	Shares saleable under Rule 144 or Rule 701 that are not subject to lock-up.
180 days	9,389,170	Shares that become saleable under Rule 701, Rule 144 or 144(k) upon expiration of lock-up.
Thereafter	1,191,306	Restricted securities held for one year or less.

As of March 31, 2002, options to purchase 93,395 shares of our common stock were outstanding under the Gear.com, Inc. Restated 1998 Stock Option Plan. This Gear.com stock option plan has been terminated and we will not grant any more options under this plan. As of March 31, 2002, options to purchase 1,385,314 shares of our common stock were outstanding and 366,597 shares were available for future option grants under the 1999 Stock Option Plan. Additionally, we have adopted a 2002 Stock Plan and reserved 638,680 shares for issuance under the 2002 Stock Plan as of April 23, 2002. Beginning 180 days after the effective date, approximately 522,221 shares issuable upon the exercise of vested options under the Gear.com 1998 Stock Option Plan, the 1999 Stock Option Plan and the 2002 Stock Option Plan will become eligible for sale.

We intend to file, within 180 days after the date of this prospectus, a Form S-8 registration statement under the Securities Act to register shares issuable upon exercise of options under our 1999 Stock Option Plan, the Gear.com Restated 1998 Stock Option Plan and our 2002 Stock Plan. Shares of common stock issued upon exercise of options issued under our 1999 Stock Option Plan, the Gear.com

Restated 1998 Stock Option Plan and our 2002 Stock Plan after the effective date of the Form S-8 will be available for sale in the public market, subject to Rule 144 volume limitations applicable to affiliates and lock-up agreements.

Lock-Up Agreements

All officers and directors and certain other securityholders have agreed, subject to specified exceptions, that, without prior written consent of WR Hambrecht+Co, they will not offer, sell, contract to sell, pledge, grant any option to sell, or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exercisable for shares of our common stock, or warrants or other rights to purchase our common stock during the 180-day period following the date of this prospectus. WR Hambrecht, may, in its sole discretion, permit early release of shares subject to the lock-up agreements. In considering any request to release shares subject to a lock-up agreement WR Hambrecht will consider the possible impact of the release of the shares on the trading price of the stock sold in the offering. WR Hambrecht does not have any present intention or any understandings, implicit or explicit, to release any of the shares subject to the lock-up agreements prior to the expiration of the 180-day period.

Rule 144

In general, under Rule 144 as currently in effect, a person, or group of persons whose shares are required to be aggregated, including an affiliate of Overstock who has beneficially owned shares for at least one year, is entitled to sell within any three-month period commencing 90 days after the date of this prospectus, a number of shares that does not exceed the greater of one percent of the then outstanding shares of our common stock, which will be approximately 142,924 shares immediately after this offering, or the average weekly trading volume in our common stock during the four calendar weeks preceding the date on which notice of the sale is filed. In addition, a person who is not deemed to have been an affiliate at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years would be entitled to sell those shares under Rule 144(k) without regard to the requirements described above. When a person acquires shares from one of our affiliates, that person's holding period for the purpose of effecting a sale under Rule 144 would commence on the date of transfer from the affiliate.

Rule 701

In general, under Rule 701 of the Securities Act, an employee, officer, director, consultant or advisor who purchased shares from us in connection with compensatory stock or option plan or other written agreement is eligible to resell those shares in reliance on Rule 144, but without compliance with certain restrictions, including the holding period contained in Rule 144. However, the shares issued pursuant to Rule 701 are subject to the lock-up agreements described in "Underwriting" and will only become eligible for sale at the expiration of those agreements.

Stock Options

As of May 3, 2002, options to purchase a total of 1,570,385 shares of our common stock were outstanding. We intend to file a Form S-8 registration statement under the Securities Act to register these shares of common stock subject to outstanding options, and an additional 905,525 shares of our common stock reserved for issuance under our stock option plans. Accordingly, shares of our common stock issued under these plans will be eligible for sale in the public markets, subject to applicable vesting restrictions and the lock-up agreements.

Registration Rights

Holders of up to 993,807 shares of our outstanding common stock will have rights to participate in future registrations of securities by us. Beginning 180 days following completion of this offering, certain of these holders will have two demand registration rights with respect to their shares of our common stock to require us to register their shares of our common stock under the Securities Act. If the holders of these registrable securities request that we register their shares, and if the registration is effected, these shares would become freely tradable without restriction under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock. See "Description of Capital Stock—Registration Rights."

In May 2002, we entered into a Registration and Expenses Agreement with Amazon.com NV Investment Holdings, Inc., a holder of 845,000 shares of our common stock and the selling stockholder in this offering. Pursuant to this agreement, we have agreed to register all of Amazon's shares in this offering, and Amazon has agreed to sell all of its shares in this offering, subject to certain conditions. In particular, Amazon's agreement to sell all of its shares in this offering is conditioned upon an initial public offering price of at least $11.83 per share and the sale of not less than all of its shares. If these conditions are not met, Amazon has the right, under certain conditions, but not the obligation to include up to all of its shares in this offering. If Amazon elects not to sell all of its shares in this offering, Amazon has informed us that they intend to sell any unsold shares as soon as they are able under applicable securities laws. Under Rule 144, commencing ninety days after the completion of this offering, Amazon would be able to sell all of its unsold shares, subject to the volume restrictions described above. Further, commencing on November 17, 2002, Amazon would be able to sell all such shares without regard to the volume restrictions described above. Sales by Amazon of its shares in the public trading market, or the perception that such shares are available for sale, could have a depressant effect on our stock price.

PLAN OF DISTRIBUTION

In accordance with the terms of the underwriting agreement between WR Hambrecht+Co, LLC and us, WR Hambrecht+Co will purchase 2,155,000 shares of common stock from us and 845,000 shares of common stock from the selling stockholder at the public offering price less the underwriting discounts and commissions described on the cover page of this prospectus.

The underwriting agreement provides that the obligations of WR Hambrecht+Co are subject to conditions, including the absence of any material adverse change in our business, and the receipt of certificates, opinions and letters from us, counsel and independent accountants. Subject to those conditions, WR Hambrecht+Co is committed to purchase all of the shares of our common stock offered by this prospectus if any of the shares are purchased.

In May 2002, we entered into a Registration and Expenses Agreement with the selling stockholder pursuant to which we have agreed to register all of the selling stockholder's shares in this offering, and the selling stockholder has agreed to sell all of its shares in this offering, subject to certain conditions. Under this agreement, we will pay all of the registration expenses associated with this offering. In addition, we will pay the selling stockholder an amount equal to the aggregate underwriting discount associated with the sale of such selling stockholder's shares in the offering.

WR Hambrecht+Co proposes to offer the shares of our common stock directly to the public at the offering price set forth on the cover page of this prospectus, as this price is determined by the OpenIPO process described below, and to certain dealers at this price less a concession not in excess of $ per share. Any dealers that participate in the distribution of our common stock may be deemed to be underwriters within the meaning of the Securities Act, and any discount, commission or concession received by them and any provided by the sale of the shares by them may be deemed to be underwriting discounts and commissions under the Securities Act. After completion of the initial public offering of the shares, the public offering price and other selling terms may be changed by WR Hambrecht+Co.

The following table shows the per share and total underwriting discount to be paid to WR Hambrecht+Co by us in connection with this offering. The underwriting discount has been determined through negotiations between WR Hambrecht+Co and us, and has been calculated as a percentage of the offering price. These amounts are shown assuming both no exercise and full exercise of the over-allotment option.

		Per Share		No Exercise		Full Exercise
Public offering price
Underwriting discounts
Proceeds, before expenses, to us

The expenses of the offering, exclusive of the underwriting discounts, will be approximately $1,200,000. These fees and expenses are payable entirely by us. These fees include, among other things, our legal and accounting fees, printing expenses, expenses incurred in connection with meetings with potential investors, filing fees of the Securities and Exchange Commission and the National Association of Securities Dealers, Inc., fees of our transfer agent and registrar and the listing fees of the Nasdaq National Market.

An electronic prospectus is available on the Website maintained by WR Hambrecht+Co and may also be made available on Websites maintained by selected dealers. Other than the prospectus in electronic format, the information on these Websites is not part of this prospectus and has not been approved or endorsed by us.

The OpenIPO Auction Process

The distribution method being used in this offering is known as the OpenIPO auction, which differs from methods traditionally used in underwritten public offerings. In particular, the public offering price and the allocation of shares are determined primarily by an auction conducted by WR Hambrecht+Co. All qualified individual and institutional investors may place bids in an OpenIPO auction and investors submitting valid bids have an equal opportunity to receive an allocation of shares.

The following describes how WR Hambrecht+Co and some selected dealers conduct the auction process and confirm bids from prospective investors:

•: Before the registration statement relating to this offering becomes effective, WR Hambrecht+Co and participating dealers solicit bids from prospective investors through the Internet and by telephone and facsimile. The bids specify the number of shares of our common stock the potential investor proposes to purchase and the price the potential investor is willing to pay for the shares. These bids may be above or below the range set forth on the cover page of the prospectus. The minimum size of any bid is 100 shares.
•: The shares offered by this prospectus may not be sold, nor may offers to buy be accepted, prior to the time that the registration statement filed with the Securities and Exchange Commission becomes effective. A bid received by WR Hambrecht+Co involves no obligation or commitment of any kind prior to the closing of the auction. Bids can be modified or revoked at any time prior to the closing of the auction.
•: Approximately two business days prior to the registration statement being declared effective, prospective investors receive, by e-mail, telephone or facsimile, a notice indicating the proposed effective date.
•: After the registration statement relating to this offering has become effective, potential investors who have submitted bids to WR Hambrecht+Co are contacted by e-mail, telephone or facsimile. Potential investors are advised that the registration statement has been declared effective and are requested to confirm their bids.
•: The auction will close after the registration statement becomes effective at a time agreed to by us and WR Hambrecht+Co, which we anticipate will be immediately after the close of trading on the Nasdaq National Market on the same day on which the registration statement is declared effective. However, the date on which the auction will close can not currently be predicted and will be determined by us and WR Hambrecht+Co based on general market conditions during the period after the registration statement is declared effective. After the registration statement has been declared effective, the public offering price of the common stock may be set at a price that is outside the range set forth on the cover of the prospectus.
•: All bids that are not confirmed before the time specified by WR Hambrecht+Co, or if the time is not specified, by the close of the auction, are deemed withdrawn.
•: Once a potential investor affirmatively confirms its previous bid, the confirmation remains valid unless subsequently withdrawn by the potential investor. Potential investors are able to withdraw their bids at any time before the close of the auction by notifying WR Hambrecht+Co or a participating dealer.
•: If the public offering price range is changed before or after a potential investor affirmatively confirms a bid, or if the public offering price is outside the public offering range previously provided to the potential investor in the prospectus, WR Hambrecht+Co and participating dealers notify potential investors of the change and that offers will not be accepted until the potential investor has again reconfirmed its bid regardless of whether the potential investor's initial bid was above, below or at the public offering price.

•: Following the closing of the auction, WR Hambrecht+Co determines the highest price at which all of the shares offered, including shares that may be purchased by WR Hambrecht+Co to cover any over-allotments, may be sold to potential investors. This price, which is called the "clearing price," is determined based on the results of all valid bids at the time the auction is closed. The clearing price is not necessarily the public offering price, which is set as described in "Determination of Public Offering Price" below. The public offering price determines the allocation of shares to potential investors, with all bids submitted at or above the public offering price receiving a pro rata portion of the shares bid for.
•: Once the auction closes and a clearing price is set as described below, WR Hambrecht+Co accepts the bids from those bidders whose bid is at or above the public offering price but may allocate to a prospective investor fewer shares than the number included in the investor's bid.
•: Bidders receiving a pro rata portion of the shares bid receive an allocation of shares on a round lot basis, rounded to multiples of 100 or 1000 shares, depending on the size of the bid. No bids are rounded to a round lot higher than the original bid size. Because bids may be rounded down to round lots in multiples of 100 or 1000 shares, some bidders may receive allocations of shares that reflect a greater percentage decrease in their original bid than the average pro rata decrease. Thus, for example, if a bidder has confirmed a bid for 200 shares, and there is an average pro rata decrease of all bids of 30%, the bidder may receive an allocation of 100 shares (a 50% decrease from 200 shares) rather than receiving an allocation of 140 shares (a 30% decrease from 200 shares). In addition, some bidders may receive allocations of shares that reflect a lesser percentage decrease in their original bid than the average pro rata decrease. For example, if a bidder has confirmed a bid for 100 shares, and there is an average pro rata decrease of all bids of 30%, the bidder may receive an allocation of all 100 shares to avoid having the bid rounded down to zero.
•: WR Hambrecht+Co or a participating dealer notifies successful bidders by e-mail, telephone or facsimile or mail that the auction has closed and that their confirmed bids have been accepted. Other bidders are notified that their bids have not been accepted.
•: Potential investors may at any time expressly request that all, or any specific, communications between them and WR Hambrecht+Co and participating dealers be made by specific means of communication, including e-mail, telephone and facsimile.

WR Hambrecht+Co and selected dealers that participate in this offering may request prospective investors to confirm their bids prior to the effective date of the registration statement, if that practice is used by these institutions in connection with initial public offerings that are not conducted using the OpenIPO process. Bidders should carefully review the procedures of, and communications from, the institution through which they bid to purchase our shares. In general, approximately two business days before the registration statement is declared effective, WR Hambrecht+Co and these dealers request potential investors to reconfirm the bids that they have submitted. If a bid is not reconfirmed prior to the close of the auction, it is rejected. If a bid is reconfirmed, it may still be modified or revoked prior to the auction closing; however, if the reconfirmed bid is not revoked prior to the effectiveness of the registration statement and the closing of the auction, it is considered a firm bid and may be accepted at the closing of the auction. WR Hambrecht+Co and these dealers also seek reconfirmation of bids in the event that the price range of the offering is changed, or if the initial public offering price is set at a price that is outside the range that has previously been provided to potential investors.

Determination of Public Offering Price

The public offering price for this offering is ultimately determined by negotiation between WR Hambrecht+Co and us after the auction closes and does not necessarily bear any direct relationship to our assets, current earnings or book value or to any other established criteria of value, although these

factors are considered in establishing the initial public offering price. Prior to the offering, there has been no public market for our common stock. The principal factor in establishing the public offering price is the clearing price resulting from the auction.

The clearing price is the highest price at which all of the shares offered, including the shares that may be purchased by WR Hambrecht+Co to cover any over-allotments, may be sold to potential investors, based on the valid bids at the time the auction is run. The shares subject to WR Hambrecht+Co's over- allotment option are used to calculate the clearing price whether or not the option is actually exercised.

Factors considered in determining the initial public offering price include an assessment of our management, operating results, capital structure and business potential and the demand for similar securities of comparable companies. Changes, if any, in the public offering price are based primarily on the bids received.

The public offering price may be lower, but will not be higher, than the clearing price based on negotiations between WR Hambrecht+Co and us. The public offering price always determines the allocation of shares to potential investors. Therefore, if the public offering price is below the clearing price, all bids that are at or above the public offering price receive a pro rata portion of the shares bid for. If sufficient bids are not received, or if we do not consider the clearing price to be adequate, or if we and WR Hambrecht+Co are not able to reach agreement on the public offering price, then we and WR Hambrecht+Co will either postpone or cancel this offering. Alternatively, we may file a post-effective amendment to the registration statement in order to conduct a new auction.

The following simplified example illustrates how the public offering price is determined through the auction process:

Company X offers to sell 1,000 shares in its public offering through the auction process. WR Hambrecht+Co, on behalf of Company X, receives five bids to purchase, all of which are kept confidential until the auction closes.

The first bid is to pay $10.00 per share for 200 shares. The second bid is to pay $9.00 per share for 300 shares. The third bid is to pay $8.00 per share for 600 shares. The fourth bid is to pay $7.00 per share for 400 shares. The fifth bid is to pay $6.00 per share for 800 shares.

Assuming that all of these bids are confirmed and not withdrawn or modified before the auction closes, and assuming that no additional bids are received, the clearing price used to determine the public offering price would be $8.00 per share, which is the highest price at which all 1,000 shares offered may be sold to potential investors who have submitted valid bids. However, the shares may be sold at a price below $8.00 per share based on negotiations between Company X and WR Hambrecht+Co.

If the public offering price is the same as the $8.00 per share clearing price, WR Hambrecht+Co would confirm bids at or above $8.00 per share. Because 1,100 shares were bid for at or above the clearing price, each of the three potential investors who bid $8.00 per share or more would receive approximately 90% of the shares for which bids were made. The two potential investors whose bids were below $8.00 per share would not receive any shares in this example.

If the public offering price is $7.00 per share, WR Hambrecht+Co would confirm bids that were made at or above $7.00 per share. No bids made at a price of less than $7.00 per share would be accepted. The four potential investors with the highest bids would receive a pro rata portion of the 1,000 shares offered, based on the 1,500 shares they requested, or two- thirds of the shares for which bids were made. The potential investor with the lowest bid would not receive any shares in this example.

Because bids that are reduced on a pro rata basis may be rounded down to round lots, a potential investor may be allocated less than two-thirds of the shares bid for. Thus, the potential investor who bid for 200 shares may receive a pro rata allocation of 100 shares (one-half of the shares bid for), rather than receiving a pro rata allocation of 133 shares (two-thirds of the shares bid for).

The following table illustrates the example described above, before rounding down any bids to the nearest round lot, assuming that the initial public offering price is set at $8.00 per share. The table also assumes that these bids are the final bids, and that they reflect any modifications that have been made to reflect any prior changes to the offering range, and to avoid the issuance of fractional shares.

		Bid Information				Auction Results
		Shares Requested	Cumulative Shares Requested	Bid Price		Shares Allocated	Approximate Allocated Requested Shares		Clearing Price		Amount Raised
		200	200	$	10.00	180	90	%	$	8.00	$	1,440
		300	500		9.00	270	90			8.00		2,160
	Clearing Price	600	1,100		8.00	550	90			8.00		4,400
		400	1,500		7.00	—	—			—		—
		800	2,300		6.00	—	—			—		—

Total:						1,000					$	8,000

Requirements for Valid Bids

Valid bids are those that meet the requirements, including eligibility, account status and size, established by WR Hambrecht+Co or participating dealers. In order to open a brokerage account with WR Hambrecht+Co, a potential investor must deposit $2,000 in its account. This brokerage account will be a general account subject to WR Hambrecht+Co's customary rules, and will not be limited to this offering. In addition, once the registration statement becomes effective and the auction closes, a prospective investor submitting a bid through a WR Hambrecht+Co brokerage account must have an account balance equal to or in excess of the amount of its bid or its bid is not accepted by WR Hambrecht+Co. However, other than the $2,000 described above, prospective investors are not required to deposit any money into their accounts until after the registration statement becomes effective. No funds will be transferred to WR Hambrecht+Co, and any amounts in excess of $2,000 may be withdrawn at any time until the acceptance of the bid and the subsequent closing of this offering. Conditions for valid bids, including eligibility standards and account funding requirements of participating dealers other than WR Hambrecht+Co, may vary.

The Closing of the Auction and Allocation of Shares

The auction closes on a date estimated and publicly disclosed in advance by WR Hambrecht+Co on its Websites at www.wrhambrecht.com and www.openipo.com. The 3,000,000 shares offered by this prospectus, or 3,450,000 shares if WR Hambrecht+Co's over-allotment option is exercised in full, will be purchased from us and the selling stockholder by WR Hambrecht+Co and sold through WR Hambrecht+Co and participating dealers to investors who have submitted valid bids at or higher than the public offering price. These investors are notified by e-mail, telephone, voice mail, facsimile or mail as soon as practicable following the closing of the auction that their bids have been accepted.

Each participating dealer has agreed with WR Hambrecht+Co to sell the shares it purchases from WR Hambrecht+Co in accordance with the auction process described above, unless WR Hambrecht+Co otherwise consents. WR Hambrecht+Co reserves the right to reject bids that it deems manipulative or disruptive in order to facilitate the orderly completion of this offering, and it reserves the right, in exceptional circumstances, to alter this method of allocation as it deems necessary to

ensure a fair and orderly distribution of the shares of our common stock. For example, large orders may be reduced to ensure a public distribution and bids may be rejected or reduced by WR Hambrecht+Co or participating dealers based on eligibility or creditworthiness criteria. In addition, WR Hambrecht+Co or the participating dealers may reject or reduce a bid by a prospective investor who has engaged in practices that could have a manipulative, disruptive or otherwise adverse effect on the offering.

Some dealers participating in the selling group may submit firm bids that reflect indications of interest from their customers that they have received at prices within the initial public offering price range. In these cases, the dealer submitting the bid is treated as the bidder for the purposes of determining the clearing price and allocation of shares.

Price and volume volatility in the market for our common stock may result from the somewhat unique nature of the proposed plan of distribution. Price and volume volatility in the market for our common stock after the completion of this offering may adversely affect the market price of our common stock.

We have granted to WR Hambrecht+Co an option, exercisable no later than 30 days after the date of this prospectus, to purchase up to an aggregate of 450,000 additional shares of our common stock from us at the offering price, less the underwriting discounts and commissions set forth on the cover page of this prospectus. To the extent that WR Hambrecht+Co exercises this option, it will have a firm commitment to purchase the additional shares and we will be obligated to sell the additional shares to WR Hambrecht+Co. WR Hambrecht+Co may exercise the option only to cover over-allotments made in connection with the sale of shares offered. The underwriting agreement provides that we will indemnify WR Hambrecht+Co against specified liabilities, including liabilities under the Securities Act, or contribute to payments that WR Hambrecht+Co may be required to make.

We have agreed not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of common stock, or any options or warrants to purchase common stock other than the shares of common stock or options to acquire common stock issued under our stock plans, for a period of 180 days after the date of this prospectus, except with the prior written consent of WR Hambrecht+Co. Each of our directors and executive officers and additional holders of a substantial majority of our outstanding capital stock have agreed to restrictions on their ability to sell, offer, contract or grant any option to sell, pledge, transfer or otherwise dispose of shares of our common stock for a period of 180 days after the date of this prospectus, without the prior written consent of WR Hambrecht+Co. The persons signing the lock-up agreements will be able to transfer their shares of common stock as a bona fide gift, to immediate family members or to a trust or partnership or other business entity, or as a distribution without compensation, to partners, members or shareholders of a business entity, subject to the transferees agreeing to enter into a lock-up agreement.

In connection with the offering, WR Hambrecht+Co may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by WR Hambrecht+Co of a greater number of shares than it is required to purchase in the offering. "Covered" short sales are sales made in an amount not greater than WR Hambrecht+Co's option to purchase additional shares from us in the offering. WR Hambrecht+Co may close out any covered short position by either exercising its option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, WR Hambrecht+Co will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which it may purchase shares through the over-allotment option. "Naked" short sales are any sales in excess of such option. WR Hambrecht+Co must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if

WR Hambrecht+Co is concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by WR Hambrecht+Co in the open market prior to the completion of the offering.

These activities by WR Hambrecht+Co may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the WR Hambrecht+Co at any time. These transactions may be effected on the Nasdaq National Market, in the over-the-counter market or otherwise.

WR Hambrecht+Co currently intends to act as a market maker for the common stock following this offering. However, WR Hambrecht+Co is not obligated to do so and may discontinue any market making at any time.

WR Hambrecht+Co is an investment banking firm formed in February 1998. In addition to this offering, WR Hambrecht+Co has engaged in the business of public and private equity investing and financial advisory services since its inception. The manager of WR Hambrecht+Co, William R. Hambrecht, has 40 years of experience in the securities industry.

LEGAL MATTERS

The validity of our common stock offered by this prospectus will be passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Salt Lake City, Utah. Certain legal matters in connection with this offering will be passed upon for the underwriters by Morrison & Foerster LLP, San Francisco, California.

EXPERTS

The consolidated financial statements of Overstock.com, Inc. as of December 31, 2000 and 2001 and for each of the three years in the period ended December 31, 2001 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.

The financial statements of Gear.com, Inc., included in this prospectus and elsewhere in this registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report thereto, and are included herein in reliance upon the authority of such firm as experts in giving said reports.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 with the SEC with respect to the common stock we are offering by this prospectus. This prospectus, which constitutes a part of that registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules which are part of the registration statement. For further information with respect to Overstock and the common stock, reference is hereby made to the registration statement and the exhibits and schedules thereto. You may read and copy any document we file at the SEC's public reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC's Website at http://www.sec.gov.

Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the SEC's public reference rooms, our Website and the Website of the SEC referred to above.

INDEX TO FINANCIAL STATEMENTS

		Page
Overstock.com, Inc. Consolidated Financial Statements
	Unaudited Consolidated Balance Sheets for December 31, 2001 and March 31, 2002	F-2
	Unaudited Consolidated Statements of Operations for the three months ended March 31, 2001 and 2002	F-3
	Unaudited Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2002	F-4
	Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2002	F-5
	Unaudited Notes to Consolidated Financial Statements	F-6
	Report of Independent Accountants	F-10
	Consolidated Balance Sheets	F-11
	Consolidated Statements of Operations	F-12
	Consolidated Statements of Stockholders' Equity	F-13
	Consolidated Statements of Cash Flows	F-14
	Notes to Consolidated Financial Statements	F-15
Gear.com, Inc. Financial Statements
	Report of Independent Public Accountants	F-35
	Statement of Operations	F-36
	Statement of Stockholders' Equity	F-37
	Statement of Cash Flows	F-38
	Notes to Financial Statements	F-39
	Statements of Operations (nine months, unaudited)	F-44
	Statement of Cash Flows (nine months, unaudited)	F-45
	Notes to Financial Statements (nine months, unaudited)	F-46

F-1

Overstock.com, Inc.

Consolidated Balance Sheets

			December 31, 2001			March 31, 2002
						(unaudited)
			(in thousands)
Assets
Current assets:
	Cash and cash equivalents		$	3,729		$	7,902
	Accounts receivable			1,565			1,198
	Inventories, net			7,586			6,834
	Prepaid expenses and other assets			476			662

		Total current assets		13,356			16,596
Property and equipment, net				5,018			4,977
Other long-term assets, net				3,340			3,683

	Total assets		$	21,714		$	25,256

Liabilities, Redeemable Securities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	3,680		$	4,016
	Accrued liabilities			2,093			1,992
	Notes payable, related party			4,258			2,879
	Capital lease obligations, current			254			222

		Total current liabilities		10,285			9,109
Capital lease obligations, non-current				165			126

		Total liabilities		10,450			9,235

Commitments and contingencies
Redeemable securities:
	Series A redeemable preferred stock, $0.0001 par value, 1,764 shares authorized, no shares and 959 shares issued and outstanding as of December 31, 2001 and March 31, 2002, respectively			—			6,582
	Redeemable common stock $0.0001 par value, 851 shares issued and outstanding as of December 31, 2001 and March 31, 2002, respectively			5,284			5,395

		Total redeemable securities		5,284			11,977

Stockholders' equity:
	Common stock, $0.0001 par value, 15,879 shares authorized, 10,327 shares and 10,363 shares issued as of December 31, 2001 and March 31, 2002, respectively			1			1
	Additional paid-in capital			52,187			62,994
	Accumulated deficit			(44,093	)		(53,818	)
	Unearned stock-based compensation			(2,015	)		(5,033	)
	Treasury stock, 35 shares at cost			(100	)		(100	)

		Total stockholders' equity		5,980			4,044

		Total liabilities, redeemable securities and stockholders' equity	$	21,714		$	25,256

The accompanying notes are an integral part of these consolidated financial statements.

F-2

Overstock.com, Inc.

Consolidated Statements of Operations (unaudited)

		Three months ended March 31,
		2001			2002
		(in thousands, except per share data)
Direct revenue		$	8,282		$	10,029
Commission revenue			501			1,659
Warehouse revenue			795			379

	Total revenue		9,578			12,067
Cost of goods sold (includes stock-based compensation of $5 and $102)			8,549			9,990

	Gross profit		1,029			2,077

Operating expenses:
Sales and marketing expenses (excludes stock-based compensation of $1 and $22)			1,413			1,219
General and administrative expenses (excludes stock-based compensation of $66 and $824)			2,128			2,802
Amortization of goodwill			774			—
Amortization of stock-based compensation			67			846

	Total operating expenses		4,382			4,867

Operating loss			(3,353	)		(2,790	)
Interest income			72			22
Interest expense			(62	)		(240	)
Other income, net			7			1

Net loss			(3,336	)		(3,007	)
Deemed dividend related to redeemable common stock			(100	)		(111	)
Deemed dividend related to beneficial conversion feature of preferred stock			—			(6,607	)

Net loss attributable to common shares		$	(3,436	)	$	(9,725	)

Net loss per common share-basic and diluted		$	(0.32	)	$	(0.87	)
Weighted average common shares outstanding - basic and diluted			10,596			11,171

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Overstock.com, Inc.

