Master Equipment Lease Agreement
THIS MASTER EQUIPMENT LEASE AGREEMENT dated as of December 18,2003 (Master
Lease) is made by and between KEY EQUIPMENT FINANCE, a Division of Key
Corporate Capital Inc., having an address at 66 South Pearl Street, Albany, NY
12207 (Lessor), and YOCREAM INTERNATIONAL, INC. with its chief executive
offices located at 5858 N.E. 87th Avenue, Portland, OR 97220 (Lessee).
1. Lease. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, Equipment, subject to and upon the terms set forth herein and in any
equipment schedule executed in connection herewith (each, a Schedule). Each
Schedule shall constitute a separate and enforceable lease incorporating all
the terms of this Master Lease (each Schedule, together with this Master Lease
as it relates to such Schedule, is referred to herein as a Lease). If any term
of a Schedule conflicts or is inconsistent with any term of this Master Lease,
the terms of such Schedule shall govern.
2. Definitions. Unless the context otherwise requires, as used in the Lease,
the following terms shall have the respective meanings indicated below and
shall be equally applicable to both the singular and the plural forms thereof:
Equipment - means each item of property designated on a Schedule that will be
leased by Lessee pursuant to the Lease, together with all replacement parts,
additions and accessories incorporated therein or affixed thereto. Where rights
to receive license fees for Software and charges for Services supplied or to be
supplied to Lessee are included in the amount financed by Lessor under the
Lease, references to leasing, purchases, ownership and administration of
Equipment under the Lease shall be broadly interpreted to include such
Fair Market Rental Value or Fair Market Sale Value - means the value of
Equipment for lease or sale, in place and in continued use, which would be
obtained in an arms length transaction between an informed and willing retail
lessor or seller (under no compulsion to lease or sell) and an informed and
willing retail lessee or buyer (under no compulsion to lease or purchase),
assuming that Equipment is in the condition specified by Sections 10 and 11
hereof, as determined by the parties or, if the parties cannot agree, by an
American Society of Appraisers certified appraiser selected by Lessor and paid
for by Lessee.
Financed Fees - means the Software license, usage, or other fees and the
charges for Services, if any, specified on a Schedule.
Guarantor - means any guarantor of Lessees obligations hereunder.
Initial Term Expiration Date - shall have the meaning specified in the
Lease Documents - means this Master Lease, a Schedule and all other documents
relating to or provided in connection with a Lease, prepared by Lessor, and now
or hereafter executed in connection herewith or therewith, as the same may be
modified, amended, extended or replaced.
License Agreement - means the software license agreement(s) between Lessee and
Licensor relating to Software.
Licensor - means the Supplier(s) of Software, solely in its (their) capacity as
licensor of such Software.
Purchase Agreement - means any purchase agreement or other contract between a
Supplier and Lessee for the acquisition of Equipment to be leased or financed
under a Lease.
Rent - means the periodic payments due for the leasing of Equipment as set
forth on the related Schedule and, where the context hereof requires, all such
additional amounts as may, from time to time, be payable under a Lease. The
term Rent shall include interim rent, if any, as described in Section 5 hereof.
Rent Commencement Date - means, with respect to Equipment, the date on which
(a) Lessor receives an executed Certificate of Acceptance for Equipment from
Lessee or (b) Lessor disburses funds for the purchase of Equipment, as
determined by Lessor in its sole discretion.
Rent Payment Date - shall have the meaning specified in the applicable
Services - means all training, installation, transportation, handling,
maintenance, custom programming, integration, technical consulting and support
services relating to Equipment and specified on a Schedule.
Software - means the software and all related documentation, corrections,
updates and revisions used in connection with Equipment financed under a
Stipulated Loss Value - shall have the meaning specified in the applicable
Schedule. Supplier means the manufacturer or the vendor of the Equipment.
Term - means the Initial Term or any Renewal Term, each as defined in Section 6
hereof, and any Extended Lease Term or Interim Term, as defined in the
3. Ordering Equipment. Lessee hereby assigns to Lessor all of Lessees
rights, but none of its obligations, under any Purchase Agreement related to a
Lease. Lessor may (a) accept such assignment from Lessee of Lessees rights,
but none of Lessees obligations, under any such Purchase Agreement and/or
(b) issue a purchase order for the Equipment to the Supplier. Lessee shall
arrange for delivery of Equipment. If Equipment is subject to an existing
Purchase Agreement between Lessee and the Supplier, and Equipment has been
delivered to Lessee as of the date of the Schedule applicable thereto, Lessee
warrants that it has advised Lessor of the delivery date(s) of such Equipment.
