REPORT TITLE:
UCC; Secured Transactions

DESCRIPTION:
Adopts UCC Revised Article 9 relating to secured transactions
that expands the Article's scope, clarifies perfection methods,
establishes new rules regarding choice of laws, default, and
enforcement, makes improvements to filing system, and provides
clarification where debtor is a consumer.  (HB1938 CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1938
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                S.D. 1
STATE OF HAWAII                                            C.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO REVISED UNIFORM COMMERCIAL CODE ARTICLE 9--SECURED
   TRANSACTIONS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 490, Hawaii Revised Statutes, is amended
 
 2 by adding a new article 9 to read as follows:
 
 3                            "ARTICLE 9.
 4 
 5                       SECURED TRANSACTIONS
 6 
 7                    PART 1.  GENERAL PROVISIONS
 
 8    SUBPART 1.  SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
 
 9      490:9-101  Short title.  This article may be cited as
 
10 Uniform Commercial Code -  Secured Transactions.
 
11      490:9-102  Definitions and index of definitions.  (a)  In
 
12 this chapter:
 
13      "Accession" means goods that are physically united with
 
14 other goods in such a manner that the identity of the original
 
15 goods is not lost.
 
16      "Account", except as used in "account for":
 
17      (1)  Means a right to payment of a monetary obligation,
 
18           whether or not earned by performance:
 
19           (A)  For property that has been or is to be sold,
 
20                leased, licensed, assigned, or otherwise disposed
 
21                of;
 

 
Page 2                                                     1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           (B)  For services rendered or to be rendered;
 
 2           (C)  For a policy of insurance issued or to be issued;
 
 3           (D)  For a secondary obligation incurred or to be
 
 4                incurred;
 
 5           (E)  For energy provided or to be provided;
 
 6           (F)  For the use or hire of a vessel under a charter or
 
 7                other contract;
 
 8           (G)  Arising out of the use of a credit or charge card
 
 9                or information contained on or for use with the
 
10                card; or
 
11           (H)  As winnings in a lottery or other game of chance
 
12                operated or sponsored by a state, governmental
 
13                unit of a state, or person licensed or authorized
 
14                to operate the game by a state or governmental
 
15                unit of a state.  The term includes health-care-
 
16                insurance receivables.
 
17      (2)  Does not include:
 
18           (A)  Rights to payment evidenced by chattel paper or an
 
19                instrument;
 
20           (B)  Commercial tort claims;
 
21           (C)  Deposit accounts;
 
22           (D)  Investment property;
 
23           (E)  Letter-of-credit rights or letters of credit; or
 

 
Page 3                                                     1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           (F)  Rights to payment for money or funds advanced or
 
 2                sold, other than rights arising out of the use of
 
 3                a credit or charge card or information contained
 
 4                on or for use with the card.
 
 5      "Account debtor" means a person obligated on an account,
 
 6 chattel paper, or general intangible.  The term does not include
 
 7 persons obligated to pay a negotiable instrument, even if the
 
 8 instrument constitutes part of chattel paper.
 
 9      "Accounting", except as used in "accounting for", means a
 
10 record:
 
11      (1)  Authenticated by a secured party;
 
12      (2)  Indicating the aggregate unpaid secured obligations as
 
13           of a date not more than thirty-five days earlier or
 
14           thirty-five days later than the date of the record; and
 
15      (3)  Identifying the components of the obligations in
 
16           reasonable detail.
 
17      "Agricultural lien" means an interest, other than a security
 
18 interest, in farm products:
 
19      (1)  Which secures payment or performance of an obligation
 
20           for:
 
21           (A)  Goods or services furnished in connection with a
 
22                debtor's farming operation; or
 

 
 
 
Page 4                                                     1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
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 1           (B)  Rent on real property leased by a debtor in
 
 2                connection with its farming operation;
 
 3      (2)  Which is created by statute in favor of a person that:
 
 4           (A)  In the ordinary course of its business furnished
 
 5                goods or services to a debtor in connection with a
 
 6                debtor's farming operation; or
 
 7           (B)  Leased real property to a debtor in connection
 
 8                with the debtor's farming operation; and
 
 9      (3)  Whose effectiveness does not depend on the person's
 
10           possession of the personal property.
 
11      "As-extracted collateral" means:
 
12      (1)  Oil, gas, or other minerals that are subject to a
 
13           security interest that:
 
14           (A)  Is created by a debtor having an interest in the
 
15                minerals before extraction; and
 
16           (B)  Attaches to the minerals as extracted; or
 
17      (2)  Accounts arising out of the sale at the wellhead or
 
18           minehead of oil, gas, or other minerals in which the
 
19           debtor had an interest before extraction.
 
20      "Authenticate" means:
 
21      (1)  To sign; or
 
22      (2)  To execute or otherwise adopt a symbol, or encrypt or
 
23           similarly process a record in whole or in part, with
 

 
Page 5                                                     1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           the present intent of the authenticating person to
 
 2           identify the person and adopt or accept a record.
 
 3      "Bank" means an organization that is engaged in the business
 
 4 of banking.  The term includes savings banks, savings and loan
 
 5 associations, credit unions, and trust companies.
 
 6      "Cash proceeds" means proceeds that are money, checks,
 
 7 deposit accounts, or the like.
 
 8      "Certificate of title" means a certificate of title with
 
 9 respect to which a statute provides for the security interest in
 
10 question to be indicated on the certificate as a condition or
 
11 result of the security interest's obtaining priority over the
 
12 rights of a lien creditor with respect to the collateral.
 
13      "Chattel paper" means a record or records that evidence both
 
14 a monetary obligation and a security interest in specific goods,
 
15 a security interest in specific goods and software used in the
 
16 goods, a security interest in specific goods and license of
 
17 software used in the goods, a lease of specific goods, or a lease
 
18 of specific goods and license of software used in the goods.  In
 
19 this paragraph, "monetary obligation" means a monetary obligation
 
20 secured by the goods or owed under a lease of the goods and
 
21 includes a monetary obligation with respect to software used in
 
22 the goods.  The term does not include charters or other contracts
 
23 involving the use or hire of a vessel.  If a transaction is
 

 
Page 6                                                     1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 evidenced by records that include an instrument or series of
 
 2 instruments, the group of records taken together constitutes
 
 3 chattel paper.
 
 4      "Collateral" means the property subject to a security
 
 5 interest or agricultural lien.  The term includes:
 
 6      (1)  Proceeds to which a security interest attaches;
 
 7      (2)  Accounts, chattel paper, payment intangibles, and
 
 8           promissory notes that have been sold; and
 
 9      (3)  Goods that are the subject of a consignment.
 
10      "Commercial tort claim" means a claim arising in tort with
 
11 respect to which:
 
12      (1)  The claimant is an organization; or
 
13      (2)  The claimant is an individual and the claim:
 
14           (A)  Arose in the course of the claimant's business or
 
15                profession; and
 
16           (B)  Does not include damages arising out of personal
 
17                injury to or the death of an individual.
 
18      "Commodity account" means an account maintained by a
 
19 commodity intermediary in which a commodity contract is carried
 
20 for a commodity customer.
 
21      "Commodity contract" means a commodity futures contract, an
 
22 option on a commodity futures contract, a commodity option, or
 
23 another contract if the contract or option is:
 

 
Page 7                                                     1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Traded on or subject to the rules of a board of trade
 
 2           that has been designated as a contract market for such
 
 3           a contract pursuant to federal commodities laws; or
 
 4      (2)  Traded on a foreign commodity board of trade, exchange,
 
 5           or market, and is carried on the books of a commodity
 
 6           intermediary for a commodity customer.
 
 7      "Commodity customer" means a person for which a commodity
 
 8 intermediary carries a commodity contract on its books.
 
 9      "Commodity intermediary" means a person that:
 
10      (1)  Is registered as a futures commission merchant under
 
11           federal commodities law; or
 
12      (2)  In the ordinary course of its business provides
 
13           clearance or settlement services for a board of trade
 
14           that has been designated as a contract market pursuant
 
15           to federal commodities law.
 
16      "Communicate" means:
 
17      (1)  To send a written or other tangible record;
 
18      (2)  To transmit a record by any means agreed upon by the
 
19           persons sending and receiving the record; or
 
20      (3)  In the case of transmission of a record to or by a
 
21           filing office, to transmit a record by any means
 
22           prescribed by filing-office rule.
 

 
 
 
Page 8                                                     1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      "Consignee" means a merchant to which goods are delivered in
 
 2 a consignment.
 
 3      "Consignment" means a transaction, regardless of its form,
 
 4 in which a person delivers goods to a merchant for the purpose of
 
 5 sale and:
 
 6      (1)  The merchant:
 
 7           (A)  Deals in goods of that kind under a name other
 
 8                than the name of the person making delivery;
 
 9           (B)  Is not an auctioneer; and
 
10           (C)  Is not generally known by its creditors to be
 
11                substantially engaged in selling the goods of
 
12                others;
 
13      (2)  With respect to each delivery, the aggregate value of
 
14           the goods is $1,000 or more at the time of delivery;
 
15      (3)  The goods are not consumer goods immediately before
 
16           delivery; and
 
17      (4)  The transaction does not create a security interest
 
18           that secures an obligation.
 
19      "Consignor" means a person that delivers goods to a
 
20 consignee in a consignment.
 
21      "Consumer debtor" means a debtor in a consumer transaction.
 
22      "Consumer goods" means goods that are used or bought for use
 
23 primarily for personal, family, or household purposes.
 

 
Page 9                                                     1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      "Consumer-goods transaction" means a consumer transaction in
 
 2 which:
 
 3      (1)  An individual incurs an obligation primarily for
 
 4           personal, family, or household purposes; and
 
 5      (2)  A security interest in consumer goods secures the
 
 6           obligation.
 
 7      "Consumer obligor" means an obligor who is an individual and
 
 8 who incurred the obligation as part of a transaction entered into
 
 9 primarily for personal, family, or household purposes.
 
10      "Consumer transaction" means a transaction in which (i) an
 
11 individual incurs an obligation primarily for personal, family,
 
12 or household purposes, (ii) a security interest secures the
 
13 obligation, and (iii) the collateral is held or acquired
 
14 primarily for personal, family, or household purposes.  The term
 
15 includes consumer-goods transactions.
 
16      "Continuation statement" means an amendment of a financing
 
17 statement which:
 
18      (1)  Identifies, by its file number, the initial financing
 
19           statement to which it relates; and
 
20      (2)  Indicates that it is a continuation statement for, or
 
21           that it is filed to continue the effectiveness of, the
 
22           identified financing statement.
 

 
 
 
Page 10                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      "Debtor" means:
 
 2      (1)  A person having an interest, other than a security
 
 3           interest or other lien, in the collateral, whether or
 
 4           not the person is an obligor;
 
 5      (2)  A seller of accounts, chattel paper, payment
 
 6           intangibles, or promissory notes; or
 
 7      (3)  A consignee.
 
 8      "Deposit account" means a demand, time, savings, passbook,
 
 9 or similar account maintained with a bank.  The term does not
 
10 include investment property or accounts evidenced by an
 
11 instrument.
 
12      "Document" means a document of title or a receipt of the
 
13 type described in section 490:7-201(2).
 
14      "Electronic chattel paper" means chattel paper evidenced by
 
15 a record or records consisting of information stored in an
 
16 electronic medium.
 
17      "Encumbrance" means a right, other than an ownership
 
18 interest, in real property.  The term includes mortgages and
 
19 other liens on real property.
 
20      "Equipment" means goods other than inventory, farm products,
 
21 or consumer goods.
 
22      "Farm products" means goods, other than standing timber,
 
23 with respect to which the debtor is engaged in a farming
 
24 operation and which are:
 

 
Page 11                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Crops grown, growing, or to be grown, including:
 
 2           (A)  Crops produced on trees, vines, and bushes; and
 
 3           (B)  Aquatic goods produced in aquacultural operations;
 
 4      (2)  Livestock, born or unborn, including aquatic goods
 
 5           produced in aquacultural operations;
 
 6      (3)  Supplies used or produced in a farming operation; or
 
 7      (4)  Products of crops or livestock in their unmanufactured
 
 8           states.
 
 9      "Farming operation" means raising, cultivating, propagating,
 
10 fattening, grazing, or any other farming, livestock, or
 
11 aquacultural operation.
 
12      "File number" means the number assigned to an initial
 
13 financing statement pursuant to section 490:9-519(a).
 
14      "Filing office" means an office designated in section 490:9-
 
15 501 as the place to file a financing statement.
 
16      "Filing-office rule" means a rule adopted pursuant to
 
17 section 490:9-526.
 
18      "Financing statement" means a record or records composed of
 
19 an initial financing statement and any filed record relating to
 
20 the initial financing statement.
 
21      "Fixture filing" means the filing of a financing statement
 
22 covering goods that are or are to become fixtures and satisfying
 
23 section 490:9-502(a) and (b).  The term includes the filing of a
 

 
Page 12                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 financing statement covering goods of a transmitting utility
 
 2 which are or are to become fixtures.
 
 3      "Fixtures" means goods that have become so related to
 
 4 particular real property that an interest in them arises under
 
 5 real property law.
 
 6      "General intangible" means any personal property, including
 
 7 things in action, other than accounts, chattel paper, commercial
 
 8 tort claims, deposit accounts, documents, goods, instruments,
 
 9 investment property, letter-of-credit rights, letters of credit,
 
10 money, and oil, gas, or other minerals before extraction.  The
 
11 term includes payment intangibles and software.
 
12      "Good faith" means honesty in fact and the observance of
 
13 reasonable commercial standards of fair dealing.
 