Consolidated Statement of Stockholders' Equity (unaudited)

	Common stock
	Common stock			Additional Paid-in Capital		Accumulated deficit			Unearned stock-based compensation			Treasury stock
	Shares	Amount		Additional Paid-in Capital		Accumulated deficit			Unearned stock-based compensation			Treasury stock			Total
	(amounts in thousands)
Balance at December 31, 2001	10,327	$	1	$	52,187	$	(44,093	)	$	(2,015	)	$	(100	)	$	5,980
Issuance of common stock	6				191		—			—			—			191
Exercise of stock options	30				33		—			—			—			33
Unearned stock-based compensation from options issued to employees	—				3,929		—			(3,929	)		—			—
Amortization of unearned stock-based compensation	—		—		—		—			948			—			948
Issuance of stock options to consultants in exchange for services	—				47		—			(37	)		—			10
Deemed dividend related to redeemable common stock	—		—		—		(111	)		—			—			(111	)
Deemed dividend related to beneficial conversion feature of preferred stock	—		—		6,607		(6,607	)		—			—			—
Net loss	—		—		—		(3,007	)		—			—			(3,007	)

Balance at March 31, 2002	10,363	$	1	$	62,994	$	(53,818	)	$	(5,033	)	$	(100	)	$	(4,044	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Overstock.com, Inc.

Consolidated Statements of Cash Flows (unaudited)

					Three months ended March 31,
					2001			2002
					(amounts in thousands)
Cash flows from operating activities:
	Net loss				$	(3,336	)	$	(3,007	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization				402			465
		Amortization of goodwill				774			—
		Amortization of unearned stock-based compensation				72			948
		Issuance of stock options to consultants for services				—			10
		Issuance of stock to employees				62			160
		Amortization of debt discount				—			121
		Changes in operating assets and liabilities:
			Accounts receivable			(1,468	)		367
			Inventories, net			2,249			752
			Prepaid assets			492			(186	)
			Other long-term assets			(610	)		(354	)
			Accounts payable			(2,869	)		336
			Accrued liabilities			(1,876	)		(101	)

				Net cash used in operating activities		(6,108	)		(489	)

Cash flows from investing activities:
	Issuance of note receivable to vendor					(2,300	)		—
	Expenditures for property and equipment					(490	)		(413	)

				Net cash used in investing activities		(2,790	)		(413	)

Cash flows from financing activities:
	Payments on capital lease obligations					(55	)		(71	)
	Payments on note payable					(3,000	)		(1,500	)
	Issuance of redeemable preferred stock					—			6,582
	Issuance of common stock and redeemable common stock					5,069			31
	Exercise of stock options					47			33

				Net cash provided by financing activities		2,061			5,075

Net (decrease) increase in cash and cash equivalents						(6,837	)		4,173
Cash and cash equivalents, beginning of period						8,348			3,729

Cash and cash equivalents, end of period						1,511			7,902

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Overstock.com, Inc.

Notes to Unaudited Consolidated Financial Statements

(all amounts in thousands, except per share data)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared by Overstock.com, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the audited financial statements and related notes thereto included in this Form S-1. The accompanying unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. Preparing financial statements requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from the estimates. The results of operations for the three-month period ended March 31, 2002 are not necessarily indicative of the results to be expected for any future period or the full fiscal year.

2. ADOPTION OF ACCOUNTING PRINCIPLE

Effective January 1, 2002, Overstock.com adopted SFAS 142, which establishes accounting and reporting for all goodwill and identified intangible assets acquired in a business combination. Under the new standard, all goodwill and long-lived intangible assets, including those acquired before initial application of the standard will not be amortized, but will be tested for impairment at least annually, using a two-step process. The first step is to identify a potential impairment and, in transition, this step must be measured as of the beginning of the fiscal year. However, a company has six months from the date of adoption to complete the first step. The Company expects to complete that first step of the goodwill impairment test during the second quarter of 2002. The second step of the goodwill impairment test measures the amount of the impairment loss (measured as of the beginning of the year of adoption), if any, and must be completed by the end of the Company's fiscal year. Although management does not anticipate an impairment loss, any impairment loss resulting from the transitional impairment tests will be reflected as the cumulative effect of a change in accounting principle in the first quarter 2002.

The following table summarizes the amortization expense and net income of the Company for the three months of initial application of SFAS 142 and the corresponding three-month period in the prior

F-6

year. It shows what net income would have been in the quarter ended March 31, 2001 exclusive of the amortization expense recognized in that period related to goodwill that is no longer being amortized:

	For the Three Months Ended March 31,
	2001			2002
Reported net loss	$	(3,336	)	$	(3,007	)
Add back: Goodwill amortization		774			—

Adjusted net loss	$	(2,562	)	$	(3,007	)

Basic and diluted loss per share:
Reported net loss per share attributable to common shares	$	(0.32	)	$	(0.87	)
Add back: Goodwill amortization		(0.07	)		—

Adjusted net loss per share attributable to common shares	$	(0.25	)	$	(0.87	)

3. ADVERTISING EXPENSE

The Company recognizes advertising expenses in accordance with SOP 93-7 "Reporting on Advertising Costs." As such, the Company expenses the costs of producing advertisements at the time production occurs, and expenses the cost of communicating advertising in the period during which the advertising space or airtime is used. Internet advertising expenses are recognized based on the terms of the individual agreements, which is generally: 1) during the period customers are acquired; or 2) based on the number of clicks generated during a given period over the term of the contract. Advertising expenses totaled $1,178 and $650 during the three-month periods ending March 31, 2001 and 2002, respectively.

4. LEASE TERMINATION SETTLEMENT

In February 2002, the Company relocated its corporate headquarters. At the time the Company relocated, it had 23 months remaining under the facilities lease for the former headquarters location. In March 2002, the Company settled its remaining obligation under the lease by paying the former landlord $340 and relinquishing the right to sublease the facilities. The settlement payment is recorded in the quarter ended March 31, 2002 under general and administrative expenses in the statement of operations.

5. STOCK PURCHASE PLAN

In January 2002, the Company renewed its Employee Stock Purchase Plan (the "ESPP") to provide certain employees, directors and consultants an opportunity to purchase shares of its common stock in amounts up to 5% of the participant's eligible compensation. During the quarter ended March 31, 2002, participants were allowed to purchase shares of stock at approximately $5.06 per share. There were 6 shares issued under the ESPP during the quarter ended March 31, 2002. The Company recognized approximately $51 of stock-based compensation for the excess of the fair value of the shares of common stock over the purchase price.

F-7

6. SALE OF SERIES A PREFERRED STOCK

In March 2002, the Company sold approximately 959 shares of mandatorily redeemable convertible preferred stock ("preferred stock") for approximately $6,582, net of issuance costs. The preferred stock will automatically convert upon an initial public offering (as described below), or if 65% of the holders of the preferred stock elect to convert. The preferred stock is convertible at the option of the holder into common stock on an initial 1:1 basis. If a holder has not elected to convert prior to March 2006 and the preferred stock has not otherwise converted, the preferred stock is mandatorily redeemable at the option of the holder in two equal yearly installments beginning in March 2007. As the fair value of the common stock to be received upon conversion was greater than the conversion price of the preferred stock at the date the preferred stock was issued, a beneficial conversion feature resulted in the amount of $6,607, which was calculated in accordance with Emerging Issues Task Force No. 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios." This beneficial conversion feature is reflected as a deemed dividend in the statement of operations.

7. RELATED PARTY TRANSACTIONS

As indicated in Note 6, the Company sold shares of mandatorily redeemable convertible preferred stock in March 2002, for which a deemed dividend will be recorded as a result of the beneficial conversion feature. The total deemed dividend recorded in the quarter ending March 31, 2002 was $6,607, of which $1,000 is attributable to preferred shares purchased by Haverford Internet, LLC, and $1,200 is attributable to preferred shares purchased by members of the board of directors, and $1,500 is attributable to preferred shares purchased by family members of management.

8. BUSINESS SEGMENTS

Segment information has been prepared in accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information." There were no intersegment sales or transfers during the three months ended March 31, 2001 or 2002. The Company evaluates the performance of its segments and allocates resources to them based primarily on gross profit.

F-8

The table below summarizes information about reportable segments for the three months ended March 31, 2001 and 2002:

			Direct operations		Commission operations		Warehouse operations		Consolidated
2001
	Revenue		$	8,282	$	501	$	795	$	9,578
	Costs of goods sold			7,530		225		794		8,549

	Gross profit		$	752	$	276	$	1		1,029
	Operating expenses									(4,382	)
	Other income (expense), net									17

		Net loss							$	(3,336	)

2002
	Revenue		$	10,029	$	1,659	$	379	$	12,067
	Cost of goods sold			9,198		432		360		9,990

	Gross profit		$	831	$	1,227	$	19		2,077
	Operating expenses									(4,867	)
	Other income, net									(217	)

		Net loss							$	(3,007	)

9. PUBLIC OFFERING, REINCORPORATION AND REVERSE STOCK SPLIT

On March 5, 2002, the Company filed a registration statement with the Securities and Exchange Commission with the intention of selling shares of the Company's common stock on the public markets. The initial public offering is expected to close in May 2002.

On April 9, 2002, the Company reincorporated in the state of Delaware. The common stock and additional paid-in capital amounts reflected in these consolidated financial statements are shown after giving retroactive effect to reincorporation.

On March 4, 2002, the Company's Board of Directors approved a proposal to amend the Company's certificate of incorporation to effect a reverse stock split. On April 15, 2002 the Company's Board of Directors approved a 1 for 28.34 reverse split. The authorized common shares will be decreased from 450,000 to 100,000, effective prior to the initial public offering. All share amounts and per share data reflected in these consolidated financial statements are shown after giving retroactive effect to the 1-for-28.34 reverse stock split.

F-9

Report of Independent Accountants

To the Board of Directors and
Stockholders of Overstock.com, Inc.

The 1-for-28.34 reverse stock split described in Note 20 to the consolidated financial statements has not been effected on April 17, 2002. When it has been effected, we will be in a position to furnish the following report:

"In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, shareholders' equity, and cash flows present fairly, in all material respects, the financial position of Overstock.com, Inc. and its subsidiary (the "Company") at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion."

/s/PricewaterhouseCoopers LLP

Salt Lake City, Utah
March 4, 2002

F-10

Overstock.com, Inc.

Consolidated Balance Sheets

			December 31,
			2000			2001
			(in thousands)
Assets
Current assets:
	Cash and cash equivalents		$	8,348		$	3,729
	Accounts receivable			791			1,565
	Inventories, net			8,666			7,586
	Prepaid expenses and other assets			1,397			476

		Total current assets		19,202			13,356
Property and equipment, net				4,984			5,018
Other long-term assets, net				6,215			3,340

		Total assets	$	30,401		$	21,714

Liabilities, Redeemable Securities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	5,212		$	3,680
	Accrued liabilities			4,319			2,093
	Notes payable			3,000			—
	Notes payable, related party			—			4,258
	Capital lease obligations, current			231			254

		Total current liabilities		12,762			10,285
Capital lease obligations, non-current				360			165

		Total liabilities		13,122			10,450

Commitments and contingencies (Note 10)
Redeemable securities:
	Series A redeemable preferred stock, $0.0001 par value, 1,764 shares authorized, no shares issued and outstanding			—			—
	Redeemable common stock, $0.0001 par value, 858 shares and 851 shares issued and outstanding as December 31, 2000 and 2001, respectively			4,930			5,284

Stockholders' equity:
	Common stock, $0.0001 par value, 15,879 shares authorized, 9,096 and 10,327 shares issued at December 31, 2000 and 2001, respectively			1			1
	Additional paid-in capital			42,231			52,187
	Accumulated deficit			(29,883	)		(44,093	)
	Unearned stock-based compensation			—			(2,015	)
	Treasury stock, 35 shares at cost			—			(100	)

		Total stockholders' equity		12,349			5,980

		Total liabilities, redeemable securities and stockholders' equity	$	30,401		$	21,714

The accompanying notes are an integral part of these consolidated financial statements.

F-11

Overstock.com, Inc.

Consolidated Statements of Operations

		Year ended December 31,
		1999			2000			2001
		(in thousands, except per share data)
Direct revenue		$	1,835		$	21,762		$	35,243
Commission revenue			—			867			3,965
Warehouse revenue			—			2,894			795

	Total revenue		1,835			25,523			40,003
Cost of goods sold (includes amortization of stock-based compensation of $0, $0 and $78, respectively)			2,029			27,812			34,640

	Gross profit (loss)		(194	)		(2,289	)		5,363

Operating expenses:
Sales and marketing expenses (excludes amortization of stock-based compensation of $0, $0 and $14, respectively)			4,948			11,376			5,784
General and administrative expenses (excludes amortization of stock-based compensation of $0, $0 and $635, respectively)			3,230			7,556			9,441
Amortization of goodwill			—			226			3,056
Amortization of stock-based compensation			—			—			649

	Total operating expenses		8,178			19,158			18,930

Operating loss			(8,372	)		(21,447	)		(13,567	)
Interest income			52			241			461
Interest expense			(37	)		(73	)		(729	)
Other income (expense), net			—			(33	)		29

Net loss			(8,357	)		(21,312	)		(13,806	)
Deemed dividend related to redeemable common stock			(4	)		(210	)		(404	)

Net loss attributable to common shares		$	(8,361	)	$	(21,522	)	$	(14,210	)

Net loss per common share		$	(4.63	)	$	(3.63	)	$	(1.29	)
Weighted average common shares outstanding - basic and diluted (Note 3)			1,804			5,922			10,998

The accompanying notes are an integral part of these consolidated financial statements.

F-12

Overstock.com, Inc.

Consolidated Statements of Stockholders' Equity

	Common stock
	Common stock			Additional Paid-in capital			Accumulated deficit			Unearned stock-based compensation			Treasury stock
	Shares	Amount		Additional Paid-in capital			Accumulated deficit			Unearned stock-based compensation			Treasury stock			Total
	(amounts in thousands)
Balance at December 31, 1998	897	$			(839	)	$	—		$	—		$	—		$	(839	)
Issuance of common stock	2,441		—		11,035			—			—			—			11,035
Deemed dividend related to redeemable common stock	—		—		—			(4	)		—			—			(4	)
Net loss	—		—		—			(8,357	)					—			(8,357	)

Balance at December 31, 1999	3,338		—		10,196			(8,361	)		—			—			1,835
Issuance of common stock with warrants	3,716		1		21,007			—			—			—			21,008
Exercise of stock options	1		—		5			—			—			—			5
Issuance of common stock and options in connection with the Gear.com acquisition (Note 4)	2,041		—		11,023			—			—			—			11,023
Deemed dividend related to redeemable common stock					—			(210	)		—			—			(210	)
Net loss	—		—		—			(21,312	)		—			—			(21,312	)

Balance at December 31, 2000	9,096		1		42,231			(29,883	)		—			—			12,349
Issuance of common stock	1,210		—		6,915			—			—			—			6,915
Exercise of stock options	14		—		73			—			—			—			73
Purchase of treasury stock	—		—		—			—			—			(100	)		(100	)
Unearned stock-based compensation from options issued to employees	—		—		2,534			—			(2,534	)		—			—
Amortization of unearned stock-based compensation	—		—		—			—			727			—			727
Issuance of stock options to consultants in exchange for services	—		—		384			—			(208	)		—			176
Lapse of recission rights on redeemable common stock	7		—		50			—			—			—			50
Deemed dividend related to redeemable common stock	—		—		—			(404	)		—			—			(404	)
Net loss	—		—		—			(13,806	)		—			—			(13,806	)

Balance at December 31, 2001	10,327	$	1	$	52,187		$	(44,093	)	$	(2,015	)	$	(100	)	$	5,980

The accompanying notes are an integral part of these consolidated financial statements.

F-13

Overstock.com, Inc.

Consolidated Statements of Cash Flows

					Year ended December 31,
					1999			2000			2001
					(amounts in thousands)
Cash flows from operating activities:
	Net loss				$	(8,357	)	$	(21,312	)	$	(13,806	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization				98			706			1,735
		Amortization of goodwill				—			226			3,056
		Amortization of unearned stock-based compensation				—			—			727
		Issuance of stock options to consultants for services				—			—			176
		Issuance of stock to employees				—			—			63
		Amortization of debt discount				—			—			291
		Changes in operating assets and liabilities:
			Accounts receivable			(110	)		(682	)		(774	)
			Inventories, net			(1,080	)		(4,025	)		1,081
			Prepaid assets			(620	)		(277	)		920
			Other long-term assets			(34	)		(143	)		(263	)
			Accounts payable			2,249			2,781			(1,532	)
			Accrued liabilities			182			327			(2,133	)

				Net cash used in operating activities		(7,672	)		(22,399	)		(10,459	)

Cash flows from investing activities:
	Expenditures for property and equipment					(814	)		(3,263	)		(1,669	)
	Expenditures for other long-term assets					(111	)		—			(35	)
	Cash received from the acquisition of Gear.com					—			3,499			—

				Net cash (used in) provided by investing activities		(925	)		236			(1,704	)

Cash flows from financing activities:
	Cash overdraft					(56	)		—			—
	Payments on capital lease obligations					(19	)		(207	)		(248	)
	Payments on note payable					(300	)					(3,000	)
	Proceeds from note payable					—			3,000			4,500
	Issuance of common stock and redeemable common stock					11,535			25,150			6,319
	Exercise of stock options					—			5			73
	Purchase of treasury stock					—			—			(100	)

				Net cash provided by financing activities		11,160			27,948			7,544

Net increase (decrease) in cash and cash equivalents						2,563			5,785			(4,619	)
Cash and cash equivalents, beginning of year						—			2,563			8,348

Cash and cash equivalents, end of year					$	2,563		$	8,348		$	3,729

Supplemental disclosures of cash flow information:
	Interest paid				$	12		$	58		$	271

	Equipment acquired under capital leases				$	397		$	420		$	75

	Deemed dividend on redeemable common stock				$	4		$	210		$	404

	Lapse of recission rights on redeemable common stock				$	—		$	—		$	50

The accompanying notes are an integral part of these consolidated financial statements.

F-14

Overstock.com, Inc.

Notes to Consolidated Financial Statements

(all amounts in thousands, except per share data)

1. BUSINESS AND ORGANIZATION

Overstock.com, Inc. (the "Company") is an Internet retailer of high-quality, brand name excess and close-out consumer merchandise. The Company sells home and office products, housewares, electronics, sporting goods, travel/leisure products, gifts, toys and jewelry.

The Company was formed on May 5, 1997 as D2—Discounts Direct, a limited liability company. On December 30, 1998, the Company was reorganized as a C Corporation in the State of Utah. On October 25, 1999, the Company changed its name to Overstock.com, Inc.

The Company is subject to risks common to rapidly growing Internet-based companies, including rapid technological change, growth and consumer acceptance of the Internet, dependence on principal products, new product development, new product introductions and other activities of competitors, and a limited operating history in Internet related e-commerce activities.

2. LIQUIDITY

The Company has been successful in securing private equity financing and sold $6,319 of additional common stock during 2001 to previous investors and $6,607 of Series A preferred stock in March 2002 to private and previous investors. However, the Company has incurred substantial losses and negative cash flows from operations in every fiscal period since inception. For the year ended December 31, 1999, the Company incurred a loss from operations of $8,357 and negative cash flows from operations of $7,672. For the year ended December 31, 2000, the Company incurred a loss from operations of approximately $21,312 and negative cash flows from operations of $22,399. For the year ended December 31, 2001, the Company incurred a loss from operations of approximately $13,806 and negative cash flows from operations of $10,459. As of December 31, 2001, the Company had an accumulated deficit of $44,093. Management anticipates that operating losses and negative cash flows may continue in 2002 and could increase from current levels because of additional costs and expenses related to brand development, marketing and other promotional activities, continued expansion of operations, expansion of product offerings and development of relationships with other businesses.

Management believes that the cash currently on hand, as supplemented by the March 2002 proceeds from the sale of Series A preferred stock, and the available lines of credit will be sufficient to continue operations through 2002. Also, while there can be no assurance that if additional financing is necessary it will be available, or, if available, that such financing can be obtained on terms satisfactory to the Company, management believes that the current investors will continue to support the business if and when cash needs arise. However, failure to generate sufficient revenues or raise additional capital could have a material adverse effect on the Company's ability to continue as a going concern and to achieve its intended business objectives.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany account balances and transactions have been eliminated in consolidation.

F-15

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Reclassifications

Certain amounts in the prior years financial statements have been reclassified to be consistent with the current year presentation.

Cash and cash equivalents

Cash equivalents include short-term, highly liquid instruments with original maturities of 90 days or less. At December 31, 2000 and 2001, the Company's cash and cash equivalents were held by three banks. The Company does not believe that, as a result of this concentration, it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships.

Accounts receivable

Accounts receivable consist primarily of amounts due from credit cards billed but not yet received at period end. The Company has determined that no allowance for doubtful accounts was necessary at December 31, 2000 and 2001.

Inventories

Inventories consist of merchandise purchased for resale and are stated at the lower of average cost or market.

Property and equipment

Property and equipment, which includes capitalized leases, are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets or the term of the related lease, whichever is shorter, as follows:

		Years
Computer software		3
Computer hardware		5
Furniture and equipment		5

Leasehold improvements are amortized over the shorter of the term of the related leases or estimated service lives. Upon sale or retirement of assets, cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations.

F-16

Other long-term assets

Other long-term assets include deposits, the cost of acquiring the Overstock.com and other related domain names and goodwill. The cost of the domain names is being amortized using the straight-line method over 5 years. Goodwill represents the excess of the purchase price paid over the fair value of the tangible and identifiable intangible net assets acquired for the purchase of Gear.com (see Note 4). From November 28, 2000, the date of the Gear.com acquisition, to December 2001, the goodwill was being amortized on a straight-line basis over a 2 year period. Effective January 2002, under Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," the remaining $2,784 of unamortized goodwill will not be amortized but will be evaluated periodically for impairment.

Impairment of assets

The Company reviews property and equipment and other long-lived assets, including enterprise level goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the assets' carrying amount to future undiscounted net cash flows the assets are expected to generate. Cash flow forecasts are based on trends of historical performance and management's estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future cash flows arising from the assets or their fair values, whichever is more determinable.

Revenue recognition

Revenue from direct sales is recognized when the following four revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) products are shipped and the customer takes ownership and assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collectibility is reasonably assured. The Company generally requires payment by credit card at the point of sale. Amounts received prior to shipment of goods to customers are recorded as deferred revenue. Gross sales are reduced by returns, chargebacks and coupons redeemed by customers and other discounts to obtain such sales.

Revenue from commissions is recognized when the following four revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) services have been rendered (generally when verification of the shipment of the product is communicated to the Company from the third party that shipped the product); (3) the selling price is fixed or determinable; and (4) collectibility is reasonably assured. For commission revenue, the Company recognizes as revenue only the commission portion of the price its customers pay for the purchased products since the Company is acting as an agent in such transactions. Commissions are also reduced by the impact of returns, chargebacks and coupons redeemed by customers and other discounts to obtain such sales. Any portion of the sales of commission-based products that has not yet been remitted to the commission-based third party at period end is recognized as a liability and included in accrued liabilities. The Company sold commission-based products with total sales values of $0, $7,627 and $25,657 off its websites during 1999, 2000, and 2001, respectively; however, it recognized $0, $867 and $3,965 in commission revenue during 1999, 2000 and 2001, respectively.

F-17

Revenue from warehouse sales is recognized when the following four revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) the customer takes ownership, carries the products from the warehouse and assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collectibility is reasonably assured. For warehouse sales, the Company generally requires payment by cash or credit card at the point of sale. Gross sales are reduced by chargebacks and discounts to obtain such sales.

Cost of goods sold

Cost of goods sold include product costs, warehousing costs, inbound and outbound shipping costs, handling and fulfillment costs, customer service costs and credit card fees, and are recorded in the same period in which related revenues have been recorded.

Income taxes

Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized. Income tax expense (benefit) is the tax payable (receivable) for the period and the change during the period in the deferred tax assets and liabilities.

Stock-based compensation

The Company measures compensation expense to employees for its equity incentive plan using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees, and provides pro forma disclosures of net income as if the fair value based method prescribed by Statement of Financial Accounting Standards No. 123 ("FAS 123"), Accounting for Stock-Based Compensation, had been applied (Note 14). Stock-based awards to non-employees are accounted for under the provisions of FAS 123 and Emerging Issues Task Force Issue 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services."

Earnings per share

Earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share assumes the exercise of all options and warrants which are dilutive, whether exercisable or not.

F-18

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated:

		Year ended December 31,
		1999			2000			2001
Net loss attributable to common shares		$	(8,361	)	$	(21,522	)	$	(14,210	)
Weight average common shares-basic			1,804			5,922			10,998
Effect of dilutive securities:
	Warrants		—			—			—
	Employee stock options		—			—			—

	Weighted average common shares-diluted		1,804			5,922			10,998

	Earnings per common share-basic:	$	(4.63	)	$	(3.63	)	$	(1.29	)
	Earnings per common share-diluted:	$	(4.63	)	$	(3.63	)	$	(1.29	)

The average shares of stock options and warrants outstanding were not included in the computation of diluted earnings per share because to do so would have been antidilutive. However, the weighted average number of shares of stock options and warrants outstanding during each year was 34 shares, 234 shares and 986 shares for 1999, 2000 and 2001, respectively, of which 32 shares, 114 shares and 977 shares would have been included in the calculation of diluted earnings per share if the effect had been dilutive.

Internal use software

The Company expenses all costs incurred for the development of internal use software that relate to the planning and post implementation phases of the development. Direct costs incurred in the development phase are capitalized and recognized over the software's estimated useful life of 3 years. Software costs capitalized were $436 and $81 in 2000 and 2001, respectively. Research and development costs and other computer software maintenance costs related to software development are expensed as incurred.

Advertising Expense

The Company recognizes advertising expenses in accordance with SOP 93-7 "Reporting on Advertising Costs." As such, the Company expenses the costs of producing advertisements at the time production occurs, and expenses the cost of communicating advertising in the period during which the advertising space or airtime is used. Internet advertising expenses are recognized based on the terms of the individual agreements, which is generally: 1) during the period customers are acquired; or 2) based on the number of clicks generated during a given period over the term of the contract. Advertising expenses totaled $4,475, $10,752 and $4,802 during the years ended December 31, 1999, 2000 and 2001, respectively.

F-19

Recently issued Accounting Pronouncements

In June 2001, Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141") and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") were issued. SFAS 141 requires that all business combinations initiated after June 30, 2001 be accounted for using the purchase method of accounting and also requires identified intangible assets acquired in a business combination be recognized as an asset apart from goodwill if they meet certain criteria. The impact of the adoption of SFAS 141 on our reported operating results, financial position and existing financial statement disclosure is not expected to be material.

SFAS 142 applies to all goodwill and identified intangible assets acquired in a business combination. Under the new standard, all goodwill and long-lived intangible assets, including that acquired before initial application of the standard will not be amortized, but will be tested for impairment at least annually. The new standard is effective for the fiscal year beginning after December 15, 2001.

SFAS 142 requires that goodwill be tested annually for impairment using a two-step process. The first step is to identify a potential impairment and, in transition, this step must be measured as of the beginning of the fiscal year. However, a company has six months from the date of adoption to complete the first step. The Company expects to complete that first step of the goodwill impairment test during the second quarter of 2002. The second step of the goodwill impairment test measures the amount of the impairment loss (measured as of the beginning of the year of adoption), if any, and must be completed by the end of the Company's fiscal year. Any impairment loss resulting from the transitional impairment tests will be reflected as the cumulative effect of a change in accounting principle in the first quarter 2002. The Company has not yet determined what effect these impairment tests will have on the Company's results of operations, financial position or existing financial statement disclosures; however, it will no longer record $2,784 of amortization related to the goodwill recorded in connection with the Gear.com acquisition.