Lessee hereby authorizes Lessor to complete each Schedule with the serial
numbers and other identification data of Equipment associated therewith as such
data is received by Lessor.
4. Delivery and Acceptance. Upon delivery to and acceptance by Lessee of any
Equipment, Lessee shall execute and deliver to Lessor a Certificate of
Acceptance in form acceptable to Lessor (Certificate of Acceptance).
LESSOR SHALL HAVE NO OBLIGATION TO ADVANCE ANY FUNDS HEREUNDER UNLESS AND
UNTIL LESSOR RECEIVES A CERTIFICATE OF ACCEPTANCE FOR SUCH EQUIPMENT EXECUTED
5. Rent; Delinquent Payments, (a) Lessee shall pay Rent commencing on the
Rent Commencement Date, and, unless otherwise set forth on the applicable
Schedule, on the same day of each payment period thereafter for the balance of
the Term. Rent shall be due whether or not Lessee has received any notice that
it is due, and all Rent shall be paid to Lessor at its address set forth on the
Schedule, or as otherwise directed by Lessor in writing.
b) If Lessee fails to pay any Rent or other sums under the Lease on or
before the date when the same becomes due, Lessee shall pay to Lessor (in
addition to and not in lieu of other rights of Lessor) a late charge equal
to the lesser of five percent of such delinquent amount or the maximum
permitted by law. Such late charge shall be payable by Lessee upon demand by
Lessor and shall be deemed Rent hereunder. Lessee acknowledges and agrees that
the late charge (i) does not constitute interest, (ii) is an estimate of the
costs Lessor will incur as a result of the late payment and (iii) is reasonable
6. Term; Survival.With respect to any Equipment, unless otherwise specified
on a Schedule, the initial term of the Lease (the Initial Term) shall commence
on the earlier of (a) the date risk of loss is transferred from the Supplier to
Lessee or Lessor or (b) the date on which such Equipment is delivered to Lessee
and, unless earlier terminated as provided herein, shall expire on the Initial
Term Expiration Date. Any renewal term of the Lease (individually, a Renewal
Term) shall commence immediately upon the expiration of the Initial Term or any
prior Renewal Term, as the case may be, and, unless earlier terminated as
provided herein, shall expire on the last day of the period for which the final
payment of Rent is due. All obligations of Lessee hereunder shall survive the
expiration, cancellation or other termination of the Term of each Lease.
7. Location; Inspection; Labels. Equipment shall be delivered to the location
specified in the Schedule and shall not be removed therefrom without Lessors
prior written consent. Lessor shall have the right to enter upon the premises
where the Equipment is located and inspect the Equipment at any reasonable
time. At Lessors request, Lessee shall (a) affix permanent labels in a
prominent place on Equipment stating Lessors interest in the Equipment,
(b) keep such labels in good repair and condition and (c) provide Lessor with
an inventory listing of all labeled Equipment within thirty days of such
8. Non-Cancelable Lease. THE LEASE IS A NET LEASE. LESSEES OBLIGATION TO PAY
RENT AND PERFORM ITS OBLIGATIONS HEREUNDER ARE ABSOLUTE, IRREVOCABLE AND
UNCONDITIONAL AND SHALL NOT BE SUBJECT TO ANY RIGHT OF SET OFF, COUNTERCLAIM,
DEDUCTION, DEFENSE OR OTHER RIGHT LESSEE MAY HAVE AGAINST THE SUPPLIER, LESSOR
OR ANY OTHER PARTY PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL PRECLUDE LESSEE
FROM ASSERTING ANY SUCH CLAIMS IN A SEPARATE CAUSE OF ACTION. LESSEE
UNDERSTANDS AND AGREES THAT NEITHER THE SUPPLIER NOR ANY SALES REPRESENTATIVE
OR OTHER AGENT OF THE SUPPLIER IS AN AGENT OF LESSOR OR IS AUTHORIZED TO WAIVE
OR ALTER ANY TERM OR CONDITION OF THE LEASE, AND NO SUCH WAIVER OR ALTERATION
SHALL VARY THE TERMS OF THE LEASE. LESSOR IS NEITHER A SUPPLIER NOR A LICENSOR,
AND LESSOR IS NOT RESPONSIBLE FOR REPAIRS, SERVICE OR DEFECTS IN EQUIPMENT.