14      "Goods" means all things that are movable when a security
 
15 interest attaches.  The term includes (i) fixtures, (ii) standing
 
16 timber that is to be cut and removed under a conveyance or
 
17 contract for sale, (iii) the unborn young of animals, (iv) crops
 
18 grown, growing, or to be grown, even if the crops are produced on
 
19 trees, vines, or bushes, and (v) manufactured homes.  The term
 
20 also includes a computer program embedded in goods and any
 
21 supporting information provided in connection with a transaction
 
22 relating to the program if (i) the program is associated with the
 
23 goods in such a manner that it customarily is considered part of
 

 
Page 13                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
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 1 the goods, or (ii) by becoming the owner of the goods, a person
 
 2 acquires a right to use the program in connection with the goods.
 
 3 The term does not include a computer program embedded in goods
 
 4 that consist solely of the medium in which the program is
 
 5 embedded.  The term also does not include accounts, chattel
 
 6 paper, commercial tort claims, deposit accounts, documents,
 
 7 general intangibles, instruments, investment property, letter-of-
 
 8 credit rights, letters of credit, money, or oil, gas, or other
 
 9 minerals before extraction.
 
10      "Governmental unit" means a subdivision, agency, department,
 
11 county, parish, municipality, or other unit of the government of
 
12 the United States, a State, or a foreign country.  The term
 
13 includes an organization having a separate corporate existence if
 
14 the organization is eligible to issue debt on which interest is
 
15 exempt from income taxation under the laws of the United States.
 
16      "Health-care-insurance receivable" means an interest in or
 
17 claim under a policy of insurance which is a right to payment of
 
18 a monetary obligation for health-care goods or services provided.
 
19      "Instrument" means a negotiable instrument or any other
 
20 writing that evidences a right to the payment of a monetary
 
21 obligation, is not itself a security agreement or lease, and is
 
22 of a type that in ordinary course of business is transferred by
 
23 delivery with any necessary indorsement or assignment.  The term
 
24 does not include:
 

 
Page 14                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Investment property;
 
 2      (2)  Letters of credit; or
 
 3      (3)  Writings that evidence a right to payment arising out
 
 4           of the use of a credit or charge card or information
 
 5           contained on or for use with the card.
 
 6      "Inventory" means goods, other than farm products, which:
 
 7      (1)  Are leased by a person as lessor;
 
 8      (2)  Are held by a person for sale or lease or to be
 
 9           furnished under a contract of service;
 
10      (3)  Are furnished by a person under a contract of service;
 
11           or
 
12      (4)  Consist of raw materials, work in process, or materials
 
13           used or consumed in a business.
 
14      "Investment property" means a security, whether certificated
 
15 or uncertificated, security entitlement, securities account,
 
16 commodity contract, or commodity account.
 
17      "Jurisdiction of organization", with respect to a registered
 
18 organization, means the jurisdiction under whose law the
 
19 organization is organized.
 
20      "Letter-of-credit right" means a right to payment or
 
21 performance under a letter of credit, whether or not the
 
22 beneficiary has demanded or is at the time entitled to demand
 
23 payment or performance.  The term does not include the right of a
 

 
Page 15                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 beneficiary to demand payment or performance under a letter of
 
 2 credit.
 
 3      "Lien creditor" means:
 
 4      (1)  A creditor that has acquired a lien on the property
 
 5           involved by attachment, levy, or the like;
 
 6      (2)  An assignee for benefit of creditors from the time of
 
 7           assignment;
 
 8      (3)  A trustee in bankruptcy from the date of the filing of
 
 9           the petition; or
 
10      (4)  A receiver in equity from the time of appointment.
 
11      "Manufactured home" means a structure, transportable in one
 
12 or more sections, which, in the traveling mode, is eight body
 
13 feet or more in width or forty body feet or more in length, or,
 
14 when erected on site, is three hundred twenty or more square
 
15 feet, and which is built on a permanent chassis and designed to
 
16 be used as a dwelling with or without a permanent foundation when
 
17 connected to the required utilities, and includes the plumbing,
 
18 heating, air-conditioning, and electrical systems contained
 
19 therein.  The term includes any structure that meets all of the
 
20 requirements of this paragraph except the size requirements and
 
21 with respect to which the manufacturer voluntarily files a
 
22 certification required by the United States Secretary of Housing
 
23 and Urban Development and complies with the standards established
 
24 under Title 42 of the United States Code.
 

 
Page 16                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      "Manufactured-home transaction" means a secured transaction:
 
 2      (A)  That creates a purchase-money security interest in a
 
 3           manufactured home, other than a manufactured home held
 
 4           as inventory; or
 
 5      (B)  In which a manufactured home, other than a manufactured
 
 6           home held as inventory, is the primary collateral.
 
 7      "Mortgage" means a consensual interest in real property,
 
 8 including fixtures, which secures payment or performance of an
 
 9 obligation.
 
10      "New debtor" means a person that becomes bound as debtor
 
11 under section 490:9-203(d) by a security agreement previously
 
12 entered into by another person.
 
13      "New value" means:
 
14      (1)  Money;
 
15      (2)  Money's worth in property, services, or new credit; or
 
16      (3)  Release by a transferee of an interest in property
 
17           previously transferred to the transferee.  The term
 
18           does not include an obligation substituted for another
 
19           obligation.
 
20      "Noncash proceeds" means proceeds other than cash proceeds.
 
21      "Obligor" means a person that, with respect to an obligation
 
22 secured by a security interest in or an agricultural lien on the
 
23 collateral:
 

 
Page 17                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Owes payment or other performance of the obligation;
 
 2      (2)  Has provided property other than the collateral to
 
 3           secure payment or other performance of the obligation;
 
 4           or
 
 5      (3)  Is otherwise accountable in whole or in part for
 
 6           payment or other performance of the obligation.  The
 
 7           term does not include issuers or nominated persons
 
 8           under a letter of credit.
 
 9      "Original debtor" means a person that, as debtor, entered
 
10 into a security agreement to which a new debtor has become bound
 
11 under section 490:9-203(d).
 
12      "Payment intangible" means a general intangible under which
 
13 the account debtor's principal obligation is a monetary
 
14 obligation.
 
15      "Person related to", with respect to an individual, means:
 
16      (1)  The spouse of the individual;
 
17      (2)  A brother, brother-in-law, sister, or sister-in-law of
 
18           the individual;
 
19      (3)  An ancestor or lineal descendant of the individual or
 
20           the individual's spouse; or
 
21      (4)  Any other relative, by blood or marriage, of the
 
22           individual or the individual's spouse who shares the
 
23           same home with the individual.
 

 
Page 18                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      "Person related to", with respect to an organization, means:
 
 2      (1)  A person directly or indirectly controlling, controlled
 
 3           by, or under common control with the organization;
 
 4      (2)  An officer or director of, or a person performing
 
 5           similar functions with respect to, the organization;
 
 6      (3)  An officer or director of, or a person performing
 
 7           similar functions with respect to, a person described
 
 8           in paragraph (1);
 
 9      (4)  The spouse of an individual described in paragraph (1),
 
10           (2), or (3); or
 
11      (5)  An individual who is related by blood or marriage to an
 
12           individual described in paragraph (1), (2), (3), or (4)
 
13           and shares the same home with the individual.
 
14      "Proceeds" means the following property:
 
15      (1)  Whatever is acquired upon the sale, lease, license,
 
16           exchange, or other disposition of collateral;
 
17      (2)  Whatever is collected on, or distributed on account of,
 
18           collateral;
 
19      (3)  Rights arising out of collateral;
 
20      (4)  To the extent of the value of collateral, claims
 
21           arising out of the loss, nonconformity, or interference
 
22           with the use of, defects or infringement of rights in,
 
23           or damage to, the collateral; or
 

 
Page 19                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (5)  To the extent of the value of collateral and to the
 
 2           extent payable to the debtor or the secured party,
 
 3           insurance payable by reason of the loss or
 
 4           nonconformity of, defects or infringement of rights in,
 
 5           or damage to, the collateral.
 
 6      "Promissory note" means an instrument that evidences a
 
 7 promise to pay a monetary obligation, does not evidence an order
 
 8 to pay, and does not contain an acknowledgment by a bank that the
 
 9 bank has received for deposit a sum of money or funds.
 
10      "Proposal" means a record authenticated by a secured party
 
11 which includes the terms on which the secured party is willing to
 
12 accept collateral in full or partial satisfaction of the
 
13 obligation it secures pursuant to sections 490:9-620, 490:9-621,
 
14 and 490:9-622.
 
15      "Public-finance transaction" means a secured transaction in
 
16 connection with which:
 
17      (1)  Debt securities are issued;
 
18      (2)  All or a portion of the securities issued have an
 
19           initial stated maturity of at least twenty years; and
 
20      (3)  The debtor, obligor, secured party, account debtor or
 
21           other person obligated on collateral, assignor or
 
22           assignee of a secured obligation, or assignor or
 
23           assignee of a security interest is a state or a
 
24           governmental unit of a state.
 

 
Page 20                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      "Pursuant to commitment", with respect to an advance made or
 
 2 other value given by a secured party, means pursuant to the
 
 3 secured party's obligation, whether or not a subsequent event of
 
 4 default or other event not within the secured party's control has
 
 5 relieved or may relieve the secured party from its obligation.
 
 6      "Record", except as used in "for record", "of record",
 
 7 "record or legal title", and "record owner", means information
 
 8 that is inscribed on a tangible medium or which is stored in an
 
 9 electronic or other medium and is retrievable in perceivable
 
10 form.
 
11      "Registered organization" means an organization organized
 
12 solely under the law of a single state or the United States and
 
13 as to which the state or the United States must maintain a public
 
14 record showing the organization to have been organized.
 
15      "Secondary obligor" means an obligor to the extent that:
 
16      (1)  The obligor's obligation is secondary; or
 
17      (2)  The obligor has a right of recourse with respect to an
 
18           obligation secured by collateral against the debtor,
 
19           another obligor, or property of either.
 
20      "Secured party" means:
 
21      (1)  A person in whose favor a security interest is created
 
22           or provided for under a security agreement, whether or
 
23           not any obligation to be secured is outstanding;
 

 
Page 21                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  A person that holds an agricultural lien;
 
 2      (3)  A consignor;
 
 3      (4)  A person to which accounts, chattel paper, payment
 
 4           intangibles, or promissory notes have been sold;
 
 5      (5)  A trustee, indenture trustee, agent, collateral agent,
 
 6           or other representative in whose favor a security
 
 7           interest or agricultural lien is created or provided
 
 8           for; or
 
 9      (6)  A person that holds a security interest arising under
 
10           section 490:2-401, 490:2-505, 490:2-711(3),
 
11           490:2A-508(e), 490:4-210, or 490:5-118.
 
12      "Security agreement" means an agreement that creates or
 
13 provides for a security interest.
 
14      "Send", in connection with a record or notification, means:
 
15      (1)  To deposit in the mail, deliver for transmission, or
 
16           transmit by any other usual means of communication,
 
17           with postage or cost of transmission provided for,
 
18           addressed to any address reasonable under the
 
19           circumstances; or
 
20      (2)  To cause the record or notification to be received
 
21           within the time that it would have been received if
 
22           properly sent under paragraph (1).
 

 
 
 
Page 22                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      "Software" means a computer program and any supporting
 
 2 information provided in connection with a transaction relating to
 
 3 the program.  The term does not include a computer program that
 
 4 is included in the definition of goods.
 
 5      "State" means a state of the United States, the District of
 
 6 Columbia, Puerto Rico, the United States Virgin Islands, or any
 
 7 territory or insular possession subject to the jurisdiction of
 
 8 the United States.
 
 9      "Supporting obligation" means a letter-of-credit right or
 
10 secondary obligation that supports the payment or performance of
 
11 an account, chattel paper, a document, a general intangible, an
 
12 instrument, or investment property.
 
13      "Tangible chattel paper" means chattel paper evidenced by a
 
14 record or records consisting of information that is inscribed on
 
15 a tangible medium.
 
16      "Termination statement" means an amendment of a financing
 
17 statement which:
 
18      (1)  Identifies, by its file number, the initial financing
 
19           statement to which it relates; and
 
20      (2)  Indicates either that it is a termination statement or
 
21           that the identified financing statement is no longer
 
22           effective.
 

 
 
 
Page 23                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      "Transmitting utility" means a person primarily engaged in
 
 2 the business of:
 
 3      (1)  Operating a railroad, subway, street railway, or
 
 4           trolley bus;
 
 5      (2)  Transmitting communications electrically,
 
 6           electromagnetically, or by light;
 
 7      (3)  Transmitting goods by pipeline or sewer; or
 
 8      (4)  Transmitting or producing and transmitting electricity,
 
 9           steam, gas, or water.
 
10      (b)  The following definitions in other articles apply to
 
11 this article:
 
12      "Applicant".  Section 490:5-102.
 
13      "Beneficiary".  Section 490:5-102.
 
14      "Broker".  Section 490:8-102.
 
15      "Certificated security".  Section 490:8-102.
 
16      "Check".  Section 490:3-104.
 
17      "Clearing corporation".  Section 490:8-102.
 
18      "Contract for sale".  Section 490:2-106.
 
19      "Customer".  Section 490:4-104.
 
20      "Entitlement holder".  Section 490:8-102.
 
21      "Financial asset".  Section 490:8-102.
 
22      "Holder in due course".  Section 490:3-302.
 

 
 
 
Page 24                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      "Issuer" (with respect to a letter of credit or letter-of-
 
 2 credit right).  Section 490:5-102.
 
 3      "Issuer" (with respect to a security).  Section 490:8-201.
 
 4      "Lease".  Section 490:2A-103.
 
 5      "Lease agreement".  Section 490:2A-103.
 
 6      "Lease contract".  Section 490:2A-103.
 
 7      "Leasehold interest".  Section 490:2A-103.
 