The following table shows what net income would have been for the years ended December 31, 1999, 2000 and 2001 exclusive of the amortization expense recognized in those periods related to goodwill that will no longer be amortized:

	For the Three Years Ended December 31,
	1999			2000			2001
Reported net loss	$	(8,357	)	$	(21,312	)	$	(13,806	)
Add back: Goodwill amortization		—			226			3,056

Adjusted net loss	$	(8,357	)	$	(21,086	)	$	(10,750	)

Basic and diluted loss per share:
Reported net loss per share attributable to common shares	$	(4.63	)	$	(3.63	)	$	(1.29	)
Add back: Goodwill amortization		—			0.04			0.28

Adjusted net loss per share attributable to common shares	$	(4.63	)	$	(3.59	)	$	(1.01	)

F-20

The Financial Accounting Standards Board ("FASB") also issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," that is applicable to financial statement issued for fiscal years beginning after June 15, 2002. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets. The Company anticipates the provisions of this Standard will not have a significant effect on the Company's financial position or operating results.

The FASB also recently issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," that is applicable to financial statements issued for fiscal years beginning after December 15, 2001. The FASB's new rules on asset impairment supersede Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and portions of Accounting Principles Bulletin Opinion 30, "Reporting the Results of Operations." This Standard provides a single accounting model for long-lived assets to be disposed of and significantly changes the criteria that would have to be met to classify an asset as held-for-sale. Classification as held-for-sale is an important distinction since such assets are not depreciated and are stated at the lower of fair value and carrying amount. This Standard also requires expected future operating losses from discontinued operations to be displayed in the periods in which the losses are incurred, rather than as of the measurement date as presently required. The provisions of this Standard are not expected to have a significant effect on the Company's financial position or operating results.

4. ACQUISITION OF GEAR.COM, INC.

On November 28, 2000, the Company completed the acquisition of Gear.com, Inc. (the "Gear Acquisition"), valued at $11,097 through the issuance of 2,055 shares of the Company's common stock and 181 options to purchase common stock. Also as part of the Gear Acquisition, the Company assumed $2,105 in liabilities. The Gear Acquisition was accounted for by the purchase method of accounting. Results of operations of Gear.com have been included in the Company's consolidated financial statements since the date of acquisition.

The acquired assets and assumed liabilities consist of the following:

Cash	$	3,499
Inventory		3,561
Prepaid expenses and other current assets		495
Property and equipment		787
Goodwill		6,160
Accounts payable and accrued liabilities		(3,405	)

Common stock and options issued	$	11,097

As a result of the acquisition of Gear.com, the Company incurred expenses for the incremental costs to exit and consolidate activities at Gear.com locations, to involuntarily terminate Gear.com employees, and for other costs to integrate operating locations and other activities of Gear.com with the Company totaling $1,300. Generally accepted accounting principles require that these acquisition integration expenses, which are not associated with the generation of future revenues and have no

F-21

future economic benefit, be reflected as assumed liabilities in the allocation of the purchase price to the net assets acquired.

The components of the acquisition integration liabilities included in the purchase price allocation for Gear.com are as follows:

	Original Costs		Utilized		Reversed Against Goodwill		Balance Remaining at December 31, 2001
Lease exit costs	$	650	$	556	$	94	$	—
Workforce reductions		250		250		—		—
Fulfillment contract termination costs		400		400		—		—

	$	1,300	$	1,206	$	94	$	—

The lease exit costs represented the remaining minimum payments on an office lease, less anticipated sublease revenue. The workforce reductions represented the expected termination of 45 of 49 total Gear.com employees. As of December 31, 2001, all 45 have been terminated. The fulfillment contract termination cost represented the early termination penalty on a fulfillment contract which the Company terminated in October 2001. A final adjustment to the estimated lease exit costs of $94 was included in the allocation of the purchase price of Gear.com, as the adjustment was determined within the purchase price allocation period.

Assuming the acquisition of Gear.com had been made as of January 1, 1999, the Company's pro forma consolidated revenues for the year ended December 31, 1999 would have been $4,143 (unaudited), the pro forma consolidated net loss would have been $17,028 (unaudited) and the pro forma basic and diluted loss per share would have been $7.65 (unaudited); the Company's pro forma consolidated revenues for the year ended December 31, 2000 would have been $35,394 (unaudited), the pro forma consolidated net loss would have been $34,564 (unaudited) and the pro forma basic and diluted loss per share would have been $5.38 (unaudited).

5. INVENTORIES

Inventories consist of the following:

	December 31,
	2000			2001
Product inventory	$	10,416		$	8,529
Less: allowance for obsolescence		(1,750	)		(943	)

	$	8,666		$	7,586

6. PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consist of the following:

	December 31,
	2000		2001
Inventory paid for in advance of receipt	$	1,203	$	263
Other prepaid expenses		194		213

	$	1,397	$	476

F-22

7. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

	December 31,
	2000			2001
Computer hardware and software	$	4,155		$	4,541
Furniture and equipment		1,624			2,984
Leasehold improvements		12			12

		5,791			7,537
Less: accumulated depreciation		(807	)		(2,519	)

	$	4,984		$	5,018

Depreciation of property and equipment totaled $94, $684, and $1,712 for the years ended December 31, 1999, 2000 and 2001, respectively.

Property and equipment included assets under capital leases of $756 and $831 at December 31, 2000 and 2001, respectively and accumulated amortization related to assets under capital leases of $194 and $359, respectively.

8. OTHER LONG-TERM ASSETS

Other long-term assets consist of the following:

	December 31,
	2000			2001
Goodwill	$	6,160		$	6,066
Domain names		111			146
Deposits		196			459

		6,467			6,671
Less: accumulated amortization		(252	)		(3,331	)

	$	6,215		$	3,340

Amortization for other long-term assets totaled $4, $248 and $3,079 for the years ended December 31, 1999, 2000 and 2001, respectively.

F-23

9. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

	December 31,
	2000		2001
Inventory received but not invoiced	$	368	$	434
Reserve for returns		350		496
Accrued payroll		667		400
Other accrued expenses		1,855		738
Deferred revenue		29		25
Accrued lease and fulfillment costs		1,050		—

	$	4,319	$	2,093

10. COMMITMENTS AND CONTINGENCIES

The Company leases office and warehouse facilities in Salt Lake City, Utah and also leases computer equipment under non-cancelable operating leases. Minimum future payments under these leases are as follows:

Year Ending December 31,
2002	$	1,260
2003		1,243
2004		1,111
2005		856
2006		303
Thereafter		25

Total minimum lease payments	$	4,798

Rental expense for operating leases totaled $157, $694 and $1,180 for the years ended December 31, 1999, 2000 and 2001, respectively.

In February 2002, the Company relocated its corporate headquarters and entered into a facilities lease agreement. Future minimum payments under the agreement are included in the table above. The Company also has a facilities lease obligation for the former headquarters location through December 2003. The future minimum payments for the former headquarters total $599 and are included in the table above. Management anticipates that it will be able to sublease the office space within a reasonable period of time, however, the sublease rental rate is anticipated to be less than the rental rate that the Company is obligated to pay. The anticipated loss for amounts to be paid on the unused space prior to receiving any sublease income, as well as the cumulative loss for the difference in anticipated rental rates, is estimated to be $263. This amount has not been accrued at December 31, 2001, as management did not make a determination to relocate until 2002. Due to the uncertainty of rental rates and when the office space will be subleased, an additional loss may result.

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. In February 2002, Microsoft Corporation filed a complaint against the Company alleging

F-24

that the Company has distributed counterfeit and otherwise unauthorized Microsoft software in violation of federal copyright and trademark law and related state laws. The complaint seeks damages in an unspecified amount and injunctive relief. Although the Company believes it has defenses to the allegations and intends to pursue them vigorously, the Microsoft lawsuit is in its early stages, and management does not have sufficient information to assess the validity of the claims or the amount of potential damages. Company management currently believes that resolution of such legal matters will not have a material adverse impact on the Company's financial position, results of operations or cash flows.

11. BORROWINGS

Note payable

On November 2000, the Company issued a note payable to a bank in the amount of $3,000 which bore interest at 7.56%. The note was due and paid in full on February 28, 2001.

In March 2001, the Company entered into a credit agreement with a related party (Note 18), which provides for borrowings of up to the lesser of $6,000 or 50% of the value of the Company's inventory balance for working capital purposes, of which $4,500 was outstanding on December 31, 2001. The borrowings bear interest at 3.5% above prime (prime was 4.75% on December 31, 2001) and are collateralized by substantially all of the Company's assets. The agreement is subject to financial and non-financial covenants. As of December 31, 2001, the Company was not in compliance with one financial covenant; however, as allowed by the credit agreement, the Company cured its non compliance within the time allotted.

In September 2001, the Company entered into a separate $7,000 credit agreement with a related party (Note 18) for the purposes of acquiring inventory. Principle amounts outstanding under the agreement bear interest at 2% per month until paid. The agreement matures in June 2002 and is collateralized by all inventory acquired under the agreement. The agreement contains certain financial covenants. The Company has complied with such covenants. As of December 31, 2001, the Company has no borrowings outstanding under the agreement.

F-25

Capital leases

Future minimum lease payments under capital leases are as follows:

Year Ending December 31,
2002	$	290
2003		127
2004		42
2005		10
2006		—

Total minimum lease payments		469
Less: amount representing interest		(50	)

Present value of capital lease obligations		419
Less: current portion		(254	)

Capital lease obligations, non-current	$	165

12. REDEEMABLE SECURITIES

Series A Mandatorily Redeemable Convertible Preferred Stock

In March 2002, the Company sold approximately 959 shares of mandatorily redeemable convertible preferred stock ("preferred stock") for approximately $6,582, net of acquisition costs. The preferred stock will automatically convert upon an initial public offering (as described below) or if 65% of the holders of the preferred stock elect to convert. The preferred stock is convertible at the option of the holder into common stock on an initial 1:1 basis. If a holder has not elected to convert prior to March 2006 and the preferred stock has not otherwise converted, the preferred stock is mandatorily redeemable at the option of the holder in two equal yearly installments beginning in March 2007. As the fair value of the common stock to be received upon conversion is greater than the conversion price of the preferred stock at the date the preferred stock was issued, a beneficial conversion feature results in the amount of approximately $6,607 which was calculated in accordance with Emerging Issues Task Force No. 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios." This beneficial conversion feature will be reflected as a deemed dividend in the statement of operations for the quarter ending March 31, 2002.

In the event of a liquidation, dissolution, or winding up of the Company, the holders of the preferred stock will be entitled to be paid out of the assets in preference to the holders of the Company's common stock.

The holders of preferred stock are entitled to receive dividends prior and in preference to declaration of any dividend on the common stock. The preferred shareholders are entitled to dividends at the rate of 8% of the original purchase price per annum, on a non-cumulative basis, payable when and if declared by the Board of Directors. In the event that the Company has not completed an initial public offering by March 31, 2003, the preferred stock will cumulate dividends at the rate of 8% of the original purchase price per annum commencing on April 1, 2003.

F-26

The voting rights, conversion rights and preferences of the preferred stock are as follows: (1) the Series A convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock then issuable upon conversion of such shares of Series A convertible preferred stock, (2) the Series A convertible preferred stock is convertible into common stock on a share for share basis at the option of the holder anytime after the issuance date, subject to adjustment for dilution, (3) the Series A convertible preferred stock shall be automatically converted into common stock upon (i) the closing of a firmly underwritten public offering of shares of common stock of the Company at a per share price not less than 1.5 times the original purchase price of the Series A convertible preferred stock (as adjusted for stock splits, dividends and the like) and for a total offering of not less than $20 million (before deduction of underwriters' commissions and expenses) or (ii) the consent of at least the holders of 65% of the shares initially issued, (4) the liquidation preference amount of the Series A convertible preferred stock is equal to the original purchase price plus any accrued, but unpaid dividends and the preferred stock participates with the common stock, after the payment of the common stock liquidation preference, in the remaining assets of the Company.

Redeemable Common Stock

Included in redeemable securities are amounts related to warrants and securities that are subject to rescission. Sales of 858 shares of the common stock and the issuance of 185 warrants to certain individuals did not fully comply with certain requirements under applicable State Blue Sky Laws. The offer and sale of these securities were not made pursuant to a registration statement and the Securities Act of 1933, nor were the offer and sale registered or qualified under any state security laws. Although the Company believed at the time that such offers, sales and conversion were exempt from such registration or qualification, they may not have been exempt in several states. As a result, purchasers of our common stock in some states have the right under federal or state securities laws to rescind their purchases for the amount an amount equal to the purchase price paid for the shares, plus interest from the date of purchase until the rescission offer expires, at the annual rate mandated by the state in which such shares were purchased. These interest rates range from 8% to 10% per annum. The rescission rights lapse on various dates through September 2006.

The Company has classified $4,930 and $5,284 related to the rescission for the years ended December 31, 2000 and 2001 outside of shareholders' equity, as the redemption features are not within the control of the Company. However, management does not anticipate that holders of the redeemable common stock will exercise their rescission rights. Interest attributable to these securities is recorded as a deemed dividend and reflected as a deduction to arrive at net loss attributable to common shares in the Statements of Operations.

13. STOCKHOLDERS' EQUITY

Common Stock

Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors, subject to prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid on the Company's common stock through

F-27

December 31, 2001. In October 2001, the Company's Board of Directors authorized the purchase of 35 treasury shares from a former employee for $100.

Warrants

In 2000, the Company issued warrants to certain shareholders in connection with the purchase of additional shares of common stock. At December 31, 2001, warrants to purchase 1,122 shares of common stock of the Company were outstanding, as follows:

Date of Issue	Exercise Price per Share		Warrants Outstanding	Expiration Date
May 1, 2000	$	7.09	265	April 30, 2005
May 15, 2000		7.09	268	May 14, 2005
September 21, 2000		4.26	589	September 20, 2005

No warrants were exercised in 2000 or 2001.

The Company has reserved sufficient shares of common stock to meet its stock option and warrant obligations. As stated in Note 12, 185 of these warrants are subject to rescission. At December 31, 2001, related parties held 850 of the total warrants outstanding.

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14. 1999 STOCK OPTION PLAN

During 1999, the Company's board of directors adopted the 1999 Stock Option Plan (the "Plan"). Under the Plan, the Board of Directors may issue incentive stock options to employees and non-qualified stock options to consultants or non-employee directors of the Company. Options granted under this Plan expire at the end of five years and vest in accordance with a vesting schedule determined by the Company's Board of Directors, usually over four years from the grant date. The Plan provided for the grant of up to 1,235 shares, of which 234 shares were reserved for future issuance at December 31, 2001.

In February 2002, the Company's Board of Directors approved an increase in the number of shares reserved for issuance under the Plan from 1,235 shares to 1,764.

The following is a summary of stock option activity:

		1999				2000				2001
		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Weighted Average Fair Value
Outstanding—beginning of year		—		$	—	123		$	4.13	415		$	5.03
	Granted at fair value	126			4.12	344			5.50	—			—
	Granted at price below fair value	—			—	—			—	1,020			4.71	$	5.97
	Exercised	—			—	(1	)		4.74	(14	)		5.06
	Cancelled/forfeited	(3	)		3.89	(51	)		4.80	(260	)		4.82

Outstanding—end of year		123			4.13	415			5.03	1,161			4.68
Options exercisable at year-end		—			—	227			4.50	260			4.61

The following table summarizes information about stock options as of December 31, 2001:

	Options Outstanding at December 31, 2001				Options Exercisable at December 31, 2001
Range of Exercise Prices	Shares	Weighted Average Exercise Price		Weighted Average Years Remaining	Shares	Weighted Average Exercise Price
$0.67-$3.68	295	$	2.73	3.42	99	$	2.21
$4.25-$5.06	773		5.05	3.63	113		5.00
$7.09-$17.72	93		7.88	2.94	48		8.64

	1,161		4.68	3.52	260		4.61

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Had compensation expense for the Company's option plan been determined based on fair value at the grant dates, as prescribed in SFAS 123, the Company's net loss would have been as follows:

		Years ended December 31,
		1999			2000			2001
Net loss
	As reported	$	(8,357	)	$	(21,312	)	$	(13,806	)
	Pro forma		(8,382	)		(21,516	)		(14,136	)
Earnings per common share-basic and diluted-as reported		$	(4.63	)	$	(3.63	)	$	(1.26	)
Earnings per common share-basic and diluted-pro forma			(4.65	)		(3.67	)		(1.32	)

The weighted-average grant-date fair value of options granted during 1999, 2000 and 2001 was $3.36, $4.01 and $5.97 per share. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	1999		2000		2001
Risk-free interest rate	6.02	%	6.18	%	5.17	%
Expected life (in years)	4		4		4
Expected volatility	100.00	%	100.00	%	100.00	%
Expected dividend yield	0.00	%	0.00	%	0.00	%

Stock-based compensation

In connection with certain stock option grants to employees during the year ended December 31, 2001, the Company recognized approximately $2,534 of unearned stock-based compensation for the excess of deemed fair value of shares of common stock subject to such options over the exercise price of these options at the date of grant. Such amounts are included as a reduction of shareholders' equity and are being amortized over the vesting period in accordance with FASB Interpretation Number 28, "Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plan." The Company recorded stock-based compensation expense of $727 during the year ended December 31, 2001. No unearned stock-based compensation was recorded in prior years.

During the year ended December 31, 2001, the Company granted 42 options to consultants. The Company recorded unearned stock-based compensation of $384 related to these grants, of which $176 was recognized in operations in 2001. The fair value for these options was calculated using a Black-Scholes option pricing model using a weighted-averages risk-free rate of 4.65%, an expected life of 5 years, expected volatility of 100% and a dividend yield of 0%. Because there has been no public market for the Company's common stock, the fair value of the underlying common stock was estimated.

15. EMPLOYEE STOCK PURCHASE PLAN

Effective January 24, 2001, the Company adopted an Employee Stock Purchase Plan (the "ESPP") to provide certain employees, directors and consultants an opportunity to purchase shares of its common stock annually, up to 5% of eligible compensation. Participants can purchase shares of stock at a value determined by the Company's board of directors. The ESPP expires in May 2011. A total of

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353 shares are available for purchase under the ESPP. There were 14 shares issued under the ESPP during 2001. The Company recognized approximately $63 of stock-based compensation for the excess of the fair value of the shares of common stock over the purchase price.

16. EMPLOYEE RETIREMENT PLAN

The Company has a 401(k) defined contribution plan which permits participating employees to defer up to a maximum of 15% of their compensation, subject to limitations established by the Internal Revenue Code. Employees who have completed a half-year of service and are 21 years of age or older are qualified to participate in the plan. The Company matches 50% of the first 6% of each participant's contributions to the plan. Participant contributions are immediately vested. Company contributions vest based on the participant's years of service at 20% per year over five years. The Company's cash contribution totaled $0, $32 and $68 during 1999, 2000 and 2001, respectively.

17. INCOME TAXES

The components of the Company's deferred tax assets and liabilities as of December 31, 2000 and 2001 are as follows:

		December 31,
		2000			2001
Deferred tax assets:
	Net operating loss carryforwards	$	16,631		$	20,996
	Accrued expenses and other		701			312
	Reserves		902			575

			18,234			21,883

Deferred tax liabilities:
	Depreciation		(117	)		(121	)

			(117	)		(121	)

Valuation allowance			(18,117	)		(21,762	)

Net asset		$	—		$	—

As a result of the Company's history of losses, a valuation allowance has been provided for the full amount of the Company's net deferred tax assets. Based on the weight of available evidence, it is more likely than not that such benefits will not be realized.

At December 31, 2001, the Company had net operating loss carryforwards of approximately $36,200 which may be used to offset future taxable income. An additional $18,230 of net operating losses are limited under Section 382 to $963 a year. These carryforwards begin to expire in 2018.

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The income tax benefit differs from the amount computed by applying the U.S. federal income tax rate of 35% to loss before income taxes for the following reasons:

	1999			2000			2001
U.S. federal income tax benefit at statutory rate	$	2,925		$	7,459		$	4,832
State income tax benefit, net of federal expense		302			769			338
Nondeductible goodwill amortization		—			(86	)		(1,070	)
Other		13			(9	)		(455	)
Unrecognized benefit due to valuation allowance		(3,240	)		(8,133	)		(3,645	)

Income tax benefit	$	—		$	—		$	—

18. RELATED PARTY TRANSACTIONS

In March 2001, the Company entered into a credit agreement with a related party, High Meadows Finance L.C. Under the terms of the agreement, High Meadows Finance L.C. was allowed to purchase 197 shares of common stock for $1,000. Amounts borrowed under the agreement will bear interest at 3.5 percentage points above prime (prime was 4.75% on December 31, 2001) and will be collaterized by substantially all the Company's assets. The fair value of the common stock High Meadows Finance L.C. purchased in conjunction with this agreement was deemed to be $1,425. The excess of the fair value of the common stock over the price paid for the common stock of $425 was recorded as a debt discount, which is being amortized over the term of this agreement.

In September 2001, the Company entered into a credit agreement with another related party, Norwich Associates L.C. Under the terms of the agreement, Norwich Associates L.C. was given 11 shares of common stock. Principle amounts outstanding bear interest at 2% per month until paid. As of December 31, 2001, the Company had no borrowings under the agreement. The fair value of the common stock issued in conjunction with this agreement was deemed to be $108 and was recorded as a debt discount, which is being amortized over the term of this agreement.

In July 2001, the Company's Chief Executive Officer, who is also a significant shareholder in the Company, agreed to personally guarantee the Company's merchant account with a bank. The bank agreed to accept this personal guarantee in lieu of a demand deposit of $1,000 with the bank. In exchange for his personal guarantee, the Company compensated the Chief Executive Officer with options to purchase 1,000 shares of the Company's common stock at an exercise price of $5.06 per share. These options vest over a three year period based on the renewal of the guarantee. The Company recognized $151 of expense in 2001 related to this arrangement. The fair value for these options was calculated to be $340 at December 31, 2001 using a Black-Scholes option pricing model using a weighted-averages risk-free rate of 4.59%, an expected life of 3 years, expected volatility of 100% and a dividend yield of 0%. Because there has been no public market for the Company's common stock, the fair value of the underlying common stock was estimated.

As indicated in Note 12, the Company sold shares of mandatorily redeemable convertible preferred stock in March 2002, for which a deemed dividend will be recorded as a result of the beneficial conversion feature. The total deemed dividend to be recorded in the quarter ending March 31, 2002 will be $6,607 of which $1,000 is attributable to preferred shares purchased by

F-32

Haverford Internet, $1,200 is attributable to preferred shares purchased by members of the board of directors, and $1,500 is attributable to preferred shares purchased by family members of management.

On occasion, Haverford-Valley, L.C. and certain affiliated entities make travel arrangements for our executives and pay the travel related expenses incurred by our executives on Company business. In 1999, 2000, and 2001, we reimbursed Haverford-Valley L.C. $120, $241, and $251, respectively, for these expenses.

19. BUSINESS SEGMENTS

Segment information has been prepared in accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information." Segments were determined based on products and services provided by each segment. Accounting policies of the segments are the same as those described in Note 2. There were no intersegment sales or transfers during 1999, 2000 or 2001. The Company evaluates the performance of its segments and allocates resources to them based primarily on gross profit. The table below summarizes information about reportable segments.

	Direct operations			Commission operations		Warehouse operations			Consolidated
1999
Revenue	$	1,835		$	—	$	—		$	1,835
Cost of goods sold		2,029			—		—			2,029

Gross loss	$	(194	)	$	—	$	—			(194	)
Operating expenses										(8,178	)
Other income (expense), net										15

Net loss									$	(8,357	)

2000
Revenue	$	21,762		$	867	$	2,894		$	25,523
Cost of goods sold		23,923			381		3,508			27,812

Gross (loss) profit	$	(2,161	)	$	486	$	(614	)		(2,289	)
Operating expenses										(19,158	)
Other income, net										135

Net loss									$	(21,312	)

2001
Revenue	$	35,243		$	3,965	$	795		$	40,003
Cost of goods sold		31,341			1,578		1,721			34,640

Gross profit (loss)	$	3,902		$	2,387	$	(926	)		5,363
Operating expenses										(18,930	)
Other expense, net										(239	)

Net loss									$	(13,806	)

F-33

The direct segment includes revenues, direct costs, and cost allocations associated with sales made to individual consumers and businesses directly through the Company's Websites. Costs for this segment include product cost warehousing, fulfillment, credit card fees and customer service costs.

The commission segment includes revenues, direct costs and cost allocations associated with the Company's commission-based third party commissions and are earned from selling the merchandise of third parties over the Company's Websites.

The warehouse segment includes revenues, direct costs, and cost allocations associated with sales made to individual consumers at the Company's warehouse store. Costs for this segment include warehousing and credit card fees.

Assets are not broken out between the segments for management purposes, and as such, they are not presented here.

In 1999, 2000 and 2001, virtually all sales were made to customers in the United States of America. No individual geographical area or customer accounted for more than 10% of net sales in any of the periods presented. At December 31, 2000 and 2001, all of the Company's fixed assets were located in the United States of America.

20. REVERSE STOCK SPLIT

On March 4, 2002, the Company's Board of Directors approved a proposal to amend the Company's certificate of incorporation to effect a reverse stock split. On April 15, 2002, the Company's Board of Directors approved a 1-for-28.34 reverse split. The authorized common shares will be decreased from 450,000 to 100,000, effective prior to the initial public offering. All share amounts and per share data reflected in these consolidated financial statements are shown after giving retroactive effect to the 1-for-28.34 reverse stock split.

F-34

Report of Independent Public Accountants

To the Stockholders'
of Gear.com, Inc.:

We have audited the accompanying statements of operations, stockholders' equity and cash flows of Gear.com, Inc. (a Washington Corporation) for the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Gear.com, Inc. for the year ended December 31, 1999 in conformity with accounting principles generally accepted in the United States.

/s/ Arthur Andersen LLP
Seattle, Washington,
March 31, 2000 (except with respect to the matter discussed in Note 5, as to which the date is June 30, 2000)

F-35

Gear.com, Inc.

Statement of Operations

For the Year Ended December 31, 1999

			1999
NET SALES			$	2,308,638
COST OF SALES				3,505,285

		Gross loss		(1,196,647	)

OPERATING EXPENSES:
	Marketing and sales			5,059,493
	Technology and content			1,518,289
	General and administrative			1,184,025

		Total operating expenses		7,761,807

LOSS FROM OPERATIONS				(8,958,454	)
INTEREST INCOME, NET				291,285

NET LOSS			$	(8,667,169	)

The accompanying notes are an integral part of this financial statement.

F-36

Gear.com, Inc.
Statement of Stockholders' Equity
December 31, 1999

		Series A Convertible Preferred Stock
					Common Stock
					Common Stock		Additional Paid-In Capital	Accumulated Deficit		Total Stockholders' Equity
		Shares	Amount		Shares	Amount	Additional Paid-In Capital	Accumulated Deficit		Total Stockholders' Equity
BALANCE, December 31, 1998		—	$	—	4,444,434	14,815	399,185	(391,650	)	22,350
	Sale of common stock	—		—	2,319,765	7,732	1,742,268	—		1,750,000
	Sale of Series A preferred stock	2,167,630		21,676	—	—	14,978,324	—		15,000,000
	Net loss	—		—	—	—	—	(8,667,169	)	(8,667,169	)

BALANCE, December 31, 1999		2,167,630		21,676	6,764,199	22,547	17,119,777	(9,058,819	)	8,105,181

The accompanying notes are an integral part of these financial statements.

F-37

Gear.com, Inc.

Statement of Cash Flows

For the Year Ended December 31, 1999

					1999
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss				$	(8,667,169	)
	Adjustments to reconcile net loss to net cash used in operating activities-
		Depreciation				135,638
		Allowance for sales returns				100,000
		Changes in assets and liabilities-
			Merchandise inventory, net			(3,854,868	)
			Other current assets			(266,574	)
			Other assets			(158,094	)
			Accounts payable			3,320,752
			Accrued liabilities			202,100

				Net cash used in operating activities		(9,188,215	)

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of property and equipment					(1,042,295	)

				Net cash used in investing activities		(1,042,295	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from the sale of common stock					1,750,000
	Proceeds from the sale of preferred stock					15,000,000

				Net cash provided by financing activities		16,750,000

NET INCREASE IN CASH AND EQUIVALENTS						6,519,490
CASH AND EQUIVALENTS, beginning of year						60,576

CASH AND EQUIVALENTS, end of year					$	6,580,066

The accompanying notes are an integral part of this financial statement.

F-38

Gear.com, Inc.

Notes to Financial Statements

December 31, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Company

Gear.com, Inc. ("Gear.com" or the "Company") is an all-sport online clearance retailer operating through the Gear.com web site. The Company sells closeout outdoor and sporting equipment and apparel. The Company was incorporated in the state of Washington on January 1, 1998 and has its headquarters in Seattle, Washington.