LESSEE AGREES NOT TO ASSERT AGAINST LESSOR ANY CLAIMS OR DEFENSES LESSEE MAY
HAVE WITH RESPECT TO EQUIPMENT, AND UNDERSTANDS THAT IT MAY ASSERT SUCH CLAIMS
AGAINST SUPPLIER OR LICENSOR.
9. Use; Alterations. (a) Lessee shall use Equipment lawfully and only in
the manner for which it was designed and intended and so as to subject it only
to ordinary wear and tear. Lessee shall comply with all applicable laws.
Lessee shall immediately notify Lessor, in writing, upon becoming aware of any
existing or threatened investigation, claim or action by any governmental
authority that could adversely affect Equipment, Lessor or the Lease. Lessee,
at its own expense, shall make such alterations, additions or modifications
(each, a Required Alteration) to Equipment as may be required from time to time
to meet the requirements of applicable law or a governmental body. All such
Required Alterations shall immediately, and without further act, be deemed to
constitute Equipment and be fully subject to the Lease as if originally leased
hereunder. Except as otherwise permitted herein, Lessee shall not make any
alterations to Equipment without Lessors prior written consent.
(b) Lessee, at its own expense, may from time to time add or install
upgrades or attachments (each an Upgrade) to Equipment during the Term;
provided, that such Upgrades (i) are readily removable without causing material
damage to Equipment, (ii) do not materially adversely affect the Fair Market
Sale Value, the Fair Market Rental Value, residual value, productive capacity,
utility or remaining useful life of Equipment and (iii) do not cause Equipment
to become limited use property within the meaning of Revenue Procedure 2001-28,
2001-19 I.R.B. 1156 (or such other successor tax provision), as of the date of
installation of such Upgrade. Any such Upgrades shall remain the property of
Lessee, Upon the expiration or earlier cancellation of the Lease, Lessee may,
at its option, remove any such Upgrades and, upon such removal, shall restore
Equipment to the condition required hereunder.
c) If any Equipment covered under any Lease becomes attached or affixed
to, or used in connection with, Equipment covered under another Lease hereunder
(a Related Lease), Lessee agrees that, if Lessee elects to exercise a purchase
or renewal option under any such Lease, or if Lessee elects to return Equipment
under any such Lease, then Lessor, in its sole discretion, may require that all
Equipment leased under all Related Leases be similarly disposed of.
10. Repairs and Maintenance. Lessee, at Lessees cost and expense, shall
(a) keep Equipment in good repair, good operating condition, appearance and
working order in compliance with the manufacturers recommendations and Lessees
standard practices (but in no event less than industry practices), (b) take all
actions necessary to ensure that the Equipment will be eligible, at the
expiration of the Initial Term and any Renewal Term, for a standard, full
service maintenance contract with the manufacturer, (c) properly service all
components of Equipment following the manufacturers written operating and
servicing procedures, (d) enter into and keep in full force and effect during
the Term a maintenance agreement covering the Equipment with the manufacturer,
or a manufacturer-approved maintenance organization, to maintain, service and
repair such Equipment, as otherwise required herein (but an alternate source of
maintenance may be used by Lessee with Lessors prior written consent), (e) upon
Lessors request furnish Lessor with an executed copy of any such maintenance
agreement, and (f) replace any part of the Equipment that becomes unfit or
unavailable for use from any cause (whether or not such replacement is covered
by a maintenance agreement) with a replacement part that, in Lessors sole
opinion, is of the same manufacture, value, remaining useful life and utility
as the replaced part immediately preceding the replacement, assuming that such
replaced part was in the condition required by this Lease. Replacement parts
shall be free and clear of all liens, constitute Equipment and be fully subject
to this Lease as if originally leased hereunder.
11. Return of Equipment. Except as otherwise provided in a Schedule, upon
the expiration or earlier termination or cancellation of each Lease, Lessee, at
its sole expense, shall de-install, assemble, pack properly and in accordance
with the manufacturers instructions (under the supervision of persons cceptable
to Lessor), including labeling of all components and hardware, and return to
Lessor all, but not less than all, Equipment by delivering the Equipment to and
unloading it at such location or with such carrier as Lessor shall specify.
