Item 1.01 Entry Into a Material Definitive Agreement
Concurrently with entering into the Sale Leaseback Agreements, the Company and Varilease entered into six Schedules (the "Schedules" or a "Schedule") each corresponding to a Sale Leaseback Agreement. The Company and Varilease also entered into a Master Lease Agreement (the "Master Lease Agreement") which is incorporated by reference into each Schedule. Each Schedule (including the Master Lease Agreement) sets forth the terms and conditions pursuant to which Varilease would lease to the Company the ePort equipment to be purchased by Varilease from the Company pursuant to the corresponding Sale Leaseback Agreement. Each Schedule provides for a 36-month base lease term and specifies the base monthly rental for the equipment described in the Schedule. During the lease term, all of the costs, expenses and liabilities associated with the equipment are to be borne by the Company, and the Company is entitled to the unlimited use of the equipment.
At the completion of the base lease term provided in each Schedule, the Company will have, among other things, the option to either purchase the equipment described in the Schedule for a price to be agreed upon by the Company and Varilease, or extend the lease term of the Schedule for an additional 12 months at the base monthly rental, at the conclusion of which all of the right, title and interest of Varilease in the ePort equipment would pass to the Company.
The Master Lease Agreement includes customary events of default, including non-payment by the Company of the monthly rental or other charges due under any Schedule. The Master Lease Agreement provides that in the event of the declaration by Varilease of a default, the Company would pay to Varilease, among other things, any unpaid amount due on or before the declaration of default plus liquidated damages equal to the Stipulated Loss Value of the equipment. The Stipulated Loss Value of the equipment is an amount equal to 110% of the Company's original cost for such equipment less 1.25% of such cost for each month elapsed during the lease term through the declaration of default.
The Company intends to utilize the proceeds from the sale of the equipment for working capital purposes. If all of the equipment described in the six Sale Leaseback Agreements is purchased by Varilease, the Company may also explore and consider utilizing a portion of these proceeds for other purposes, including the possible purchase of some of its outstanding securities.
Pursuant to a Sixth Amendment to the Loan and Security Agreement dated as of
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
The information set forth in Item 1.01 is incorporated by reference into this Item 2.03.
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