MASTER LEASE AGREEMENT

LEASE NO.  BC0709

 

MASTER LEASE AGREEMENT

 

This agreement (this "Agreement") is made this   29th  day  of July , 20 09,  between   ACC Capital Corporation (the "Lessor"), with its principal office at  7109 S High Tech Drive, Suite B, Midvale, UT  84047 , and Broadcast International, Inc. _( the "Lessee"), with its principal office located at 7050 Union Park Ave Suite 600, SLC, UT  84047 .  A word with an initial letter capitalized shall have the meaning set forth in this Agreement.

 

1.

LEASE:

 

Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the equipment ("Equipment") described in any "Equipment Schedule" executed and delivered by Lessor and Lessee in connection with the Agreement.  The terms and conditions contained herein and in each Equipment Schedule shall govern the leasing and use of the Equipment.  In the event of conflict between the provisions of this Agreement and any Equipment Schedule, the provisions of the Equipment Schedule shall govern.  Each Equipment Schedule, together with this Agreement as applied to that Equipment Schedule, shall constitute a separate lease (a "Lease") and shall be a "finance lease" as that term is defined in Article 2A of the Uniform Commercial Code as adopted in the prevailing jurisdiction ("UCC").

 

2.

ADDITIONAL DEFINITIONS:

 

a.

"Acceptance Date" means, as to the Equipment designated on any Equipment Schedule, the date as of which  (i) Lessor has received all documents, duly completed and executed, which Lessor reasonably deems necessary to ensure enforceability of Lessor's interests in the transaction represented by the Equipment Schedule (including but not limited to invoices, the Equipment Schedule, guaranties, evidence of title sufficient to establish Lessor's unencumbered ownership of the Equipment, insurance certificates, UCC financing statements, landlord/mortgagee waivers, property and sales tax information (including exemptions if applicable), inspection reports, vendor certifications if required, and applicable riders and addenda), and (ii) Lessor  has received, at Lessor's option, either (A) a certificate of acceptance of delivery signed by the Lessee (the "Acceptance Certificate") or (B) confirmation from the manufacturer or vendor of the Equipment that such Equipment has been installed. The listing of certain documents in this section shall not preclude Lessor from requesting additional documents at any time to ensure enforceability of Lessor's interests hereunder, and Lessee shall promptly comply with any such commercially reasonable request. Lessor may waive, in writing, any of the requirements of Subsection (ii) of this Section 2a.

 

b.

"Commencement Date" means, as to the Equipment designated on any Equipment Schedule, the first day of the calendar  following the Acceptance Date (unless the Acceptance Date falls on the first day of the calendar , in which case the Commencement Date shall be the same date as the Acceptance Date).

 

c.

"Schedule Date" means, as to any Equipment Schedule, the date of such Equipment Schedule as stated therein.

 

d.

"Assignment Date" means, as to the Equipment designated on any particular Equipment Schedule, the date upon which Lessor shall assign its interests in such Equipment Schedule, or in any Monthly Rental payable thereunder or in any Equipment described therein, to any third party, either outright or as security for Lessor's performance of an obligation.

 

3.

TERMS OF LEASE:

 

The "Initial Period" and the "Monthly Rental" payable with respect to each item of Equipment shall be as stated in the applicable Equipment Schedule.  Lessee may exercise an "Early Purchase Option" (if provided by, and as described in, the applicable Equipment Schedule) only by giving Lessor prior written notice of intent to exercise said option at least 180 days, but not more than 240 days, before the option date stated in the applicable Equipment Schedule.  If said written notice is not received by Lessor within the specified period, then the Early Purchase Option referred to above shall expire.  No notice of intent to exercise an Early Purchase Option may be revoked without Lessor's prior written consent.

 

4.

RENT AND PAYMENT:

 

a.

Monthly Rental :  As to any Equipment leased hereunder, the "Monthly Rental" payable by Lessee to Lessor shall be as set forth in the applicable Equipment Schedule.  The Monthly Rental shall begin on the Commencement Date and shall be due and payable by Lessee in advance on the first day of each month throughout the Initial Period and any "Renewal Period," as defined in Section 19m of this Agreement.  If the Acceptance Date does not fall on the first day of the calendar , then in

 

 

