MASTER EQUIPMENT LEASE -KEY EQUIPMENT FINANCE

 

                                                                  C#: 143293

                                                                  L#: 143294

                       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

Financed Fees.

 

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

applicable Schedule.

 

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

Schedule.

 

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

Schedule.

 

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

applicable Schedule.

 

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

BY LESSEE.

 

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

in amount.

 

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

request.

 

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

implied.

 

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

estimated taxes.

 

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

Guarantor violates or fails to perform any provision of either this Lease or

any other loan, lease or credit agreement or any acquisition or purchase

agreement with Lessor or any other party; (vi) any warranty or representation

made by Lessee herein proves to have been false or misleading when made; (vii)

there is a material adverse change in Lessees or any Guarantors financial

condition since the related Rent Commencement Date; (viii) Lessee or any

Guarantor merges or consolidates with any other corporation or entity, or

sells, leases or disposes of all or substantially all of its assets without the

prior written consent of Lessor; (ix) Lessee or any Guarantor, if an

individual, dies or, if not an individual, is dissolved; or (x) any filing by

Lessee of a termination statement for any financing statement filed by Lessor

while any obligations are owed by Lessee under a Lease. A Default with respect

to any Lease shall, at Lessors option, constitute a Default for all Leases and

any other agreements between Lessor and Lessee.

 

     (b) Upon the occurrence of a Default, Lessor may do one or more of the

following as Lessor in its sole discretion shall elect: (i) proceed by

appropriate court action to enforce performance by Lessee of the related Lease

or to recover damages, including incidental and consequential damages, for the

breach thereof; (ii) cause Lessee, at its expense, promptly to assemble

Equipment and return the same to Lessor at such place as Lessor ma