(1) The financier does not receive the benefits or the burdens of the license.

(2) The licensee's rights and obligations with respect to the information and informational property rights are governed by:

(bc) If a financier becomes is a licensee and that transfers the license to a licensee receiving the financial accommodation, the following rules apply:

(1) A The transfer to the accommodated licensee is not effective unless:

(A) the transfer meets the conditions for transfer under Sections 2B-502 and 2B-503; or

(B) the accommodated licensee party accepts agrees to the license,; the financier becomes a licensee solely to make the financial accommodation; and before the licensor provides the information or grants the license in informational property rights, the financier delivered notice to the licensor giving the name and location of the accommodated licensee party and clearly indicating that the accommodated licensee party will be the only licensee end user of the information or informational property rights.

(2) A The financier making a transfer effective under in paragraph subsection (1)(B) may make only the single transfer contemplated by the notice unless the licensor consents to a subsequent transfer or any subsequent transfer is effective under Section 2B-504.

(3) After an effective transfer to the accommodated licensee, the accommodated licensee becomes a party to the license and the accommodated licensee's rights and obligations with respect to the information and informational property rights are governed by:

(4) On completion of an effective transfer to the accommodated licensee, the financier is no longer a licensor.

(5) The financier makes no warranties to the accommodated licensee other than any express warranties in the financial accommodation agreement and the warranty of quiet enjoyment in Section 2B-401(b).

(d) Unless the accommodated licensee is a consumer, if the financial accommodation agreement so provides the accommodated licensee's promises under that agreement and any related agreements become irrevocable and independent of the license as between the financier, the licensee and any transferee of either party, if the financial accommodation agreement so provides. They become irrevocable and independent upon:

(1) the licensee's acceptance of the license or on payment by the financier, unless

(2) transfer of the financial accommodation agreement contract by the financier to a third party.

(e) As between the financier and the accommodated licensee, the financier is entitled to possession of any copies , improvements, or modifications of the information provided by the licensor under the license if the financial accommodation agreement so provides., However, but the financier's rights with respect to the licensor are determined under Section 2B-504.

(f) On material breach of a financial accommodation agreement by the accommodated licensee, the financier may:

a. In December, 1996, the Committee concluded, by a consensus, that treatment of financing arrangements should be limited and generic. The concept is to allow creation of an interest, but not sale without consent.

b. Did not adopt a motion that the "hell and high water" rules should apply even though the contract does not so provide. Vote: 5 - 5 (April, 1997).

1. Scope. This section integrates treatment of security interests and finance leases. It deals with the rights among the parties, while Section 2B-504 deals with the creation of the interest in a license. The critical distinction, implemented here, is between a traditional loan arrangement where the financier does not become a party to the license and the relationship that exists more in reference to three party leases where the lessor (financier) acquires the property (license) and transfers it to the licensee.

The financial accommodation is conditional on the licensee's assent to the license. In the absence of such assent, the licensee may have no rights to use the information and, thus, the transaction is illusory from its standpoint. This transaction is different from the ordinary equipment lease because of the central importance of this license agreement and the provisions here recognize that importance. (see also the treatment of when promises become irrevocable).

2. Licensor and Licensee Direct Contracts. Subsection (b) involves a situation where the licensor contracts directly with the licensee as to the information, even though the lessor may also have a contract relationship with the licensee. The key factor here is that the financier is not bound by the obligations of the license, but is bound by the limitations of the license. The licensee's rights are governed first by the license and secondly by the financial accommodation agreement.

3. Financier as a Transferor. Subsection (c) deals with the less common situation where the license is actually provided to the financier and then passed through to the licensee. Here, when the eventual licensee takes on the license, the financier is taken out of the transaction as between the licensee and financier for purposes of qualitative performance issues. The licensee becomes a direct party to the license.

4. Hell and High Water Clauses. Subsection (d) provides rules pertaining to hell and high water clauses. Promises become irrevocable if the agreement so provides and the financier was not an active, substantive party to the license. The rule is not needed where the financier never acquires a position as licensor/ licensee, but is helpful in the three party context.

Article 2A-407 provides that the promises become irrevocable on the lessee's acceptance of the goods. In a transaction under that article, goods are sold to the lessor and sent to the lessee. If there is non-payment by the lessor, the seller's remedies are against the lessor (not the lessee). In a license transaction, however, there are two different elements. First, if the licensee contracts directly with the licensor, non-payment may give a contractual right of action for the price against the licensee even though its financial accommodation contract called for payment by the lessor. Second, in a license, payment is typically a condition on the licensee's rights to continue to use the information. Thus, although the financier was to pay, the licensee may be placed in a position of paying twice if the lessor fails to do so.

To reflect these problems, the irrevocability concept is limited here not only to acceptance of the transfer, but also payment to the licensor.

5. Right to New Versions. Subsection (e) deals with a common area of litigation in the leasing industry, focusing on the relationship between the three parties in reference to update and the like made available during the license term. As between the financier and its debtor, possession and rights of control can be apportioned by the financing agreement. As between the licensor, however, the general provisions of Section 2B-504 control.

6. Remedy. Subsection (f) states a primary right of the financier in the event of breach. Since the financier is not a party to the license, it cannot cancel that contract.