The Company is subject to the risks and challenges associated with other companies at a similar stage of development including dependence on key individuals, successful development and marketing of its products and services, competition from substitute products and services, inventory obsolescence and competition from larger companies with greater financial, technical management and marketing resources, and the ability to secure adequate financing to support future growth.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the shorter of the estimated useful lives of the assets, generally three to five years, or the term of the lease if applicable.

Expenditures for major repairs and betterments that extend the useful lives of equipment are capitalized. Maintenance and minor repairs are charged to expense when incurred.

Property and equipment includes the cost of internal-use software, including software used in connection with the Company's web sites. The Company expenses all costs related to the development of internal-use software other than those incurred during the application development stage. Costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software (generally five years).

Organization Costs

Organization costs are expensed as incurred.

Revenue Recognition

Net revenue includes gross revenues from sales of merchandise and related shipping fees, net of discounts and a provision for sales returns based on historical data. Revenue is recognized upon the shipment of merchandise, which occurs only after credit card authorization is obtained.

In December 1999, the SEC released Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" (SAB 101). SAB 101 becomes effective for the year ended December 31, 2000.

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This bulletin more clearly defined revenue recognition criteria than previously existing accounting pronouncements. The Company believes that its revenue recognition practices are in conformity with the guidelines prescribed in SAB 101.

Cost of Sales

Cost of goods sold consists primarily of the cost of products sold to customers, including allowances for shrinkage and slow moving inventory, as well as outbound and inbound shipping costs and credit card processing fees.

Technology and Content

Technology and content costs consist primarily of payroll and related expenses for personnel engaged in maintaining and making minor upgrades and enhancements to the Company's web site and content. These expenses also include payroll and related expenses for information technology personnel, Internet access and hosting charges and website content and design expenses.

Fulfillment Costs

Included in marketing and sales expense are fulfillment and order processing costs. Fulfillment and order processing expenses include packaging supplies, per-unit fulfillment fees charged by third parties, and payroll and related expenses for personnel engaged in customer service, purchasing and distribution and fulfillment activities. Fulfillment costs of $1,300,314 are included in marketing and sales.

Advertising Costs

The cost of advertising is expensed as incurred. For the year ended December 31, 1999, the Company incurred advertising expense of $2,259,626. Advertising expense includes $66,000 paid to the holders of the Series A Preferred Stock under an advertising agreement.

Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees(APB No. 25), and related interpretations, in accounting for its employee stock options rather than the alternative fair value accounting prescribed by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. APB No. 25 provides that the compensation expense relative to the Company's employee stock options is measured based on the intrinsic value of the stock options granted. SFAS No. 123 requires that companies that continue to follow APB No. 25 provide a pro forma disclosure of the impact of applying the fair value method of SFAS No. 123.

Income Taxes

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company provides a

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valuation allowance for deferred tax assets when it does not believe that it is more likely than not that the deferred tax assets will be realized.

Segment and Geographic Information

The Company has adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 requires companies to disclose certain information about operating segments. Based on the criteria within SFAS No. 131, the Company has determined that it currently operates in one principal business segment in the United States. There were no revenues from shipments to customers outside of the United States or transfers between geographic areas during the years ended December 31, 1999.

2. COMMITMENTS AND CONTINGENCIES:

The Company leases office space and various office and computer equipment under noncancelable operating leases that call for fixed rental payments through the term of the lease. Total rent expense for the year ended December 31, 1999 was $270,657.

Future minimum lease payments under noncancelable operation leases are as follows:

2000	$	1,050,804
2001		1,048,002
2002		795,302
2003		107,269

	$	3,001,377

3. STOCKHOLDERS' EQUITY:

Stock Option Plan

In May 1998, the Board of Directors adopted the 1998 Stock Option Plan (the "Plan")providing for the issuance of incentive and nonqualified stock options to employees, directors, officers, consultants, agents, advisors and independent contractors of the Company. Under the plan, 2,340,000 shares are reserved for future issuance.

The options are granted by the Company's Board of Directors at an exercise price of not less than the fair market value of the Company's common stock at the date of grant. Each option has a term of ten years from the date of grant. Options granted under the Plan generally become exercisable 25% after one year, then 6.25% at the end of each succeeding three-month period until fully vested at the end of year four.

F-41

The following table summarizes the Company's stock option activity:

		Shares Available for Grant		Number of Shares	Weighted Average Exercise Price
BALANCE, December 31, 1998		1,418,082		921,918		0.105
	Options granted	(433,500	)	433,500		1.318
	Options cancelled	—		—		—
	Options exercised	—		—		—

BALANCE, December 31, 1999		984,582		1,355,418	$	0.493

The following table summarizes information about options outstanding and exercisable at December 31, 1999:

		Options Outstanding
		Options Outstanding				Options Exercisable
			Weighted Average Remaining Contractual Life			Options Exercisable
Exercise Price		Number Of Shares	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Options Exercisable	Weighted Average Exercise Price
$	0.067-$0.133	826,668	8.4 years	$	0.101	402,249	$	0.093
	0.133	95,250	8.8 years		0.133	25,078	$	0.133
	0.383	21,000	9.3 years		0.383	750	$	0.383
	0.383	70,500	9.4 years		0.383	—		—
	1.433	144,000	9.5 years		1.433	—		—
	1,667	45,000	9.7 years		1.667	—		—
	1,667	153,000	9.9 years		1.667	—		—

$	0.067-$1.667	1,355,418	8.8 years	$	0.493	428,077	$	0.096

The Company follows the intrinsic value method in accounting for its stock options. Had compensation cost been recognized based on the fair value at the date of grant for options granted in 1999, the pro forma amounts of the Company's net loss for the year ended December 31, 1999 would have been as follows:

Net loss—as reported		$	(8,667,169	)
Net loss—pro forma		$	(8,715,517	)

The fair value for each option grated was estimated at the date of grant using a Black-Scholes option-pricing model, assuming no expected dividends, an average risk-free rate of 6.85% and an average expected life of five years. Since there is currently no public market for the Company's stock, no volatility factor is assumed.

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4. INCOME TAXES:

The Company did not provide any current or deferred income tax provision or benefit in 1999 because it has experienced operating losses since inception, and has provided full valuation allowances on deferred tax assets because of the uncertainty regarding their realizability. Deferred taxes consist primarily of net operating loss carryforwards.

At December 31, 1999, the Company had net operating loss carryforwards of approximately $9 million, which will expire at various times commencing in 2018.

Utilization of net operating loss carryforwards is subject to certain limitations under Section 382 of the Internal Revenue Code.

5. SUBSEQUENT EVENT—ISSUANCE OF PREFERRED STOCK:

In April, May and June 2000, the Company issued 5,217,414 shares of series B preferred stock in a private placement offering in exchange for gross cash proceeds of $12,052,243.

6. SUBSEQUENT EVENT—ACQUISITION BY OVERSTOCK.COM, INC. (UNAUDITED):

On November 28, 2000, all of the outstanding common and preferred stock of the Company was acquired by Overstock.com, Inc. (a Utah corporation) in exchange for 58,246,000 shares of Overstock.com common stock. In addition, Overstock.com issued 5,134,000 options to purchase its common stock in exchange for all of the options to purchase common stock of Gear.com that were outstanding immediately prior to the acquisition.

F-43

Gear.com, Inc.

Statements of Operations

For the Nine Months Ended September 30, 1999 and 2000 (unaudited)

			1999			2000
			(unaudited)			(unaudited)
NET SALES			$	1,447,446		$	5,763,007
COST OF SALES				1,418,416			5,860,830

		Gross loss		29,030			(97,823	)

OPERATING EXPENSES:
	Marketing and sales			1,068,041			7,296,592
	Technology and content			903,814			1,714,042
	General and administrative			912,171			2,751,855

		Total operating expenses		(2,884,026	)		(11,762,489	)

LOSS FROM OPERATIONS				(2,854,996	)		(11,860,312	)
INTEREST INCOME, NET				204,441			256,315

NET LOSS			$	(2,650,555	)	$	(11,603,997	)

The accompanying notes are an integral part of this financial statement.

F-44

Gear.com, Inc.

Statement of Cash Flows

For the Nine Months Ended September 30, 1999 and 2000 (unaudited)

					1999			2000
					(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss				$	(2,650,555	)	$	(11,603,997	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation				80,442			307,745
		Changes in assets and liabilities:
			Merchandise inventory, net			(3,244,057	)		685,889
			Other current assets			(202,038	)		(391,578	)
			Other assets			(187,127	)		173,095
			Accounts payable			1,721,275			(2,199,119	)
			Accrued liabilities			2,240			559,798

				Net cash used in operating activities		(4,479,820	)		(12,468,167	)

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of property and equipment					(150,686	)		(1,054,636	)

				Net cash used in investing activities		(150,686	)		(1,054,636	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from the sale of stock					16,887,927			12,004,631

				Net cash provided by financing activities		16,887,927			12,004,631

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS						12,257,421			(1,518,172	)
CASH AND EQUIVALENTS, beginning of period						60,576			6,580,066

CASH AND EQUIVALENTS, end of period					$	12,317,997		$	5,061,894

The accompanying notes are an integral part of this financial statement.

F-45

Gear.com, Inc.

Notes to Financial Statements

(unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Company

Basis of Presentation:

The unaudited statements of operations have been prepared in accordance with generally accepted accounting principles for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission. While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim periods, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included elsewhere in this prospectus and registration statement.

Use of Estimates

Fulfillment Costs

Advertising Costs

The cost of advertising is expensed as incurred. For the nine-month period ending September 30, 1999 and 2000, the Company incurred advertising expense of $758,476 (unaudited) and $3,322,351 (unaudited). Advertising expense in the nine-month period ending September 30, 2000 includes $66,000 paid to the holders of the Series A Preferred Stock under an advertising agreement.

F-46

Segment and Geographic Information

2. COMMITMENTS AND CONTINGENCIES:

F-47

3,000,000 Shares

Overstock.com

Common Stock

Until , 2002 (25 days after the date of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by Overstock.com, Inc. in connection with the sale of Common Stock being registered. All amounts are estimates except the SEC registration fee and the NASD filing fee.


SEC registration fee		$	5,079
NASD filing fee			5,000
Nasdaq National Market listing fee			100,000
Printing and engraving costs			20,000
Legal fees and expenses			500,000
Accounting fees and expenses			450,000
Blue sky fees and expenses			10,000
Transfer agent and registrar fees			100,000
Miscellaneous expenses			9,921

	Total	$	1,200,000

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law permits a corporation to include in its charter documents, and in agreements between the corporation and its directors and officers, provisions expanding the scope of indemnification beyond that specifically provided by the current law.

Article VIII of our Amended and Restated Certificate of Incorporation provides for the indemnification of directors to the fullest extent permissible under Delaware law.

Article VI of our Bylaws provides for the indemnification of officers, directors and third parties acting on behalf of Overstock.com, Inc. if such person acted in good faith and in a manner reasonably believed to be in or not opposed to the best interest of Overstock.com, Inc., and, with respect to any criminal action or proceeding, the indemnified party had no reasonable cause to believe his or her conduct was unlawful.

We have entered into indemnification agreements with our directors and executive officers, in addition to indemnification provided for in our Bylaws, and intend to enter into indemnification agreements with any new directors and executive officers in the future.

Item 15. Recent Sales of Unregistered Securities

During the last three years, we have issued unregistered securities to a limited number of persons, as described below. As indicated below, we have relied on Regulation D, Rule 506 thereof, Rule 701 or Section 4(2) of the Securities Act with respect to the issuance of these securities.

1.: On June 8, 1999, we issued 980,836 shares of common stock to Haverford Internet, LLC at a per share purchase price of approximately $3.82 for an aggregate purchase price of $3,750,000. This issuance was exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transaction did not involve a public offering.
2.: On September 24, 1999, we issued 291,467 shares of common stock to Haverford Internet, LLC and six other non-affiliated persons at a per share purchase price of approximately $3.41 for an aggregate purchase price of $994,551. These issuances were exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.

II-1

3.: On September 24, 1999, we issued 28,600 shares of common stock to Robert Brazell, a founder, at a per share purchase price of approximately $6.64 for an aggregate purchase price of $189,892. These issuances were exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transaction did not involve a public offering.
4.: During September and October of 1999, we issued an aggregate of 561,725 shares of common stock to Haverford Internet, LLC and six non-affiliated other persons at a per share purchase price of approximately $3.56 for an aggregate of $1,999,999. These issuances were exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.
5.: In November and December of 1999 and January 2000, we issued an aggregate of 564,587 shares of common stock to Haverford Internet, LLC, The Gordon S. Macklin Family Trust, The Marilyn C. Macklin Family Trust, Haverford Utah, LLC, Dorthy M. Byrne, Contex Limited, John J. Byrne III, and twenty-one other non-affiliated persons at a per share purchase price of approximately $7.09 for an aggregate purchase price of $4,000,000. These issuances were exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.
6.: On December 28, 1999, we issued 35,286 shares of common stock to one non-affiliated person for an aggregate purchase price of $250,000 in exchange for a full recourse promissory note in the principal amount of $250,000 at an effective per share purchase price of approximately $7.09. These issuances were exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.
7.: On May 1, 2000, we issued 1,058,549 shares of common stock and warrants to purchase an additional 264,659 shares of common stock to Haverford Internet, LLC, The Macklin Limited Partnership I, The Gordon S. Macklin Family Trust, The Marilyn C. Macklin Family Trust, Dorthy M. Byrne, John J. Byrne III, Rope Ferry Associates, Ltd., Haverford Utah, LLC, Robert Brazell, and forty-one other non-affiliated persons at a per share purchase price of approximately $7.09 for an aggregate purchase price of $7,500,000. These issuances were exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.
8.: On May 15, 2000, we issued an aggregate of 1,044,313 shares of common stock and warrants to purchase an additional 261,087 shares of common stock to Haverford Internet, LLC, Macklin Family Limited Partnership III, Haverford Utah, LLC, The Gordon S. Macklin Family Trust, The Marilyn C. Macklin Family Trust, Dorthy Byrne, John J. Byrne, Contex Limited, and eight other non-affiliated
persons at a per share purchase price of approximately $7.09 for an aggregate purchase price of $7,398,904. These issuances were exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.
9.: On June 22, 2000, we issued 28,229 shares of common stock and a warrant to purchase 7,058 shares of common stock with an exercise price of $7.09 per share to one non-affiliated person. This issuance was exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transaction did not involve a public offering.
10.: On September 12, 2001, we issued to Norwich Associates L.C. a senior revolving promissory note in the principal amount of up to $7,000,000. This issuance was exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.
11.: On September 21, 2000, we issued an aggregate of 2,357,540 shares of common stock and warrants to purchase an additional 589,396 shares of common stock to Haverford Internet, LLC, Contex

II-2

Limited, Dorthy M. Byrne, The Gordon S. Macklin Family Trust, Haverford Utah LLC, John J. Byrne, John J. Byrne III, The Marilyn C. Macklin Family Trust, Macklin Family Limited Partnership I, Macklin Family Limited Partnership II, Rope Ferry Associates, Ltd., and seventeen other non-affiliated persons at a per share purchase price of approximately $4.25 for an aggregate purchase price of $10,021,856. These issuances were exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.

12.: On November 11, 2000, we issued a promissory note to First Security Bank, N.A. in the principal amount of $3,000,000. This issuance was exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transaction did not involve a public offering.
13.: On November 17, 2000, we issued an aggregate of 2,055,677 shares of common stock to the stockholders of Gear.com, Inc. stock in connection with our acquisition of Gear.com, Inc. This issuance was exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transaction did not involve a public offering.
14.: On February 2, 2001, we issued an aggregate of 987,293 shares of common stock to Haverford Internet, LLC and one other non-affiliated person at a per share purchase price of approximately $5.06 for an aggregate purchase price of $5,000,000. These issuances were exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.
15.: On March 27, 2001, we issued a secured promissory note in the principal amount of up to $6,000,000 to High Meadows Finance L.C. This issuance was exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transaction did not involve a public offering.
16.: On May 24, 2001, we issued 197,459 shares of common stock to High Meadows Finance, L.C. at a per share purchase price of approximately $5.06 for an aggregate of $1,000,000. This issuance was exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transaction did not involve a public offering.
17.: On September 17, 2001, we issued 10,586 shares of common stock to Norwich Associates L.C. as an origination fee for a $7,000,000 line of credit from Norwich Associates L.C. This issuance was exempt from registration under the Securities Act pursuant to Section 4(2) thereof on the basis that the transaction did not involve a public offering.
18.: On March 4, 2002, we issued 958,612 shares of Series A Preferred Stock to Haverford Internet, LLC, John J. Byrne, Contex Limited, The Gordon S. Macklin Family Trust, Rope Ferry Associates, Ltd., and ten other non-affiliated persons at a per share purchase price of approximately $6.90 for an aggregate purchase price of $6,607,000. Subject to adjustment, one share of Series A preferred stock currently converts into one share of common stock. These issuances were exempt from registration under Rule 506 of Regulation D promulgated under the Securities Act.
19.: Since January 1, 1999, we have granted stock options under our stock option plans to purchase an aggregate of 1,570,385 shares of common stock (net of expirations, exercises and cancellations) at a weighed average exercise price of $5.35 per share. These transactions were exempt from registration under the Securities Act pursuant to Rule 701 or pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.
20.: Since January 1, 1999, we have issued 19,850 shares of common stock (net of cancellations) under our 2000 Stock Purchase Plan at a weighted average purchase price of $5.07. These issuances were exempt from registration under the Securities Act pursuant to Rule 701 or pursuant to Section 4(2) thereof on the basis that the transactions did not involve a public offering.

II-3

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

Exhibit Number		Description of Document
1.1**		Form of Underwriting Agreement
3.1A*		Articles of Amendment to the Amended and Restated Articles of Incorporation of Overstock.com, a Utah corporation and the Amended and Restated Articles of Incorporation
3.1B*		Amended and Restated Certificate of Incorporation of Overstock.com, Inc., a Delaware corporation dated as of March 15, 2002
3.1C		Form of Amended and Restated Certificate of Incorporation of Overstock.com, Inc., a Delaware corporation, to be filed with the Delaware Secretary of State prior to the completion of the offering made pursuant to this Registration Statement.
3.1D		Form of Amended and Restated Certificate of Incorporation of Overstock.com, Inc. to be in effect after the completion of the offering made pursuant to this Registration Statement
3.2A*		Bylaws of Overstock.com, Inc. currently in effect
3.2B*		Form of Bylaws of Overstock.com, Inc. to be in effect after the reincorporation of Overstock.com, Inc. in Delaware
3.2C		Form of Amended and Restated Bylaws of Overstock.com, Inc. to be in effect after the closing of the offering made pursuant to this Registration Statement
4.1		Form of specimen certificate for Overstock.com, Inc.'s common stock
4.2*		Investor Rights Agreement dated March 4, 2002
5.1		Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
10.1		Form of Indemnification Agreement between Overstock.com, Inc. and each of its directors and officers
10.2*		1999 Stock Option Plan and form of agreements thereunder
10.3*		2001 Stock Purchase Plan and form of agreements thereunder
10.4*		Gear.com Restated 1998 Stock Option Plan and form of agreements thereunder
10.5		2002 Stock Plan and form of agreements thereunder
10.6*		Agreement and Plan of Merger dated November 3, 2000 by and between Overstock.com, Inc. and Gear.com, Inc.
10.7*		Form of Guaranty of Credit agreement entered into by John J. Byrne, John J. Byrne III, Patrick M. Byrne, J. Gregory Hale, and Cirque Property LC in connection with the Norwich Associates, LC $7.0 million line of credit established on September 17, 2001.
10.8*		Lease Agreement dated January 23, 2002 between Overstock.com, Inc. and Holladay Building East L.L.C.
10.9*		Lease Agreement dated November 27, 2001 between Overstock.com and Holladay Building East L.L.C.
10.10*		First Lease Extension Agreement dated January 25, 2002 by and between Overstock.com, Inc. and Holladay Building East L.L.C.
10.11*		Lease Agreement, as amended, between 2855 E. Cottonwood Parkway, L.C., and Discountsdirect, dated December 21, 1998
10.12*		Lease Agreement by and between Overstock.com, Inc. and Marvin L. Oates Trust dated March 15, 2000
10.13*		Severance Package Agreement with Douglas Greene dated June 17, 1999
10.14*		Intellectual Property Assignment Agreement with Douglas Greene dated February 28, 2002

II-4

10.15†*		Strategic Alliance and Product Sales Agreement dated February 26, 2002 between Overstock.com, Inc. and Safeway Inc.
10.16*		Irrevocable Letter of Credit dated August 24, 2001 from Wells Fargo Bank, N.A. for the account of Patrick M. Byrne in favor of Wells Fargo Merchant Services, LLC.
10.17*		Lease Termination Agreement dated March 27, 2002 by and between Overstock.com, Inc. and 2855 E. Cottonwood Parkway, L.C.
10.18		Amendment No. 1, dated April 29, 2002 to Intellectual Property Assignment Agreement dated February 28, 2002 by and between Overstock.com, Inc. and Douglas Greene.
10.19		Registration and Expenses Agreement dated May 3, 2002 among Overstock.com, Inc. and Amazon.com NV Investment Holdings, Inc.
10.20		Form of Warrant to purchase Overstock.com, Inc. common stock
23.1		Consent of Independent Accountants
23.2		Consent of Arthur Andersen LLP
23.3		Consent of Counsel (included in Exhibit 5.1)
24.1*		Power of Attorney (See page II-7 and filed previously)

†: Confidential treatment has been requested with respect to certain portions of this exhibit. This exhibit omits the information subject to this confidentiality request.
*: Filed previously
**: To be filed by amendment

(b) Financial Statement Schedules

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Item 17. Undertakings

The undersigned hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification by Overstock.com, Inc. for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Overstock.com, Inc. pursuant to the provisions referenced in Item 14 of this Registration Statement or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Overstock.com, Inc. of expenses incurred or paid by a director, officer, or controlling person of Overstock.com, Inc. in the successful defense of any action, suit or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered hereunder, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1): For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2): For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, Overstock.com, Inc. has duly caused this Amendment to the Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Salt Lake City, State of Utah, on the 6th day of May, 2002.

		OVERSTOCK.COM, INC.
		By:	/s/ JASON C. LINDSEY Jason C. Lindsey, Chief Financial Officer and Director

Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date

/s/ PATRICK M. BYRNE (Patrick M. Byrne)	President, Chief Executive Officer and Director (Principal Executive Officer)	May 6, 2002
/s/ JASON C. LINDSEY (Jason C. Lindsey)	Chief Financial Officer and Director (Principal Financial and Accounting Officer)	May 6, 2002
* (John B. Pettway)	Director	May 6, 2002
* (John J. Byrne Jr.)	Director	May 6, 2002
* (Gordon S. Macklin)	Director	May 6, 2002
* (Allison H. Abraham)	Director	May 6, 2002
* (John A. Fisher)	Director	May 6, 2002

* By

/s/ JASON C. LINDSEY

Jason C. Lindsey
Attorney-in-Fact

II-6

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Patrick M. Byrne and Jason C. Lindsey and each of them, his attorneys-in-fact, each with the power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

Signature		Title		Date

/s/ JOHN A. FISHER (John A. Fisher)		Director
		May 6, 2002

II-7

EXHIBIT INDEX

Exhibit Number		Description of Document
1.1**		Form of Underwriting Agreement
3.1A*		Articles of Amendment to the Amended and Restated Articles of Incorporation of Overstock.com, Inc., a Utah corporation and the Amended and Restated Articles of Incorporation
3.1B*		Amended and Restated Certificate of Incorporation of Overstock.com, Inc., a Delaware corporation dated as of March 15, 2002
3.1C		Form of Amended and Restated Certificate of Incorporation of Overstock.com, Inc., a Delaware corporation, to be filed with the Delaware Secretary of State prior to the completion of the offering made pursuant to this Registration Statement.
3.1D		Form of Amended and Restated Certificate of Incorporation of Overstock.com, Inc. to be in effect after the completion of the offering made pursuant to this Registration Statement
3.2A*		Bylaws of Overstock.com, Inc. currently in effect
3.2B*		Form of Bylaws of Overstock.com, Inc. to be in effect after the reincorporation of Overstock.com, Inc. in Delaware
3.2C		Form of Amended and Restated Bylaws of Overstock.com, Inc. to be in effect after the closing of the offering made pursuant to this Registration Statement
4.1		Form of specimen certificate for Overstock.com, Inc.'s common stock
4.2*		Investor Rights Agreement dated March 4, 2002
5.1		Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
10.1		Form of Indemnification Agreement between Overstock.com, Inc. and each of its directors and officers
10.2*		1999 Stock Option Plan and form of agreements thereunder
10.3*		2001 Stock Purchase Plan and form of agreements thereunder
10.4*		Gear.com Restated 1998 Stock Option Plan and form of agreements thereunder
10.5		2002 Stock Plan and form of agreements thereunder
10.6*		Agreement and Plan of Merger dated November 3, 2000 by and between Overstock.com, Inc. and Gear.com, Inc.
10.7*		Form of Guaranty of Credit agreement entered into by John J. Byrne, John J. Byrne III, Patrick M. Byrne, J. Gregory Hale, and Cirque Property LC in connection with the Norwich Associates, LC $7.0 million line of credit established on September 17, 2001.
10.8*		Lease Agreement dated January 23, 2002 between Overstock.com, Inc. and Holladay Building East L.L.C.
10.9*		Lease Agreement dated November 27, 2001 between Overstock.com and Holladay Building East L.L.C.
10.10*		First Lease Extension Agreement dated January 25, 2002 by and between Overstock.com, Inc. and Holladay Building East L.L.C.
10.11*		Lease Agreement, as amended, between 2855 E. Cottonwood Parkway, L.C., and Discountsdirect, dated December 21, 1998
10.12*		Lease Agreement by and between Overstock.com, Inc. and Marvin L. Oates Trust dated March 15, 2000
10.13*		Severance Package Agreement with Douglas Greene dated June 17, 1999
10.14*		Intellectual Property Assignment Agreement with Douglas Greene dated February 28, 2002
10.15†*		Strategic Alliance and Product Sales Agreement dated February 26, 2002 between Overstock.com, Inc. and Safeway Inc.
10.16*		Irrevocable Letter of Credit dated August 24, 2001 from Wells Fargo Bank, N.A. for the account of Patrick M. Byrne in favor of Wells Fargo Merchant Services, LLC.
10.17*		Lease Termination Agreement dated March 27, 2002 by and between Overstock.com, Inc. and 2855 E. Cottonwood Parkway, L.C.
10.18		Amendment No. 1, dated April 29, 2002 to Intellectual Property Assignment Agreement dated February 28, 2002 by and between Overstock.com, Inc. and Douglas Greene.
10.19		Registration and Expenses Agreement dated May 3, 2002 among Overstock.com, Inc. and Amazon.com NV Investment Holdings, Inc.
10.20		Form of Warrant to purchase Overstock.com, Inc. common stock
23.1		Consent of Independent Accountants
23.2		Consent of Arthur Andersen LLP
23.3		Consent of Counsel (included in Exhibit 5.1)
24.1*		Power of Attorney (See page II-7 and filed previously)

†: Confidential treatment has been requested with respect to certain portions of this exhibit. This exhibit omits the information subject to this confidentiality request.
*: Filed previously
**: To be filed by amendment

QuickLinks

Exhibit 3.1C

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

OVERSTOCK.COM, INC.

Overstock.com, Inc., a corporation organized and existing under the laws of the State of Delaware (the “ Corporation ”), certifies that:

A. The name of the Corporation is Overstock.com, Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on February 27, 2002 and later amended and restated on March 15, 2002.

B. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, and restates, integrates and further amends the provisions of the Corporation’s Certificate of Incorporation.

C. The text of the Certificate of Incorporation is amended and restated to read as set forth in EXHIBIT A attached hereto.

IN WITNESS WHEREOF, Overstock.com, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by Patrick Byrne, a duly authorized officer of the Corporation, on May ___, 2002.


	Patrick M. Byrne,
	President and Chief Executive Officer

Exhibit A

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OVERSTOCK.COM, INC.

ARTICLE I

NAME

The name of this corporation is “Overstock.com, Inc.” (the “ Company ”).

ARTICLE II

PURPOSE

The purposes for which the Company is organized is to engage in any lawful activity allowed by Delaware General Corporation Law (the “ DGCL ”).

