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Operating Lease Agreement template
Operating Lease Agreement sample


What is Operating Lease Agreement?

Operating Lease Agreement An Operating Lease Agreement outlines the terms for leasing equipment or property, specifying lease duration, rental payments, and responsibilities of the parties involved.



Sample template:



OPERATING LEASE AGREEMENT


This Operating Lease Agreement (the "Agreement") is made and entered into as of the date of last signature below, by and between ABC Company, a company incorporated under the laws of the United States, having its registered office at [Lessee Address] (the "Lessee"), and XYZ Company, a company incorporated under the laws of the United States, having its registered office at [Lessor Address] (the "Lessor").

1. Agreement to Lease

1.1. Equipment Description


Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to lease from Lessor, ten (10) industrial grade Computer Numerically Controlled (CNC) Milling Machines (the "Equipment"), subject to the terms and conditions of this Agreement.



1.2. Lease Duration


The lease term shall be for a fixed period of five (5) years (the "Lease Term"), commencing on the date the Equipment is delivered to and accepted by Lessee (the "Commencement Date") and ending on the fifth (5th) anniversary of the Commencement Date, unless either party provides written notice of its intention not to renew the Agreement not less than ninety (90) days prior to the expiration of the Lease Term.



2. Rental Payments

2.1. Lease Rent


Lessee shall pay to Lessor during the Lease Term, as rent for the use and possession of the Equipment, the sum of $______ per month (the "Rent"), payable in advance on the first day of each calendar month during the Lease Term. Rent shall be prorated for any partial month at the beginning or end of the Lease Term.



2.2. Late Fee


If any installment of rent due under this Agreement is not paid within ten (10) days after the applicable due date, Lessee shall pay to Lessor a late fee equal to five percent (5%) of the overdue amount.



3. Delivery, Installation, and Acceptance

The Equipment shall be delivered to Lessee at [Delivery Address] at Lessor's expense. Lessor shall be responsible for the installation of the Equipment. Lessee agrees to inspect the Equipment and provide Lessor with written acceptance of the Equipment within five (5) days of delivery and installation.



4. Maintenance and Repairs

4.1. Lessee's Responsibilities


Lessee shall be responsible for the routine maintenance and repair of the Equipment with the exception of any major repairs or maintenance, which shall be the responsibility of the Lessor, subject to the terms and conditions of this Agreement. Lessee shall use and operate the Equipment in accordance with the manufacturer's specifications and guidelines.



4.2. Lessor's Responsibilities


Lessor shall be responsible for any major repairs or maintenance to the Equipment during the Lease Term, provided that Lessee notifies Lessor in writing of the need for such major repair or maintenance as soon as reasonably practicable, but in no event later than three (3) days from the date Lessee becomes aware of such need.



5. Insurance

Lessee shall, throughout the Lease Term, maintain, at its sole expense, insurance covering the Equipment for its full replacement value, providing protection against any and all risks of loss, damage, or destruction, and naming Lessor as the loss payee. Such insurance shall also include general liability coverage, with limits not less than $___,____ for personal injury and $___,____ for property damage, naming Lessor as an additional insured.



6. Indemnification

Lessee shall indemnify, defend and hold Lessor harmless from and against any and all losses, claims, liabilities, damages, costs and expenses, including reasonable attorneys’ fees, arising out of or in connection with the use, operation, or possession of the Equipment during the Lease Term, except to the extent caused by Lessor's negligence or willful misconduct. This indemnification shall survive the termination of this Agreement.



7. Termination

Upon the expiration or earlier termination of this Agreement, Lessee shall return the Equipment to Lessor at Lessee's expense, in the same condition as when received, reasonable wear and tear excepted. Lessee shall be responsible for any costs incurred in connection with the removal and de-installation of the Equipment.



8. Governing Law and Dispute Resolution

This Agreement shall be governed by, and construed in accordance with, the laws of the United States and the State of [State Name], without regard to its principles of conflicts of law. Any disputes arising out of or in connection with this Agreement shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.



9. Miscellaneous

9.1. Entire Agreement


This Agreement, including any exhibits and schedules hereto, constitutes the entire Agreement between the parties concerning the subject matter hereof and supersedes any and all prior agreements. This Agreement may only be amended or supplemented in writing signed by both parties.



9.2. Assignment


Neither party may assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld.



9.3. Notices


All notices, requests, and other communications required or permitted hereunder shall be in writing and shall be deemed duly given upon receipt when personally delivered, sent by overnight courier, or mailed by registered or certified mail, postage prepaid, return receipt requested, to the respective addresses of the parties set forth on the first page hereof, or to such other address as either party may designate by notice to the other.



IN WITNESS WHEREOF, the parties hereto have executed this Operating Lease Agreement as of the date first above written.

_________________________ _________________________
[ABC Company - Lessee] [XYZ Company - Lessor]
[Authorized Signature] [Authorized Signature]
[Name and Title] [Name and Title]

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Sections of an Operating Lease Agreement


In this Operating Lease Agreement, you will see the following sections:

  1. Agreement to Lease
  2. Rental Payments
  3. Delivery, Installation, and Acceptance
  4. Maintenance and Repairs
  5. Insurance
  6. Indemnification
  7. Termination
  8. Governing Law and Dispute Resolution
  9. Miscellaneous


Going indepth - Analysis of each section:

  1. Agreement to Lease : This section outlines the equipment being leased (10 CNC Milling Machines) and the duration of the lease (5 years). It's like renting a car for a specific period, but in this case, it's industrial equipment.

  2. Rental Payments : This section specifies the monthly rent amount and the due date for payments. It also includes a late fee if the rent is not paid on time, similar to paying rent for an apartment.

  3. Delivery, Installation, and Acceptance : This section explains that the Lessor (the one providing the equipment) is responsible for delivering and installing the equipment. The Lessee (the one renting the equipment) must inspect and accept the equipment within 5 days of delivery and installation.

  4. Maintenance and Repairs : This section divides the responsibility for maintenance and repairs between the Lessee and Lessor. The Lessee is responsible for routine maintenance, while the Lessor is responsible for major repairs, as long as the Lessee notifies the Lessor within 3 days of discovering the need for such repairs.

  5. Insurance : This section requires the Lessee to maintain insurance on the equipment, covering its full replacement value and including general liability coverage. The Lessor must be named as the loss payee and an additional insured.

  6. Indemnification : This section states that the Lessee will protect and compensate the Lessor for any losses, claims, or damages related to the use, operation, or possession of the equipment, unless caused by the Lessor's negligence or misconduct. This is like a safety net for the Lessor in case something goes wrong with the equipment during the lease.

  7. Termination : This section explains that at the end of the lease, the Lessee must return the equipment to the Lessor in the same condition it was received, except for reasonable wear and tear. The Lessee is responsible for the costs of removing and de-installing the equipment.

  8. Governing Law and Dispute Resolution : This section states that the agreement is governed by the laws of a specific state and that any disputes will be resolved through binding arbitration, a process where a neutral third party makes a decision instead of going to court.

  9. Miscellaneous : This section covers various additional terms, such as the agreement being the entire agreement between the parties, the requirement for written consent to assign the agreement, and the proper method for sending notices between the parties.

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