 8      "Lessee".  Section 490:2A-103.
 
 9      "Lessee in ordinary course of business".  Section
 
10 490:2A-103.
 
11      "Lessor".  Section 490:2A-103.
 
12      "Lessor's residual interest".  Section 490:2A-103.
 
13      "Letter of credit".  Section 490:5-102.
 
14      "Merchant".  Section 490:2-104.
 
15      "Negotiable instrument".  Section 490:3-104.
 
16      "Nominated person".  Section 490:5-102.
 
17      "Note".  Section 490:3-104.
 
18      "Proceeds of a letter of credit".  Section 490:5-114.
 
19      "Prove".  Section 490:3-103.
 
20      "Sale".  Section 490:2-106.
 
21      "Securities account".  Section 490:8-501.
 
22      "Securities intermediary".  Section 490:8-102.
 
23      "Security".  Section 490:8-102.
 

 
Page 25                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      "Security certificate".  Section 490:8-102.
 
 2      "Security entitlement".  Section 490:8-102.
 
 3      "Uncertificated security".  Section 490:8-102.
 
 4      (c)  Article 1 contains general definitions and principles
 
 5 of construction and interpretation applicable throughout this
 
 6 article.
 
 7      490:9-103  Purchase-money security interest; application of
 
 8 payments; burden of establishing.(a)  In this section:
 
 9      (1)  "Purchase-money collateral" means goods or software
 
10           that secures a purchase-money obligation incurred with
 
11           respect to that collateral; and
 
12      (2)  "Purchase-money obligation" means an obligation of an
 
13           obligor incurred as all or part of the price of the
 
14           collateral or for value given to enable the debtor to
 
15           acquire rights in or the use of the collateral if the
 
16           value is in fact so used.
 
17      (b)  A security interest in goods is a purchase-money
 
18 security interest:
 
19      (1)  To the extent that the goods are purchase-money
 
20           collateral with respect to that security interest;
 
21      (2)  If the security interest is in inventory that is or was
 
22           purchase-money collateral, also to the extent that the
 
23           security interest secures a purchase-money obligation
 

 
Page 26                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           incurred with respect to other inventory in which the
 
 2           secured party holds or held a purchase-money security
 
 3           interest; and
 
 4      (3)  Also to the extent that the security interest secures a
 
 5           purchase-money obligation incurred with respect to
 
 6           software in which the secured party holds or held a
 
 7           purchase-money security interest.
 
 8      (c)  A security interest in software is a purchase-money
 
 9 security interest to the extent that the security interest also
 
10 secures a purchase-money obligation incurred with respect to
 
11 goods in which the secured party holds or held a purchase-money
 
12 security interest if:
 
13      (1)  The debtor acquired its interest in the software in an
 
14           integrated transaction in which it acquired an interest
 
15           in the goods; and
 
16      (2)  The debtor acquired its interest in the software for
 
17           the principal purpose of using the software in the
 
18           goods.
 
19      (d)  The security interest of a consignor in goods that are
 
20 the subject of a consignment is a purchase-money security
 
21 interest in inventory.
 
22      (e)  In a transaction other than a consumer-goods
 
23 transaction, if the extent to which a security interest is a
 

 
Page 27                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 purchase-money security interest depends on the application of a
 
 2 payment to a particular obligation, the payment must be applied:
 
 3      (1)  In accordance with any reasonable method of application
 
 4           to which the parties agree;
 
 5      (2)  In the absence of the parties' agreement to a
 
 6           reasonable method, in accordance with any intention of
 
 7           the obligor manifested at or before the time of
 
 8           payment; or
 
 9      (3)  In the absence of an agreement to a reasonable method
 
10           and a timely manifestation of the obligor's intention,
 
11           in the following order:
 
12           (A)  To obligations that are not secured; and
 
13           (B)  If more than one obligation is secured, to
 
14                obligations secured by purchase-money security
 
15                interests in the order in which those obligations
 
16                were incurred.
 
17      (f)  In a transaction other than a consumer-goods
 
18 transaction, a purchase-money security interest does not lose its
 
19 status as such, even if:
 
20      (1)  The purchase-money collateral also secures an
 
21           obligation that is not a purchase-money obligation;
 
22      (2)  Collateral that is not purchase-money collateral also
 
23           secures the purchase-money obligation; or
 

 
Page 28                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (3)  The purchase-money obligation has been renewed,
 
 2           refinanced, consolidated, or restructured.
 
 3      (g)  In a transaction other than a consumer-goods
 
 4 transaction, a secured party claiming a purchase-money security
 
 5 interest has the burden of establishing the extent to which the
 
 6 security interest is a purchase-money security interest.
 
 7      (h)  The limitation of the rules in subsections (e), (f),
 
 8 and (g) to transactions other than consumer-goods transactions is
 
 9 intended to leave to the court the determination of the proper
 
10 rules in consumer-goods transactions.  The court may not infer
 
11 from that limitation the nature of the proper rule in consumer-
 
12 goods transactions and may continue to apply established
 
13 approaches.
 
14      490:9-104  Control of deposit account.  (a)  A secured
 
15 party has control of a deposit account if:
 
16      (1)  The secured party is the bank with which the deposit
 
17           account is maintained;
 
18      (2)  The debtor, secured party, and bank have agreed in an
 
19           authenticated record that the bank will comply with
 
20           instructions originated by the secured party directing
 
21           disposition of the funds in the deposit account without
 
22           further consent by the debtor; or
 

 
 
 
Page 29                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (3)  The secured party becomes the bank's customer with
 
 2           respect to the deposit account.
 
 3      (b)  A secured party that has satisfied subsection (a) has
 
 4 control, even if the debtor retains the right to direct the
 
 5 disposition of funds from the deposit account.
 
 6      490:9-105  Control of electronic chattel paper.  A secured
 
 7 party has control of electronic chattel paper if the record or
 
 8 records comprising the chattel paper are created, stored, and
 
 9 assigned in such a manner that:
 
10      (1)  A single authoritative copy of the record or records
 
11           exists which is unique, identifiable and, except as
 
12           otherwise provided in paragraphs (4), (5), and (6),
 
13           unalterable;
 
14      (2)  The authoritative copy identifies the secured party as
 
15           the assignee of the record or records;
 
16      (3)  The authoritative copy is communicated to and
 
17           maintained by the secured party or its designated
 
18           custodian;
 
19      (4)  Copies or revisions that add or change an identified
 
20           assignee of the authoritative copy can be made only
 
21           with the participation of the secured party;
 
22      (5)  Each copy of the authoritative copy and any copy of a
 
23           copy is readily identifiable as a copy that is not the
 
24           authoritative copy; and
 

 
Page 30                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (6)  Any revision of the authoritative copy is readily
 
 2           identifiable as an authorized or unauthorized revision.
 
 3      490:9-106  Control of investment property.  (a)  A person
 
 4 has control of a certificated security, uncertificated security,
 
 5 or security entitlement as provided in section 490:8-106.
 
 6      (b)  A secured party has control of a commodity contract if:
 
 7      (1)  The secured party is the commodity intermediary with
 
 8           which the commodity contract is carried; or
 
 9      (2)  The commodity customer, secured party, and commodity
 
10           intermediary have agreed that the commodity
 
11           intermediary will apply any value distributed on
 
12           account of the commodity contract as directed by the
 
13           secured party without further consent by the commodity
 
14           customer.
 
15      (c)  A secured party having control of all security
 
16 entitlements or commodity contracts carried in a securities
 
17 account or commodity account has control over the securities
 
18 account or commodity account.
 
19      490:9-107  Control of letter-of-credit right.  A secured
 
20 party has control of a letter-of-credit right to the extent of
 
21 any right to payment or performance by the issuer or any
 
22 nominated person if the issuer or nominated person has consented
 
23 to an assignment of proceeds of the letter of credit under
 
24 section 490:5-114(c) or otherwise applicable law or practice.
 

 
Page 31                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-108  Sufficiency of description.  (a)  Except as
 
 2 otherwise provided in subsections (c), (d), and (e), a
 
 3 description of personal or real property is sufficient, whether
 
 4 or not it is specific, if it reasonably identifies what is
 
 5 described.
 
 6      (b)  Except as otherwise provided in subsection (d), a
 
 7 description of collateral reasonably identifies the collateral if
 
 8 it identifies the collateral by:
 
 9      (1)  Specific listing;
 
10      (2)  Category;
 
11      (3)  Except as otherwise provided in subsection (e), a type
 
12           of collateral defined in this chapter;
 
13      (4)  Quantity;
 
14      (5)  Computational or allocational formula or procedure; or
 
15      (6)  Except as otherwise provided in subsection (c), any
 
16           other method, if the identity of the collateral is
 
17           objectively determinable.
 
18      (c)  A description of collateral as "all the debtor's
 
19 assets" or "all the debtor's personal property" or using words of
 
20 similar import does not reasonably identify the collateral.
 
21      (d)  Except as otherwise provided in subsection (e), a
 
22 description of a security entitlement, securities account, or
 
23 commodity account is sufficient if it describes:
 

 
Page 32                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  The collateral by those terms or as investment
 
 2           property; or
 
 3      (2)  The underlying financial asset or commodity contract.
 
 4      (e)  A description only by type of collateral defined in
 
 5 this chapter is an insufficient description of:
 
 6      (1)  A commercial tort claim; or
 
 7      (2)  In a consumer transaction, consumer goods, a security
 
 8           entitlement, a securities account, or a commodity
 
 9           account.
 
10               SUBPART 2.  APPLICABILITY OF ARTICLE
 
11      490:9-109  Scope.  (a)  Except as otherwise provided in
 
12 subsections (c) and (d), this article applies to:
 
13      (1)  A transaction, regardless of its form, that creates a
 
14           security interest in personal property or fixtures by
 
15           contract;
 
16      (2)  An agricultural lien;
 
17      (3)  A sale of accounts, chattel paper, payment intangibles,
 
18           or promissory notes;
 
19      (4)  A consignment;
 
20      (5)  A security interest arising under section 490:2-401,
 
21           490:2-505, 490:2-711(3), or 490:2A-508(e), as provided
 
22           in section 490:9-110; and
 

 
 
 
Page 33                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (6)  A security interest arising under section 490:4-210 or
 
 2           490:5-118.
 
 3      (b)  The application of this article to a security interest
 
 4 in a secured obligation is not affected by the fact that the
 
 5 obligation is itself secured by a transaction or interest to
 
 6 which this article does not apply.
 
 7      (c)  This article does not apply to the extent that:
 
 8      (1)  A statute, regulation, or treaty of the United States
 
 9           preempts this article;
 
10      (2)  Another statute of this State expressly governs the
 
11           creation, perfection, priority, or enforcement of a
 
12           security interest created by this State or a
 
13           governmental unit of this State;
 
14      (3)  A statute of another state, a foreign country, or a
 
15           governmental unit of another state or a foreign
 
16           country, other than a statute generally applicable to
 
17           security interests, expressly governs creation,
 
18           perfection, priority, or enforcement of a security
 
19           interest created by the state, country, or governmental
 
20           unit; or
 
21      (4)  The rights of a transferee beneficiary or nominated
 
22           person under a letter of credit are independent and
 
23           superior under section 490:5-114.
 

 
Page 34                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (d)  This article does not apply to:
 
 2      (1)  A landlord's lien, other than an agricultural lien;
 
 3      (2)  A lien, other than an agricultural lien, given by
 
 4           statute or other rule of law for services or materials,
 
 5           but section 490:9-333 applies with respect to priority
 
 6           of the lien;
 
 7      (3)  An assignment of a claim for wages, salary, or other
 
 8           compensation of an employee;
 
 9      (4)  A sale of accounts, chattel paper, payment intangibles,
 
10           or promissory notes as part of a sale of the business
 
11           out of which they arose;
 
12      (5)  An assignment of accounts, chattel paper, payment
 
13           intangibles, or promissory notes which is for the
 
14           purpose of collection only;
 
15      (6)  An assignment of a right to payment under a contract to
 
16           an assignee that is also obligated to perform under the
 
17           contract;
 
18      (7)  An assignment of a single account, payment intangible,
 
19           or promissory note to an assignee in full or partial
 
20           satisfaction of a preexisting indebtedness;
 
21      (8)  A transfer of  an interest in or an assignment of a
 
22           claim under a policy of insurance, other than an
 
23           assignment by or to a health-care provider of a health-
 

 
Page 35                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           care-insurance receivable and any subsequent assignment
 
 2           of the right to payment, but sections 490:9-315 and
 
 3           490:9-322 apply with respect to proceeds and priorities
 
 4           in proceeds;
 
 5      (9)  An assignment of a right represented by a judgment,
 
 6           other than a judgment taken on a right to payment that
 
 7           was collateral;
 
 8     (10)  A right of recoupment or set-off, but:
 
 9           (A)  Section 490:9-340 applies with respect to the
 
10                effectiveness of rights of recoupment or set-off
 
11                against deposit accounts; and
 
12           (B)  Section 490:9-404 applies with respect to defenses
 
13                or claims of an account debtor;
 
14     (11)  The creation or transfer of an interest in or lien on
 
15           real property, including a lease or rents thereunder,
 
16           except to the extent that provision is made for:
 
17           (A)  Liens on real property in sections 490:9-203 and
 
18                490:9-308;
 
19           (B)  Fixtures in section 490:9-334;
 
20           (C)  Fixture filings in sections 490:9-501, 490:9-502,
 
21                490:9-512, 490:9-516, and 490:9-519; and
 
22           (D)  Security agreements covering personal and real
 
23                property in section 490:9-604;
 

 
Page 36                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1     (12)  An assignment of a claim arising in tort, other than a
 
 2           commercial tort claim, but sections 490:9-315 and
 
 3           490:9-322 apply with respect to proceeds and priorities
 
 4           in proceeds; 
 
 5     (13)  An assignment of a deposit account in a consumer
 
 6           transaction, but sections 490:9-315 and 490:9-322 apply
 
 7           with respect to proceeds and priorities in proceeds;
 
 8     (14)  A transfer by a governmental unit;
 
 9     (15)  A claim or right to receive compensation for injuries
 
10           or sickness as described in section 386-57 or title 26
 
11           United States Code section 104(a)(1) or (2), as amended
 
12           from time to time; or
 
13     (16)  A claim or right to receive benefits under a special
 
14           needs trust as described in title 42 United States Code
 
15           section 1396p(d)(4), as amended from time to time.
 