ARTICLE III

CAPITALIZATION

Immediately upon the filing of this Amended and Restated Certificate of Incorporation (the “ Filing Date ”), each 28.34 shares of the Company’s common Stock and each 28.34 outstanding shares of the Company’s Preferred Stock will be exchanged and combined, automatically and without further action, into one share of Common Stock and into one share of the same series of Preferred Stock, respectively. Such Combination shall be effected on a certificate-by-certificate basis, and any fractional shares resulting from such combination shall be rounded up to the nearest whole share.

Authorized Capital . The aggregate number of shares which the Company shall have the authority to issue is Seventeen Million Six Hundred Fourty Two Thousand Nine Hundred Eight (17,642,908) shares. Of this amount, Fifteen Million Eight Hundred Seventy Eight Six Hundred Sixteen (15,878,617) shares shall be designated “ Common Stock ,” with a par value of $0.0001, and One Million Seven Hundred Sixty Four Two Hundred Ninety-One (1,764,291) shares shall be designated “ Preferred Stock ,” with a par value of $0.0001, having rights, preferences, qualifications, limitations or restrictions as set forth herein and as determined at some future time by the Company’s Board of Directors in its discretion pursuant to Section 151 of the DGCL.

Common Stock . The Common Stock shall have unlimited voting rights with each share of Common Stock entitling the holder thereof to one vote. The Common Stock is entitled to receive dividends when, as, and if declared by the Board of Directors. Subject to the terms of the Preferred Stock, the Common Stock is entitled to the net assets of the Company upon liquidation.

Preferred Stock .

3.1 Designation of Series A Preferred Stock .

(a) Series A Preferred Stock . One Million Eighty-Eight Thousand One Hundred Seventy three (1,088,173) shares of the authorized (1,764,291) shares are hereby designated as “Series A Preferred Stock.” To the extent that shares of Series A Preferred Stock are, following their initial issuance, converted as hereinafter provided or repurchased by the Company, the number of shares in such series shall be automatically reduced, without further action by the stockholders or the Board of Directors of the Company.

(b) Definitions . For purposes of this Article III, the following definitions shall apply:

(i) “ Conversion Price ” shall initially mean $6.8923 per share for the Series A Preferred Stock (subject to adjustment as set forth elsewhere herein).

(ii) “ Convertible Securities ” shall mean any evidences of indebtedness, shares or other securities (other than shares of Series A Preferred Stock) convertible into or exchangeable for Common Stock.

(iii) “ Distribution ” shall mean the transfer of cash or other property without consideration whether by way of dividend or otherwise, payable other than in Common Stock, or the purchase or redemption of shares of the Company for cash or property other than: (i) repurchases of Common Stock issued to or held by employees, officers, directors or consultants of the Company or its subsidiaries upon termination of their employment or services pursuant to agreements providing for the right of said repurchase, (ii) repurchases of Common Stock issued to or held by employees, officers, directors or consultants of the Company or its subsidiaries pursuant to rights of first refusal contained in agreements providing for such right, (iii) repurchase of capital stock of the Company in connection with the settlement of disputes with any stockholder, or (iv) any other repurchase or redemption of capital stock of the Company approved by the holders of a majority of the Common Stock of the Company and the holders of at least 65% of the Series A Preferred Stock of the Company voting as separate classes.

(iv) “ Dividend Rate ” for the Series A Preferred Stock, the Dividend Rate shall be an annual, fixed dividend of $)0.5514 per share (subject to adjustment from time to time for Recapitalizations of Series A Preferred as set forth elsewhere herein).

(v) “ Liquidation Preference ” shall mean $6.8923 per share for the Series A Preferred Stock (subject to adjustment from time to time for Recapitalizations of Series A Preferred Stock as set forth elsewhere herein).

(vi) “ Merger or Consolidation ” shall mean the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving or resulting entity), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the

voting securities of the Company or such surviving or resulting entity outstanding immediately after such transaction or series of transactions.

(vii) “ Options ” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

(viii) “ Original Issue Date ” shall mean the date of the first issuance of any shares of Series A Preferred Stock.

(ix) “ Original Issue Price ” shall mean $6.8923 per share for the Series A Preferred Stock (subject to adjustment from time to time for any Recapitalization of Series A Preferred Stock as set forth elsewhere herein).

(x) “ Qualified Public Offering ” shall mean a firmly underwritten public offering of the Company pursuant to an effective registration statement filed under the Securities Act, covering the offer and sale of Common Stock for the account of the Company with an offering price per share of $10.34 (as appropriately adjusted for Recapitalizations) and aggregate offering proceeds to the Company of not less than $20,000,000 (net of underwriting discounts and commissions) and a listing of the Company’s equity securities on the NASDAQ-NMS or other national exchange.

(xi) “ Recapitalization ” shall mean any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event occurring after the Filing Date.

(xii) “ Securities Act ” shall mean the Securities Act of 1933, as amended.

3.2 Dividends .

(a) Series A Preferred Stock . The holders of outstanding shares of Series A Preferred Stock shall be entitled, when and if declared by the Board of Directors, to receive dividends out of any assets at the time legally available therefor, at the Dividend Rate payable in preference and priority to any declaration or payment of any Distribution on any other class or series of capital stock of the Company. Payment of declared and accrued (pursuant to Section 3.2(c)) but unpaid dividends shall be in cash or, at the mutual agreement of the holder of such shares and the Company, in Common Stock, with the number of shares of Common Stock per holder into which such dividends may be converted being determined by dividing the aggregate amount of the declared but unpaid and accrued but unpaid dividends due such holder by the then fair market value of one share of Common Stock. Such dividend preference shall not be cumulative except as expressly provided in Section 3.2(c).

(b) Dividends on Common Stock . After the payment or setting aside for payment of the dividends as described in Section 3.2(a) and 3.2(c), any additional dividends (other than dividends payable solely in Common Stock) declared or paid in any fiscal year shall be declared or paid among the holders of the Series A Preferred Stock and Common Stock then outstanding in proportion to the greatest whole number of shares of Common Stock which would be held by each such holder if all shares of Series A Preferred Stock were converted at the then-effective Conversion Rate (as defined in Section 3.4 hereof).

(c) Cumulative Dividends . In the event that the Company has not by March 31, 2003, completed its initial public offering of its Common Stock pursuant to an effective registration statement filed under the Securities Act, the dividends described in Section 3.2(a) shall become cumulative. Such dividends shall be cumulative from April 1, 2003 and payable (i) when and as declared by the Board of Directors, (ii) upon a Liquidation Event (as defined in Section 3.3(d) below), (iii) upon a Qualified Public Offering or (iv) pursuant to Section 3.5 below.

(d) Non-Cash Distributions .

(i) Distributions other than Common Stock . Except as provided in subsection (ii) below, whenever a Distribution provided for in this Section 3.2 shall be payable in property other than cash, the value of such Distribution shall be deemed to be the fair market value of such property as determined in good faith by the Board of Directors.

(ii) Common Stock . For purposes of this Section 3.2, the fair market value of one share of common stock shall be: (x) the initial “price to public” specified in the final prospectus with respect to a Qualified Public Offering; (y) the value received by the holders of Common Stock pursuant to a Merger or Consolidation for each share of such securities; or (z) as determined pursuant to Section 3.2(d)(i) above if there is no Qualified Public Offering or Merger or Consolidation.

3.3 Liquidation Rights .

(a) Liquidation Preference . In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any Distribution of any of the assets of the Company to the holders of the Common Stock by reason of their ownership of such stock, an amount per share for each share of Series A Preferred Stock held by them equal to the sum of (i) the Liquidation Preference and (ii) all declared but unpaid and accrued but unpaid dividends on such share of Series A Preferred Stock. If, upon the liquidation, dissolution or winding up of the Company, the assets of the Company legally available for distribution to the holders of the Series A Preferred Stock are insufficient to permit the payment to such holders of the full amounts specified in this Section 3.3(a), then the entire assets of the Company legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series A Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this Section 3.3(a).

(b) Common Stock Liquidation Preference . After the payment to the holders of Series A Preferred Stock of the full preferential amounts specified above, the remaining assets of the Company, in an amount not to exceed the amount of the common stock paid in capital as reflected on the Company’s December 31, 2001 audited balance sheet, legally available for distribution by the Company, shall be distributed with equal priority and pro rata among the holders of the Common Stock in proportion to the number of shares of Common Stock held by them, without the shares of Series A Preferred Stock being treated for this purpose as if they had been converted to shares of Common Stock. If, upon the liquidation, dissolution or winding up of the Company, the assets of the Company legally available for distribution to the holders of Common Stock are insufficient to permit the payment to such holders of the full amounts specified in this Section 3.3(b), then the entire assets of the Company legally available for distribution after payment to the holders of Series A Preferred of the full preferential amounts specified above shall be distributed with equal priority and pro rata among the holders of

Common Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this Section 3.3(b).

(c) Remaining Assets . After the payment to the holders of Series A Preferred Stock and Common Stock of the full preferential amounts specified above in Sections 3.3(a) and 3.3(b), the entire remaining assets of the Company legally available for distribution by the Company shall be distributed with equal priority and pro rata among the holders of the Series A Preferred Stock and Common Stock in proportion to the number of shares of Common Stock held by them, with the shares of Series A Preferred Stock being treated for this purpose as if they had been converted to shares of Common Stock at the then applicable Conversion Rate.

(d) Liquidation Events . For purposes of this Section 3.3, a liquidation, dissolution or winding up of the Company (a “ Liquidation Event ”) shall be deemed to be occasioned by, or to include, (i) a Merger or Consolidation; (ii) a sale, lease or other conveyance of all or substantially all of the assets of the Company; or (iii) any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary.

(e) Valuation of Non-Cash Consideration . If any assets of the Company distributed to stockholders in connection with any liquidation, dissolution, or winding up of the Company are other than cash, then the value of such assets shall be their fair market value as determined in good faith by the Board of Directors, except that any publicly-traded securities to be distributed to stockholders in a liquidation, dissolution, or winding up of the Company shall be valued as follows:

(i) If the securities are then traded on a national securities exchange or the Nasdaq Stock Market (or a similar national quotation system), then the value of the securities shall be deemed to be to the average of the closing prices of the securities on such exchange or system over the 10 trading day period ending 5 trading days prior to the Distribution;

(ii) if the securities are actively traded over-the-counter, then the value of the securities shall be deemed to be the average of the closing bid prices of the securities over the 10 trading day period ending 5 trading days prior to the Distribution.

In the event of a merger or other acquisition of the Company by another entity, the Distribution date shall be deemed to be the date such transaction closes.

3.4 Conversion . The holders of the Series A Preferred Stock shall have conversion rights as follows (the “ Conversion Rights ”):

(a) Right to Convert . Subject to the provisions of Section 3.4(b), each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of the Company or any transfer agent for the Series A Preferred Stock, into that number of fully-paid, nonassessable shares of Common Stock determined by dividing the Original Issue Price of the Series A Preferred Stock by the then effective Conversion Price of the Series A Preferred Stock. (The number of shares of Common Stock into which each share of Series A Preferred Stock may be converted is hereinafter referred to as the “ Conversion Rate ” for the Series A Preferred Stock.) Upon any decrease or increase in the Conversion Price for the Series A Preferred Stock, as described in this Section 3.4, the Conversion Rate for the Series A Preferred Stock shall be appropriately increased or decreased.

(b) Automatic Conversion . Each share of Series A Preferred Stock shall automatically be converted into that number of fully-paid, nonassessable shares of Common Stock determined by dividing (i) the sum of the Original Issue Price plus all declared but unpaid and accrued but unpaid dividends, if applicable, by (ii) the then effective Conversion Price for such share, upon the earlier to occur of: (1) immediately prior to the closing of the Qualified Public Offering or (2) the written consent of the holders of at least 65% of the then outstanding shares of Series A Preferred Stock (each of the events referred to in (1) and (2) are referred to herein as an “ Automatic Conversion Event ”).

(c) Mechanics of Conversion . No fractional shares of Common Stock shall be issued upon conversion of Series A Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the then fair market value of a share of Common Stock as determined by the Board of Directors. For such purpose, all shares of Series A Preferred Stock held by each holder of Series A Preferred Stock shall be aggregated, and any resulting fractional share of Common Stock shall be paid in cash. Before any holder of Series A Preferred Stock shall be entitled to convert the same into full shares of Common Stock, and to receive certificates therefor, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or of any transfer agent for the Series A Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same; provided, however , that on the date of an Automatic Conversion Event, the outstanding shares of Series A Preferred Stock shall be converted automatically, without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided further , however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such Automatic Conversion Event unless either the certificates evidencing such shares of Series A Preferred Stock are delivered to the Company or its transfer agent as provided above, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. On the date of the occurrence of an Automatic Conversion Event, each holder of record of shares of Series A Preferred Stock shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, notwithstanding that the certificates representing such shares of Series A Preferred Stock shall not have been surrendered at the office of the Company, that notice from the Company shall not have been received by any holder of record of shares of Series A Preferred Stock, or that the certificates evidencing such shares of Common Stock shall not then be actually delivered to such holder.

(d) Adjustments to Conversion Price for Diluting Issues .

(i) Special Definition . For purposes of this Section 3.4(d), “ Additional Shares of Common ” shall mean all shares of Common Stock issued (or, pursuant to Section 3.4(d)(iii), deemed to be issued) by the Company after the Original Issue Date other than :

(1) shares of Common Stock issued or issuable upon conversion of shares of Series A Preferred Stock;

(2) up to 79,671,136 shares of Common Stock issued or issuable to employees, consultants, directors or other service providers for compensatory purposes and in accordance with stock plans approved by the Board of Directors, or upon exercise of options or warrants granted to such parties pursuant to any such plans (net of any repurchase of such shares or cancellations or expiration of such options);

(3) shares of Common Stock issued upon the exercise, exchange, adjustment or conversion of Options or Convertible Securities outstanding as of March 4, 2002 of Overstock.com, Inc., a Utah corporation and predecessor to the Company (other than options outstanding pursuant to stock plans covered under Section 3.4(d)(i)(2) above);

(4) shares of Common Stock issued or issuable pursuant to a stock split, as a dividend or distribution on Series A Preferred Stock or pursuant to any event for which adjustment is made pursuant to Section 3.4(e), (f) or (g) hereof;

(5) shares of Common Stock issued in a Qualified Public Offering;

(6) shares of Common Stock issued or issuable pursuant to the acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or other reorganization approved by a majority of the Board of Directors;

(7) shares of Common Stock issued or issuable pursuant to bona fide equipment lease and bank financing arrangements approved by a majority of the Board of Directors;

(8) shares of Common Stock issued or issuable in connection with transactions of a strategic nature for which the primary purpose is other than raising equity capital and which is approved by a majority of the Board of Directors;

(9) shares of Common Stock which the holders of at least 65% of the then outstanding Series A Preferred Stock agree in writing shall not constitute Additional Shares of Common, each such agreement to be deemed effective immediately prior to the related issuance.

(ii) No Adjustment of Conversion Price . No adjustment in the Conversion Price of the Series A Preferred Stock shall be made in respect of the issuance of Additional Shares of Common unless the consideration per share (as determined pursuant to Section 3.4(d)(v)) for an Additional Share of Common issued or deemed to be issued by the Company is less than the Conversion Price in effect on the date of, and immediately prior to such issue, for the Series A Preferred Stock.

(iii) Deemed Issue of Additional Shares of Common . In the event the Company at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities, the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options and the conversion or exchange of the underlying Convertible Securities, shall be deemed to have been issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that in any such case in which shares are deemed to be issued:

(1) no further adjustment in the Conversion Price of the Series A Preferred Stock shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock in connection with the exercise of such Options or conversion or exchange of such Convertible Securities;

(2) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Conversion Price of the Series A Preferred Stock computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities;

(3) no readjustment pursuant to clause (2) above shall have the effect of increasing the Conversion Price of the Series A Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price of the Series A Preferred Stock on the original adjustment date, or (ii) the Conversion Price of the Series A Preferred Stock that would have resulted from any issuance of Additional Shares of Common between the original adjustment date and such readjustment date;

(4) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon shall, upon such expiration, be recomputed as if:

a) in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Company for the issue of such exercised Options plus the consideration actually received by the Company upon such exercise or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and

b) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Company for the Additional Shares of Common deemed to have been then issued was the consideration actually received by the Company for the issue of such exercised Options, plus the consideration deemed to have been received by the Company (determined pursuant to Section 3.4(d)(v)) upon the issue of the Convertible Securities with respect to which such Options were actually exercised; and

(5) if such record date shall have been fixed and such Options or Convertible Securities are not issued on the date fixed therefor, the adjustment previously made in the Conversion Price which became effective on such record date shall be canceled as of the close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this Section 3.4(d)(iii) as of the actual date of their issuance.

(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares of Common . In the event this Company shall issue Additional Shares of Common (including Additional Shares of Common deemed to be issued pursuant to Section 3.4(d)(iii)) without consideration or for a consideration per share less than the applicable Conversion Price of the Series A Preferred Stock in effect on the date of and immediately prior to such issue, then, the Conversion Price of the affected

series of Series A Preferred Stock shall be reduced, concurrently with such issue, to a price equal to the consideration per share of such Additional Shares of Common; provided , however , that if, immediately prior to any adjustment to the Conversion Price, the then current Conversion Price is less than $0.1702 (as adjusted for any Recapitalizations after the Original Issue Date), then, the Conversion Price of the Series A Preferred Stock shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock and Preferred Stock outstanding immediately prior to such issue plus the number of shares which the aggregate consideration received by the Company for the total number of Additional Shares of Common so issued would purchase at such Conversion Price, and the denominator of which shall be the number of shares of Common Stock and Preferred Stock outstanding immediately prior to such issue plus the number of such Additional Shares of Common so issued. For the purposes of this Section 3.4(d)(iv), shares of Common Stock issuable upon (i) conversion of outstanding shares of Preferred Stock and (ii) exercise of Options or conversion or exchange of Convertible Securities shall not be deemed to be outstanding.

(v) Determination of Consideration . For purposes of this Section 3.4(d), the consideration received by the Company for the issue (or deemed issue) of any Additional Shares of Common shall be computed as follows:

(1) Cash and Property . Such consideration shall:

a) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Company excluding amounts paid or payable for accrued interest or dividends;

b) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors; and

c) in the event Additional Shares of Common are issued together with other shares or securities or other assets of the Company for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (a) and (b) above, as reasonably determined in good faith by the Board of Directors.

(2) Options and Convertible Securities . The consideration per share received by the Company for Additional Shares of Common deemed to have been issued pursuant to Section 3.4(d)(iii) shall be determined by dividing

a) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by

b) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a

subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(e) Adjustments for Subdivisions or Combinations of Common Stock . In the event the outstanding shares of Common Stock shall be subdivided after the Filing Date (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Common Stock, the Conversion Price of the Series A Preferred Stock in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Common Stock, the Conversion Price of the Series A Preferred Stock in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.

(f) Adjustments for Subdivisions or Combinations of Series A Preferred Stock . In the event the outstanding shares of Series A Preferred Stock shall be subdivided after the Filing Date (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Series A Preferred Stock, the Dividend Rate, Original Issue Price and Liquidation Preference of the Series A Preferred Stock in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Series A Preferred Stock shall be combined after the Filing Date (by reclassification or otherwise) into a lesser number of shares of Series A Preferred Stock, the Dividend Rate, Original Issue Price and Liquidation Preference of the affected series of Series A Preferred Stock in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.

(g) Adjustments for Reclassification, Exchange and Substitution . Subject to Section 3.3 above (the “ Liquidation Rights ”), if the Common Stock issuable upon conversion of the Series A Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise after the Filing Date (other than a subdivision or combination of shares provided for above), then, in any such event, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive, each holder of such Series A Preferred Stock shall have the right thereafter to convert such shares of Series A Preferred Stock into a number of shares of such other class or classes of stock which a holder of the number of shares of Common Stock deliverable upon conversion of such Series A Preferred Stock immediately before that change would have been entitled to receive in such reorganization or reclassification, all subject to further adjustment as provided herein with respect to such other shares.

(h) No Impairment . The Company will not through any amendment of its Amended and Restated Certificate of Incorporation, as amended hereby (its “ Certificate of Incorporation ”), or through any reorganization, transfer of assets, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in the carrying out of all the provisions of this Section 3.4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of Series A Preferred Stock against impairment. Notwithstanding the foregoing, nothing in this Section 3.4(h) shall prohibit the Company from amending its Certificate of Incorporation with the requisite consent of its stockholders and the board of directors.

(i) Adjustment in the Event of No Qualified Public Offering . Notwithstanding anything herein to the contrary, if the Company has not closed a Qualified Public Offering by March 31, 2003, the then-applicable Conversion Price for each share of Series A Preferred will automatically adjust down to the lower of $4.8235 (as adjusted for any Recapitalizations after the Filing Date) or the fair market value per share of the Company’s Common Stock. For purposes of this Section 3.4(i), the fair market value of one share of Common Stock shall be: (A) the price per share of the Common Stock sold in the transaction in which the Company sells shares of Common Stock that is consummated during 2002 or 2003 that is nearest in time to the time of adjustment pursuant to this Section 3.4(i), or (B) if no such transaction has occurred, as determined in good faith by the Board of Directors.

(j) The Conversion Price is subject to adjustment pursuant to the provisions of Section 3.5 below.

(k) Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 3.4, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Series A Preferred Stock.

(l) Waiver of Adjustment of Conversion Price . Notwithstanding anything herein to the contrary, any downward adjustment of the Conversion Price of the Series A Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, by the consent or vote of the holders of at least 65% of the outstanding shares of Series A Preferred Stock. Any such waiver shall bind all future holders of shares of Series A Preferred Stock.

(m) Reservation of Stock Issuable Upon Conversion . The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

3.5 Redemption .

(a) Redemption Dates . If the Series A Preferred Stock has not been converted pursuant to Section 3.4 above prior to the fourth anniversary of the Original Issue Date and a holder of Series A Preferred Stock provides the Redemption Notice in accordance with Section 3.5(d) below, the Company shall redeem (to the extent that such redemption shall not violate any applicable provisions of the laws of the State of Delaware) at a price equal to (i) the Original Issue Price per share, plus (ii) an amount equal to any declared but unpaid and any accrued but unpaid dividends thereon (such amount is hereinafter

referred to as the “ Redemption Price ”), in two equal yearly installments beginning on the next anniversary of the Original Issue Date which anniversary is at least 90 days following the date the Company receives the Redemption Notice (the “ Redemption Date ”).

(b) Unredeemed Shares . If the Company is unable at any Redemption Date to redeem any shares of Series A Preferred Stock then to be redeemed (“ Unredeemed Shares ”) because such redemption would violate the applicable laws of the State of Delaware, then the Company shall redeem such shares as soon thereafter as redemption would not violate such laws. If the Company fails to redeem any shares of Series A Preferred Stock then to be redeemed within 30 days of the applicable Redemption Date, the then applicable Conversion Price for the Series A Preferred Stock will be immediately reduced to an amount equal to 90% of such then applicable Conversion Price, and, until such redemption has been made, such applicable Conversion Price will be further reduced on the 90 ^th day following the applicable Redemption Date and on the last day of each 90-day period thereafter, to an amount equal to 90% of the applicable Conversion Price in effect immediately prior to each such reduction.

(c) Partial Redemption . In the event of any redemption of only a part of the then outstanding Series A Preferred Stock (including Unredeemed Shares), the Company shall effect such redemption pro rata among the holders thereof electing redemption (based on the number of shares of Series A Preferred Stock held by such holders as of 90 days prior to the initial Redemption Date).

(d) Redemption Notice and Procedure . If a holder of Series A Preferred Stock elects to redeem its Series A Preferred Stock, such holder must provide written notice to the Company of such election (the “ Redemption Notice ”) at least 90 days in advance of the initial Redemption Date. On or prior to the each Redemption Date or other redemption date, each holder of Series A Preferred Stock to be redeemed shall surrender such holder’s certificate or certificates representing such shares to the Company and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the Redemption Date or other redemption date unless there shall have been a default in payment of the Redemption Price, all rights of the holders of the Series A Preferred Stock designated for redemption (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever.

(e) Effect of Redemption . Except as provided in this Section 3.5(e), the Company shall have no right to redeem the shares of Series A Preferred Stock. Any shares of Series A Preferred Stock so redeemed shall be permanently retired, shall no longer be deemed outstanding and shall not under any circumstances be reissued, and the Company may from time to time take such appropriate corporate action as may be necessary to reduce the authorized Series A Preferred Stock accordingly.

3.6 Voting .

(a) Series A Preferred Stock . The holder of each share of Series A Preferred Stock shall have the right to one vote for each share of Common Stock into which such Series A Preferred Stock could then be converted (with any fractional share determined on an aggregate conversion basis not being able to be voted), and with respect to such vote, such holder shall have full voting rights and powers equal to the voting

rights and powers of the holders of Common Stock (except as otherwise expressly provided herein or as required by law, voting together with the Common Stock as a single class), and shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Company. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Series A Preferred Stock held by each holder could be converted), shall be disregarded.

(b) Election of Directors . The number of directors of the Company shall be fixed from time to time according to the Company’s Bylaws. All members of the Company’s Board of Directors shall be elected by the holders of Common Stock and Series A Preferred Stock, voting together as a single class. Stockholders do not have the right to cumulate their votes for the election of directors and elections need not be by written ballot unless required by the Bylaws or applicable law.

3.7 Protective Provisions . As long as any of the Series A Preferred Stock shall be issued and outstanding, the Company shall not, without first obtaining the approval (by vote or written consent as provided by law) of the holders of 65% of the then outstanding shares of the Series A Preferred Stock:

(a) authorize, create or issue, or obligate itself to authorize, create or issue, any other equity security (by reclassification or otherwise), including any other security convertible into or exercisable for any equity security having a preference over, or on parity with, the Series A Preferred Stock with respect to voting, dividends or upon liquidation;

(b) amend or repeal or add any provision to its Certificate of Incorporation or Bylaws, if such action would (i) adversely affect the preferences, rights, privileges, or powers of, or restrictions provided for the benefit of the Series A Preferred Stock or (ii) increase or decrease the number of authorized shares of any class of stock or the Series A Preferred;

(c) increase the number of shares of Common Stock issuable pursuant to the Company’s 1999 Stock Option Plan above 2,489,711 (on a post-split basis);

(d) increase the number of shares of Common Stock issuable pursuant to the Company’s 2000 Stock Purchase Plan above 352,859 (on a post-split basis); or

(e) amend this Section 3.7.

ARTICLE IV

REGISTERED AGENT AND ADDRESS OF REGISTERED OFFICE

The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE V

LIMITATION OF LIABILITY AND INDEMNIFICATION

5.1 Limitation of Liability .

To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as it may hereafter be amended, the directors of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director.

5.2 Indemnification of Corporate Agents .

To the fullest extent permitted by applicable law, the Company is authorized to provide indemnification of, and advancement of expenses to, directors, officers, employees, or other agents of the Company and any other person to which the Delaware General Corporation Law permits the Company to provide indemnification.

5.3 Repeal or Modification .

Any repeal or modification of this Article V, by amendment of such article or by operation of law, shall not adversely affect any right or protection of a director, officer, employee or other agent of the Company existing at the time of, or increase the liability of any such person with respect to any acts or omissions in their capacity as a director, officer, employee, or other agent of the Company occurring prior to, such repeal or modification.

IN WITNESS WHEREOF , this Amended and Restated Certificate of Incorporation is hereby executed as of the __ day of April, 2002.


	Patrick Byrne
	President and Chief Executive Officer

Exhibit 3.1D

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OVERSTOCK.COM, INC.

a Delaware corporation

Overstock.com, Inc., a corporation organized and existing under the laws of the State of Delaware, does hereby certify:

1. The name of the corporation is Overstock.com, Inc. (the “Corporation”). The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on February 27, 2002.

2. The amendment and restatement herein set forth has been duly approved by the Board of Directors of the Corporation and by the stockholders of the Corporation pursuant to Sections 141, 228 and 242 of the General Corporation Law of the State of Delaware (the “Delaware Law”). Approval of this amendment and restatement was approved by a written consent signed by less than all of the stockholders of the Corporation pursuant to Section 228 of the Delaware Law, and notice has been given in accordance with Section 228(e) of the Delaware Law to those stockholders not signing such written consent.

3. The restatement herein set forth has been duly adopted pursuant to Section 245 of the Delaware Law. This Amended and Restated Certificate of Incorporation restates and integrates and amends the provisions of the Corporation’s Certificate of Incorporation.

