Texas Equipment Lease Agreement (UCC Article 2A – Chapter 2A)

TEXAS EQUIPMENT LEASE AGREEMENT

This Equipment Lease Agreement (this "Lease") is entered into as of [__/__/____] (the "Effective Date") between:

LESSOR: [________________________________], a [____________] [entity type], with its principal place of business at [________________________________] ("Lessor"); and

LESSEE: [________________________________], a [____________] [entity type], with its principal place of business at [________________________________] ("Lessee").

Lessor and Lessee are collectively referred to as the "Parties" and individually as a "Party."

1. GOVERNING LAW DECLARATION; UCC ARTICLE 2A

This Lease constitutes a "lease" as that term is defined in Tex. Bus. & Com. Code § 2A.103(a)(10) and is governed by Chapter 2A of the Texas Business & Commerce Code (Texas's enactment of UCC Article 2A). This Lease is not intended to be a sale, a retained security interest, a conditional sale, or a "lease intended as security" within the meaning of § 1.203.

☐ Finance Lease. This Lease is a "finance lease" as defined in Tex. Bus. & Com. Code § 2A.103(a)(7), and the Supplier is [________________________________]. Lessee acknowledges receipt of a copy of the Supply Contract in accordance with § 2A.209, or the warranty information provided by Lessor.

☐ True Lease (Non-Finance). This Lease is a non-finance true lease; Lessor is the seller/manufacturer or its affiliate.

☐ Consumer Lease. [STRIKE if Lessee is a business.] This is a "consumer lease" under § 2A.103(a)(5) and is additionally subject to consumer protections under Texas law, including the DTPA.

2. EQUIPMENT

2.1 Description. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the following equipment (collectively, the "Equipment"):

A complete Equipment Schedule is attached as Exhibit A.

2.2 Location and Permission to Inspect. The Equipment shall be located at: [________________________________], [____________] County, Texas (the "Equipment Location"). Lessee shall not remove the Equipment from the Equipment Location without Lessor's prior written consent, which shall not be unreasonably withheld. Lessor and its authorized representatives shall have reasonable access to inspect the Equipment during normal business hours upon reasonable notice.

2.3 No Fixture. The Equipment shall remain personal property notwithstanding affixation to real estate, pursuant to Tex. Bus. & Com. Code § 2A.309. Lessor may file a fixture filing under § 9.502(b) with the [____________] County Clerk to protect its interest.

3. TERM

3.1 Initial Term. The initial term of this Lease is [____] months commencing on the Acceptance Date (defined below) and ending on [__/__/____] (the "Initial Term"). Unless terminated earlier under Section [__] or extended pursuant to Section 3.2, the Lease shall expire at the end of the Initial Term.

3.2 Renewal. ☐ Auto-renewal for successive [____]-month periods unless either Party provides [____] days' written notice prior to expiration. ☐ Renewal by mutual written agreement only.

3.3 Acceptance Date. "Acceptance Date" means the date Lessee signs and delivers to Lessor a written Certificate of Acceptance in the form of Exhibit B. Acceptance occurs as provided in Tex. Bus. & Com. Code § 2A.515 after a reasonable opportunity to inspect; a lessee may revoke acceptance on the grounds and within the time allowed by § 2A.517. For a non-consumer finance lease, § 2A.407 addresses the enforceability of a term making the lessee’s promises irrevocable upon acceptance.

4. RENT AND PAYMENTS

4.1 Base Rent. Lessee shall pay Lessor base rent of $[____________] per month (the "Base Rent"), due in advance on the [____] day of each month.

4.2 Initial Payment and Security Deposit. Lessee shall pay, on the Effective Date:

• First month's Base Rent: $[____________]
• Last month's Base Rent: $[____________]
• Security Deposit: $[____________] (held under Section [__])
• Documentation fee: $[____________]
• Total Due at Signing: $[____________]

4.3 Texas Sales and Use Tax. Rental payments are subject to Texas sales and use tax at the state rate of 6.25% plus applicable local rates (up to 2% combined, maximum 8.25%) under Tex. Tax Code Ch. 151. Lessee shall pay all such taxes in addition to Base Rent. If Lessee claims a sales-tax exemption, Lessee shall deliver a properly executed Texas Sales and Use Tax Resale/Exemption Certificate. Motor vehicle leases are subject to Tex. Tax Code Ch. 152 instead of Ch. 151.

4.4 Late Charges. A late charge equal to the lesser of (a) 5% of the past-due amount or (b) the maximum rate permitted under Tex. Fin. Code Ch. 302 shall accrue on any payment not received within [____] days of the due date.

4.5 Default Interest. Amounts in default shall bear interest at the lesser of (a) [____]% per annum or (b) the maximum commercial rate permitted under Tex. Fin. Code § 303.009 (28% for commercial transactions over $250,000; 18% otherwise).

4.6 Ad Valorem Property Tax (Business Personal Property). Lessee shall pay all ad valorem property taxes assessed on the Equipment under Tex. Tax Code Ch. 11 and 22. Lessee shall timely render the Equipment to the [____________] County Appraisal District on or before April 15 each year.