16      490:9-110  Security interests arising under Article 2 or
 
17 2A.  A security interest arising under section 490:2-401,
 
18 490:2-505, 490:2-711(3), or 490:2A-508(e) is subject to this
 
19 article.  However, until the debtor obtains possession of the
 
20 goods:
 
21      (1)  The security interest is enforceable, even if section
 
22           490:9-203(b)(3) has not been satisfied;
 

 
 
 
Page 37                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Filing is not required to perfect the security
 
 2           interest;
 
 3      (3)  The rights of the secured party after default by the
 
 4           debtor are governed by Article 2 or 2A; and
 
 5      (4)  The security interest has priority over a conflicting
 
 6           security interest created by the debtor.
 
 7     PART 2.  EFFECTIVENESS OF SECURITY AGREEMENT; ATTACHMENT
 
 8   OF SECURITY INTEREST; RIGHTS OF PARTIES TO SECURITY AGREEMENT
 
 9             SUBPART 1.  EFFECTIVENESS AND ATTACHMENT
 
10      490:9-201  General effectiveness of security agreement.
 
11 (a)  Except as otherwise provided in this chapter, a security
 
12 agreement is effective according to its terms between the
 
13 parties, against purchasers of the collateral, and against
 
14 creditors.
 
15      (b)  A transaction subject to this article is subject to:
 
16      (1)  Any applicable rule of law which establishes a
 
17           different rule for consumers;
 
18      (2)  Any other statute or regulation that regulates the
 
19           rates, charges, agreements, and practices for loans,
 
20           credit sales, or other extensions of credit; and
 
21      (3)  Any consumer-protection statute or regulation.
 
22      (c)  In case of conflict between this article and a rule of
 
23 law, statute, or regulation described in subsection (b), the rule
 

 
Page 38                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 of law, statute, or regulation controls.  Failure to comply with
 
 2 a statute or regulation described in subsection (b) has only the
 
 3 effect the statute or regulation specifies.
 
 4      (d)  This article does not:
 
 5      (1)  Validate any rate, charge, agreement, or practice that
 
 6           violates a rule of law, statute, or regulation
 
 7           described in subsection (b); or
 
 8      (2)  Extend the application of the rule of law, statute, or
 
 9           regulation to a transaction not otherwise subject to
 
10           it.
 
11      490:9-202  Title to collateral immaterial.  Except as
 
12 otherwise provided with respect to consignments or sales of
 
13 accounts, chattel paper, payment intangibles, or promissory
 
14 notes, the provisions of this article with regard to rights and
 
15 obligations apply whether title to collateral is in the secured
 
16 party or the debtor.
 
17      490:9-203  Attachment and enforceability of security
 
18 interest; proceeds; supporting obligations; formal requisites.
 
19 (a)  A security interest attaches to collateral when it becomes
 
20 enforceable against the debtor with respect to the collateral,
 
21 unless an agreement expressly postpones the time of attachment.
 
22      (b)  Except as otherwise provided in subsections (c) through
 
23 (i), a security interest is enforceable against the debtor and
 
24 third parties with respect to the collateral only if:
 

 
Page 39                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Value has been given;
 
 2      (2)  The debtor has rights in the collateral or the power to
 
 3           transfer rights in the collateral to a secured party;
 
 4           and
 
 5      (3)  One of the following conditions is met:
 
 6           (A)  The debtor has authenticated a security agreement
 
 7                that provides a description of the collateral and,
 
 8                if the security interest covers timber to be cut,a
 
 9                description of the land concerned;
 
10           (B)  The collateral is not a certificated security and
 
11                is in the possession of the secured party under
 
12                section 490:9-313 pursuant to the debtor's
 
13                security agreement;
 
14           (C)  The collateral is a certificated security in
 
15                registered form and the security certificate has
 
16                been delivered to the secured party under section
 
17                490:8-301 pursuant to the debtor's security
 
18                agreement; or
 
19           (D)  The collateral is deposit accounts, electronic
 
20                chattel paper, investment property, or letter-of-
 
21                credit rights, and the secured party has control
 
22                under section 490:9-104, 490:9-105, 490:9-106, or
 
23                490:9-107 pursuant to the debtor's security
 
24                agreement.
 

 
Page 40                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (c)  Subsection (b) is subject to section 490:4-210 on the
 
 2 security interest of a collecting bank, section 490:5-118 on the
 
 3 security interest of a letter-of-credit issuer or nominated
 
 4 person, section 490:9-110 on a security interest arising under
 
 5 Article 2 or 2A, and section 490:9-206 on security interests in
 
 6 investment property.
 
 7      (d)  A person becomes bound as debtor by a security
 
 8 agreement entered into by another person if, by operation of law
 
 9 other than this article or by contract:
 
10      (1)  The security agreement becomes effective to create a
 
11           security interest in the person's property; or
 
12      (2)  The person becomes generally obligated for the
 
13           obligations of the other person, including the
 
14           obligation secured under the security agreement, and
 
15           acquires or succeeds to all or substantially all of the
 
16           assets of the other person.
 
17      (e)  If a new debtor becomes bound as debtor by a security
 
18 agreement entered into by another person:
 
19      (1)  The agreement satisfies subsection (b)(3) with respect
 
20           to existing or after-acquired property of the new
 
21           debtor to the extent the property is described in the
 
22           agreement; and
 

 
 
 
Page 41                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Another agreement is not necessary to make a security
 
 2           interest in the property enforceable.
 
 3      (f)  The attachment of a security interest in collateral
 
 4 gives the secured party the rights to proceeds provided by
 
 5 section 490:9-315 and is also attachment of a security interest
 
 6 in a supporting obligation for the collateral.
 
 7      (g)  The attachment of a security interest in a right to
 
 8 payment or performance secured by a security interest or other
 
 9 lien on personal or real property is also attachment of a
 
10 security interest in the security interest, mortgage, or other
 
11 lien.
 
12      (h)  The attachment of a security interest in a securities
 
13 account is also attachment of a security interest in the security
 
14 entitlements carried in the securities account.
 
15      (i)  The attachment of a security interest in a commodity
 
16 account is also attachment of a security interest in the
 
17 commodity contracts carried in the commodity account.
 
18      490:9-204  After-acquired property; future advances.  (a)
 
19 Except as otherwise provided in subsection (b), a security
 
20 agreement may create or provide for a security interest in after-
 
21 acquired collateral.
 
22      (b)  A security interest does not attach under a term
 
23 constituting an after-acquired property clause to:
 

 
Page 42                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Consumer goods, other than an accession when given as
 
 2           additional security, unless the debtor acquires rights
 
 3           in them within ten days after the secured party gives
 
 4           value; or
 
 5      (2)  A commercial tort claim.
 
 6      (c)  A security agreement may provide that collateral
 
 7 secures, or that accounts, chattel paper, payment intangibles, or
 
 8 promissory notes are sold in connection with, future advances or
 
 9 other value, whether or not the advances or value are given
 
10 pursuant to commitment.
 
11      490:9-205  Use or disposition of collateral permissible.
 
12 (a)  A security interest is not invalid or fraudulent against
 
13 creditors solely because:
 
14      (1)  The debtor has the right or ability to:
 
15           (A)  Use, commingle, or dispose of all or part of the
 
16                collateral, including returned or repossessed
 
17                goods;
 
18           (B)  Collect, compromise, enforce, or otherwise deal
 
19                with collateral;
 
20           (C)  Accept the return of collateral or make
 
21                repossessions; or
 
22           (D)  Use, commingle, or dispose of proceeds; or
 

 
 
 
Page 43                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  The secured party fails to require the debtor to
 
 2           account for proceeds or replace collateral.
 
 3      (b)  This section does not relax the requirements of
 
 4 possession if attachment, perfection, or enforcement of a
 
 5 security interest depends upon possession of the collateral by
 
 6 the secured party.
 
 7      490:9-206  Security interest arising in purchase or
 
 8 delivery of financial asset.  (a)  A security interest in favor
 
 9 of a securities intermediary attaches to a person's security
 
10 entitlement if:
 
11      (1)  The person buys a financial asset through the
 
12           securities intermediary in a transaction in which the
 
13           person is obligated to pay the purchase price to the
 
14           securities intermediary at the time of the purchase;
 
15           and
 
16      (2)  The securities intermediary credits the financial asset
 
17           to the buyer's securities account before the buyer pays
 
18           the securities intermediary.
 
19      (b)  The security interest described in subsection (a)
 
20 secures the person's obligation to pay for the financial asset.
 
21      (c)  A security interest in favor of a person that delivers
 
22 a certificated security or other financial asset represented by a
 
23 writing attaches to the security or other financial asset if:
 

 
Page 44                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  The security or other financial asset:
 
 2           (A)  In the ordinary course of business is transferred
 
 3                by delivery with any necessary indorsement or
 
 4                assignment; and
 
 5           (B)  Is delivered under an agreement between persons in
 
 6                the business of dealing with such securities or
 
 7                financial assets; and
 
 8      (2)  The agreement calls for delivery against payment.
 
 9      (d)  The security interest described in subsection (c)
 
10 secures the obligation to make payment for the delivery.
 
11                   SUBPART 2.  RIGHTS AND DUTIES
 
12      490:9-207  Rights and duties of secured party having
 
13 possession or control of collateral.  (a)  Except as otherwise
 
14 provided in subsection (d), a secured party shall use reasonable
 
15 care in the custody and preservation of collateral in the secured
 
16 party's possession.  In the case of chattel paper or an
 
17 instrument, reasonable care includes taking necessary steps to
 
18 preserve rights against prior parties unless otherwise agreed.
 
19      (b)  Except as otherwise provided in subsection (d), if a
 
20 secured party has possession of collateral:
 
21      (1)  Reasonable expenses, including the cost of insurance
 
22           and payment of taxes or other charges, incurred in the
 
23           custody, preservation, use, or operation of the
 

 
Page 45                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           collateral are chargeable to the debtor and are secured
 
 2           by the collateral;
 
 3      (2)  The risk of accidental loss or damage is on the debtor
 
 4           to the extent of a deficiency in any effective
 
 5           insurance coverage;
 
 6      (3)  The secured party shall keep the collateral
 
 7           identifiable, but fungible collateral may be
 
 8           commingled; and
 
 9      (4)  The secured party may use or operate the collateral:
 
10           (A)  For the purpose of preserving the collateral or
 
11                its value;
 
12           (B)  As permitted by an order of a court having
 
13                competent jurisdiction; or
 
14           (C)  Except in the case of consumer goods, in the
 
15                manner and to the extent agreed by the debtor.
 
16      (c)  Except as otherwise provided in subsection (d), a
 
17 secured party having possession of collateral or control of
 
18 collateral under section 490:9-104, 490:9-105, 490:9-106, or
 
19 490:9-107:
 
20      (1)  May hold as additional security any proceeds, except
 
21           money or funds, received from the collateral;
 
22      (2)  Shall apply money or funds received from the collateral
 
23           to reduce the secured obligation, unless remitted to
 
24           the debtor; and
 

 
Page 46                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (3)  May create a security interest in the collateral.
 
 2      (d)  If the secured party is a buyer of accounts, chattel
 
 3 paper, payment intangibles, or promissory notes or a consignor:
 
 4      (1)  Subsection (a) does not apply unless the secured party
 
 5           is entitled under an agreement:
 
 6           (A)  To charge back uncollected collateral; or
 
 7           (B)  Otherwise to full or limited recourse against the
 
 8                debtor or a secondary obligor based on the
 
 9                nonpayment or other default of an account debtor
 
10                or other obligor on the collateral; and
 
11      (2)  Subsections (b) and (c) do not apply.
 
12      490:9-208  Additional duties of secured party having
 
13 control of collateral.  (a)  This section applies to cases in
 
14 which there is no outstanding secured obligation and the secured
 
15 party is not committed to make advances, incur obligations, or
 
16 otherwise give value.
 