4. The text of the Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:

ARTICLE I

The name of this corporation is Overstock.com, Inc. (hereinafter, the “Corporation”).

ARTICLE II

The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

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ARTICLE IV

This Corporation is authorized to issue two classes of shares to be designated, respectively, Common Stock and Preferred Stock. Each share of Common Stock shall have a par value of $0.0001 and each share of Preferred Stock shall have a par value of $0.0001. The total number of shares of Common Stock this Corporation shall have authority to issue is 100,000,000, and the total number of shares of Preferred Stock this Corporation shall have authority to issue is 5,000,000.

The Preferred Stock initially shall be undesignated as to series. Any Preferred Stock not previously designated as to series may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the Board of Directors (authority to do so being hereby expressly vested in the Board), without further stockholder approval, and such resolution or resolutions shall also set forth the voting powers, full or limited or none, of each such series of Preferred Stock and shall fix the designations, preferences and relative, participating, optional or other special rights of each such series of Preferred Stock and the qualifications, limitations or restrictions of such powers, designations, preferences or rights. The Board of Directors is also authorized to fix the number of shares of each such series of Preferred Stock. The Board of Directors is authorized to alter the powers, designation, preferences, rights, qualifications, limitations and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series of Preferred Stock, to increase or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series.

Each share of Preferred Stock issued by the Corporation, if reacquired by the Corporation (whether by redemption, repurchase, conversion to Common Stock or other means), shall upon such reacquisition resume the status of authorized and unissued shares of Preferred Stock, undesignated as to series and available for designation and issuance by the Corporation in accordance with the immediately preceding paragraph.

The Corporation shall from time to time in accordance with the laws of the State of Delaware increase the authorized amount of its Common Stock if at any time the number of shares of Common Stock remaining unissued and available for issuance shall not be sufficient to permit conversion, if applicable, of the Preferred Stock.

ARTICLE V

The Corporation is to have perpetual existence.

ARTICLE VI

The Board of Directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. At the first annual meeting of stockholders following the date hereof, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the date

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hereof, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the date hereof, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose term expire at such annual meeting. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director.

ARTICLE VII

Section 1. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

Section 2. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, alter, amend or repeal the Bylaws of the Corporation. The affirmative vote of at least a majority of the Board of Directors then in office shall be required to adopt, amend, alter or repeal the Corporation’s Bylaws. No Bylaw hereafter legally adopted, amended, altered or repealed by the stockholders of the Corporation shall invalidate any prior act of the directors or officers of the Corporation which would have been valid if such Bylaw had not been adopted, amended, altered or repealed.

Section 3. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

Section 4. At the election of directors of the Corporation, each holder of Common Stock shall be entitled to one vote for each share held. No stockholder will be permitted to cumulate votes at any election of directors.

Section 5. The number of directors which constitute the whole Board of Directors shall be fixed exclusively in the manner designated in the Bylaws of the Corporation.

ARTICLE VIII

Section 1. To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.

Section 2. The Corporation shall indemnify to the fullest extent permitted by law, as now or hereinafter in effect, any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director or officer of the Corporation or any predecessor of the Corporation or serves or served at any other enterprise as a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation and such right to indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of his or her heirs, executors and personal and legal representatives; provided, however, that, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) in connection with a proceeding

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(or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. The right to indemnification conferred by this Section 2 shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition. The Corporation may indemnify to the fullest extent permitted by law, as now or hereinafter in effect, any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was an employee or agent of the Corporation or any predecessor of the Corporation or serves or served at any other enterprise as a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation. The rights to indemnification and to the advancement of expenses conferred in this Section 2 shall not be exclusive of any other right which any person may have or hereafter acquire under this Amended and Restated Certificate Incorporation (as amended and restated from time to time, the “Restated Certificate of Incorporation”), the Bylaws of the Corporation, any statute, agreement, vote of the stockholders of the Corporation or disinterested directors of the Corporation or otherwise.

Section 3. Neither any amendment nor repeal of any Section of this Article VIII, nor the adoption of any provision of the Restated Certificate of Incorporation inconsistent with this Article VIII, shall adversely affect any right or protection of any director or officer established pursuant to this Article VIII existing at the time of such amendment, repeal or adoption of an inconsistent provision, including without limitation by eliminating or reducing the effect of this Article VIII, for or in respect of any act, omission or other matter occurring, or any action or proceeding accruing or arising (or that, but for this Article VIII, would accrue or arise) prior to such amendment, repeal or adoption of an inconsistent provision.

ARTICLE IX

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

ARTICLE X

Section 1. Except as otherwise provided for or fixed by or pursuant to the provisions of Article IV hereof in relation to the rights of the holders of Preferred Stock to elect directors under specified circumstances, newly-created directorships resulting from any increase in the number of directors, created in accordance with the Bylaws of the Corporation, and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and qualified, or until such director’s earlier death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

Section 2. Any director or the entire Board of Directors may be removed from office at any time, but only for cause, and only by the affirmative vote of the holders of at least a majority of the voting

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power of the issued and outstanding capital stock of the Corporation entitled to vote in the election of directors.

ARTICLE XI

Advance notice of new business and stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation.

ARTICLE XII

Section 1. Stockholders of the Corporation may not take action by written consent in lieu of a meeting, but must take any actions at a duly called annual or special meeting.

Section 2. Unless otherwise required by law, special meetings of the stockholders of the Corporation, for any purpose or purposes, may be called only by either (i) the Board of Directors of the Corporation, (ii) the Chairman of the Board of Directors of the Corporation, if there be one, (iii) the Chief Executive Officer of the Corporation or (iv) the President of the Corporation.

ARTICLE XIII

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.”

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IN WITNESS WHEREOF , Overstock.com, Inc. has caused this Restated Certificate of Incorporation to be signed by Patrick M. Byrne.

	Overstock.com, Inc. a Delaware Corporation

	By:
		Patrick M. Byrne,
		President and Chief Executive Officer

Exhibit 3.2C

BYLAWS

OVERSTOCK.COM, INC.

(a Delaware corporation)

TABLE OF CONTENTS

		Page

ARTICLE I CORPORATE OFFICES		1

1.1	REGISTERED OFFICE	1
1.2	OTHER OFFICES	1

ARTICLE II MEETINGS OF STOCKHOLDERS		1

2.1	PLACE OF MEETINGS	1
2.2	ANNUAL MEETING	1
2.3	SPECIAL MEETING	1
2.4	NOTICE OF STOCKHOLDERS’ MEETINGS	2
2.5	MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE	2
2.6	QUORUM	2
2.7	ADJOURNED MEETING; NOTICE	3
2.8	VOTING	3
2.9	VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT	3
2.10	STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING	4
2.11	RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS	4
2.12	PROXIES	4
2.13	INSPECTORS OF ELECTION	4
2.14	ADVANCE NOTICE OF STOCKHOLDER BUSINESS	5
2.15	ADVANCE NOTICE OF DIRECTOR NOMINATIONS	6

ARTICLE III DIRECTORS		7

3.1	POWERS	7
3.2	NUMBER AND TERM OF OFFICE	7
3.3	RESIGNATION AND VACANCIES	7
3.4	REMOVAL	8
3.5	PLACE OF MEETINGS; MEETINGS BY TELEPHONE	8
3.6	REGULAR MEETINGS	8
3.7	SPECIAL MEETINGS; NOTICE	8
3.8	QUORUM	9
3.9	WAIVER OF NOTICE	9
3.10	ADJOURNMENT	9
3.11	NOTICE OF ADJOURNMENT	9
3.12	BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING	9
3.13	FEES AND COMPENSATION OF DIRECTORS	10
3.14	APPROVAL OF LOANS TO OFFICERS	10
3.15	INTERESTED DIRECTORS	10

ARTICLE IV COMMITTEES		10

4.1	COMMITTEES OF DIRECTORS	10

ARTICLE V OFFICERS		11

5.1	OFFICERS	11
5.2	ELECTION OF OFFICERS	12

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TABLE OF CONTENTS
(continued)



		Page

5.3	SUBORDINATE OFFICERS	12
5.4	REMOVAL AND RESIGNATION OF OFFICERS	12
5.5	VACANCIES IN OFFICES	12
5.6	CHAIRMAN OF THE BOARD	12
5.7	CHIEF EXECUTIVE OFFICER	12
5.8	PRESIDENT	13
5.9	VICE PRESIDENTS	13
5.10	SECRETARY	13
5.11	CHIEF FINANCIAL OFFICER	13

ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS		14

6.1	POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION	14
6.2	POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION	14
6.3	AUTHORIZATION OF INDEMNIFICATION	15
6.4	GOOD FAITH DEFINED	15
6.5	INDEMNIFICATION BY A COURT	15
6.6	EXPENSES PAYABLE IN ADVANCE	16
6.7	NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES	16
6.8	INSURANCE	16
6.9	CERTAIN DEFINITIONS	16
6.10	SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES	17
6.11	LIMITATION ON INDEMNIFICATION	17
6.12	INDEMNIFICATION OF EMPLOYEES AND AGENTS	17

ARTICLE VII RECORDS AND REPORTS		17

7.1	MAINTENANCE AND INSPECTION OF RECORDS	17
7.2	INSPECTION BY DIRECTORS	18
7.3	ANNUAL STATEMENT TO STOCKHOLDERS	18
7.4	REPRESENTATION OF SHARES OF OTHER CORPORATIONS	18

ARTICLE VIII GENERAL MATTERS		18

8.1	RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING	18
8.2	CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS	19
8.3	CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED	19
8.4	STOCK CERTIFICATES; PARTLY PAID SHARES	19
8.5	SPECIAL DESIGNATION ON CERTIFICATES	19
8.6	LOST CERTIFICATES	20
8.7	CONSTRUCTION; DEFINITIONS	20

ARTICLE IX AMENDMENTS		20

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BYLAWS

OVERSTOCK.COM, INC.

(a Delaware corporation)

ARTICLE I

CORPORATE OFFICES

1.1 REGISTERED OFFICE

The registered office of the corporation shall be fixed in the Certificate of Incorporation of the corporation.

1.2 OTHER OFFICES

The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS

Meetings of stockholders shall be held at any place within or outside the State of Delaware designated from time to time by the board of directors. In the absence of any such designation, stockholders’ meetings shall be held at the registered office of the corporation.

2.2 ANNUAL MEETING

The annual meeting of stockholders shall be held each year on a date and at a time designated from time to time by the board of directors. In the absence of such designation, the annual meeting of stockholders shall be held on the first Wednesday of May in each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected, and any other proper business may be transacted.

2.3 SPECIAL MEETING

Unless otherwise required by law, a special meeting of the stockholders may be called at any time only by the board of directors, or by the chairman of the board, by the chief executive officer, or by the president.

If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, chief executive officer, or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in the notice of such special meeting delivered to stockholders (or any supplement thereto).

2.4 NOTICE OF STOCKHOLDERS’ MEETINGS

All notices of meetings of stockholders shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date, and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted (no business other than that specified in the notice (or in any supplement thereto) may be transacted) or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the stockholders (but any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, the board intends to present for election.

2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

Written notice of any meeting of stockholders shall be given by first-class mail or by facsimile, telegraphic or other written communication or in such other manner as permitted by law. Notices shall be sent charges prepaid and shall be addressed to the stockholder at the address of that stockholder appearing on the books of the corporation or given by the stockholder to the corporation for the purpose of notice. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.

If any notice addressed to a stockholder at the address of that stockholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the stockholder at that address, then all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the stockholder on written demand of the stockholder at the principal executive office of the corporation for a period of one (1) year from the date of the giving of the notice.

An affidavit of the mailing or other means of giving any notice (or supplement thereto) of any stockholders’ meeting, executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, shall be prima facie evidence of the giving of such notice (or supplement thereto).

2.6 QUORUM

The presence in person or by proxy of the holders of a majority of the shares entitled to vote thereat constitutes a quorum for the transaction of business at all meetings of stockholders. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business for which such meeting is called until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

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2.7 ADJOURNED MEETING; NOTICE

Any stockholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as has been transacted while a quorum was present, if any, as provided in Section 2.6 of these bylaws.

When any meeting of stockholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than thirty (30) days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Notice of any such adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.

2.8 VOTING

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners, and to voting trusts and other voting agreements).

Except as may be otherwise provided in the Certificate of Incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of the stockholders.

If a quorum is present, the affirmative vote of the majority of the shares represented and voting at a duly held meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the stockholders, unless the vote of a greater number or a vote by classes is required by law, by the Certificate of Incorporation or by these bylaws. The board of directors, in its discretion, or the officer of the corporation presiding at a meeting of stockholders, in such officer’s discretion, may require that any votes cast at such meeting shall be cast by written ballot.

Unless otherwise provided in the Amended and Restated Certificate of Incorporation (as amended and restated from time to time, the “Restated Certificate of Incorporation”), a stockholder shall not be entitled to cumulate votes at any.

2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT

The transactions of any meeting of stockholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. The waiver of notice or consent or approval need not specify either the business to be transacted or the purpose of any annual or special meeting of stockholders. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

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Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by law to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.

2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Stockholders of the corporation may not take action by written consent in lieu of a meeting, but must take any actions at a duly called annual or special meeting.

2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS

For purposes of determining the stockholders entitled to notice of any meeting or to vote thereat or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in such event only stockholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date.

If the board of directors does not so fix a record date, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; providing, however, that the board of directors may fix a new record date for the adjourned meeting. The record date for any other purpose shall be as provided in Article VIII of these bylaws.

2.12 PROXIES

Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact. The provisions of Section 212(e) of the General Corporation Law of Delaware shall govern the revocability of a proxy that states on its face that it is irrevocable.

2.13 INSPECTORS OF ELECTION

The board of directors of the corporation may adopt by resolution such rules and regulations for the conduct of the meeting of the stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the board of directors, the chairman of any meeting of the stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the board of directors or prescribed by the

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chairman of the meeting, and such acts may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (iii) rules and procedures for maintaining order at the meeting and the safety of those present; (iv) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (v) restrictions on entry to the meeting after the time fixed for the commencement thereof; (vi) limitations on the time allotted to questions or comments by participants; (vii) determination of the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies; (viii) counting and tabulation of all votes or consents; (ix) hearing and determining all challenges and questions in any way arising in connection with the right to vote; (x) any other acts that may be proper to conduct the election or vote with fairness to all stockholders and (xi) the appointment of an inspector or inspectors of election to act at the meeting or its adjournment in respect of one or more of the foregoing matters. The board of directors or chairman may hear and determine all challenges and questions in any way arising in connection with the right to vote.

2.14 ADVANCE NOTICE OF STOCKHOLDER BUSINESS

To be properly brought before an annual meeting, any business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a stockholder (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.14 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 2.14. For such nominations or other business to be considered properly brought before the meeting by a stockholder such stockholder must, in addition to any other applicable requirements, have given timely notice and in proper form of such stockholder’s intent to bring such business before such meeting.

To be timely, such stockholder’s notice must be delivered to or mailed and received by the Secretary of the corporation at the principal executive offices of the corporation not less than sixty (60) days prior to the anniversary date of the mailing of the proxy materials for the immediately preceding annual meeting; provided, however, that in the event the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder to be timely must be so received not later than the close of business on the tenth (10 ^th )day following the day on which such notice of the date of the meeting was mailed or such public disclosure made, whichever occurs first. To be in proper form, a stockholder’s notice to the Secretary shall set forth:

(a) the name and record address of the stockholder who intends to propose the business and the class or series and number of shares of capital stock of the corporation which are owned beneficially or of record by such stockholder;

(b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting introduce the business specified in the notice;

(c) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; and

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(d) any material interest of the stockholder in such business.

No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.14; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.14 shall be deemed to preclude discussion by any stockholder of any such business. The chairman of the meeting may refuse to acknowledge the proposal of any business not made in compliance with the foregoing procedure.

2.15 ADVANCE NOTICE OF DIRECTOR NOMINATIONS

Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the corporation to nominate and elect a specified number of directors in certain circumstances. To be properly brought before an annual meeting, meeting of stockholders, or any special meeting of stockholders called for the purpose of electing directors, nominations for the election of director must be specified in the notice of meeting (or any supplement thereto), (a) made by or at the direction of the board of directors (or any duly authorized committee thereof) or (b) made by any stockholder of the corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.15 and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 2.15.

In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the corporation. To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the corporation (a) in the case of an annual meeting, not less than sixty (60) days prior to the anniversary date of the mailing of the proxy materials for the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs.

To be in proper written form, a stockholder’s notice to the Secretary must set forth:

(a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder; and

(b) as to the stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the corporation which are owned

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beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section 2.15. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

ARTICLE III

DIRECTORS

3.1 POWERS

Subject to the provisions of the General Corporation Law of Delaware and to any limitations in the Restated Certificate of Incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.

3.2 NUMBER AND TERM OF OFFICE

The authorized number of directors shall be established from time to time by resolution of the board of directors or by amendment of this Section 3.2, duly adopted by the board of directors or by the stockholders.

No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

3.3 RESIGNATION AND VACANCIES

Any director may resign effective on giving notice in writing or by electronic transmission to the chairman of the board, the president, the secretary or the board of directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors (including such director whose resignation is to be effective at a later time) may elect a successor to take office when the resignation becomes effective.

Unless otherwise required by law or the Restated Certificate of Incorporation, vacancies arising through death, resignation, removal, an increase in the number of directors or otherwise may be filled only by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such

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director’s successor shall have been elected and qualified, or until such director’s earlier death, resignation or removal. No decrease in the number of directors constituting the board of directors shall shorten the term of any incumbent director.

3.4 REMOVAL

Any director may be removed from office at any time only with cause by the affirmative vote of the holders of at least a majority of the then outstanding shares of the capital stock of the corporation entitled to vote at an election of directors.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

Regular meetings of the board of directors may be held at any place within or outside the State of Delaware that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held at any place within or outside the State of Delaware that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation.

Any meeting, regular or special, may be held by conference telephone or other communication equipment, so long as all directors participating in the meeting can hear one another; and all such directors shall be deemed to be present in person at the meeting.

3.6 REGULAR MEETINGS

Regular meetings of the board of directors may be held without notice if the board of directors fixes the times of such meetings.

3.7 SPECIAL MEETINGS; NOTICE

The chairman of the board, the president, or any two directors may call special meetings of the board of directors for any purpose or purposes at any time.

Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail, facsimile, electronic transmission or telegram, charges prepaid, addressed to each director at that director’s address or, in the case of notice delivered by electronic mail, the director’s electronic mail address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by notice, facsimile or electronic transmission, it shall be delivered personally or by telephone, facsimile machine or appropriate means of electronic communication at least forty-eight (48) hours before the time of the holding of the meeting or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. An affidavit of the secretary or an assistant secretary of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

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3.8 QUORUM

Except as otherwise required by law, a majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.11 of these bylaws. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of the Certificate of Incorporation and applicable law.

A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

3.9 WAIVER OF NOTICE

Notice of a meeting need not be given to any director (a) who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or (b) who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such directors. All such waivers, consents, and approvals shall be filed with the corporate records or made part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the board of directors.

3.10 ADJOURNMENT

A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.

3.11 NOTICE OF ADJOURNMENT

Notice of the time and place of holding an adjourned meeting need not be given unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified in Section 3.7 of these bylaws, to the directors who were not present at the time of the adjournment.

3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Any action required or permitted to be taken by the board of directors may be taken without a meeting, provided that all the members of the board individually or collectively consent in writing or by electronic transmission to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent and any counterparts thereof or electronic transmission or transmissions shall be filed with the minutes of the proceedings of the board. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

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3.13 FEES AND COMPENSATION OF DIRECTORS

Directors and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the board of directors. This Section 3.13 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation for those services.

3.14 APPROVAL OF LOANS TO OFFICERS

The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing contained in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

3.15 INTERESTED DIRECTORS

No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of directors or committee thereof which authorizes the contract or transaction, or solely because the director or officer’s vote is counted for such purpose if (a) the material facts as to the director or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board of directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to the director or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction.

ARTICLE IV

COMMITTEES

4.1 COMMITTEES OF DIRECTORS

The board of directors may designate one (1) or more committees, each consisting of one (1) or more directors, to serve at the pleasure of the board. The board may designate one (1) or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the board of

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directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent permitted by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; provided, however, that no such committee shall have the power or authority to (i) amend the Restated Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation’s property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the Restated Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. Each committee shall keep regular minutes and report to the board of directors when required

4.2 MEETINGS AND ACTION OF COMMITTEES

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section 3.12 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

ARTICLE V

OFFICERS

5.1 OFFICERS

The officers of the corporation shall be a president, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, a chief executive officer, a treasurer, one or more vice presidents, one or more assistant secretaries, one or more

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assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. The same person may hold any number of offices.

5.2 ELECTION OF OFFICERS

The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws, shall be chosen by the board of directors, subject to the rights, if any, of an officer under any contract of employment.

5.3 SUBORDINATE OFFICERS

The board of directors may appoint, or may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.

5.4 REMOVAL AND RESIGNATION OF OFFICERS

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors at any regular or special meeting of the board or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.

Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

5.5 VACANCIES IN OFFICES

A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office.

5.6 CHAIRMAN OF THE BOARD

The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws. If there is no chief executive officer, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these bylaws.

5.7 CHIEF EXECUTIVE OFFICER

Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the chief executive officer shall be subject to the control of the board of directors and have general supervision, direction and control of the business. He or she shall preside at all meetings of the stockholders and, in the absence or non-existence of the chairman of the board, at all meetings of the board of directors. He or she shall have the general powers and duties of management usually vested in

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the office of the chief executive officer of a corporation, and shall have such other powers and perform such other duties as from time to time may be prescribed by the board of directors or these bylaws.

5.8 PRESIDENT

In the absence or disability of the chief executive officer, and if there is no chairman of the board, the president shall perform all the duties of the chief executive officer and when so acting shall have the power of, and be subject to all the restrictions upon, the chief executive officer. The president shall have such other powers and perform such other duties as from time to time may be prescribed for the president by the board of directors, these bylaws, the chief executive officer or the chairman of the board.

5.9 VICE PRESIDENTS

In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board.

5.10 SECRETARY

The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.

5.11 CHIEF FINANCIAL OFFICER

The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.

The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated in accordance with procedures established by the

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board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS

6.1 POWER TO INDEMNIFY IN ACTIONS , SUITS OR PROCEEDINGS OTHER
THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION

Subject to Section 6.3 of this Article VI, the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s con-duct was unlawful.

6.2 POWER TO INDEMNIFY IN ACTIONS , SUITS OR PROCEEDINGS BY
OR IN THE RIGHT OF THE CORPORATION

Subject to Section 6.3 of this Article VI, the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

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6.3 AUTHORIZATION OF INDEMNIFICATION

Any indemnification under this Article VI (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 6.1 or Section 6.2 of this Article VI, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (a) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (b) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (c) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (d) by the stockholders (but only if a majority of the directors who are not parties to such action, suit or proceeding, if they constitute a quorum of the board of directors, presents the issue of entitlement to indemnification to the stockholders for their determination). Any person or persons having the authority to act on the matter on behalf of the corporation shall make such determination, with respect to former directors and officers. To the extent, however, that a present or former director or officer of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.

6.4 GOOD FAITH DEFINED

For purposes of any determination under Section 6.3 of this Article VI, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person’s conduct was unlawful, if such person’s action is based on the records or books of account of the corporation or another enterprise, or on information supplied to such person by the officers of the corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the corporation or another enterprise or on information or records given or reports made to the corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the corporation or another enterprise. The term “another enterprise” as used in this Section 6.4 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the corporation as a director, officer, employee or agent. The provisions of this Section 6.4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 6.1 or 6.2 of this Article VI, as the case may be.

6.5 INDEMNIFICATION BY A COURT

Notwithstanding any contrary determination in the specific case under Section 6.3 of this Article VI, and not withstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery in the State of Delaware for indemnification to the extent otherwise permissible under Sections 6.1 and 6.2 of this Article VI. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standards of conduct set forth in Section 6.1 or 6.2 of this Article VI, as the case may be. Neither a contrary determination in the specific case under Section 6.3 of this Article VI nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any

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application for indemnification pursuant to this Section 5 shall be given to the corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.

6.6 EXPENSES PAYABLE IN ADVANCE

Expenses incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this Article VI.

6.7 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

The indemnification and advancement of expenses provided by or granted pursuant to this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Restated Certificate of Incorporation, any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, it being the policy of the corporation that indemnification of the persons specified in Sections 6.1 and 6.2 of this Article VI shall be made to the fullest extent permitted by law. The provisions of this Article VI shall not be deemed to preclude the indemnification of any person who is not specified in Section 6.1 or 6.2 of this Article VI but whom the corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise.

6.8 INSURANCE

The corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article VI.

6.9 CERTAIN DEFINITIONS

For purposes of this Article VI, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VI, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a

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director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Article VI.

6.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

6.11 LIMITATION ON INDEMNIFICATION

Notwithstanding anything contained in this Article VI to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 6.5 hereof), the corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the board of directors of the corporation.

6.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS

The corporation may, to the extent authorized from time to time by the board of directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the corporation similar to those conferred in this Article VI to directors and officers of the corporation.

ARTICLE VII

RECORDS AND REPORTS

7.1 MAINTENANCE AND INSPECTION OF RECORDS

The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books and other records.

Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.

The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the

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meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Nothing contained in this Section shall require the corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

7.2 INSPECTION BY DIRECTORS

Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

7.3 ANNUAL STATEMENT TO STOCKHOLDERS

The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.

7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS

The chairman of the board, the chief executive officer, the president or any other person authorized by the board of directors or the chief executive officer or president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

ARTICLE VIII

GENERAL MATTERS

8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING

For purposes of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any other

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lawful action (other than action by stockholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action. In that case, only stockholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided by law.

If the board of directors does not so fix a record date, then the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.

8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS

From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED

The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

8.4 STOCK CERTIFICATES; PARTLY PAID SHARES

The shares of a corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed in the name of the corporation by(a) the chairman or vice-chairman of the board of directors, or the chief executive officer, president or vice-president, and by (b) the chief financial officer, treasurer, secretary or an assistant secretary of the corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

8.5 SPECIAL DESIGNATION ON CERTIFICATES

If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such

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preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

8.6 LOST CERTIFICATES

Except as provided in this Section 8.6, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of replacement certificates on such terms and conditions as the board may require; the board may require indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.

8.7 CONSTRUCTION; DEFINITIONS

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the General Corporation Law of Delaware shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person. Also without limiting the generality of this provision, for purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

ARTICLE IX

AMENDMENTS

These bylaws of the corporation may be altered, amended or repealed, in whole or in part, or new bylaws may be adopted by the stockholders entitled to vote or by the board of directors. All such amendments must be approved by either the holders of sixty six and two thirds percent (66%) of the voting power of outstanding capital stock entitled to vote at an election of directors or by a majority of the board of directors then in office. The fact that such power has been so conferred upon the board of directors shall not divest the stockholders of the power, nor limit their power to adopt, alter, amend or repeal bylaws.

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EXHIBIT 4.1

NUMBER

Overstock.com, Inc.

INCORPORATED UNDER THE LAWS OF		SEE REVERSE FOR STATEMENT RELATING TO
THE STATE OF DELAWARE		RIGHTS, REFERENCES, PRIVILEGES
		AND RESTRICTIONS, IF ANY

This Certificates that is		CUSIP [_____________]

the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK,

PAR VALUE $0.0001 PER SHARE, OF OVERSTOCK.COM, INC.

transferable only on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.

WITNESS the facsimile seal of the Corporation and the facsimile signature of its duly authorized officers.

Dated

[SIGNATURE ILLEGIBLE]

[SEAL]

PRESIDENT AND CHIEF EXECUTIVE OFFICER

SECRETARY

COUNTERSIGNED AND REGISTERED:

[_________________]

TRANSFER AGENT AND REGISTRAR

BY:

OVERSTOCK.COM, INC.

A statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights as established, from time to time, by the Certificate of Incorporation and by any certificate of determination, the number of shares constituting each class and series, and designations thereof, may be obtained by the holder hereof upon request and without charge at the principal office of the Corporation.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM--as tenants in common	UNIF GIFT MIN ACT--		Custodian
TEN ENT--as tenants by the entireties		(Cust)		(Minor)
JT TEN--as joint tenants with right of survivorship and not as tenants in common		under Uniform Gifts to Minors Act
		(State)

	UNIF TRF MIN ACT--	Custodian (until age)
		under Uniform Transfers to Minors Act

		(State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, ___________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFICATION NUMBER OF ASSIGNEE: _________________

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EXHIBIT 5.1

[Wilson Sonsini Goodrich & Rosati Letterhead]

May 6, 2002

Overstock.com, Inc.
6322 S. 3000 East, Suite 100
Salt Lake City, Utah 84121

Re:: Amendment No. 3 to Registration Statement on Form S-1

Ladies and Gentlemen:

We have examined the Amendment No. 3 to Registration Statement on Form S-1 to be filed on or about the date hereof by Overstock.com, Inc., a Delaware corporation (the "Company"), with the Securities and Exchange Commission in connection with the registration under the Securities Act of 1933, as amended (the "Registration Statement"), of up to 3,450,000 shares of the Company's common stock (the "Shares"). The Shares consist of 2,155,000 shares to be issued and sold by the Company (the "Primary Shares"), 845,000 shares to be sold by the selling stockholder indicated in the Registration Statement (the "Selling Stockholder Shares") and an over-allotment option granted to the underwriters to purchase 450,000 newly issued shares to be sold by the Company (the "Over-allotment Shares" and together with the Primary Shares the "Company Shares").

The Shares are to be sold to the underwriter for resale to the public as described in the Registration Statement and pursuant to the underwriting agreement to be filed as an exhibit thereto. As legal counsel to the Company, we have examined the proceedings proposed to be taken in connection with said sale and issuance of the Company Shares.

Based upon the foregoing, we are of the opinion that the Shares, when issued in the manner described in the Registration Statement, will be duly authorized, validly issued, fully paid and non-assessable.

We consent to the use of this opinion as an exhibit to the Registration Statement, and further consent to the use of our name wherever appearing in the Registration Statement, including the prospectus constituting a part thereof, and any amendment thereto.

		Very truly yours,
		/s/ WILSON SONSINI GOODRICH & ROSATI
		WILSON SONSINI GOODRICH & ROSATI Professional Corporation

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EXHIBIT 5.1

EXHIBIT 10.1

OVERSTOCK.COM, INC.

INDEMNIFICATION AGREEMENT

THIS AGREEMENT (the “ Agreement ”) is made and entered into as of ________, 2002, by and between Overstock.com, Inc., a Delaware corporation (the “ Company ”), and [____________] (“ Indemnitee ”).

RECITALS

WHEREAS , Indemnitee performs a valuable service for the Company; and

WHEREAS , the Board of Directors of the Company has adopted Bylaws (the “ Bylaws ”) providing for the indemnification of the officers and directors of the Company to the maximum extent authorized by Section 145 of the Delaware General Corporation Law, as amended (“ Delaware Law ”); and

WHEREAS , the Bylaws and Delaware Law, by their nonexclusive nature, permit contracts between the Company and the officers or directors of the Company with respect to indemnification of such officers or directors; and

WHEREAS , in accordance with the authorization as provided by Delaware Law, the Company may purchase and maintain a policy or policies of directors’ and officers’ liability insurance (“ D & O Insurance ”), covering certain liabilities which may be incurred by its officers or directors in the performance of their obligations to the Company; and

WHEREAS , in order to induce Indemnitee to continue to serve as an officer or director of the Company, the Company has determined and agreed to enter into this contract with Indemnitee;

NOW, THEREFORE , in consideration of Indemnitee’s service as an officer or director after the date hereof, the parties hereto agree as follows:

1. Indemnity of Indemnitee . The Company hereby agrees to hold harmless and indemnify Indemnitee to the full extent authorized or permitted by the provisions of Delaware Law, as such may be amended from time to time, and the Bylaws, as such may be amended. In furtherance of the foregoing indemnification, and without limiting the generality thereof:

(a) Proceedings Other Than Proceedings by or in the Right of the Company . Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in

connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful.

(b) Proceedings by or in the Right of the Company . Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; provided, however , that, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware shall determine that such indemnification may be made.

(c) Indemnification for Expenses of a Party Who is Wholly or Partly Successful . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

2. Additional Indemnity . In addition to, and without regard to any limitations on, the indemnification provided for in Section 1, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful under Delaware law.

3. Contribution in the Event of Joint Liability .

(a) Whether or not the indemnification provided in Section 1 and Section 2 above is available, in respect of any threatened, pending or completed action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such

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action, suit or proceeding), Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. Company shall not enter into any settlement of any action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

(b) Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), Company shall contribute to the amount of expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which the law may require to be considered. The relative fault of Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary, and the degree to which their conduct is active or passive.

(c) Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee.

4. Indemnification for Expenses of a Witness . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

5. Advancement of Expenses . Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within 10 days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by

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Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 5 shall be subject to the condition that, if, when and to the extent that the Company determines that Indemnitee would not be permitted to be indemnified under applicable law, the Company shall be entitled to be reimbursed, within 30 days of such determination, by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Company that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed).

6. Procedures and Presumptions for Determination of Entitlement to Indemnification . It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the law and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

(a) To obtain indemnification (including, but not limited to, the advancement of Expenses and contribution by the Company) under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Company’s Board of Directors in writing that Indemnitee has requested indemnification.

(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following three methods, which shall be at the election of Indemnitee: (i) by a majority vote of the disinterested directors, even though less than a quorum, or (ii) by independent legal counsel in a written opinion, or (iii) by the stockholders.

(c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors). Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may

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be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed.

(d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 6(a) of this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence.

(e) Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence.

(f) If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 30 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not

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materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however , that such 30-day period may be extended for a reasonable time, not to exceed an additional 15 days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating documentation or information relating thereto; and provided, further , that the foregoing provisions of this Section 6(g) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within 15 days after receipt by the Company of the request for such determination the Board of Directors or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within 75 days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made thereat.

(g) Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Company’s Board of Directors, or stockholder of the Company shall act reasonably and in good faith in making a determination under the Agreement of the Indemnitee’s entitlement to indemnification. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(h) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence.

7. Remedies of Indemnitee .

(a) In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 6(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within 10 days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not

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made within 10 days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a). The Company shall not oppose Indemnitee’s right to seek any such adjudication.

(b) In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination under Section 6(b).

(c) If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent a prohibition of such indemnification under applicable law.

(d) In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company the Company shall pay on his behalf, in advance, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.

(e) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement.

8. Non–Exclusivity; Survival of Rights; Insurance; Subrogation .

(a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the certificate of incorporation of the Company, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware Law, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or

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remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies.

(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

9. Exception to Right of Indemnification . Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification under this Agreement with respect to any Proceeding brought by Indemnitee, or any claim therein, unless (a) the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors of the Company or (b) such Proceeding is being brought by the Indemnitee to assert, interpret or enforce his rights under this Agreement.

10. Duration of Agreement . All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or any other Enterprise at the Company’s request.

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11. Security . To the extent requested by the Indemnitee and approved by the Company’s Board of Directors, the Company may at any time and from time to time provide security to the Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to the Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.

12. Enforcement .

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

13. Definitions . For purposes of this Agreement:

(a) “Corporate Status” describes the status of a person who is or was a director, officer, employee or agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the express written request of the Company.

(b) “ Disinterested Director ” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(c) “ Enterprise ” shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

(d) “ Expenses ” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding.

(e) “ Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding

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the foregoing, the term “ Independent Counsel ” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

(f) “ Proceeding ” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director of the Company, by reason of any action taken by him or of any inaction on his part while acting as an officer or director of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other Enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement; and excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement.

14. Severability . If any provision or provisions of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, illegal or otherwise unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

15. Modification and Waiver . No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

16. Notice By Indemnitee . Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

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17. Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

(a) If to Indemnitee, to the address set forth below Indemnitee signature hereto.

(b) If to the Company, to:

Overstock.com, Inc.

6322 South 3000 East, Suite 100

Salt Lake City, Utah 84121

Attention: Secretary

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

18. Identical Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

19. Headings . The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

20. Governing Law . The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware without application of the conflict of laws principles thereof.

21. Gender . Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.

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IN WITNESS WHEREOF , the parties hereto have executed this Indemnification Agreement as of the date first above written.

	OVERSTOCK.COM, INC.



	By:
		Signature of Authorized Signatory


	Print Name and Title


	Address:

AGREED TO AND ACCEPTED:



INDEMNITEE:



Signature


Print Name


Address:

EXHIBIT 10.5

OVERSTOCK.COM, INC.

2002 STOCK OPTION PLAN

(As adopted by the Board of Directors on April 23, 2002)

1. Purposes of the Plan . The purposes of this 2002 Stock Option Plan are:

• to attract and retain the best available personnel for positions of substantial responsibility,

• to provide additional incentive to Employees, Directors and Consultants, and

• to promote the success of the Company’s business.

Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan.

2. Definitions . As used herein, the following definitions shall apply:

(a) “ Administrator ” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.

(b) “ Applicable Laws ” means the requirements relating to the administration of stock option plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are, or will be, granted under the Plan.

(c) “ Board ” means the Board of Directors of the Company.

(d) “ Cause” means (i) an act of personal dishonesty taken by the Optionee in connection with his or her responsibilities as a Service Provider and intended to result in personal enrichment of the Optionee, (ii) Optionee being convicted of a felony, (iii) a willful act by the Optionee which constitutes gross misconduct and which is injurious to the Company, or (iv) following delivery to the Optionee of a written demand for performance from the Company which describes the basis for the Company’s reasonable belief that the Optionee has not substantially performed his duties, continued violations by the Optionee of his or her obligations to the Company which are demonstrably willful and deliberate on the Employee’s part.

(e) “ Change in Control ” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act),

directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;

(iii) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the effective date of the Plan, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iv) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

(f) “ Code ” means the Internal Revenue Code of 1986, as amended.

(g) “ Committee ” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.

(h) “ Common Stock ” means the common stock of the Company.

(i) “ Company ” means Overstock.com, Inc.

(j) “ Consultant ” means any natural person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.

(k) “ Director ” means a member of the Board.

(l) “ Disability ” means total and permanent disability as defined in Section 22(e)(3) of the Code.

(m) “ Employee ” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3) months following the 91 ^st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a

Nonstatutory Stock Option. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

(n) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

(o) “ Fair Market Value ” means, as of any date, the value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

(iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

(p) “ Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(q) “ Nonstatutory Stock Option ” means an Option not intended to qualify as an Incentive Stock Option.

(r) “ Notice of Grant ” means a written or electronic notice evidencing certain terms and conditions of an individual Option or Stock Purchase Right grant. The Notice of Grant is part of the Option Agreement.

(s) “ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(t) “ Option ” means a stock option granted pursuant to the Plan.

(u) “ Option Agreement ” means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.

(v) “ Option Exchange Program ” means a program whereby outstanding Options are surrendered in exchange for Options with a lower exercise price.

(w) “ Optioned Stock ” means the Common Stock subject to an Option or Stock Purchase Right.

(x) “ Optionee ” means the holder of an outstanding Option or Stock Purchase Right granted under the Plan.

(y) “ Parent ” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(z) “ Plan ” means this 2002 Stock Option Plan.

(aa) “ Restricted Stock ” means shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.

(bb) “ Restricted Stock Purchase Agreement ” means a written agreement between the Company and the Optionee evidencing the terms and restrictions applying to stock purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and the Notice of Grant.

(cc) “ Rule 16b-3 ” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(dd) “ Section 16(b) “ means Section 16(b) of the Exchange Act.

(ee) “ Service Provider ” means an Employee, Director or Consultant.

(ff) “ Share ” means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan.

(gg) “ Stock Purchase Right ” means the right to purchase Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

(hh) “ Subsidiary ” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

(ii) “ Voluntary Termination for Good Reason” means the Optionee voluntarily resigns within ninety (90) days after the occurrence of any of the following (i) without the Optionee’s express written consent, a material reduction of the Optionee’s duties, title, authority or responsibilities, relative to the Optionee’s duties, title, authority or responsibilities as in effect immediately prior to such reduction, or the assignment to Optionee of such reduced duties, title, authority or responsibilities; provided, however, that a reduction in duties, title, authority or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief Executive Officer of the Company remains as such following a Change of Control and is not made the Chief Executive Officer of the acquiring corporation) shall not by itself constitute grounds for a “Voluntary Termination for Good Reason;” (ii) a reduction by the Company in the base salary or annual incentive bonus of the Optionee as in effect immediately prior to such reduction; (iii) the relocation of the Optionee to a facility or a location outside of a 35 mile radius from the present facility or location, without the Optionee’s express written consent; or (iv)

any act or set of facts or circumstances which would, under applicable case law or statute constitute a constructive termination of the Optionee.

3. Stock Subject to the Plan . Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares that may be optioned and sold under the Plan is 18,100,183 Shares (on pre-reverse stock split basis) plus (a) any Shares which have been reserved but not issued under the Company’s 1999 Stock Option Plan (the “1999 Plan”) and (b) any Shares returned to the 1999 Plan as a result of termination of options or repurchase of Shares issued under the 1999 Plan. The Shares may be authorized, but unissued, or reacquired Common Stock.

If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided , however, that Shares that have actually been issued under the Plan, whether upon exercise of an Option or Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if unvested Shares are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan.

4. Administration of the Plan .

(a) Procedure .

(i) Multiple Administrative Bodies . Different Committees with respect to different groups of Service Providers may administer the Plan.

(ii) Section 162(m) . To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code.

(iii) Rule 16b-3 . To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.

(iv) Other Administration . Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.

(b) Powers of the Administrator . Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Options and Stock Purchase Rights may be granted hereunder;

(iii) to determine the number of shares of Common Stock to be covered by each Option and Stock Purchase Right granted hereunder;

(iv) to approve forms of agreement for use under the Plan;

(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

(vi) to reduce the exercise price of any Option or Stock Purchase Right to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or Stock Purchase Right shall have declined since the date the Option or Stock Purchase Right was granted;

(vii) to institute an Option Exchange Program;

(viii) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;

(ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;

(x) to modify or amend each Option or Stock Purchase Right (subject to Section 15(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;

(xi) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable;

(xii) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or Stock Purchase Right previously granted by the Administrator;

(xiii) to make all other determinations deemed necessary or advisable for administering the Plan.

(c) Effect of Administrator’s Decision . The Administrator’s decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options or Stock Purchase Rights.

5. Eligibility . Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

6. Limitations .

(a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

(b) Neither the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee’s right or the Company’s right to terminate such relationship at any time, with or without cause.

(c) The following limitations shall apply to grants of Options:

(i) No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than 12,000,000 Shares (on a pre-reverse stock split basis).

(ii) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 12,000,000 Shares (on a pre-reverse stock split basis), which shall not count against the limit set forth in subsection (i) above.

(iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 13.

(iv) If an Option is cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 13), the cancelled Option will be counted against the limits set forth in subsections (i) and (ii) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option.

7. Term of Plan . Subject to Section 19 of the Plan, the Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless terminated earlier under Section 15 of the Plan.

8. Term of Option . The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an

Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.

9. Option Exercise Price and Consideration .

(a) Exercise Price . The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

(B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction.

(b) Waiting Period and Exercise Dates . At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised.

(c) Form of Consideration . The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of:

(i) cash;

(ii) check;

(iii) promissory note;

(iv) other Shares which, in the case of Shares acquired directly or indirectly from the Company, (A) have been owned by the Optionee for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;

(v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;

(vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee’s participation in any Company-sponsored deferred compensation program or arrangement;

(vii) any combination of the foregoing methods of payment; or

(viii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

10. Exercise of Option .

(a) Procedure for Exercise; Rights as a Stockholder . Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be suspended during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share.

An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13 of the Plan.

Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(b) Termination of Relationship as a Service Provider . If an Optionee ceases to be a Service Provider, other than upon the Optionee’s death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the

Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(c) Disability of Optionee . If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(d) Death of Optionee . If an Optionee dies while a Service Provider, the Option may be exercised following the Optionee’s death within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Option Agreement), by the Optionee’s designated beneficiary, provided such beneficiary has been designated prior to Optionee’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Optionee, then such Option may be exercised by the personal representative of the Optionee’s estate or by the person(s) to whom the Option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following Optionee’s death. If, at the time of death, Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

11. Stock Purchase Rights .

(a) Rights to Purchase . Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically, by means of a Notice of Grant, of the terms, conditions and restrictions related to the offer, including the number of Shares that the offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree must accept such offer. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.

(b) Repurchase Option . Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser’s service with the Company for any reason

(including death or Disability). The purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at a rate determined by the Administrator.

(c) Other Provisions . The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.

(d) Rights as a Stockholder . Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a stockholder, and shall be a stockholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan.

12. Transferability of Options and Stock Purchase Rights . Unless determined otherwise by the Administrator, an Option or Stock Purchase Right may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option or Stock Purchase Right transferable, such Option or Stock Purchase Right shall contain such additional terms and conditions as the Administrator deems appropriate.

13. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Change in Control .

(a) Changes in Capitalization . In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares such that an adjustment is determined by the Administrator (in its sole discretion) to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Administrator shall, in such manner as it may deem equitable, adjust the number and class of Shares which may be delivered under the Plan, the number, class, and price of Shares covered by each outstanding Option and Stock Purchase Right, and the numerical Share limits of Sections 3 and 6.

(b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously

exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action.

(c) Merger or Change in Control . In the event of a merger of the Company with or into another corporation, or a Change in Control, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation.

In the event that the successor corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period.

For the purposes of this subsection (c), the Option or Stock Purchase Right shall be considered assumed if, following the merger or Change in Control, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger or Change in Control, the consideration (whether stock, cash, or other securities or property) received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or Change in Control.

(d) Involuntary Termination other than for Cause, Death or Disability or a Voluntary Termination for Good Reason, Following a Change of Control . If, within eighteen (18) months following a Change of Control, Optionee’s employment is terminated involuntarily by the Company or successor corporation other than for Cause, death or Disability or by the Optionee by a Voluntary Termination for Good Reason, then Optionee shall fully vest in and have the right to exercise his or her Option as to all of the Shares subject to each such Option including Shares as to which such Option would not otherwise be vested or exercisable.

14. Date of Grant . The date of grant of an Option or Stock Purchase Right shall be, for all purposes, the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant.

15. Amendment and Termination of the Plan .

(a) Amendment and Termination . The Board may at any time amend, alter, suspend or terminate the Plan.

(b) Stockholder Approval . The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c) Effect of Amendment or Termination . No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.

16. Conditions Upon Issuance of Shares .

(a) Legal Compliance . Shares shall not be issued pursuant to the exercise of an Option or Stock Purchase Right unless the exercise of such Option or Stock Purchase Right and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b) Investment Representations . As a condition to the exercise of an Option or Stock Purchase Right, the Company may require the person exercising such Option or Stock Purchase Right to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

17. Inability to Obtain Authority . The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

18. Reservation of Shares . The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

19. Stockholder Approval . The Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws.

OVERSTOCK.COM, INC.

2002 STOCK OPTION PLAN

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the 2002 Stock Option Plan shall have the same defined meanings in this Stock Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

[Optionee’s Name and Address]

You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:

Grant Number

Date of Grant

Vesting Commencement Date

Exercise Price per Share	$

Total Number of Shares Granted

Total Exercise Price	$

Type of Option:		Incentive Stock Option

		Nonstatutory Stock Option

Term/Expiration Date:

Vesting Schedule :

This Option shall be exercisable, in whole or in part, in accordance with the following schedule:

[28% of the Shares subject to the Option shall vest twelve months after the Vesting Commencement Date, and 2% of the Shares subject to the Option shall vest each month thereafter, subject to the Optionee continuing to be a Service Provider on such dates].

Termination Period :

This Option may be exercised for three months after Optionee ceases to be a Service Provider. Upon the death or Disability of the Optionee, this Option may be exercised for twelve months after Optionee ceases to be a Service Provider. In no event shall this Option be exercised later than the Term/Expiration Date as provided above.

II. AGREEMENT

A. Grant of Option .

The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Agreement (the “Optionee”) an option (the “Option”) to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the “Exercise Price”), subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail.

If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option (“NSO”).

B. Exercise of Option .

(a) Right to Exercise . This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the Plan and this Option Agreement.

(b) Method of Exercise . This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the “Exercise Notice”), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be completed by the Optionee and delivered to Secretary of the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Exercised Shares.

C. Method of Payment .

Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:

1. cash; or

2. check; or

3. consideration received by the Company under a formal cashless exercise program implemented by the Company in connection with the Plan; or

4. surrender of other Shares which (i) in the case of Shares acquired either directly or indirectly from the Company, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares.

D. Non-Transferability of Option .

This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by the Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

E. Term of Option .

This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.

F. Tax Obligations .

(a) Withholding Taxes . Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements applicable to the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.

(b) Notice of Disqualifying Disposition of ISO Shares . If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, or (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.

G. Entire Agreement; Governing Law .

The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of Delaware.

H. NO GUARANTEE OF CONTINUED SERVICE .

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

OPTIONEE:		OVERSTOCK.COM, INC.


Signature		By


Print Name		Title


Residence Address

EXHIBIT A

OVERSTOCK.COM, INC.

2002 STOCK OPTION PLAN

EXERCISE NOTICE

Overstock.com, Inc.

2855 East Cottonwood Parkway

Suite 500

Salt Lake City, UT 84121

Attention: Secretary or Chief Financial Officer

1. Exercise of Option . Effective as of today, ________________, _____, the undersigned (“Purchaser”) hereby elects to purchase ______________ shares (the “Shares”) of the Common Stock of Overstock.com, Inc. (the “Company”) under and pursuant to the 2002 Stock Option Plan (the “Plan”) and the Stock Option Agreement dated, _____ (the “Option Agreement”). Subject to adjustment in accordance with Section 13 of the Plan, the purchase price for the Shares shall be $_____, as required by the Option Agreement.

2. Delivery of Payment . Purchaser herewith delivers to the Company the full purchase price for the Shares.

3. Representations of Purchaser . Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.

4. Rights as Shareholder . Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance, except as provided in Section 13 of the Plan.

5. Tax Consultation . Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.

6. Entire Agreement; Governing Law . The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser’s interest except by means of a writing signed by the Company and Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of Delaware.

Submitted by:		Accepted by:

PURCHASER:		OVERSTOCK.COM, INC.


Signature		By


Print Name		Its

Address :		Address :






		Date Received

Exhibit 10.18

Amendment No. 1, Dated April 29, 2002

to Intellectual Property Assignment Agreement

Dated February 28, 2002

THIS AMENDMENT NO. 1, dated April 29, 2002 (“ Effective Date ”) to Intellectual Property Assignment Agreement (“ Agreement ”) dated February 28, 2002 (“ Amendment ”) is made and entered into by and between Overstock.com, Inc., a Utah corporation with offices at 6322 South, 3000 East, Suite 100, Salt Lake City, Utah 84121, its subsidiaries, affiliates, successors and assigns (“ Company ”) and Douglas Greene, an individual (“ Developer ”).

WHEREAS, the parties desire to clarify their understanding of the Technology and intellectual property assigned by Developer under the Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

1. Terms not otherwise defined in this Amendment shall have the meaning as set forth under the Agreement.

2. Schedule A of the Agreement is amended to read as follows:

“ Schedule A
Technology

1. The Overstock.com web site, any related infrastructure or system (including, but not limited to, transaction processing systems, network infrastructure and related software or content).

2. Application Server Technology (AST).

Multi-platform Internet software development facility and supporting middle level software, including, without limitation, the following components: AST Development Module and AST Enablement Module. AST enables software developers to easily create web-enabled applications which can be hosted across numerous hardware platforms, including Windows 2000, Windows NT, Linux, Unix, IBM AS400 and IBM MVS. AST supports development in C and C++.”

3. Except as expressly amended hereby, the Agreement remains unmodified and in full force and effect. This Amendment and the Agreement represent the entire agreement of the parties in respect to the subject matter of the Agreement and supersede all prior agreements between the parties, whether oral or written, of any nature whatsoever, with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the Effective Date.

DEVELOPER

COMPANY

By:

/s/ Douglas Greene

By:

/s/ Jason Lindsey

Name:

Douglas Greene

Name:

Jason Lindsey

Title:

CTO

Title:

CFO

Exhibit 10.19

REGISTRATION AND EXPENSES AGREEMENT

THIS REGISTRATION AND EXPENSES AGREEMENT (this “ Agreement ”) is made as of May 3, 2002 among Overstock.com, Inc., a Delaware corporation (the “ Company ”) and Amazon.com NV Investment Holdings, Inc. (the “ Selling Stockholder ”).

WHEREAS , the Company proposes to make an underwritten initial public offering (the (“ Offering ”) of its common stock (“ Common Stock ”) pursuant to a Registration Statement on Form S-1 (the “ Registration Statement ”) filed with the Securities and Exchange Commission (the “ SEC ”).

WHEREAS , the Selling Stockholder owns 23,947,282 shares of Common Stock as appropriately adjusted to give effect to stock splits, reverse stock splits, combinations, recapitalizations and similar events (the “ Shares ”) and is willing to sell all of the Shares in connection with the Offering. The Shares are sometimes referred to herein as “ Registrable Securities .”

WHEREAS , the Company believes it is in the best interests of the Company and its stockholders to include the Shares in the Registration Statement because the sale of the Shares pursuant to the Registration Statement will accomplish an orderly distribution of the Shares.

WHEREAS , the Company and the Selling Stockholder propose to enter into an underwriting agreement (such agreement in the form in which executed being herein called the “ Underwriting Agreement ”) with WR Hambrecht + Co., LLC (the “ Underwriter ”), with respect to the Offering.

WHEREAS , concurrent with the execution of this Agreement, the Selling Stockholder is entering into an Irrevocable Election to Sell (the “ Election to Sell ”), Irrevocable Power of Attorney (the “ Power of Attorney ”) and a Custody Agreement (the “ Custody Agreement ” and together with the Election to Sell and the Power of Attorney, the “Related Agreements” ).

WHEREAS , the Company is prepared to enter into such Underwriting Agreement and this Agreement to provide for certain expenses and commissions related to registration and sale of the Shares.

NOW, THEREFORE , in consideration of the mutual covenants set forth herein, the parties agree as follows:

1. Irrevocable Election to Sell . The Selling Stockholder shall elect to include and sell all of the Shares in the Registration Statement in accordance with the terms and provisions of the Election to Sell, the Power of Attorney and the Custody Agreement. The Company and the Selling Stockholder shall perform their respective obligations under the Underwriting Agreement and the Related Agreements.

2. Representations and Warranties of the Selling Stockholder . The Selling Stockholder hereby represents and warrants to the Company as follows:

a. The Selling Stockholder has good and marketable title to all of the Shares, free and clear of all liens, encumbrances, equities, security interests and claims whatsoever. Certificates in

negotiable form for the Shares to be sold by the Selling Stockholder have been placed in custody under the Custody Agreement for delivery under the Underwriting Agreement with the Custodian; the Selling Stockholder specifically agrees that the Shares represented by the certificates so held in custody for the Selling Stockholder will be subject to the interests of the Underwriter under the Underwriting Agreement (if and when it is consummated), that the arrangements made by the Selling Stockholder for such custody, including the Power of Attorney, are to the extent specified in such documents, irrevocable, and that the obligations of the Selling Stockholder under this Agreement or the Related Agreements shall not be terminated by any act of the Selling Stockholder or by operation of law, whether by the dissolution or liquidation of the Selling Stockholder or the occurrence of any other event, except to the extent specified herein or in the Related Agreements.

b. The performance of this Agreement and the Related Agreements and the consummation of the transactions herein and therein contemplated will not result in a breach or violation of any agreement to which the Selling Stockholder is a party or by which the Selling Stockholder is bound, other than a breach or violation that would not have a material adverse effect on the Selling Stockholder’s ability to perform its obligations under this Agreement.

c. The Selling Stockholder will not take, directly or indirectly, any action which constitutes an unlawful stabilization or manipulation of the price of sale of the Shares in the Offering.

d. The Selling Stockholder has not distributed any offering material in connection with the offering and sale of the Shares other than any Preliminary Prospectus, the Prospectus, the Registration Statement and other materials, if any, permitted by the Securities Act.

e. This Agreement and the Related Agreements have been duly authorized, executed and delivered by the Selling Stockholder and are valid and binding obligations of the Selling Stockholder.