5. HELL-OR-HIGH-WATER CLAUSE (FINANCE LEASE)

If this Lease is a non-consumer finance lease and Lessee has accepted the Equipment, Lessee's obligations under this Lease, including its obligation to pay all rent when due, are absolute and unconditional and are not subject to any abatement, reduction, setoff, defense, counterclaim, interruption, deferment, or recoupment for any reason whatsoever, and shall continue in full force and effect regardless of any disability of Lessee to use the Equipment. This provision is enforceable under Tex. Bus. & Com. Code § 2A.407. Lessee's remedies against the Supplier pass through under § 2A.209, and Lessee's exclusive remedy for Equipment defects is against the Supplier under the Supply Contract, not Lessor.

6. WARRANTIES AND DISCLAIMERS

6.1 Disclaimer (Finance Lease). LESSOR IS NOT A MANUFACTURER OR DEALER OF THE EQUIPMENT. LESSOR MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, NON-INFRINGEMENT, OR CONDITION. THIS DISCLAIMER IS CONSPICUOUS WITHIN THE MEANING OF TEX. BUS. & COM. CODE § 1.201(b)(10) AND COMPLIES WITH § 2A.214.

6.2 Pass-Through Warranty (Finance Lease). Pursuant to § 2A.209, Lessee receives the benefit of any warranty made by the Supplier to Lessor that extends to Lessee.

6.3 True Lease (if applicable). Lessor warrants only that it has the right to lease the Equipment to Lessee and that, on the Acceptance Date, the Equipment will be free from material defects in workmanship.

7. USE, MAINTENANCE, AND INSURANCE

7.1 Use. Lessee shall use the Equipment solely for lawful business purposes and in accordance with the manufacturer's specifications.

7.2 Maintenance. Lessee shall, at its expense, keep the Equipment in good operating condition, perform all manufacturer-recommended maintenance, and make all necessary repairs. Lessee shall not make material alterations without Lessor's written consent.

7.3 Insurance. Lessee shall maintain the following insurance throughout the Lease term, naming Lessor as loss payee and additional insured:

• Commercial General Liability: $[____________] per occurrence / $[____________] aggregate
• Property Insurance: All-risk coverage at the full replacement value of the Equipment
• Workers' Compensation: If Lessee elects coverage, coverage at statutory limits. Texas private employers generally may choose whether to obtain coverage under Tex. Lab. Code § 406.002. An employer without coverage must give the division notice under § 406.004; failure to notify is an administrative violation.
• Certificates of insurance shall be delivered within 10 days of the Effective Date and annually thereafter.

7.4 Risk of Loss. Under Tex. Bus. & Com. Code § 2A.219(a), risk of loss remains with Lessor in a non-finance lease and passes to Lessee in a finance lease, unless the Lease lawfully allocates risk otherwise. If risk is to pass and the time is not stated, § 2A.219(b) supplies different rules for carrier shipments, destination contracts, bailees, merchant lessees, and receipt. Selected allocation: [________________________________].

8. PROHIBITED ACTIONS

Lessee shall not, without Lessor's prior written consent:
(a) sublease, assign, or transfer the Equipment or any interest in this Lease;
(b) grant any security interest, lien, or encumbrance on the Equipment;
(c) remove the Equipment from the Equipment Location;
(d) permit the Equipment to become a fixture;
(e) use the Equipment outside the State of Texas for more than 30 days;
(f) alter, modify, or add to the Equipment.

9. EVENTS OF DEFAULT AND REMEDIES

9.1 Events of Default. The following constitute "Events of Default" (§ 2A.501):
(a) Failure to pay rent or any other amount when due, continuing for [____] days;
(b) Breach of any covenant continuing for [____] days after notice;
(c) Lessee's insolvency or assignment for benefit of creditors; provided that a bankruptcy filing or appointment of a trustee, custodian, or receiver is not by itself an enforceable termination or default trigger to the extent prohibited by 11 U.S.C. § 365 or other applicable law;
(d) Misrepresentation in any document furnished to Lessor;
(e) Unauthorized transfer, sublease, or relocation of the Equipment;
(f) Failure to maintain required insurance;
(g) Cross-default with any other agreement between Lessor and Lessee.

9.2 Lessor's Remedies (§§ 2A.523–.532). Upon an Event of Default, Lessor may exercise any or all of the following remedies, cumulatively and without election:

(a) Cancel the Lease (§ 2A.505);
(b) Accelerate all remaining rent payments, which shall become immediately due;
(c) Repossess the Equipment without judicial process, provided such repossession can be accomplished without breach of the peace under § 2A.525(c);
(d) Dispose of the Equipment by re-leasing, sale, or other disposition in a commercially reasonable manner under § 2A.527;
(e) Recover damages measured by the present value of the accelerated rent plus incidental damages, less the present value of market rent for the remaining term (§ 2A.528) or, alternatively, the present value of future rent without re-leasing (§ 2A.529) if Lessor is unable to dispose of the Equipment;
(f) Recover reasonable attorney's fees under Tex. Civ. Prac. & Rem. Code § 38.001, which are recoverable after proper presentment under § 38.002;
(g) Seek injunctive relief to prevent further breach;
(h) Any other remedy available at law or in equity.