17      (b)  Within ten days after receiving an authenticated demand
 
18 by the debtor:
 
19      (1)  A secured party having control of a deposit account
 
20           under section 490:9-104(a)(2) shall send to the bank
 
21           with which the deposit account is maintained an
 
22           authenticated statement that releases the bank from any
 
23           further obligation to comply with instructions
 
24           originated by the secured party;
 

 
Page 47                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  A secured party having control of a deposit account
 
 2           under section 490:9-104(a)(3) shall:
 
 3           (A)  Pay the debtor the balance on deposit in the
 
 4                deposit account; or
 
 5           (B)  Transfer the balance on deposit into a deposit
 
 6                account in the debtor's name;
 
 7      (3)  A secured party, other than a buyer, having control of
 
 8           electronic chattel paper under section 490:9-105 shall:
 
 9           (A)  Communicate the authoritative copy of the
 
10                electronic chattel paper to the debtor or its
 
11                designated custodian;
 
12           (B)  If the debtor designates a custodian that is the
 
13                designated custodian with which the authoritative
 
14                copy of the electronic chattel paper is maintained
 
15                for the secured party, communicate to the
 
16                custodian an authenticated record releasing the
 
17                designated custodian from any further obligation
 
18                to comply with instructions originated by the
 
19                secured party and instructing the custodian to
 
20                comply with instructions originated by the debtor;
 
21                and
 
22           (C)  Take appropriate action to enable the debtor or
 
23                its designated custodian to make copies of or
 

 
Page 48                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1                revisions to the authoritative copy which add or
 
 2                change an identified assignee of the authoritative
 
 3                copy without the consent of the secured party;
 
 4      (4)  A secured party having control of investment property
 
 5           under section 490:8-106(d)(2) or 490:9-106(b) shall
 
 6           send to the securities intermediary or commodity
 
 7           intermediary with which the security entitlement or
 
 8           commodity contract is maintained an authenticated
 
 9           record that releases the securities intermediary or
 
10           commodity intermediary from any further obligation to
 
11           comply with entitlement orders or directions originated
 
12           by the secured party; and
 
13      (5)  A secured party having control of a letter-of-credit
 
14           right under section 490:9-107 shall send to each person
 
15           having an unfulfilled obligation to pay or deliver
 
16           proceeds of the letter of credit to the secured party
 
17           an authenticated release from any further obligation to
 
18           pay or deliver proceeds of the letter of credit to the
 
19           secured party.
 
20      490:9-209  Duties of secured party if account debtor has
 
21 been notified of assignment.  (a)  Except as otherwise provided
 
22 in subsection (c), this section applies if:
 

 
 
 
Page 49                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  There is no outstanding secured obligation; and
 
 2      (2)  The secured party is not committed to make advances,
 
 3           incur obligations, or otherwise give value.
 
 4      (b)  Within ten days after receiving an authenticated demand
 
 5 by the debtor, a secured party shall send to an account debtor
 
 6 that has received notification of an assignment to the secured
 
 7 party as assignee under section 490:9-406(a) an authenticated
 
 8 record that releases the account debtor from any further
 
 9 obligation to the secured party.
 
10      (c)  This section does not apply to an assignment
 
11 constituting the sale of an account, chattel paper, or payment
 
12 intangible.
 
13      490:9-210  Request for accounting; request regarding list
 
14 of collateral or statement of account.  (a)  In this section:
 
15      (1)  "Request" means a record of a type described in
 
16           paragraph (2), (3), or (4).
 
17      (2)  "Request for an accounting" means a record
 
18           authenticated by a debtor requesting that the recipient
 
19           provide an accounting of the unpaid obligations secured
 
20           by collateral and reasonably identifying the
 
21           transaction or relationship that is the subject of the
 
22           request.
 

 
 
 
Page 50                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (3)  "Request regarding a list of collateral" means a record
 
 2           authenticated by a debtor requesting that the recipient
 
 3           approve or correct a list of what the debtor believes
 
 4           to be the collateral securing an obligation and
 
 5           reasonably identifying the transaction or relationship
 
 6           that is the subject of the request.
 
 7      (4)  "Request regarding a statement of account" means a
 
 8           record authenticated by a debtor requesting that the
 
 9           recipient approve or correct a statement indicating
 
10           what the debtor believes to be the aggregate amount of
 
11           unpaid obligations secured by collateral as of a
 
12           specified date and reasonably identifying the
 
13           transaction or relationship that is the subject of the
 
14           request.
 
15      (b)  Subject to subsections (c), (d), (e), and (f), a
 
16 secured party, other than a buyer of accounts, chattel paper,
 
17 payment intangibles, or promissory notes or a consignor, shall
 
18 comply with a request within fourteen days after receipt:
 
19      (1)  In the case of a request for an accounting, by
 
20           authenticating and sending to the debtor an accounting;
 
21           and
 
22      (2)  In the case of a request regarding a list of collateral
 
23           or a request regarding a statement of account, by
 

 
Page 51                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           authenticating and sending to the debtor an approval or
 
 2           correction.
 
 3      (c)  A secured party that claims a security interest in all
 
 4 of a particular type of collateral owned by the debtor may comply
 
 5 with a request regarding a list of collateral by sending to the
 
 6 debtor an authenticated record including a statement to that
 
 7 effect within fourteen days after receipt.
 
 8      (d)  A person that receives a request regarding a list of
 
 9 collateral, claims no interest in the collateral when it receives
 
10 the request, and claimed an interest in the collateral at an
 
11 earlier time shall comply with the request within fourteen days
 
12 after receipt by sending to the debtor an authenticated record:
 
13      (1)  Disclaiming any interest in the collateral; and
 
14      (2)  If known to the recipient, providing the name and
 
15           mailing address of any assignee of or successor to the
 
16           recipient's security interest in the collateral.
 
17      (e)  A person that receives a request for an accounting or a
 
18 request regarding a statement of account, claims no interest in
 
19 the obligations when it receives the request, and claimed an
 
20 interest in the obligations at an earlier time shall comply with
 
21 the request within fourteen days after receipt by sending to the
 
22 debtor an authenticated record:
 

 
 
 
Page 52                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Disclaiming any interest in the obligations; and
 
 2      (2)  If known to the recipient, providing the name and
 
 3           mailing address of any assignee of or successor to the
 
 4           recipient's interest in the obligations.
 
 5      (f)  A debtor is entitled without charge to one response to
 
 6 a request under this section during any six-month period.  The
 
 7 secured party may require payment of a charge not exceeding $25
 
 8 for each additional response.
 
 9                 PART 3.  PERFECTION AND PRIORITY
 
10         SUBPART 1.  LAW GOVERNING PERFECTION AND PRIORITY
 
11      490:9-301  Law governing perfection and priority of
 
12 security interests.  Except as otherwise provided in sections
 
13 490:9-303 through 490:9-306, the following rules determine the
 
14 law governing perfection, the effect of perfection or
 
15 nonperfection, and the priority of a security interest in
 
16 collateral:
 
17      (1)  Except as otherwise provided in this section, while a
 
18           debtor is located in a jurisdiction, the local law of
 
19           that jurisdiction governs perfection, the effect of
 
20           perfection or nonperfection, and the priority of a
 
21           security interest in collateral.
 
22      (2)  While collateral is located in a jurisdiction, the
 
23           local law of that jurisdiction governs perfection, the
 

 
Page 53                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           effect of perfection or nonperfection, and the priority
 
 2           of a possessory security interest in that collateral.
 
 3      (3)  Except as otherwise provided in paragraph (4), while
 
 4           negotiable documents, goods, instruments, money, or
 
 5           tangible chattel paper is located in a jurisdiction,
 
 6           the local law of that jurisdiction governs:
 
 7           (A)  Perfection of a security interest in the goods by
 
 8                filing a fixture filing;
 
 9           (B)  Perfection of a security interest in timber to be
 
10                cut; and
 
11           (C)  The effect of perfection or nonperfection and the
 
12                priority of a nonpossessory security interest in
 
13                the collateral.
 
14      (4)  The local law of the jurisdiction in which the wellhead
 
15           or minehead is located governs perfection, the effect
 
16           of perfection or nonperfection, and the priority of a
 
17           security interest in as-extracted collateral.
 
18      490:9-302  Law governing perfection and priority of
 
19 agricultural liens.  While farm products are located in a
 
20 jurisdiction, the local law of that jurisdiction governs
 
21 perfection, the effect of perfection or nonperfection, and the
 
22 priority of an agricultural lien on the farm products.
 

 
 
 
Page 54                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-303  Law governing perfection and priority of
 
 2 security interests in goods covered by a certificate of title.
 
 3 (a)  This section applies to goods covered by a certificate of
 
 4 title, even if there is no other relationship between the
 
 5 jurisdiction under whose certificate of title the goods are
 
 6 covered and the goods or the debtor.
 
 7      (b)  Goods become covered by a certificate of title when a
 
 8 valid application for the certificate of title and the applicable
 
 9 fee are delivered to the appropriate authority.  Goods cease to
 
10 be covered by a certificate of title at the earlier of the time
 
11 the certificate of title ceases to be effective under the law of
 
12 the issuing jurisdiction or the time the goods become covered
 
13 subsequently by a certificate of title issued by another
 
14 jurisdiction.
 
15      (c)  The local law of the jurisdiction under whose
 
16 certificate of title the goods are covered governs perfection,
 
17 the effect of perfection or nonperfection, and the priority of a
 
18 security interest in goods covered by a certificate of title from
 
19 the time the goods become covered by the certificate of title
 
20 until the goods cease to be covered by the certificate of title.
 
21      490:9-304  Law governing perfection and priority of
 
22 security interests in deposit accounts.  (a)  The local law of a
 
23 bank's jurisdiction governs perfection, the effect of perfection
 

 
Page 55                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 or nonperfection, and the priority of a security interest in a
 
 2 deposit account maintained with that bank.
 
 3      (b)  The following rules determine a bank's jurisdiction for
 
 4 purposes of this part:
 
 5      (1)  If an agreement between the bank and the debtor
 
 6           governing the deposit account expressly provides that a
 
 7           particular jurisdiction is the bank's jurisdiction for
 
 8           purposes of this part, this article, or this chapter,
 
 9           that jurisdiction is the bank's jurisdiction.
 
10      (2)  If paragraph (1) does not apply and an agreement
 
11           between the bank and its customer governing the deposit
 
12           account expressly provides that the agreement is
 
13           governed by the law of a particular jurisdiction, that
 
14           jurisdiction is the bank's jurisdiction.
 
15      (3)  If neither paragraph (1) nor paragraph (2) applies and
 
16           an agreement between the bank and its customer
 
17           governing the deposit account expressly provides that
 
18           the deposit account is maintained at an office in a
 
19           particular jurisdiction, that jurisdiction is the
 
20           bank's jurisdiction.
 
21      (4)  If none of the preceding paragraphs applies, the bank's
 
22           jurisdiction is the jurisdiction in which the office
 
23           identified in an account statement as the office
 
24           serving the customer's account is located.
 

 
Page 56                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (5)  If none of the preceding paragraphs applies, the bank's
 
 2           jurisdiction is the jurisdiction in which the chief
 
 3           executive office of the bank is located.
 
 4      490:9-305  Law governing perfection and priority of
 
 5 security interests in investment property.  (a)  Except as
 
 6 otherwise provided in subsection (c), the following rules apply:
 
 7      (1)  While a security certificate is located in a
 
 8           jurisdiction, the local law of that jurisdiction
 
 9           governs perfection, the effect of perfection or
 
10           nonperfection, and the priority of a security interest
 
11           in the certificated security represented thereby.
 
12      (2)  The local law of the issuer's jurisdiction as specified
 
13           in section 490:8-110(d) governs perfection, the effect
 
14           of perfection or nonperfection, and the priority of a
 
15           security interest in an uncertificated security.
 
16      (3)  The local law of the securities intermediary's
 
17           jurisdiction as specified in section 490:8-110(e)
 
18           governs perfection, the effect of perfection or
 
19           nonperfection, and the priority of a security interest
 
20           in a security entitlement or securities account.
 
21      (4)  The local law of the commodity intermediary's
 
22           jurisdiction governs perfection, the effect of
 
23           perfection or nonperfection, and the priority of a
 

 
Page 57                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           security interest in a commodity contract or commodity
 
 2           account.
 
 3      (b)  The following rules determine a commodity
 
 4 intermediary's jurisdiction for purposes of this part:
 
 5      (1)  If an agreement between the commodity intermediary and
 
 6           commodity customer governing the commodity account
 
 7           expressly provides that a particular jurisdiction is
 
 8           the commodity intermediary's jurisdiction for purposes
 
 9           of this part, this article, or this chapter, that
 
10           jurisdiction is the commodity intermediary's
 
11           jurisdiction.
 
12      (2)  If paragraph (1) does not apply and an agreement
 
13           between the commodity intermediary and commodity
 
14           customer governing the commodity account expressly
 
15           provides that the agreement is governed by the law of a
 
16           particular jurisdiction, that jurisdiction is the
 
17           commodity intermediary's jurisdiction.
 
18      (3)  If neither paragraph (1) nor paragraph (2) applies and
 
19           an agreement between the commodity intermediary and
 
20           commodity customer governing the commodity account
 
21           expressly provides that the commodity account is
 
22           maintained at an office in a particular jurisdiction,
 
23           that jurisdiction is the commodity intermediary's
 
24           jurisdiction.
 

 
Page 58                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (4)  If none of the preceding paragraphs applies, the
 
 2           commodity intermediary's jurisdiction is the
 
 3           jurisdiction in which the office identified in an
 
 4           account statement as the office serving the commodity
 
 5           customer's account is located.
 
 6      (5)  If none of the preceding paragraphs applies, the
 
 7           commodity intermediary's jurisdiction is the
 
 8           jurisdiction in which the chief executive office of the
 
 9           commodity intermediary is located.
 
10      (c)  The local law of the jurisdiction in which the debtor
 
11 is located governs:
 
12      (1)  Perfection of a security interest in investment
 
13           property by filing;
 
14      (2)  Automatic perfection of a security interest in
 
15           investment property created by a broker or securities
 
16           intermediary; and
 
17      (3)  Automatic perfection of a security interest in a
 
18           commodity contract or commodity account created by a
 
19           commodity intermediary.
 
20      490:9-306  Law governing perfection and priority of
 
21 security interests in letter-of-credit rights.  (a)  Subject to
 
22 subsection (c), the local law of the issuer's jurisdiction or a
 
23 nominated person's jurisdiction governs perfection, the effect of
 

 
Page 59                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 perfection or nonperfection, and the priority of a security
 
 2 interest in a letter-of-credit right if the issuer's jurisdiction
 
 3 or nominated person's jurisdiction is a state.
 