Lessee agrees that (a) Equipment, when returned, shall be in the condition
required by the Lease, and (b) upon Lessors request, Lessee will obtain from
the manufacturer (or other maintenance service provider previously approved by
Lessor or manufacturer) a certificate stating that such Equipment qualifies for
full maintenance service at the standard rates and terms then in effect. If, in
the opinion of Lessor, any Equipment fails to meet the standards set forth
above, Lessee agrees to pay, on demand, all costs and expenses incurred in
connection with the repairing and restoring of such Equipment so as to meet
such standards. If Lessee fails to return any Equipment as required hereunder,
then all of Lessees obligations under the Lease (including, without limitation,
Lessees obligation to pay Rent for the Equipment at the rental then applicable
under the Lease) shall continue in full force and effect until such Equipment
shall have been returned in the condition required under the Lease.
12. Sublease and Assignment, (a) LESSEE SHALL NOT, WITHOUT LESSORS PRIOR
WRITTEN CONSENT, (i) SELL, ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE
DISPOSE OF THE LEASE, EQUIPMENT OR ANY INTEREST THEREIN, (ii) RENT, SUBLET OR
LEND EQUIPMENT TO ANYONE OR (iii) PERMIT EQUIPMENT TO BE USED BY ANYONE OTHER
THAN LESSEE OR LESSEES AFFILIATES AND THEIR RESPECTIVE QUALIFIED EMPLOYEES.
LESSEE ACKNOWLEDGES THAT IT REMAINS PRIMARILY LIABLE FOR ALL
OBLIGATIONS HEREUNDER NOTWITHSTANDING ANY USE BY AN AFFILIATE.
(b) Lessor, at any time with or without notice to Lessee, may sell,
transfer, assign and/or grant a security interest in all or any part of Lessors
interest in each Lease or any Equipment (each, a Lessor Transfer). Any
purchaser, transferee, assignee or secured party of Lessor (each a Lessor
Assignee) shall have and may exercise all of Lessors rights hereunder with
respect to the items to which any such Lessor Transfer relates, and Lessee
shall not assert against any Lessor Assignee any claim that Lessee may have
against Lessor provided, Lessee may assert any such claim in a separate action
against Lessor. Upon written notice of a Lessor Transfer, Lessee shall promptly
acknowledge in writing its obligations under the applicable Lease, shall comply
with the written directions or demands of any Lessor Assignee and shall make
all payments due under the applicable Schedule as directed in writing by the
Lessor Assignee. Following such Lessor Transfer, the term Lessor shall be
deemed to include or refer to each Lessor Assignee. Lessee will provide
reasonable assistance to Lessor to complete any transaction contemplated by
this subsection (b).
(c) Subject to the restriction on assignment contained in subsection
(a), the Lease Documents shall inure to the benefit of, and are binding upon,
the successors and assigns of the parties thereto including, without
limitation, each person who becomes bound thereto as a new debtor as set forth
in the Uniform Commercial Code (UCC).
13. Risk of Loss; Damage to Equipment, (a) Lessee shall bear the entire risk
of loss (including without limitation, theft, destruction, disappearance of or
damage to Equipment from any cause whatsoever), whether or not insured against,
during the Term of each Lease and until Equipment is returned to Lessor in
accordance with Section 11 hereof. No such loss shall relieve Lessee of the
obligation to pay Rent or of any other obligation under the related Lease.
(b) If any Equipment is lost, stolen or damaged beyond repair, or
confiscated, seized or the use and/or title thereof requisitioned to someone
other than Lessee (any such event being a Total Loss), Lessee shall immediately
notify Lessor of such event. On the next Rent Payment Date following the
occurrence of the Total Loss, at Lessors option, Lessee shall either (i)
replace Equipment with equipment that, in Lessors sole opinion, is of the
same manufacture, value, remaining useful life and utility as the replaced
Equipment immediately preceding the Total Loss, assuming such replaced
Equipment was in the condition required by the Lease or (ii) pay to Lessor the
sum of (A) all Rent due and owing under the Lease with respect to such
Equipment (at the time of such payment) plus (B) the Stipulated Loss Value for
the Equipment as of that Rent Payment Date. If Lessor elects to allow
replacement of Equipment as set forth in subsection (i) above, Lessee shall
cause the Supplier of such replacement equipment to deliver to Lessor a bill of
sale for such equipment free and clear of all liens and encumbrances, and such
replacement equipment shall become Equipment subject to the applicable Lease.