1

Initial           

 

addition to Monthly Rental, Lessee shall pay "Interim Rental" for the period from and including the Acceptance Date until the Commencement Date. Interim Rental shall be due and payable on the Acceptance Date and shall be calculated according to the following formula: Interim Rental equals Monthly Rental divided by 30, with that quotient multiplied by the number of days between the Acceptance Date and the Commencement Date (for example, if the Monthly Rental were $100 and the Acceptance Date occurred 12 days before the Commencement Date, Lessee would be obligated to pay $40 in Interim Rental on the Acceptance Date). Lessee shall pay all Interim Rental and Monthly Rental to Lessor, its successors or assigns, at Lessor's address set forth above (or as otherwise directed in writing by Lessor, its successors or assigns), whether or not Lessee has received any notice that such payment is due.  As of the Commencement Date (or the Assignment Date, if earlier), Monthly Rental shall be increased proportionately to the increase in yields of U.S. Treasury Notes (as designated in the applicable Equipment Schedule) occurring between the Schedule Date and the Commencement Date (or the Assignment Date, if earlier); and in addition, if the Assignment Date occurs after the Commencement Date, Monthly Rental shall be increased as of the Assignment Date proportionately to the increase in yields of designated U.S. Treasury Notes occurring between the Commencement Date and the Assignment Date, all as provided in the applicable Equipment Schedule.  In the event an Equipment Schedule fails to commence for any reason, then at Lessor's sole election, any advance payments (including but not limited to deposits and advanced Monthly Rentals) collected by Lessor shall be deemed earned by Lessor and shall be retained by Lessor as liquidated damages for failure of commencement, the parties acknowledging that actual damages sustained by failure of commencement are difficult or impossible to ascertain and that the advance payments retained are a reasonable estimate of such damages.  Retention of advance payments shall not release Lessee from any of Lessee's obligations hereunder.  LESSEE SHALL NOT ABATE, SET OFF, OR DEDUCT ANY AMOUNT OR DAMAGES FROM OR REDUCE ANY MONTHLY RENTAL FOR ANY REASON WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, ITS SUCCESSORS OR ASSIGNS.

 

b.

Late Charges :  Late charges on any payments, taxes, or other charges due hereunder shall accrue at the rate of 10% of the payment amount due per month (or if such rate shall exceed the maximum rate allowed by law, then at the highest rate that is permitted to be charged on liquidated amounts after judgment or at the statutory forbearance rate, whichever is greater) beginning ten days after the date that such amount was due and continuing until the amount is paid.  For example, if Monthly Rental were $100 and the Lessee failed to pay Monthly Rental due in January and February until April of that year, late charges would be payable in the sum of $70 ($100 times 10% per month times four months, as to the January Monthly Rental, plus $100 times 10% per month times three months, as to the February Monthly Rental). Lessee shall pay any late charges promptly upon Lessor's demand.

 

5.

TAXES

 

Lessee shall pay to Lessor an amount equal to all taxes paid, payable or required to be collected by Lessor and service fees assessed, however designated, which are levied or based on the Monthly Rental or on the possession, use, operation, lease, rental, sale, purchase, control or value of the Equipment, including, without limitation, registration and license fees and assessments, state and local privilege or excise taxes, sales and use taxes, personal and other property taxes, and taxes or charges based on gross lease revenue, but excluding taxes based on Lessor's net income.  Lessor may (but shall not be obligated to) invoice Lessee for all such taxes and fees in advance of their payment due date, and Lessee shall promptly remit to Lessor all such taxes and fees (together with a service charge not to exceed $50, payable to Lessor) upon receipt of such invoice from Lessor.  Lessee shall pay all penalties and interest resulting from its failure timely to remit such taxes to Lessor when invoiced by Lessor.  Lessor (or at Lessor's option, Lessee) shall file all required sales and use tax and personal property tax returns and reports concerning the Equipment with all applicable governmental agencies. The provisions of this section shall survive the expiration or earlier termination of this Agreement with respect to events occurring before such expiration or termination.

 

6.

USE; ALTERATIONS AND ATTACHMENTS:

 

a.

Acceptance Certificate :  After Lessee receives and inspects any Equipment and is satisfied that the Equipment is satisfactory, Lessee shall execute and deliver to Lessor an Acceptance Certificate in a form provided by Lessor; provided, however, that Lessee's failure to execute and deliver an Acceptance Certificate for any Equipment shall not affect Lessee's obligations under this Agreement and the applicable Equipment Schedule.

 

b.

Unlimited Usage :  Lessee shall be entitled to unlimited usage of the Equipment during the Initial Period, any Renewal Periods and any extension or renewal periods approved by Lessor in writing.

 

c.

Control and Location :  Lessee shall at all times keep the Equipment in its sole possession and control.  The Equipment shall not be moved from the location stated in the Equipment Schedule without the prior written consent of Lessor.

 

 

 

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Initial           

 

d.

Nature of Use :  Lessee shall cause the Equipment to be installed, used, operated and, at the termination of the Agreement as to each Equipment Schedule, removed (i) in accordance with any applicable manufacturer's manuals or instructions;  (ii) by competent and duly qualified personnel only; and (iii) in accordance with applicable governmental regulations, if any.

 

e.

Alterations :  Lessee shall not alter, or add attachments to, the Equipment without first obtaining the written consent of Lessor.  Any such alterations or attachments shall be made at Lessee's expense and shall not interfere with the normal and satisfactory operation or maintenance of the Equipment.  The manufacturer may incorporate engineering changes or make temporary alterations to the Equipment upon request of Lessee.  Unless Lessor shall otherwise agree in writing, all such alterations and attachments shall be and become the property of Lessor or, at the option of Lessor, shall be removed by Lessee at the termination of this Agreement as to such Equipment and the Equipment restored at Lessee's expense to its original condition, reasonable wear and tear only excepted.

 

f.

Personal Property Character :  Lessee acknowledges that the Equipment is and shall remain personal property throughout the term of this Agreement.  Lessee shall not permit the Equipment to become an accession to other goods or a fixture to, or part of, any real property.

 

g.

Compliance with Laws :  Lessee shall comply with all applicable laws, regulations and orders relating to the Equipment and this Agreement.  Lessee shall pay all fines and penalties for late registration, moving violations or other infractions or violations of law with respect to the Equipment or Lessee's use of the Equipment.

 

h.

Commercial Use :  The Equipment is leased solely for commercial or business purposes.

 

i.

Software :  In the event the Equipment includes software (including all documentation, later versions, updates, and modifications) (herein "Software"), the following shall apply:  (i) Lessee shall possess and use the Software in accordance with the terms and conditions of any license agreement ("License") entered into with the owner/vendor of such Software (at Lessor's request, Lessee shall provide a complete copy of the License to Lessor); (ii) as due consideration for Lessor's payment of the Software price and for providing the Software to Lessee at a lease rate (as opposed to a debt rate), Lessee agrees that Lessor is leasing (and not financing) the Software to Lessee; and (iii) except as otherwise specifically provided herein, the Software shall be deemed Equipment for all purposes under the Lease.

 

7.

MAINTENANCE AND REPAIRS; RETURN OF EQUIPMENT:

 

a.

General Maintenance :  Subject to the following provisions of this Section 7, during the continuance of this Agreement and at its expense, Lessee (i) shall keep the Equipment in good repair, working order and condition;  (ii) shall make all necessary adjustments, repairs and replacements, in accordance with Manufacturer specifications;  (iii) shall furnish all required parts, mechanisms, devices and servicing; and (iv) shall not use or permit the Equipment to be used for any purpose for which, in the opinion of the manufacturer or service company, the Equipment is not designed or suitable.  Such parts, mechanisms and devices shall immediately become part of the Equipment for all purposes hereunder.

 

b.

Service Company :  During the continuance of this Agreement and at its own expense, Lessee shall enter into and maintain in force a contract with the manufacturer or other qualified maintenance organization for maintenance of each item of Equipment.  Such contract as to each item shall commence upon expiration of the manufacturer's warranty period, if any, relating to such item.  Lessee shall furnish Lessor with a copy of such contract upon demand.

 

c.

Return of Equipment :  At the end of the Initial Period or ultimate Renewal Period, as applicable, and provided that Lessee has timely elected the "Return Option" described in Section 19m of this Agreement, then at Lessee's expense, Lessee shall  return the Equipment to Lessor within the time, and at the location within the Continental United States, designated in writing by Lessor.  Upon such return, the Equipment shall be in the same operating order, repair, condition and appearance as on the Acceptance Date, excepting reasonable wear and tear from proper use thereof, but including all engineering changes theretofore prescribed by the manufacturer.   If the Equipment or its component parts were packed or crated for shipping when new, Lessee shall pack or crate the same carefully and in accordance with any recommendations of the Supplier or manufacturer before redelivering the item(s) to Lessor.  Lessee shall also deliver to Lessor all plans, specifications, operating manuals, software documentation, discs, warranties and other documents furnished by the manufacturer or supplier of the Equipment and all other documents in Lessee's possession relating to the maintenance and method of operation of such Equipment.  Lessee shall return and convey to Lessor at no cost to Lessor all upgrades and/or enhancements made to the Equipment that are inherent to the functioning of the Equipment.   Lessee shall provide maintenance qualification letters and/or arrange for and pay the cost of repairs which are necessary for the manufacturer or qualified maintenance organization to accept the Equipment under contract maintenance at its then standard rates.  With regard to Software, at the time of return of the Equipment, Lessee shall (i) return to Lessor the Software

 

 

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Initial           

 

(including all upgrades and modifications and all Licenses) and all copies, in whole or part, made by Lessee, (ii) at Lessor's written request, delete from its systems all Software then installed, destroy all copies or duplicates thereof, and certify in writing that such copies and duplicates have been destroyed, that all installed Software has been deleted, and that Lessee has returned the Software, with all upgrades, modifications, Licenses, copies and duplicates, to Lessor; and (iii) cease using the Software altogether.  Upon receipt of Software from Lessee, Lessor shall be responsible to return the Software to the owner/vendor so that Lessee shall not be in breach of any software license.  At Lessor's written request, Lessee shall provide free storage for any item of Equipment for a period not to exceed sixty (60) days after the expiration of the Agreement before returning such item to Lessor and shall permit Lessor access to the Equipment for inspection and/or resale.  If Lessee shall fail to return each item of Equipment in the manner and condition provided herein, Lessee shall be obligated, upon Lessor's demand, to reimburse Lessor for all expenses incurred by Lessor in restoring the Equipment to such required condition and shall be liable for any reduction in value as a result of Lessee's failure to return the Equipment in the condition and manner provided herein.  If Lessee shall fail timely to return an item of Equipment to Lessor's designated location, such item shall be deemed lost within the meaning, and subject to the provisions of, Section 12c of this Agreement.

 

8.

OWNERSHIP AND INSPECTION:

 

a.

Ownership :  The Equipment shall at all times remain the property of Lessor or its assigns.  By this Agreement, Lessee acquires no ownership rights in the Equipment.  Lessor may affix (or require Lessee to affix) tags, decals or plates to the Equipment indicating Lessor's ownership, and Lessee shall not permit their removal or concealment.  Lessor shall be shown as the owner of the Equipment on all vehicle titles and licenses, as applicable.

 

b.

No Liens :  LESSEE SHALL KEEP THE EQUIPMENT AND LESSEE'S INTEREST UNDER THIS AGREEMENT FREE AND CLEAR OF ALL LIENS AND ENCUMBRANCES, EXCEPT THOSE PERMITTED BY LESSOR OR ITS ASSIGNS.

 

c.

Access :  Lessor, its assigns and their respective agents shall have free access to the Equipment at all reasonable times during normal business hours for the purpose of inspecting the Equipment and for any other purpose contemplated by this Agreement.

 

d.

Notification of Loss :  Lessee shall immediately notify Lessor in writing of all details concerning any damage or loss to the Equipment arising from any cause, including but not limited to the alleged or apparent improper manufacture, functioning, or operation of the Equipment.

 

9.

WARRANTIES:

 

a.

Limitation on Warranties : LESSEE ACKNOWLEDGES THAT LESSOR HAS NOT MADE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT, INCLUDING, WITHOUT LIMITATION, WARRANTIES RELATING TO ANY OF THE FOLLOWING:  (i) THE DESCRIPTION, CONDITION, DESIGN, QUALITY OR PERFORMANCE OF THE EQUIPMENT;  (ii) ITS MERCHANTABILITY OR FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE WHETHER OR NOT DISCLOSED TO LESSOR; AND (iii) DELIVERY OF THE EQUIPMENT FREE OF THE RIGHTFUL CLAIM OF ANY PERSON BY WAY OF INFRINGEMENT OR THE LIKE.  LESSOR EXPRESSLY DISCLAIMS ALL SUCH WARRANTIES.  LESSOR SHALL HAVE NO LIABILITY TO LESSEE FOR ANY CLAIM, LOSS, OR DAMAGE OF ANY KIND OR NATURE WHATSOEVER, INCLUDING SPECIAL OR CONSEQUENTIAL DAMAGES.  LESSEE EXPRESSLY WAIVES ALL RIGHTS AND REMEDIES UNDER SECTIONS 508 THROUGH 522 OF UCC2A (AS DEFINED HEREIN) AND ELECTS INSTEAD THE REMEDIES PROVIDED BY THIS AGREEMENT TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW.

 

b.

Assignment of Warranties :  Lessor hereby assigns to Lessee all assignable warranties on the Equipment, as described in Lessor's purchase contract, which assignment shall be effective only (i) during the Initial Period and any Renewal Period, as defined hereinafter, and (ii) so long as no uncured Event of Default exists.

 

10.

NET LEASE; LESSEE'S OBLIGATIONS ABSOLUTE AND UNCONDITIONAL:

 

a.

Net Lease :  This Agreement is a "net lease" and, as between Lessor and Lessee, Lessee shall be responsible for all costs, expenses and claims of every nature whatsoever arising out of or in connection with or related to this Agreement or the Equipment (including, but not limited to, transportation in and out, packing, installation, deinstallation and shipping).

 

 

 

4

Initial           

 

b.

Absolute Payment Obligation :  LESSEE AGREES THAT ITS MONTHLY RENTAL AND OTHER OBLIGATIONS HEREUNDER SHALL BE IRREVOCABLE, INDEPENDENT, ABSOLUTE, AND UNCONDITIONAL AND SHALL NOT BE SUBJECT TO ANY ABATEMENT, REDUCTION, RECOUPMENT, DEFENSE, OFFSET OR COUNTERCLAIM OTHERWISE AVAILABLE TO LESSEE AGAINST LESSOR; NOR, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN OR AS AGREED TO BY LESSOR IN WRITING, SHALL THIS AGREEMENT TERMINATE FOR ANY REASON WHATSOEVER BEFORE THE END OF THE INITIAL PERIOD OR ANY RENEWAL PERIOD THEN IN EFFECT.

 

11.

ASSIGNMENT:

 

a.

No Assignment by Lessee :  LESSEE MAY NOT ASSIGN THIS AGREEMENT OR ANY OF ITS RIGHTS HEREUNDER OR SUBLEASE THE EQUIPMENT WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR.  NO PERMITTED ASSIGNMENT OR SUBLEASE SHALL RELIEVE LESSEE OF ANY OF ITS OBLIGATIONS HEREUNDER.

 

b.

Lessor Assignments :  Lessor may sell and assign some or all of its rights and interests in any Equipment, and in any Equipment Schedule hereunder, to another party ("Lessor's Assignee"), either outright or as collateral security for loans.  Upon notice of any such assignment and as provided by instructions from Lessor, Lessee shall pay its Monthly Rental and perform its other obligations hereunder to Lessor's Assignee (or to another party designated by Lessor's Assignee).  Upon any such sale or assignment, LESSEE'S OBLIGATIONS TO LESSOR'S ASSIGNEE UNDER THE ASSIGNED EQUIPMENT SCHEDULE SHALL BE ABSOLUTE AND UNCONDITIONAL, AND LESSEE WILL NOT ASSERT AGAINST LESSOR'S ASSIGNEE ANY CLAIM, DEFENSE OR COUNTERCLAIM WHICH LESSEE MIGHT HAVE AGAINST LESSOR.  Lessor's Assignee shall have all of the rights but none of the obligations of Lessor under this Agreement.  Notwithstanding any assignment by Lessor, Lessor's Assignee shall not be deemed to have assumed or to be obligated to perform any of the obligations of Lessor, and after such assignment Lessor shall continue to be responsible for all of Lessor's obligations under the Lease.  Upon request by Lessor in connection with a proposed sale or assignment, Lessee shall promptly provide all information (including but not limited to updated financial statements), and shall execute and deliver all documents (including but not limited to consents to the proposed assignment and acknowledgements of the assignment), as requested by Lessor or Lessor’s Assignee.

 

c.

UCC2A Rights :  In connection with any assignment by Lessor of its interest in the Equipment or in this Agreement, Lessee acknowledges that the assignment will not materially change the duty of, or materially increase the burden or risk imposed on, Lessee; and Lessee waives its right, if any, to demand Lessor's Assignee to comply with the provisions of Utah Uniform Commercial Code--Leases, Utah Code Annotated, Title 70A, Chapter 2a (as it now exists or is hereafter modified) ("UCC2A"), dealing with adequate assurance and assumption requirements, among other things.  

 

d.

Confirming Documents :  Upon any such assignment, Lessee agrees to execute any document reasonably requested by Lessor acknowledging such assignment and affirming to Lessor's Assignee basic provisions of this Agreement and the Equipment Schedule, and Lessee shall authenticate (and hereby authorizes the filing of) any UCC financing statements and amendments reasonably requested by Lessor or the assignee.

 

e.

Counterparts :  Only one executed counterpart of any Equipment Schedule shall be marked "Original"; any other executed counterparts shall be marked "Duplicate Original" or "Counterpart."  No security interest in any Equipment Schedule may be created through the transfer and possession of any counterpart other than the "Original."

 

12.

RISK OF LOSS ON LESSEE:

 

From and after the date the Equipment is delivered to Lessee and until the Equipment is returned to Lessor as provided in the Agreement, Lessee shall bear all risk of loss, damage, theft,