 4      (b)  For purposes of this part, an issuer's jurisdiction or
 
 5 nominated person's jurisdiction is the jurisdiction whose law
 
 6 governs the liability of the issuer or nominated person with
 
 7 respect to the letter-of-credit right as provided in section
 
 8 490:5-116.
 
 9      (c)  This section does not apply to a security interest that
 
10 is perfected only under section 490:9-308(d).
 
11      490:9-307  Location of debtor.  (a)  In this section,
 
12 "place of business" means a place where a debtor conducts its
 
13 affairs.
 
14      (b)  Except as otherwise provided in this section, the
 
15 following rules determine a debtor's location:
 
16      (1)  An debtor who is an individual is located at the
 
17           individual's principal residence.
 
18      (2)  A debtor that is an organization and has only one place
 
19           of business is located at its place of business.
 
20      (3)  A debtor that is an organization and has more than one
 
21           place of business is located at its chief executive
 
22           office.
 

 
 
 
Page 60                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (c)  Subsection (b) applies only if a debtor's residence,
 
 2 place of business, or chief executive office, as applicable, is
 
 3 located in a jurisdiction whose law generally requires
 
 4 information concerning the existence of a nonpossessory security
 
 5 interest to be made generally available in a filing, recording,
 
 6 or registration system as a condition or result of the security
 
 7 interest's obtaining priority over the rights of a lien creditor
 
 8 with respect to the collateral.  If subsection (b) does not
 
 9 apply, the debtor is located in the District of Columbia.
 
10      (d)  A person that ceases to exist, have a residence, or
 
11 have a place of business continues to be located in the
 
12 jurisdiction specified by subsections (b) and (c).
 
13      (e)  A registered organization that is organized under the
 
14 law of a state is located in that state.
 
15      (f)  Except as otherwise provided in subsection (i), a
 
16 registered organization that is organized under the law of the
 
17 United States and a branch or agency of a bank that is not
 
18 organized under the law of the United States or a state are
 
19 located:
 
20      (1)  In the state that the law of the United States
 
21           designates, if the law designates a state of location;
 
22      (2)  In the state that the registered organization, branch,
 
23           or agency designates, if the law of the United States
 

 
Page 61                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           authorizes the registered organization, branch, or
 
 2           agency to designate its state of location; or
 
 3      (3)  In the District of Columbia, if neither paragraph (1)
 
 4           nor paragraph (2) applies.
 
 5      (g)  A registered organization continues to be located in
 
 6 the jurisdiction specified by subsection (e) or (f)
 
 7 notwithstanding:
 
 8      (1)  The suspension, revocation, forfeiture, or lapse of the
 
 9           registered organization's status as such in its
 
10           jurisdiction of organization; or
 
11      (2)  The dissolution, winding up, or cancellation of the
 
12           existence of the registered organization.
 
13      (h)  The United States government is located in the District
 
14 of Columbia.
 
15      (i)  A branch or agency of a bank that is not organized
 
16 under the law of the United States or a state is located in the
 
17 state in which the branch or agency is licensed, if all branches
 
18 and agencies of the bank are licensed in only one state.
 
19      (j)  A foreign air carrier under the Federal Aviation Act of
 
20 1958, as amended, is located at the designated office of the
 
21 agent upon which service of process may be made on behalf of the
 
22 carrier.
 
23      (k)  This section applies only for purposes of this part.
 

 
Page 62                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1                      SUBPART 2.  PERFECTION
 
 2      490:9-308  When security interest or agricultural lien is
 
 3 perfected; continuity of perfection.  (a)  Except as otherwise
 
 4 provided in this section and section 490:9-309, a security
 
 5 interest is perfected if it has attached and all of the
 
 6 applicable requirements for perfection in sections 490:9-310
 
 7 through 490:9-316 have been satisfied.  A security interest is
 
 8 perfected when it attaches if the applicable requirements are
 
 9 satisfied before the security interest attaches.
 
10      (b)  An agricultural lien is perfected if it has become
 
11 effective and all of the applicable requirements for perfection
 
12 in section 490:9-310 have been satisfied.  An agricultural lien
 
13 is perfected when it becomes effective if the applicable
 
14 requirements are satisfied before the agricultural lien becomes
 
15 effective.
 
16      (c)  A security interest or agricultural lien is perfected
 
17 continuously if it is originally perfected by one method under
 
18 this article and is later perfected by another method under this
 
19 article, without an intermediate period when it was unperfected.
 
20      (d)  Perfection of a security interest in collateral also
 
21 perfects a security interest in a supporting obligation for the
 
22 collateral.
 

 
 
 
Page 63                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (e)  Perfection of a security interest in a right to payment
 
 2 or performance also perfects a security interest in a security
 
 3 interest, mortgage, or other lien on personal or real property
 
 4 securing the right.
 
 5      (f)  Perfection of a security interest in a securities
 
 6 account also perfects a security interest in the security
 
 7 entitlements carried in the securities account.
 
 8      (g)  Perfection of a security interest in a commodity
 
 9 account also perfects a security interest in the commodity
 
10 contracts carried in the commodity account.
 
11      490:9-309  Security interest perfected upon attachment.
 
12 The following security interests are perfected when they attach:
 
13      (1)  A purchase-money security interest in consumer goods,
 
14           except as otherwise provided in section 490:9-311(b)
 
15           with respect to consumer goods that are subject to a
 
16           statute or treaty described in section 490:9-311(a);
 
17      (2)  An assignment of accounts or payment intangibles which
 
18           does not by itself or in conjunction with other
 
19           assignments to the same assignee transfer a significant
 
20           part of the assignor's outstanding accounts or payment
 
21           intangibles;
 
22      (3)  A sale of a payment intangible;
 
23      (4)  A sale of a promissory note;
 

 
Page 64                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (5)  A security interest created by the assignment of a
 
 2           health-care-insurance receivable to the provider of the
 
 3           health-care goods or services;
 
 4      (6)  A security interest arising under section 490:2-401,
 
 5           490:2-505, 490:2-711(3), or 490:2A-508(e), until the
 
 6           debtor obtains possession of the collateral;
 
 7      (7)  A security interest of a collecting bank arising under
 
 8           section 490:4-210;
 
 9      (8)  A security interest of an issuer or nominated person
 
10           arising under section 490:5-118;
 
11      (9)  A security interest arising in the delivery of a
 
12           financial asset under section 490:9-206(c);
 
13     (10)  A security interest in investment property created by a
 
14           broker or securities intermediary;
 
15     (11)  A security interest in a commodity contract or a
 
16           commodity account created by a commodity intermediary;
 
17     (12)  An assignment for the benefit of all creditors of the
 
18           transferor and subsequent transfers by the assignee
 
19           thereunder; and
 
20     (13)  A security interest created by an assignment of a
 
21           beneficial interest in a decedent's estate.
 
22      490:9-310  When filing required to perfect security
 
23 interest or agricultural lien; security interests and
 

 


 

Page 65                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 agricultural liens to which filing provisions do not apply.  (a)
 
 2 Except as otherwise provided in subsection (b) and section
 
 3 490:9-312(b), a financing statement must be filed to perfect all
 
 4 security interests and agricultural liens.
 
 5      (b)  The filing of a financing statement is not necessary to
 
 6 perfect a security interest:
 
 7      (1)  That is perfected under section 490:9-308(d), (e), (f),
 
 8           or (g);
 
 9      (2)  That is perfected under section 490:9-309 when it
 
10           attaches;
 
11      (3)  In property subject to a statute, regulation, or treaty
 
12           described in section 490:9-311(a);
 
13      (4)  In goods in possession of a bailee which is perfected
 
14           under section 490:9-312(d)(1) or (2);
 
15      (5)  In certificated securities, documents, goods, or
 
16           instruments which is perfected without filing or
 
17           possession under section 490:9-312(e), (f), or (g);
 
18      (6)  In collateral in the secured party's possession under
 
19           section 490:9-313;
 
20      (7)  In a certificated security which is perfected by
 
21           delivery of the security certificate to the secured
 
22           party under section 490:9-313;
 

 
Page 66                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (8)  In deposit accounts, electronic chattel paper
 
 2           investment property, or letter-of-credit rights which
 
 3           is perfected by control under section 490:9-314;
 
 4      (9)  In proceeds which is perfected under section 490:9-315;
 
 5           or
 
 6     (10)  That is perfected under section 490:9-316.
 
 7      (c)  If a secured party assigns a perfected security
 
 8 interest or agricultural lien, a filing under this article is not
 
 9 required to continue the perfected status of the security
 
10 interest against creditors of and transferees from the original
 
11 debtor.
 
12      490:9-311  Perfection of security interests in property
 
13 subject to certain statutes, regulations, and treaties.  (a)
 
14 Except as otherwise provided in subsection (d), the filing of a
 
15 financing statement is not necessary or effective to perfect a
 
16 security interest in property subject to:
 
17      (1)  A statute, regulation, or treaty of the United States
 
18           whose requirements for a security interest's obtaining
 
19           priority over the rights of a lien creditor with
 
20           respect to the property preempt section 490:9-310(a);
 
21      (2)  Chapter 286; or
 
22      (3)  A certificate-of-title statute of another jurisdiction
 
23           which provides for a security interest to be indicated
 

 
Page 67                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           on the certificate as a condition or result of the
 
 2           security interest's obtaining priority over the rights
 
 3           of a lien creditor with respect to the property.
 
 4      (b)  Compliance with the requirements of a statute,
 
 5 regulation, or treaty described in subsection (a) for obtaining
 
 6 priority over the rights of a lien creditor is equivalent to the
 
 7 filing of a financing statement under this article.  Except as
 
 8 otherwise provided in subsection (d) and sections 490:9-313 and
 
 9 490:9-316(d) and (e) for goods covered by a certificate of title,
 
10 a security interest in property subject to a statute, regulation,
 
11 or treaty described in subsection (a) may be perfected only by
 
12 compliance with those requirements, and a security interest so
 
13 perfected remains perfected notwithstanding a change in the use
 
14 or transfer of possession of the collateral.
 
15      (c)  Except as otherwise provided in subsection (d) and
 
16 section 490:9-316(d) and (e), duration and renewal of perfection
 
17 of a security interest perfected by compliance with the
 
18 requirements prescribed by a statute, regulation, or treaty
 
19 described in subsection (a) are governed by the statute,
 
20 regulation, or treaty.  In other respects, the security interest
 
21 is subject to this article.
 
22      (d)  During any period in which collateral is inventory held
 
23 for sale or lease by a person or leased by that person as lessor
 

 
Page 68                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 and that person is in the business of selling or leasing goods of
 
 2 that kind, this section does not apply to a security interest in
 
 3 that collateral created by that person as debtor.
 
 4      490:9-312  Perfection of security interests in chattel
 
 5 paper, deposit accounts, documents, goods covered by documents,
 
 6 instruments, investment property, letter-of-credit rights, and
 
 7 money; perfection by permissive filing; temporary perfection
 
 8 without filing or transfer of possession.  (a)  A security
 
 9 interest in chattel paper, negotiable documents, instruments, or
 
10 investment property may be perfected by filing.
 
11      (b)  Except as otherwise provided in section 490:9-315(c)
 
12 and (d) for proceeds:
 
13      (1)  A security interest in a deposit account may be
 
14           perfected only by control under section 490:9-314;
 
15      (2)  And except as otherwise provided in section
 
16           490:9-308(d), a security interest in a letter-of-
 
17           credit right may be perfected only by control under
 
18           section 490:9-314; and
 
19      (3)  a security interest in money may be perfected only by
 
20           the secured party's taking possession under section
 
21           490:9-313.
 
22      (c)  While goods are in the possession of a bailee that has
 
23 issued a negotiable document covering the goods:
 

 
Page 69                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  A security interest in the goods may be perfected by
 
 2           perfecting a security interest in the document; and
 
 3      (2)  A security interest perfected in the document has
 
 4           priority over any security interest that becomes
 
 5           perfected in the goods by another method during that
 
 6           time.
 
 7      (d)  While goods are in the possession of a bailee that has
 
 8 issued a nonnegotiable document covering the goods, a security
 
 9 interest in the goods may be perfected by:
 
10      (1)  Issuance of a document in the name of the secured
 
11           party;
 
12      (2)  The bailee's receipt of notification of the secured
 
13           party's interest; or
 
14      (3)  Filing as to the goods.
 
15      (e)  A security interest in certificated securities,
 
16 negotiable documents, or instruments is perfected without filing
 
17 or the taking of possession for a period of twenty days from the
 
18 time it attaches to the extent that it arises for new value given
 
19 under an authenticated security agreement.
 
20      (f)  A perfected security interest in a negotiable document
 
21 or goods in possession of a bailee, other than one that has
 
22 issued a negotiable document for the goods, remains perfected for
 
23 twenty days without filing if the secured party makes available
 

 
Page 70                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 to the debtor the goods or documents representing the goods for
 
 2 the purpose of:
 
 3      (1)  Ultimate sale or exchange; or
 
 4      (2)  Loading, unloading, storing, shipping, transshipping
 
 5           manufacturing, processing, or otherwise dealing with
 
 6           them in a manner preliminary to their sale or exchange.
 
 7      (g)  A perfected security interest in a certificated
 
 8 security or instrument remains perfected for twenty days without
 
 9 filing if the secured party delivers the security certificate or
 
10 instrument to the debtor for the purpose of:
 
11      (1)  Ultimate sale or exchange; or
 
12      (2)  Presentation, collection, enforcement, renewal, or
 
13           registration of transfer.
 
14      (h)  After the twenty-day period specified in subsection
 
15 (e), (f), or (g) expires, perfection depends upon compliance with
 
16 this article.
 
17      490:9-313  When possession by or delivery to secured party
 
18 perfects security interest without filing.  (a)  Except as
 
19 otherwise provided in subsection (b), a secured party may perfect
 
20 a security interest in negotiable documents, goods, instruments,
 
21 money, or tangible chattel paper by taking possession of the
 
22 collateral.  A secured party may perfect a security interest in
 
23 certificated securities by taking delivery of the certificated
 
24 securities under section 490:8-301.
 

 
Page 71                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  With respect to goods covered by a certificate of title
 
 2 issued by this State, a secured party may perfect a security
 
 3 interest in the goods by taking possession of the goods only in
 
 4 the circumstances described in section 490:9-316(d).
 
 5      (c)  With respect to collateral other than certificated
 
 6 securities and goods covered by a document, a secured party takes
 
 7 possession of collateral in the possession of a person other than
 
 8 the debtor, the secured party, or a lessee of the collateral from
 
 9 the debtor in the ordinary course of the debtor's business, when:
 
10      (1)  The person in possession authenticates a record
 
11           acknowledging that it holds possession of the
 
12           collateral for the secured party's benefit; or
 
13      (2)  The person takes possession of the collateral after
 
14           having authenticated a record acknowledging that it
 
15           will hold possession of collateral for the secured
 
16           party's benefit.
 
17      (d)  If perfection of a security interest depends upon
 
18 possession of the collateral by a secured party, perfection
 
19 occurs no earlier than the time the secured party takes
 
20 possession and continues only while the secured party retains
 
21 possession.
 
22      (e)  A security interest in a certificated security in
 
23 registered form is perfected by delivery when delivery of the
 

 
Page 72                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 certificated security occurs under section 490:8-301 and remains
 
 2 perfected by delivery until the debtor obtains possession of the
 
 3 security certificate.
 
 4      (f)  A person in possession of collateral is not required to
 
 5 acknowledge that it holds possession for a secured party's
 
 6 benefit.
 
 7      (g)  If a person acknowledges that it holds possession for
 
 8 the secured party's benefit:
 
 9      (1)  The acknowledgment is effective under subsection (c) or
 
10           section 490:8-301(a), even if the acknowledgment
 
11           violates the rights of a debtor; and
 
12      (2)  Unless the person otherwise agrees or law other than
 
13           this article otherwise provides, the person does not
 
14           owe any duty to the secured party and is not required
 
15           to confirm the acknowledgment to another person.
 
16      (h)  A secured party having possession of collateral does
 
17 not relinquish possession by delivering the collateral to a
 
18 person other than the debtor or a lessee of the collateral from
 
19 the debtor in the ordinary course of the debtor's business if the
 
20 person was instructed before the delivery or is instructed
 
21 contemporaneously with the delivery:
 
22      (1)  To hold possession of the collateral for the secured
 
23           party's benefit; or
 

 
Page 73                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  To redeliver the collateral to the secured party.
 
 2      (i)  A secured party does not relinquish possession, even if
 
 3 a delivery under subsection (h) violates the rights of a debtor.
 
 4 A person to which collateral is delivered under subsection (h)
 
 5 does not owe any duty to the secured party and is not required to
 
 6 confirm the delivery to another person unless the person
 
 7 otherwise agrees or law other than this article otherwise
 
 8 provides.
 
 9      490:9-314  Perfection by control.  (a)  A security interest
 
10 in investment property, deposit accounts, letter-of-credit
 
11 rights, or electronic chattel paper may be perfected by control
 
12 of the collateral under section 490:9-104, 490:9-105, 490:9-106,
 
13 or 490:9-107.
 
14      (b)  A security interest in deposit accounts, electronic
 
15 chattel paper, or letter-of-credit rights is perfected by control
 
16 under section 490:9-104, 490:9-105, or 490:9-107 when the secured
 
17 party obtains control and remains perfected by control only while
 
18 the secured party retains control.
 
19      (c)  A security interest in investment property is perfected
 
20 by control under section 490:9-106 from the time the secured
 
21 party obtains control and remains perfected by control until:
 
22      (1)  The secured party does not have control; and
 

 
 
 
Page 74                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  One of the following occurs:
 
 2           (A)  If the collateral is a certificated security, the
 
 3                debtor has or acquires possession of the security
 
 4                certificate;
 
 5           (B)  If the collateral is an uncertificated security
 
 6                the issuer has registered or registers the debtor
 
 7                as the registered owner; or
 
 8           (C)  If the collateral is a security entitlement, the
 
 9                debtor is or becomes the entitlement holder.
 
10      490:9-315  Secured party's rights on disposition of
 
11 collateral and in proceeds.  (a)  Except as otherwise provided in
 
12 this article and in section 490:2-403(2):
 
13      (1)  A security interest or agricultural lien continues in
 
14           collateral notwithstanding sale, lease, license
 
15           exchange, or other disposition thereof unless the
 
16           secured party authorized the disposition free of the
 
17           security interest or agricultural lien; and
 
18      (2)  A security interest attaches to any identifiable
 
19           proceeds of collateral.
 
20      (b)  Proceeds that are commingled with other property are
 
21 identifiable proceeds:
 
22      (1)  If the proceeds are goods, to the extent provided by
 
23           section 490:9-336; and
 

 
Page 75                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  If the proceeds are not goods, to the extent that the
 
 2           secured party identifies the proceeds by a method of
 
 3           tracing, including application of equitable principles,
 
 4           that is permitted under law other than this article
 
 5           with respect to commingled property of the type
 
 6           involved.
 
 7      (c)  A security interest in proceeds is a perfected security
 
 8 interest if the security interest in the original collateral was
 
 9 perfected.
 
10      (d)  A perfected security interest in proceeds becomes
 
11 unperfected on the twenty-first day after the security interest
 
12 attaches to the proceeds unless:
 
13      (1)  The following conditions are satisfied:
 
14           (A)  A filed financing statement covers the original
 
15                collateral;
 
16           (B)  The proceeds are collateral in which a security
 
17                interest may be perfected by filing in the office
 
18                in which the financing statement has been filed;
 
19                and
 
20           (C)  The proceeds are not acquired with cash proceeds;
 
21      (2)  The proceeds are identifiable cash proceeds; or
 
22      (3)  The security interest in the proceeds is perfected
 
23           other than under subsection (c) when the security
 

 
Page 76                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           interest attaches to the proceeds or within twenty days
 
 2           thereafter.
 
 3      (e)  If a filed financing statement covers the original
 
 4 collateral, a security interest in proceeds which remains
 
 5 perfected under subsection (d)(1) becomes unperfected at the
 
 6 later of:
 
 7      (1)  When the effectiveness of the filed financing statement
 
 8           lapses under section 490:9-515 or is terminated under
 
 9           section 490:9-513; or
 
10      (2)  The twenty-first day after the security interest
 
11           attaches to the proceeds.
 
12      490:9-316  Continued perfection of security interest
 
13 following change in governing law.  (a)  A security interest
 
14 perfected pursuant to the law of the jurisdiction designated in
 
15 section 490:9-301(1) or 490:9-305(c) remains perfected until the
 
16 earliest of:
 
17      (1)  The time perfection would have ceased under the law of
 
18           that jurisdiction;
 
19      (2)  The expiration of four months after a change of the
 
20           debtor's location to another jurisdiction; or
 
21      (3)  The expiration of one year after a transfer of
 
22           collateral to a person that thereby becomes a debtor
 
23           and is located in another jurisdiction.
 

 
Page 77                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  If a security interest described in subsection (a)
 
 2 becomes perfected under the law of the other jurisdiction before
 
 3 the earliest time or event described in that subsection, it
 
 4 remains perfected thereafter.  If the security interest does not
 
 5 become perfected under the law of the other jurisdiction before
 
 6 the earliest time or event, it becomes unperfected and is deemed
 
 7 never to have been perfected as against a purchaser of the
 
 8 collateral for value.
 
 9      (c)  A possessory security interest in collateral, other
 
10 than goods covered by a certificate of title and as-extracted
 
11 collateral consisting of goods, remains continuously perfected
 
12 if:
 
13      (1)  The collateral is located in one jurisdiction and
 
14           subject to a security interest perfected under the law
 
15           of that jurisdiction;
 
16      (2)  Thereafter the collateral is brought into another
 
17           jurisdiction; and
 
18      (3)  Upon entry into the other jurisdiction, the security
 
19           interest is perfected under the law of the other
 
20           jurisdiction.
 
21      (d)  Except as otherwise provided in subsection (e), a
 
22 security interest in goods covered by a certificate of title
 
23 which is perfected by any method under the law of another
 

 
Page 78                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 jurisdiction when the goods become covered by a certificate of
 
 2 title from this State remains perfected until the security
 
 3 interest would have become unperfected under the law of the other
 
 4 jurisdiction had the goods not become so covered.
 
 5      (e)  A security interest described in subsection (d)
 
 6 becomes unperfected as against a purchaser of the goods for value
 
 7 and is deemed never to have been perfected as against a purchaser
 
 8 of the goods for value if the applicable requirements for
 
 9 perfection under section 490:9-311(b) or 490:9-313 are not
 
10 satisfied before the earlier of:
 
11      (1)  The time the security interest would have become
 
12           unperfected under the law of the other jurisdiction had
 
13           the goods not become covered by a certificate of title
 
14           from this State; or
 
15      (2)  The expiration of four months after the goods had
 
16           become so covered.
 
17      (f)  A security interest in deposit accounts, letter-of-
 
18 credit rights, or investment property which is perfected under
 
19 the law of the bank's jurisdiction, the issuer's jurisdiction, a
 
20 nominated person's jurisdiction, the securities intermediary's
 
21 jurisdiction, or the commodity intermediary's jurisdiction, as
 
22 applicable, remains perfected until the earlier of:
 

 
 
 
Page 79                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  The time the security interest would have become
 
 2           unperfected under the law of that jurisdiction; or
 
 3      (2)  The expiration of four months after a change of the
 
 4           applicable jurisdiction to another jurisdiction.
 
 5      (g)  If a security interest described in subsection (f)
 
 6 becomes perfected under the law of the other jurisdiction before
 
 7 the earlier of the time or the end of the period described in
 
 8 that subsection, it remains perfected thereafter.  If the
 
 9 security interest does not become perfected under the law of the
 
10 other jurisdiction before the earlier of that time or the end of
 
11 that period, it becomes unperfected and is deemed never to have
 
12 been perfected as against a purchaser of the collateral for
 
13 value.
 
14                       SUBPART 3.  PRIORITY
 
15      490:9-317  Interests that take priority over or take free
 
16 of security interest or agricultural lien.  (a)  A security
 
17 interest or agricultural lien is subordinate to the rights of:
 
18      (1)  A person entitled to priority under section 490:9-322;
 
19           and
 
20      (2)  Except as otherwise provided in subsection (e), a
 
21           person that becomes a lien creditor before the earlier
 
22           of the time the security interest or agricultural lien
 
23           is perfected or a financing statement covering the
 
24           collateral is filed.
 

 
Page 80                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  Except as otherwise provided in subsection (e), a
 
 2 buyer, other than a secured party, of tangible chattel paper,
 
 3 documents, goods, instruments, or a security certificate takes
 
 4 free of a security interest or agricultural lien if the buyer
 
 5 gives value and receives delivery of the collateral without
 
 6 knowledge of the security interest or agricultural lien and
 
 7 before it is perfected.
 
 8      (c)  Except as otherwise provided in subsection (e), a
 
 9 lessee of goods takes free of a security interest or agricultural
 
10 lien if the lessee gives value and receives delivery of the
 
11 collateral without knowledge of the security interest or
 
12 agricultural lien and before it is perfected.
 
13      (d)  A licensee of a general intangible or a buyer, other
 
14 than a secured party, of accounts, electronic chattel paper,
 
15 general intangibles, or investment property other than a
 
16 certificated security takes free of a security interest if the
 
17 licensee or buyer gives value without knowledge of the security
 
18 interest and before it is perfected.
 
19      (e)  Except as otherwise provided in sections 490:9-320 and
 
20 490:9-321, if a person files a financing statement with respect
 
21 to a purchase-money security interest before or within twenty
 
22 days after the debtor receives delivery of the collateral, the
 
23 security interest takes priority over the rights of a buyer,
 

 
Page 81                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 lessee, or lien creditor which arise between the time the
 
 2 security interest attaches and the time of filing.
 
 3      490:9-318  No interest retained in right to payment that is
 
 4 sold; rights and title of seller of account or chattel paper with
 
 5 respect to creditors and purchasers.  (a)  A debtor that has sold
 
 6 an account, chattel paper, payment intangible, or promissory note
 
 7 does not retain a legal or equitable interest in the collateral
 
 8 sold.
 
 9      (b)  For purposes of determining the rights of creditors of,
 
10 and purchasers for value of an account or chattel paper from, a
 
11 debtor that has sold an account or chattel paper, while the
 
12 buyer's security interest is unperfected, the debtor is deemed to
 
13 have rights and title to the account or chattel paper identical
 
14 to those the debtor sold.
 
15      490:9-319  Rights and title of consignee with respect to
 
16 creditors and purchasers.  (a)  Except as otherwise provided in
 
17 subsection (b), for purposes of determining the rights of
 
18 creditors of, and purchasers for value of goods from, a
 
19 consignee, while the goods are in the possession of the
 
20 consignee, the consignee is deemed to have rights and title to
 
21 the goods identical to those the consignor had or had power to
 
22 transfer.
 

 
 
 
Page 82                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  For purposes of determining the rights of a creditor of
 
 2 a consignee, law other than this article determines the rights
 
 3 and title of a consignee while goods are in the consignee's
 
 4 possession if, under this part, a perfected security interest
 
 5 held by the consignor would have priority over the rights of the
 
 6 creditor.
 