Upon Lessors receipt of the amounts specified in subsection (ii) above, Lessee
shall be entitled to Lessors interest in the replaced Equipment, in its then
condition and location, as is and where is, without any warranties, express or
14. Insurance, (a) Lessee shall, at all times during the Term of each Lease
and at Lessees own cost and expense, maintain (i) insurance against all risks
of physical loss or damage to Equipment for the greater of the full replacement
value or the Stipulated Loss Value thereof, and (ii) commercial general
liability insurance (including blanket contractual liability coverage and
products liability coverage) for personal and bodily injury and property
damage per occurrence as stated in each Schedule.
(b) All insurance policies required hereunder shall include terms, and be
with insurance carriers, reasonably satisfactory to Lessor. Without limiting
the generality of the foregoing, each policy shall include the following terms:
(i) all physical damage insurance shall name Lessor and its assigns as loss
payee, (ii) all liability insurance shall name Lessor and its assigns as
additional insureds, (iii) the policy shall not be canceled or altered without
at least thirty days advance notice to Lessor and its assigns and (iv) coverage
shall not be invalidated against Lessor or its assigns because of any violation
of any condition or warranty contained in any policy or application therefor by
Lessee or by reason of any action or inaction of Lessee. On each anniversary of
the Rent Commencement Date during the term hereof, Lessee shall deliver to
Lessor certificates or other proof of insurance satisfactory to Lessor
evidencing the coverage required by this section.
15. Taxes. Lessee shall pay when due and shall indemnify and hold harmless
Lessor (on an after-tax basis) from and against any and all taxes, fees,
withholdings, levies, imposts, duties, assessments and charges of every kind
and nature whatsoever (including any related penalties and interest) imposed
upon or against Lessor, any Lessor Assignee, Lessee or any Equipment by any
governmental authority in connection with, arising out of or otherwise related
to Equipment, the Lease Documents or the Rent and receipts or earnings arising
therefrom and excepting only all Federal, state and local taxes on or measured
by Lessors net income. Whenever each Lease expires, terminates or is canceled
as to any Equipment, Lessee, upon written request by Lessor, shall advance to
Lessor the amount estimated by Lessor to be the taxes on said Equipment that
are not yet payable, but for which Lessee is responsible. At Lessees request,
Lessor shall provide Lessee with Lessors method of computation of any such
16. Lessors Right to Perform for Lessee. If Lessee fails to perform any of its
obligations contained herein, Lessor may (but shall not be obligated to) itself
perform such obligations, and the amount of the reasonable costs and expenses
of Lessor incurred in connection with such performance, together with interest
on such amount at the lesser of eighteen percent per annum or the maximum
permitted by law, shall be payable by Lessee to Lessor upon demand. No such
performance by Lessor shall be deemed a waiver of any rights or remedies of
Lessor or be deemed to cure the default of Lessee hereunder.
17. Personal Property; Liens. Lessee represents and warrants that the
Equipment is, and shall at all times remain, fully removable personal property
notwithstanding any affixation or attachment to real property or improvements.
Lessee shall at all times keep Equipment free and clear from all liens and
encumbrances of any kind or nature other than those created by, through or
under Lessor. If, in violation of the foregoing covenant, any prohibited lien
or encumbrance shall attach to Equipment, Lessee shall (a) give Lessor
immediate written notice thereof and (b) promptly, at Lessees sole cost and
expense, take such action as may be necessary to discharge such lien.
18. Default; Remedies, (a) As used herein, the term Default means any of the
following events: (i) Lessee fails to pay any Rent or other amount due under a
Lease within ten days after the same shall have become due; (ii) Lessee or any
Guarantor becomes insolvent or makes an assignment for the benefit of its
creditors; (iii) a receiver, trustee, conservator or liquidator of Lessee or
any Guarantor of all or a substantial part of Lessees or such Guarantors assets
is appointed with or without the application or consent of Lessee or such
Guarantor, respectively; (iv) a petition is filed by or against Lessee or any
Guarantor under any bankruptcy, insolvency or similar law; (v) Lessee or any