3. Expenses. The Company shall (a) be responsible for and pay all Registration Expenses incurred in connection with the registration to be effected pursuant to the Registration Statement and (b) instruct the Underwriter to pay to the Selling Stockholder at the closing of the Offering from the Company’s proceeds from the Offering an amount equal to the Selling Expenses (the “Selling Expenses Payment” ) and to pay to the Selling Stockholder the reasonable expenses of one legal counsel to the Selling Stockholder in connection with the legal opinion to be delivered by the Selling Stockholder pursuant to the Underwriting Agreement (such amount not to exceed $10,000). For purposes of this Section 1, (i) “ Registration Expenses ” shall mean all expenses that are not Selling Expenses incurred in filing the Registration Statement and complying herewith, including, without limitation, all registration, listing, qualification and filing fees, printing expenses, fees and disbursements of counsel for the Company, accounting fees and related expenses, blue sky fees and all other expenses incident to or required by the registration contemplated hereby and the consummation of the sales of Common Stock referred to in the Registration Statement and (ii) “ Selling Expenses ” shall mean any underwriting fees, discounts or commissions in connection with the sale of the Shares by the Selling Stockholder to the Underwriter.

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4. Offering.

a. Selling Stockholder Election to Sell. Contemporaneous with the execution of this Agreement, the Selling Stockholder has entered into the Irrevocable Election to Sell pursuant to which (and subject to the terms of this Agreement, the Underwriting Agreement and the Related Agreements) the Selling Stockholder irrevocably agrees to sell all of the Shares in the Offering, subject to the Price Term and the Share Term being satisfied or waived in writing by the Selling Stockholder (and not pursuant to the Power of Attorney) in strict compliance with Section 4.c. below.

For the purposes of this Agreement, “Price Term” shall mean the proceeds to be received by the Selling Stockholder in connection with the sale of the Shares in the Offering when added to the Selling Expenses Payment equals or exceeds $10,000,000, and (b) “Share Term” shall mean all of the Shares must be sold in the Offering. The Price Term and the Share Term are referred together herein each as a “Selling Stockholder Condition” and collectively as the “Selling Stockholder Conditions.” Whether the Price Term and the Share Term are satisfied shall be based exclusively upon the advice to the Company by the Underwriter.

b. Company Agreement to Register the Shares . The Company agrees to register and include in the Offering all of the Shares, subject to the Price Term and the Share Term being satisfied or waived in writing by the Selling Stockholder (and not pursuant to the Power of Attorney) in strict compliance with Section 4.c. below, and subject to the terms and conditions of this Agreement, the Underwriting Agreement and the Related Agreements.

c. Failure to Satisfy the Selling Stockholder Conditions . If the Underwriter advises the Company that the Underwriter will not or does not expect to be able to enter into the Underwriting Agreement on terms that satisfy the Selling Stockholder Conditions, then the following provisions shall apply:

(i) Failure to Satisfy the Price Term . If the Underwriter advises the Company that it is not or does not expect to be able to enter into the Underwriting Agreement on terms that satisfy the Price Term, then the Company shall promptly deliver to the Selling Stockholder notice of such fact and of the price per share at which the Underwriter would be willing to enter into the Underwriting Agreement, and the Selling Stockholder shall have the opportunity to waive the Price Term and thereby include the Shares in the Offering notwithstanding the failure to satisfy the Price Term; provided, however, that (a) any such waiver shall be in writing, and, to be effective, shall be provided to the Company prior to the later of the Requested Effective Time (as defined in Section 4.d. below) and two hours after the Selling Stockholder’s receipt of the forgoing notice, and (b) the Selling Stockholder shall be deemed not to have waived the Price Term if no waiver is received by the Company in writing prior to the Requested Effective Time. The Selling Stockholder acknowledges and agrees that the Underwriter shall have no obligation to reduce the number of shares to be sold in the Offering, even if such reduction would reasonably be expected to increase the initial public offering price in the Offering or otherwise result in the satisfaction of the Price Term.

(ii) Failure to Satisfy the Share Term . If the Underwriter advises the Company it is not or does not expect to be able to enter into the Underwriting Agreement on terms that satisfy the Share Term, then the Company shall promptly deliver to the Selling Stockholder notice of such fact and of the aggregate number of shares (the “Offering Shares” ) with respect to which the

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Underwriter is or expects to be able to enter into the Underwriting Agreement. In such event, the Selling Stockholder shall have the right to elect to sell a number of the Shares up to its “Pro Rata Share” of the Offering Shares; provided, however, that (a) any such election shall be in writing, shall state the exact number of Shares the Selling Stockholder elects to sell in the offering, and, to be effective, shall be provided to the Company prior to the later of the Requested Effective Time (as defined in Section 4.d. below) and two hours after the Selling Stockholder’s receipt of the forgoing notice, and (b) the Selling Stockholder shall be deemed not to have elected to sell its Pro Rata Share if such election is not received by the Company in writing prior to the Requested Effective Time. For purposes of this Section 4.d.(ii), “Pro Rata Share” shall mean the quotient obtained by dividing (A) the number of Shares by (B) the aggregate number of shares indicated as being offered on the front cover page of the Company’s preliminary “red herring” prospectus distributed in connection with the Offering (excluding any shares to be sold pursuant to an overallotment option).

d. Process . The Company shall promptly provide the Selling Stockholder with written notice of its request to the Securities and Exchange Commission (the “SEC” ) to accelerate the effectiveness of the Registration Statement (the “Acceleration Request” ), which notice shall indicate the date and time so requested (the “Requested Effective Time” ). For at least two days prior to the Acceleration Request and through the Requested Effective Time, the Company shall, and shall cause the Underwriter to, provide the Selling Stockholder with regular (at least twice daily) updates of the status of the Offering, including the status of information with respect to whether the Selling Stockholder Conditions are expected to be satisfied, and shall instruct the Underwriter to communicate with the Selling Stockholder regarding the status of the Offering promptly following the Company giving notice pursuant to Section 4(c)(i) or (ii).

5. Underwriting Agreement. If the Underwriter, the Company and the Selling Stockholder decide (through an attorney–in–fact pursuant to the Power of Attorney or otherwise) to consummate the Offering by entering into the Underwriting Agreement, the Company and the Selling Stockholder agree that, except upon the written consent of the Selling Stockholder: (a) the sections of the Underwriting Agreement relating to representations and warranties of the Selling Stockholder and covenants of the Selling Stockholder shall be identical to those contained in Sections 3 and 8 respectively of the form of underwriting agreement attached hereto as Exhibit A (the “Draft Underwriting Agreement” ); (b) the indemnification and contribution terms of the Underwriting Agreement provided for the benefit of the Selling Stockholder shall be the same as the terms of Section 11 of the Draft Underwriting Agreement, to the extent such terms relate to the indemnification and contribution rights or obligations of the Selling Stockholder and (c) all other terms of the Underwriting Agreement will not differ from those contained in the Draft Underwriting Agreement in a manner that adversely affects or impairs the rights or increases the obligations of the Selling Stockholder as set forth in the Draft Underwriting Agreement. The Selling Stockholder agrees to be bound by an underwriting agreement that complies with the previous three clauses.

6. Selling Stockholder Disclosure .

a. Approved Disclosure . Without the prior written consent of the Selling Stockholder, the disclosure of the Selling Stockholder in the Registration Statement and any amendments thereto (as well as marketing presentations related to the Offering) shall be consistent with the disclosures contained in the Registration Statement attached hereto as Exhibit B (the “Approved

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Disclosure” ); provided, however, the Company shall not be required to obtain such consent if the Company receives no response from the Selling Stockholder within 24 hours of the Company’s written request for such consent (provided that once the Company provides the Selling Stockholder with the Notice of Effective Time, such consent must be received by the Company as soon as reasonably practicable but in any event prior to the later of the Requested Effective Time (as defined in Section 4.d. below) and two hours after the Company provides the Selling Stockholder with the proposed language change).

7. Miscellaneous.

a. Governing Law. This Agreement shall be governed by and construed under the internal laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware without reference to principles of conflict of laws or choice of laws.

b. Third Party Beneficiaries. Notwithstanding anything to the contrary contained herein, no provision of this Agreement is intended to benefit any party other than the parties to this Agreement and their respective heirs, distributees, executors, administrators, personal representatives, successors, and assigns, and no provision shall be enforceable by any other party; provided, however, that the Selling Stockholder may transfer and assign its rights and obligations under this Agreement and the Related Agreements to a direct or indirect wholly-owned subsidiary or direct or indirect parent.

c. Confidentiality . The Selling Stockholder shall not disclose to any person or entity, without the prior approval of the Company, any non-public information relating to the pricing and timing of the Offering obtained by virtue of this Agreement. The Selling Stockholder hereby agrees and consents to the filing of this Agreement as an exhibit to the Registration Statement and agrees that the Company shall have no obligation to request or seek confidential treatment of all or any portion thereof.

d. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

e. Headings. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which are incorporated herein by this reference.

f. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms to the maximum extent possible.

g. Entire Agreement. This Agreement, the Underwriting Agreement and the Related Agreements constitute the entire understanding and agreement of the parties with respect to the subject matter hereof and supersede all prior negotiations, correspondence, agreements, understandings, duties or obligations among the parties with respect to the subject matter hereof.

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h. Termination . This Agreement shall terminate and be of no further force or effect if the Underwriting Agreement shall not be entered into and the transactions contemplated thereby shall not be consummated prior to the 60th day after the date hereof, provided that Section 3(a) shall survive any termination.

i. Assignments . This Agreement shall be binding upon and inure to the benefit of the Company and the Selling Stockholder and their respective permitted distributees, transferees, successors and assigns (as well as any assignee, transferee or distributee of all or any portion of the Shares).

j. Further Assurances. From and after the date of this Agreement, upon the request of a party, the other party shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

k. Notice. All notices and communications hereunder shall be in writing and delivered to the addresses specified on Exhibit C (as at any time amended) by certified mail, overnight courier or facsimile. Such notice or communication shall be deemed delivered upon receipt if delivered by certified mail or overnight courier, and shall be deemed delivered at its transmittal time if sent by facsimile provided the party sending the facsimile communicates via telephone regarding the delivery of the facsimile to the intended recipient.

l. Power of Attorney. Any action to be taken by the Selling Stockholder under this Agreement, but not under the Related Agreements, shall not be taken pursuant to the Power of Attorney.

[ REMAINDER OF PAGE INTENTIALLY LEFT BLANK ]

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IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date first above written.

		OVERSTOCK.COM, INC.

		/s/ Patrick M. Byrne
		Patrick M. Byrne
		President and Chief Executive Officer

		AMAZON.COM NV INVESTMENT HOLDINGS, INC.

		/s/ Reynaldo Sermonia
		Signature of Authorized Signatory

		Vice President & Treasurer
		Print Name and Title

SIGNATURE PAGE TO REGISTRATION AND EXPENSES AGREEMENT

Exhibit 10.20

Certificate No. ____

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) OR APPLICABLE STATE LAW AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT AND APPLICABLE STATE LAW OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THE SECURITIES, SUCH OFFER, SALE, OR TRANSFER, PLEDGE, OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

WARRANT

(Void after 5:00 p.m., Mountain Daylight Saving Time

on ____________)

This certifies that, for value received, _________________ or registered assigns (collectively, the “Holder”), is entitled at any time after the date hereof, and before 5:00 p.m., Mountain Daylight Saving Time, on _______________ (the “Expiration Date”) to purchase from Overstock.com, Inc., a Utah corporation (the “Company”), __________________________ (__________) shares of the Common Stock of the Company (the “Warrant Shares”) at a price of (i) _______________ (_________) per share (the “Exercise Price”). The number of Warrant Shares to be received upon the exercise of this Warrant and the Exercise Price may further be adjusted from time to time as hereinafter set forth.

This Warrant is issued pursuant to the ____________________ Agreement (the "Agreement") between the Company and the Holder.

1. Exercise of Warrant . This Warrant may be exercised until the Expiration Date (or if such date is a day on which federal or state chartered banking institutions are authorized by law to close, then on the next succeeding day which shall not be such a day) by presentation and surrender of this Warrant certificate (the “Warrant Certificate”) to the Company at its principal office (or at the office of its stock transfer agent, if any), with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price in cash or by check, payable to the order of the Company, together with all taxes applicable upon such exercise. Upon receipt by the Company of this Warrant Certificate at its office (or at the office of its stock transfer agent, if any) in proper form for exercise and accompanied by payment as herein provided, the Company shall promptly issue and cause to be delivered to the Holder a certificate, issued in the name of the Holder, for the full number of Warrant Shares so purchased, together with cash in respect of any fractional shares, calculated as provided in Section 3 below. Upon proper exercise of this Warrant, the Holder shall be deemed to be the holder of record of the Warrant Shares issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares shall not then be actually delivered to the Holder.

2. Reservation of Shares . The Company hereby covenants and agrees that, at all times during the period this Warrant is outstanding, it will reserve for issuance and delivery upon exercise of this Warrant such number of shares of its Common Stock (and/or other securities) as shall be required for issuance and delivery upon exercise of this Warrant. If it becomes necessary at any time to increase the number of reserved shares for this purpose, the Board of Directors of the Company shall promptly increase the number of authorized and/or reserved shares to a number sufficient to provide for the number of shares that may be at that time issuable to the Holder as described above. If it is necessary to increase the number of authorized shares for this purpose, the Board of Directors will use its best efforts to obtain any required approval of this increase by the shareholders.

3. Fractional Shares . No fractional shares or stock representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay to the Holder cash equal to the product of such fraction multiplied by the then current fair market value of one share of Common Stock, computed to the nearest whole cent. The then current fair market value of such shares shall be as determined in good faith by the Board of Directors of the Company.

4. Transfer, Exchange, Assignment, or Loss of Warrant .

(a) This Warrant and the Warrant Shares may not be assigned or transferred except in accordance with the provisions of the Securities Act of 1933, as amended, and the Rules and Regulations promulgated thereunder (said Act and such Rules and Regulations being hereinafter collectively referred to as the “Act”). Any purported transfer or assignment made other than in accordance with this Section 4 or hereof shall be null and void and of no force and effect.

(b) This Warrant and the Warrant Shares shall be transferable only upon the opinion of counsel satisfactory to the Company, which may be counsel to the Company, that (i) the Warrant or the Warrant Shares may be legally transferred without registration under the Act; and (ii) such transfer will not violate any applicable law or governmental rule or regulation including, without limitation, any applicable federal or state securities law, and the regulations of any exchange on which the securities of the Company may be registered. The Company may cause the following legend to be set forth on each certificate representing Warrant Shares or any other security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the opinion that such legend is unnecessary:

(c) Any assignment permitted hereunder shall be made by surrender of this Warrant Certificate to the Company at its principal office with the Assignment Form annexed hereto duly executed, together with funds sufficient to pay any transfer tax. In such event the Company shall, without charge, execute and deliver a new Warrant Certificate in the name of the assignee named in such Assignment Form and this Warrant Certificate shall promptly be canceled.

(d) Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant Certificate, and, in the case of loss, theft, or destruction, of indemnification and/or bond satisfactory to the Company, and, in the case of mutilation, upon surrender and cancellation of this Warrant Certificate, the Company will execute and deliver a new Warrant Certificate of like tenor and date, and any such lost, stolen, destroyed, or mutilated Warrant Certificate shall thereupon become void.

5. Rights of the Holder . The Holder shall not, by virtue of ownership of this Warrant, be entitled to any rights as a shareholder of the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.

6. Adjustments .

(a) Certain Adjustments . The Exercise Price and the number of shares of Common Stock issuable upon exercise of each Warrant shall be subject to adjustment from time to time as follows:

(1) Stock Dividends; Stock Splits; Reverse Stock Splits, Etc . In case the Company shall (i) pay a dividend with respect to its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of any class of Common Stock (any one of which actions is herein referred to as an “Adjustment Event”), the number of shares of Common Stock purchasable upon exercise of the Warrant immediately prior to the record date for such Adjustment Event shall be adjusted so that the Holder shall thereafter be entitled to receive the number of shares of Common Stock that such Holder would have owned or have been entitled to receive after the happening of such Adjustment Event, had such Warrant been exercised immediately prior to the happening of such Adjustment Event or any record date with respect thereto. An adjustment made pursuant to this Section 6(a)(1) shall become effective immediately after the effective date of such Adjustment Event retroactive to the record date, if any, for such Adjustment Event.

(2) Adjustment of Exercise Price . Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrant is adjusted pursuant to Section 6(a)(1) above, the Exercise Price for each share of Common Stock payable upon exercise of the Warrant shall be adjusted by multiplying such Exercise Price immediately

prior to such adjustment by a fraction, the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Warrant immediately prior to such adjustment, and the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.

(3) De Minimis Adjustments . No adjustment in the number of shares of Common Stock purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least 1.0% percent in the number of shares of Common Stock purchasable upon an exercise of the Warrant; provided, however, that any adjustments which by reason of this Section 6(a)(3) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest full share.

(b) Mergers . If the Company shall merge or consolidate with another corporation, the holder of this Warrant shall thereafter have the right, upon exercise hereof and payment of the Exercise Price, to receive solely the kind and amount of shares of stock (including, if applicable, Common Stock), other securities, property or cash or any combination thereof receivable by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such merger or consolidation.

(c) Recapitalizations . In case of any recapitalization or reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than elimination of par value, a change in par value, or from par value to no par value, or as the result of subdivision or combination of shares, but including any reclassification of the shares of Common Stock into two or more classes or series of shares), or in case of any merger or consolidation of another corporation into the Company in which the Company is the surviving corporation and in which there is a reclassification or change in the shares of Common Stock (other than a change in par value or from par value to no par value or as a result of a subdivision or combination, but including any reclassification of the shares of Common Stock into two or more classes or series of shares), this Warrant shall thereafter have the right, upon exercise hereof and payment of the Exercise Price, to receive solely the kind and amount of shares of stock, other securities, property or cash or any combination thereof receivable upon such reclassification, change, merger or consolidation by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, merger or consolidation.

(d) Adjustment Notice . Whenever the number or kind of securities purchasable upon the exercise of the Warrant or the Exercise Price is adjusted, as herein provided, the Company shall promptly notify the Holder in writing of such adjustment or adjustments and shall deliver to such Holder a certificate setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

(e) Warrant Certificates . The form of this Warrant Certificate need not be changed because of any change in the Exercise Price or in the number or kind of shares purchasable

upon the exercise of the Warrant. However, the Company may at the time in its sole discretion make any change in the form of the Warrant Certificate that it may deem appropriate and that does not affect the substance thereof.

(f) Duty to Make Fair Adjustments in Certain Cases . If any event occurs as to which, in the opinion of the Board of Directors, the other provisions of this Section 6 are not strictly applicable or, if strictly applicable, would not fairly protect the purchase rights of the Warrant in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such purchase right as aforesaid.

7. Notices to Warrant Holders of Certain Events . So long as this Warrant shall be outstanding and unexercised (i) if the Company shall pay any dividend or make any distribution upon its Common Stock, or (ii) if the Company shall offer to the holders of its Common Stock the opportunity for subscription or purchase by them of any shares of stock of any class or any other rights, or (iii) in the even of any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, the Company shall cause to be delivered to the Holder a notice containing a brief description of the proposed transaction, together with the date, as the case may be, on which a record is to be taken for the purpose of such dividend, distribution, or rights or on which such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation, or winding up is to take place. In the case of a dividend or other distribution by the Company, the Company shall deliver such notice to Holder a least 20 days prior to record date for such dividend or distribution. In the case of a reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation, or winding up, the Company shall deliver such notice to Holder at least 20 days prior to the earlier of the date of a shareholders meeting called to approve such transaction, if any, or the date of such event.

8. Notices Generally . Notices and other communications to be given to the Holder of the Warrant evidenced by this Warrant Certificate shall be delivered by hand or mailed, postage prepaid, to Holder at the address stated below or such other address as the Holder shall have designated by written notice to the Company as provided herein. Notices or other communications to the Company shall be delivered by hand or mailed, postage prepaid, to the Company at 2855 East Cottonwood Parkway, Salt Lake City, Utah 84121, Attention Chief Financial Officer, or such other address as the Company shall have designated by written notice to such registered owner as herein provided. Notice by mail shall be deemed given when deposited in the United States mail, postage prepaid, as herein provided.

9. Governing Law . This Warrant shall be governed by and constructed in accordance with the laws of the State of Utah applicable to contracts entered into and to be performed wholly within such State.

10. Amendments . This Warrant may not be modified except in a writing signed by the Company and Holder.

IN WITNESS WHEREOF, the Company has executed this Warrant Certificate as of this ___ day of _________, ______.

	OVERSTOCK.COM, INC.

	By

	Its

	HOLDER ADDRESS:

PURCHASE FORM

The undersigned hereby elects to exercise the Warrant represented by the attached Warrant Certificate to the extent of purchasing ________________________________ (____________) shares of the Common Stock of Overstock.com, Inc., a Utah corporation (the “Company”), and herewith presents to the Company cash or a check in the amount of _______________________ ($___________) in payment of the Exercise Price thereof.


	Name of Holder (please print)


	By:
		Signature of Holder or Authorized
		Representative, if any


	Name of Authorized Representative, if any
	(please print)


	Title of Authorized Representative, if any
	(please print)


	Date

ASSIGNMENT FORM

FOR VALUE RECEIVED, the undersigned Holder of the Warrant represented by the attached Warrant Certificate hereby sells, assigns, and transfers unto the Assignee named below the right to purchase ____________________________________ (____________________) shares of the Common Stock of Overstock.com, Inc., a Utah corporation (the “Company”), that are represented by the attached Warrant Certificate and does hereby irrevocably constitute and appoint the Company and/or its transfer agent as attorney to transfer the same on the books of the Company, with full power of substitution in the premises.


	Name of Assignee


	Address of Assignee


	Name of Holder (please print)

	By:
		Signature of Holder or Authorized
		Representative, if any


	Name of Authorized Representative, if any
	(please print)


	Title of Authorized Representative
	(please print)


	Date

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EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-1 of our report dated March 4, 2002, relating to the financial statements of Overstock.com, Inc., which appear in such Registration Statement. We also consent to the references to us under the headings "Experts" and "Selected Financial Data" in such Registration Statement.

/s/ PricewaterhouseCoopers LLP

Salt Lake City, Utah
May 3, 2002

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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS

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EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our auditors' report (dual dated March 31, 2000 and June 30, 2000), relating to the December 31, 1999 financial statements of Gear.com, Inc. and to all references to our firm included in or made a part of this registration statement.

/s/ ARTHUR ANDERSEN LLP

Seattle, Washington
May 3, 2002

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EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

3.1 Designation of Series A Preferred Stock .

(b) Definitions . For purposes of this Article III, the following definitions shall apply:

(i) “ Conversion Price ” shall initially mean $6.8923 per share for the Series A Preferred Stock (subject to adjustment as set forth elsewhere herein).

(ii) “ Convertible Securities ” shall mean any evidences of indebtedness, shares or other securities (other than shares of Series A Preferred Stock) convertible into or exchangeable for Common Stock.

(iv) “ Dividend Rate ” for the Series A Preferred Stock, the Dividend Rate shall be an annual, fixed dividend of $)0.5514 per share (subject to adjustment from time to time for Recapitalizations of Series A Preferred as set forth elsewhere herein).

(v) “ Liquidation Preference ” shall mean $6.8923 per share for the Series A Preferred Stock (subject to adjustment from time to time for Recapitalizations of Series A Preferred Stock as set forth elsewhere herein).

voting securities of the Company or such surviving or resulting entity outstanding immediately after such transaction or series of transactions.

(vii) “ Options ” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

(viii) “ Original Issue Date ” shall mean the date of the first issuance of any shares of Series A Preferred Stock.

(ix) “ Original Issue Price ” shall mean $6.8923 per share for the Series A Preferred Stock (subject to adjustment from time to time for any Recapitalization of Series A Preferred Stock as set forth elsewhere herein).

(xi) “ Recapitalization ” shall mean any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event occurring after the Filing Date.

(xii) “ Securities Act ” shall mean the Securities Act of 1933, as amended.

3.2 Dividends .

(d) Non-Cash Distributions .

3.3 Liquidation Rights .

Common Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this Section 3.3(b).

(ii) if the securities are actively traded over-the-counter, then the value of the securities shall be deemed to be the average of the closing bid prices of the securities over the 10 trading day period ending 5 trading days prior to the Distribution.

3.4 Conversion . The holders of the Series A Preferred Stock shall have conversion rights as follows (the “ Conversion Rights ”):

(d) Adjustments to Conversion Price for Diluting Issues .

(i) Special Definition . For purposes of this Section 3.4(d), “ Additional Shares of Common ” shall mean all shares of Common Stock issued (or, pursuant to Section 3.4(d)(iii), deemed to be issued) by the Company after the Original Issue Date other than :

(1) shares of Common Stock issued or issuable upon conversion of shares of Series A Preferred Stock;

(4) shares of Common Stock issued or issuable pursuant to a stock split, as a dividend or distribution on Series A Preferred Stock or pursuant to any event for which adjustment is made pursuant to Section 3.4(e), (f) or (g) hereof;

(5) shares of Common Stock issued in a Qualified Public Offering;

(6) shares of Common Stock issued or issuable pursuant to the acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or other reorganization approved by a majority of the Board of Directors;

(7) shares of Common Stock issued or issuable pursuant to bona fide equipment lease and bank financing arrangements approved by a majority of the Board of Directors;

(8) shares of Common Stock issued or issuable in connection with transactions of a strategic nature for which the primary purpose is other than raising equity capital and which is approved by a majority of the Board of Directors;

(9) shares of Common Stock which the holders of at least 65% of the then outstanding Series A Preferred Stock agree in writing shall not constitute Additional Shares of Common, each such agreement to be deemed effective immediately prior to the related issuance.

(1) no further adjustment in the Conversion Price of the Series A Preferred Stock shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock in connection with the exercise of such Options or conversion or exchange of such Convertible Securities;

(v) Determination of Consideration . For purposes of this Section 3.4(d), the consideration received by the Company for the issue (or deemed issue) of any Additional Shares of Common shall be computed as follows:

(1) Cash and Property . Such consideration shall:

a) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Company excluding amounts paid or payable for accrued interest or dividends;

b) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors; and

(2) Options and Convertible Securities . The consideration per share received by the Company for Additional Shares of Common deemed to have been issued pursuant to Section 3.4(d)(iii) shall be determined by dividing

b) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a

subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(j) The Conversion Price is subject to adjustment pursuant to the provisions of Section 3.5 below.

3.5 Redemption .

referred to as the “ Redemption Price ”), in two equal yearly installments beginning on the next anniversary of the Original Issue Date which anniversary is at least 90 days following the date the Company receives the Redemption Notice (the “ Redemption Date ”).

3.6 Voting .

(c) increase the number of shares of Common Stock issuable pursuant to the Company’s 1999 Stock Option Plan above 2,489,711 (on a post-split basis);

(d) increase the number of shares of Common Stock issuable pursuant to the Company’s 2000 Stock Purchase Plan above 352,859 (on a post-split basis); or

(e) amend this Section 3.7.

ARTICLE VII

ARTICLE X

ARTICLE XII

ARTICLE I CORPORATE OFFICES

1.1 REGISTERED OFFICE

1.2 OTHER OFFICES

ARTICLE II MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS

2.2 ANNUAL MEETING

2.3 SPECIAL MEETING

2.4 NOTICE OF STOCKHOLDERS’ MEETINGS

2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

2.6 QUORUM

2.7 ADJOURNED MEETING; NOTICE

2.8 VOTING

2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT

2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS

2.12 PROXIES

2.13 INSPECTORS OF ELECTION

2.14 ADVANCE NOTICE OF STOCKHOLDER BUSINESS

(a) the name and record address of the stockholder who intends to propose the business and the class or series and number of shares of capital stock of the corporation which are owned beneficially or of record by such stockholder;

(b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting introduce the business specified in the notice;

(c) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; and

(d) any material interest of the stockholder in such business.

2.15 ADVANCE NOTICE OF DIRECTOR NOMINATIONS

ARTICLE III DIRECTORS

3.1 POWERS

3.2 NUMBER AND TERM OF OFFICE

3.3 RESIGNATION AND VACANCIES

3.4 REMOVAL

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

3.6 REGULAR MEETINGS

3.7 SPECIAL MEETINGS; NOTICE

3.8 QUORUM

3.9 WAIVER OF NOTICE

3.10 ADJOURNMENT

3.11 NOTICE OF ADJOURNMENT

ARTICLE I

CORPORATE OFFICES

ARTICLE II

MEETINGS OF STOCKHOLDERS

ARTICLE III

DIRECTORS

ARTICLE IV

COMMITTEES

ARTICLE V

OFFICERS

ARTICLE VI

INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS