WILLIAM DONALD SCHAEFER, Governor                           S.B. 147

(3)      A PROVISION IN A LEASE AGREEMENT WHICH (I) PROHIBITS THE
CREATION OR ENFORCEMENT OF A SECURITY INTEREST IN AN INTEREST OF A
PARTY UNDER THE LEASE CONTRACT OR IN THE LESSOR'S RESIDUAL INTEREST IN
THE GOODS, OR (II) MAKES SUCH A TRANSFER AN EVENT OF DEFAULT, IS NOT
ENFORCEABLE UNLESS, AND THEN ONLY TO THE EXTENT THAT, THERE IS AN
ACTUAL TRANSFER BY THE LESSEE OF THE LESSEE'S RIGHT OF POSSESSION OR USE
OF THE GOODS IN VIOLATION OF THE PROVISION OR AN ACTUAL DELEGATION OF A
MATERIAL PERFORMANCE OF EITHER PARTY TO THE LEASE CONTRACT IN
VIOLATION OF THE PROVISION. NEITHER THE GRANTING NOR THE ENFORCEMENT
OF A SECURITY INTEREST IN (I) THE LESSOR'S INTEREST UNDER THE LEASE
CONTRACT OR (II) THE LESSOR'S RESIDUAL INTEREST IN THE GOODS IS A TRANSFER
THAT MATERIALLY IMPAIRS THE PROSPECT OF OBTAINING RETURN PERFORMANCE
BY, MATERIALLY CHANGES THE DUTY OF, OR MATERIALLY INCREASES THE
BURDEN OR RISK IMPOSED ON, THE LESSEE WITHIN THE PURVIEW OF SUBSECTION
(5) UNLESS, AND THEN ONLY TO THE EXTENT THAT, THERE IS AN ACTUAL
DELEGATION OF A MATERIAL PERFORMANCE OF THE LESSOR.

(4)      A PROVISION IN A LEASE AGREEMENT WHICH (I) PROHIBITS A TRANSFER
OF A RIGHT TO DAMAGES FOR DEFAULT WITH RESPECT TO THE WHOLE LEASE
CONTRACT OR OF A RIGHT TO PAYMENT ARISING OUT OF THE TRANSFEROR'S DUE
PERFORMANCE OF THE TRANSFEROR'S ENTIRE OBLIGATION, OR (II) MAKES SUCH A
TRANSFER AN EVENT OF DEFAULT, IS NOT ENFORCEABLE, AND SUCH A TRANSFER
IS NOT A TRANSFER THAT MATERIALLY IMPAIRS THE PROSPECT OF OBTAINING
RETURN PERFORMANCE BY, MATERIALLY CHANGES THE DUTY OF, OR
MATERIALLY INCREASES THE BURDEN OR RISK IMPOSED ON, THE OTHER PARTY TO
THE LEASE CONTRACT WITHIN THE PURVIEW OF SUBSECTION (5).

(5)      SUBJECT TO SUBSECTIONS (3) AND (4):

(A)     IF A TRANSFER IS MADE WHICH IS MADE AN EVENT OF DEFAULT
UNDER A LEASE AGREEMENT, THE PARTY TO THE LEASE CONTRACT NOT MAKING
THE TRANSFER, UNLESS THAT PARTY WAIVES THE DEFAULT OR OTHERWISE
AGREES, HAS THE RIGHTS AND REMEDIES DESCRIBED IN § 2A-501(2);

(B)      IF PARAGRAPH (A) IS NOT APPLICABLE AND IF A TRANSFER IS MADE
THAT (I) IS PROHIBITED UNDER A LEASE AGREEMENT OR (II) MATERIALLY IMPAIRS
THE PROSPECT OF OBTAINING RETURN PERFORMANCE BY, MATERIALLY CHANGES
THE DUTY OF, OR MATERIALLY INCREASES THE BURDEN OR RISK IMPOSED ON, THE
OTHER PARTY TO THE LEASE CONTRACT, UNLESS THE PARTY NOT MAKING THE
TRANSFER AGREES AT ANY TIME TO THE TRANSFER IN THE LEASE CONTRACT OR
OTHERWISE, THEN, EXCEPT AS LIMITED BY CONTRACT, (I) THE TRANSFEROR IS
LIABLE TO THE PARTY NOT MAKING THE TRANSFER FOR DAMAGES CAUSED BY THE
TRANSFER TO THE EXTENT THAT THE DAMAGES COULD NOT REASONABLY BE
PREVENTED BY THE PARTY NOT MAKING THE TRANSFER AND (II) A COURT HAVING
JURISDICTION MAY GRANT OTHER APPROPRIATE RELIEF, INCLUDING
CANCELLATION OF THE LEASE CONTRACT OR AN INJUNCTION AGAINST THE
TRANSFEROR.

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