9.3 Mitigation. Lessor's duty to mitigate damages is governed by § 2A.527 and § 2A.528 and is satisfied by a commercially reasonable disposition.

10. PRECAUTIONARY UCC FILING

Lessee authorizes Lessor to file a precautionary UCC-1 financing statement with the Texas Secretary of State under Tex. Bus. & Com. Code § 9.505, designating Lessor as "Lessor" and Lessee as "Lessee," to protect Lessor's interest in the event a court later recharacterizes this Lease as a secured transaction. Such filing is not an admission that the transaction is anything other than a true lease.

11. INDEMNIFICATION

TO THE MAXIMUM EXTENT PERMITTED BY TEXAS LAW, Lessee shall indemnify, defend, and hold harmless Lessor and its affiliates, officers, directors, employees, and agents from and against any and all claims, liabilities, damages, losses, and expenses (including reasonable attorney's fees) arising out of or relating to: (a) Lessee's possession, use, operation, maintenance, or return of the Equipment; (b) any breach by Lessee of this Lease; (c) any claim by a third party for personal injury, death, or property damage arising from the Equipment; and (d) any environmental claims relating to the Equipment Location. THIS INDEMNITY DOES NOT APPLY TO LOSSES TO THE EXTENT CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF LESSOR OR ANOTHER PROTECTED PERSON.

12. RETURN OF EQUIPMENT

Upon expiration or termination, Lessee shall, at its expense, return the Equipment to Lessor at [________________________________] in the same condition as delivered, ordinary wear and tear excepted. Lessee shall continue to pay holdover rent at 150% of Base Rent until the Equipment is returned.

13. TAX INDEMNIFICATION

Lessee shall indemnify Lessor for any loss of tax benefits (depreciation, ITC, Section 168) resulting from Lessee's action or inaction.

14. GOVERNING LAW; VENUE; JURY WAIVER

14.1 Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of Texas, without regard to conflicts-of-law principles. The Texas UCC Article 2A (Ch. 2A) applies.

14.2 Venue. Subject to subject-matter jurisdiction and controlling venue law, the Parties select the Texas state courts in [____________] County and, if federal jurisdiction and venue independently exist, the corresponding federal district. Section 15.020 controls only if the Lease satisfies every “major transaction” condition and no subsection (d) exception applies; § 15.035 is permissive and its consumer-payment branch is nonwaivable. Other mandatory venue statutes control.

14.3 JURY WAIVER. EACH PARTY IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING OUT OF THIS LEASE. This waiver is knowing and voluntary and is enforceable under In re Prudential Ins. Co., 148 S.W.3d 124 (Tex. 2004).

14.4 Limitations Period. A qualifying Article 2A lease claim is governed by Tex. Bus. & Com. Code § 2A.506; Tex. Civ. Prac. & Rem. Code § 16.051 supplies a four-year residual period when no more specific provision applies. Classify the transaction, claim, accrual rule, and any permitted original-agreement reduction before calendaring.

15. MISCELLANEOUS

15.1 Entire Agreement; Merger. This Lease, together with all Exhibits, constitutes the entire agreement. Pursuant to Tex. Bus. & Com. Code § 2A.202, parol evidence is inadmissible to contradict the written terms.

15.2 Amendments. Any amendment must be in writing and signed by both Parties (§ 2A.208).

15.3 Severability; Notices; Counterparts; Electronic Signatures. Standard terms apply. The Parties agree to electronic execution of this Agreement. For a covered transaction, a record or signature may not be denied legal effect solely because it is electronic, subject to Tex. Bus. & Com. Code §§ 322.003, 322.005, and 322.007 and other applicable law.

15.4 No Waiver. A waiver is effective only if in writing, signed by the waiving Party, and specific as to the matter waived.

15.5 Assignment. Lessor may freely assign this Lease and/or the rent stream; Lessee may not assign without Lessor's prior written consent. Lessee waives all defenses against an assignee under § 2A.303 and § 9.403, except defenses arising under the Lease itself and real defenses.

16. SIGNATURES

LESSOR: [________________________________]

By: _______________________________________
Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

LESSEE: [________________________________]

By: _______________________________________
Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

EXHIBIT A – Equipment Schedule

EXHIBIT B – Certificate of Acceptance

EXHIBIT C – Supply Contract (finance lease)

EXHIBIT D – Insurance Certificates

Sources and References

• Tex. Bus. & Com. Code Ch. 2A – https://statutes.capitol.texas.gov/Docs/BC/htm/BC.2A.htm
• Tex. Bus. & Com. Code § 2A.407 – Hell-or-high-water clauses
• Tex. Bus. & Com. Code §§ 2A.501–.532 – Default and remedies
• Tex. Tax Code Ch. 151 – Sales and use tax
• Tex. Fin. Code Ch. 302–303 – Interest rates
• In re Prudential Ins. Co., 148 S.W.3d 124 (Tex. 2004) (jury waiver)