 7      490:9-320  Buyer of goods.  (a)  Except as otherwise
 
 8 provided in subsection (e), a buyer in ordinary course of
 
 9 business, other than a person buying farm products from a person
 
10 engaged in farming operations, takes free of a security interest
 
11 created by the buyer's seller, even if the security interest is
 
12 perfected and the buyer knows of its existence.
 
13      (b)  Except as otherwise provided in subsection (e), a buyer
 
14 of goods from a person who used or bought the goods for use
 
15 primarily for personal, family, or household purposes takes free
 
16 of a security interest, even if perfected, if the buyer buys:
 
17      (1)  Without knowledge of the security interest;
 
18      (2)  For value;
 
19      (3)  Primarily for the buyer's personal, family, or
 
20           household purposes; and
 
21      (4)  Before the filing of a financing statement covering the
 
22           goods.
 

 
 
 
Page 83                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (c)  To the extent that it affects the priority of a
 
 2 security interest over a buyer of goods under subsection (b), the
 
 3 period of effectiveness of a filing made in the jurisdiction in
 
 4 which the seller is located is governed by section 490:9-316(a)
 
 5 and (b).
 
 6      (d)  A buyer in ordinary course of business buying oil, gas,
 
 7 or other minerals at the wellhead or minehead or after extraction
 
 8 takes free of an interest arising out of an encumbrance.
 
 9      (e)  Subsections (a) and (b) do not affect a security
 
10 interest in goods in the possession of the secured party under
 
11 section 490:9-313.
 
12      490:9-321  Licensee of general intangible and lessee of
 
13 goods in ordinary course of business.  (a)  In this section,
 
14 "licensee in ordinary course of business" means a person that
 
15 becomes a licensee of a general intangible in good faith, without
 
16 knowledge that the license violates the rights of another person
 
17 in the general intangible, and in the ordinary course from a
 
18 person in the business of licensing general intangibles of that
 
19 kind.  A person becomes a licensee in the ordinary course if the
 
20 license to the person comports with the usual or customary
 
21 practices in the kind of business in which the licensor is
 
22 engaged or with the licensor's own usual or customary practices.
 

 
 
 
Page 84                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  A licensee in ordinary course of business takes its
 
 2 rights under a nonexclusive license free of a security interest
 
 3 in the general intangible created by the licensor, even if the
 
 4 security interest is perfected and the licensee knows of its
 
 5 existence.
 
 6      (c)  A lessee in ordinary course of business takes its
 
 7 leasehold interest free of a security interest in the goods
 
 8 created by the lessor, even if the security interest is perfected
 
 9 and the lessee knows of its existence.
 
10      490:9-322  Priorities among conflicting security interests
 
11 in and agricultural liens on same collateral.  (a)  Except as
 
12 otherwise provided in this section, priority among conflicting
 
13 security interests and agricultural liens in the same collateral
 
14 is determined according to the following rules:
 
15      (1)  Conflicting perfected security interests and
 
16           agricultural liens rank according to priority in time
 
17           of filing or perfection.  Priority dates from the
 
18           earlier of the time a filing covering the collateral is
 
19           first made or the security interest or agricultural
 
20           lien is first perfected, if there is no period
 
21           thereafter when there is neither filing nor perfection.
 
22      (2)  A perfected security interest or agricultural lien has
 
23           priority over a conflicting unperfected security
 
24           interest or agricultural lien.
 

 
Page 85                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (3)  The first security interest or agricultural lien to
 
 2           attach or become effective has priority if conflicting
 
 3           security interests and agricultural liens are
 
 4           unperfected.
 
 5      (b)  For the purposes subsection (a)(1):
 
 6      (1)  The time of filing or perfection as to a security
 
 7           interest in collateral is also the time of filing or
 
 8           perfection as to a security interest in proceeds; and
 
 9      (2)  The time of filing or perfection as to a security
 
10           interest in collateral supported by a supporting
 
11           obligation is also the time of filing or perfection as
 
12           to a security interest in the supporting obligation.
 
13      (c)  Except as otherwise provided in subsection (f), a
 
14 security interest in collateral which qualifies for priority over
 
15 a conflicting security interest under section 490:9-327,
 
16 490:9-328, 490:9-329, 490:9-330, or 490:9-331 also has priority
 
17 over a conflicting security interest in:
 
18      (1)  Any supporting obligation for the collateral; and
 
19      (2)  Proceeds of the collateral if:
 
20           (A)  The security interest in proceeds is perfected;
 
21           (B)  The proceeds are cash proceeds or of the same type
 
22                as the collateral; and
 

 
 
 
Page 86                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           (C)  In the case of proceeds that are proceeds of
 
 2                proceeds, all intervening proceeds are cash
 
 3                proceeds, proceeds of the same type as the
 
 4                collateral, or an account relating to the
 
 5                collateral.
 
 6      (d)  Subject to subsection (e) and except as otherwise
 
 7 provided in subsection (f), if a security interest in chattel
 
 8 paper, deposit accounts, negotiable documents, instruments,
 
 9 investment property, or letter-of-credit rights is perfected by a
 
10 method other than filing, conflicting perfected security
 
11 interests in proceeds of the collateral rank according to
 
12 priority in time of filing.
 
13      (e)  Subsection (d) applies only if the proceeds of the
 
14 collateral are not cash proceeds, chattel paper, negotiable
 
15 documents, instruments, investment property, or letter-of-credit
 
16 rights.
 
17      (f)  Subsections (a) through (e) are subject to:
 
18      (1)  Subsection (g) and the other provisions of this part;
 
19      (2)  Section 490:4-210 with respect to a security interest
 
20           of a collecting bank;
 
21      (3)  Section 490:5-118 with respect to a security interest
 
22           of an issuer or nominated person; and
 

 
 
 
Page 87                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (4)  Section 490:9-110 with respect to a security interest
 
 2           arising under Article 2 or 2A.
 
 3      (g)  A perfected agricultural lien on collateral has
 
 4 priority over a conflicting security interest in or agricultural
 
 5 lien on the same collateral if the statute creating the
 
 6 agricultural lien so provides.
 
 7      490:9-323  Future advances.  (a)  Except as otherwise
 
 8 provided in subsection (c), for purposes of determining the
 
 9 priority of a perfected security interest under section
 
10 490:9-322(a)(1), perfection of the security interest dates from
 
11 the time an advance is made to the extent that the security
 
12 interest secures an advance that:
 
13      (1)  Is made while the security interest is perfected only:
 
14           (A)  Under section 490:9-309 when it attaches; or
 
15           (B)  Temporarily under section 490:9-312(e), (f), or
 
16                (g); and
 
17      (2)  Is not made pursuant to a commitment entered into
 
18           before or while the security interest is perfected by a
 
19           method other than under section 490:9-309 or
 
20           490:9-312(e), (f), or (g).
 
21      (b)  Except as otherwise provided in subsection (c), a
 
22 security interest is subordinate to the rights of a person that
 
23 becomes a lien creditor to the extent that the security interest
 

 
Page 88                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 secures an advance made more than forty-five days after the
 
 2 person becomes a lien creditor unless the advance is made:
 
 3      (1)  Without knowledge of the lien; or
 
 4      (2)  Pursuant to a commitment entered into without knowledge
 
 5           of the lien.
 
 6      (c)  Subsections (a) and (b) do not apply to a security
 
 7 interest held by a secured party that is a buyer of accounts,
 
 8 chattel paper, payment intangibles, or promissory notes or a
 
 9 consignor.
 
10      (d)  Except as otherwise provided in subsection (e), a buyer
 
11 of goods other than a buyer in ordinary course of business takes
 
12 free of a security interest to the extent that it secures
 
13 advances made after the earlier of:
 
14      (1)  The time the secured party acquires knowledge of the
 
15           buyer's purchase; or
 
16      (2)  Forty-five days after the purchase.
 
17      (e)  Subsection (d) does not apply if the advance is made
 
18 pursuant to a commitment entered into without knowledge of the
 
19 buyer's purchase and before the expiration of the forty-five-day
 
20 period.
 
21      (f)  Except as otherwise provided in subsection (g), a
 
22 lessee of goods, other than a lessee in ordinary course of
 
23 business, takes the leasehold interest free of a security
 

 
Page 89                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 interest to the extent that it secures advances made after the
 
 2 earlier of:
 
 3      (1)  The time the secured party acquires knowledge of the
 
 4           lease; or
 
 5      (2)  Forty-five days after the lease contract becomes
 
 6           enforceable.
 
 7      (g)  Subsection (f) does not apply if the advance is made
 
 8 pursuant to a commitment entered into without knowledge of the
 
 9 lease and before the expiration of the forty-five-day period.
 
10      490:9-324  Priority of purchase-money security interests.
 
11 (a)  Except as otherwise provided in subsection (g), a perfected
 
12 purchase-money security interest in goods other than inventory or
 
13 livestock has priority over a conflicting security interest in
 
14 the same goods, and, except as otherwise provided in section
 
15 490:9-327, a perfected security interest in its identifiable
 
16 proceeds also has priority, if the purchase-money security
 
17 interest is perfected when the debtor receives possession of the
 
18 collateral or within twenty days thereafter.
 
19      (b)  Subject to subsection (c) and except as otherwise
 
20 provided in subsection (g), a perfected purchase-money security
 
21 interest in inventory has priority over a conflicting security
 
22 interest in the same inventory, has priority over a conflicting
 
23 security interest in chattel paper or an instrument constituting
 

 
Page 90                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 proceeds of the inventory and in proceeds of the chattel paper,
 
 2 if so provided in section 490:9-330, and, except as otherwise
 
 3 provided in section 490:9-327, also has priority in identifiable
 
 4 cash proceeds of the inventory to the extent the identifiable
 
 5 cash proceeds are received on or before the delivery of the
 
 6 inventory to a buyer, if:
 
 7      (1)  The purchase-money security interest is perfected when
 
 8           the debtor receives possession of the inventory;
 
 9      (2)  The purchase-money secured party sends an authenticated
 
10           notification to the holder of the conflicting security
 
11           interest;
 
12      (3)  The holder of the conflicting security interest
 
13           receives the notification within five years before the
 
14           debtor receives possession of the inventory; and
 
15      (4)  The notification states that the person sending the
 
16           notification has or expects to acquire a purchase-
 
17           money security interest in inventory of the debtor and
 
18           describes the inventory.
 
19      (c)  Subsection (b)(2) through (4) applies only if the
 
20 holder of the conflicting security interest had filed a financing
 
21 statement covering the same types of inventory:
 
22      (1)  If the purchase-money security interest is perfected by
 
23           filing, before the date of the filing; or
 

 
Page 91                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  If the purchase-money security interest is temporarily
 
 2           perfected without filing or possession under section
 
 3           490:9-312(f), before the beginning of the twenty-day
 
 4           period thereunder.
 
 5      (d)  Subject to subsection (e) and except as otherwise
 
 6 provided in subsection (g), a perfected purchase-money security
 
 7 interest in livestock that are farm products has priority over a
 
 8 conflicting security interest in the same livestock, and, except
 
 9 as otherwise provided in section 490:9-327, a perfected security
 
10 interest in their identifiable proceeds and identifiable products
 
11 in their unmanufactured states also has priority, if:
 
12      (1)  The purchase-money security interest is perfected when
 
13           the debtor receives possession of the livestock;
 
14      (2)  The purchase-money secured party sends an authenticated
 
15           notification to the holder of the conflicting security
 
16           interest;
 
17      (3)  The holder of the conflicting security interest
 
18           receives the notification within six months before the
 
19           debtor receives possession of the livestock; and
 
20      (4)  The notification states that the person sending the
 
21           notification has or expects to acquire a purchase-
 
22           money security interest in livestock of the debtor and
 
23           describes the livestock.
 

 
Page 92                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (e)  Subsection (d)(2) through (4) applies only if the
 
 2 holder of the conflicting security interest had filed a financing
 
 3 statement covering the same types of livestock:
 
 4      (1)  If the purchase-money security interest is perfected by
 
 5           filing, before the date of the filing; or
 
 6      (2)  If the purchase-money security interest is temporarily
 
 7           perfected without filing or possession under section
 
 8           490:9-312(f), before the beginning of the twenty-day
 
 9           period thereunder.
 
10      (f)  Except as otherwise provided in subsection (g), a
 
11 perfected purchase-money security interest in software has
 
12 priority over a conflicting security interest in the same
 
13 collateral, and, except as otherwise provided in section
 
14 490:9-327, a perfected security interest in its identifiable
 
15 proceeds also has priority, to the extent that the purchase-money
 
16 security interest in the goods in which the software was acquired
 
17 for use has priority in the goods and proceeds of the goods under
 
18 this section.
 
19      (g)  If more than one security interest qualifies for
 
20 priority in the same collateral under subsection (a), (b), (d),
 
21 or (f):
 
22      (1)  A security interest securing an obligation incurred as
 
23           all or part of the price of the collateral has priority
 

 
Page 93                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           over a security interest securing an obligation
 
 2           incurred for value given to enable the debtor to
 
 3           acquire rights in or the use of collateral; and
 
 4      (2)  In all other cases, section 490:9-322(a) applies to the
 
 5           qualifying security interests.
 
 6      490:9-325  Priority of security interests in transferred
 
 7 collateral.  (a)  Except as otherwise provided in subsection (b),
 
 8 a security interest created by a debtor is subordinate to a
 
 9 security interest in the same collateral created by another
 
10 person if:
 
11      (1)  The debtor acquired the collateral subject to the
 
12           security interest created by the other person;
 
13      (2)  The security interest created by the other person was
 
14           perfected when the debtor acquired the collateral; and
 
15      (3)  There is no period thereafter when the security
 
16           interest is unperfected.
 
17      (b)  Subsection (a) subordinates a security interest only if
 
18 the security interest:
 
19      (1)  Otherwise would have priority solely under section
 
20           490:9-322(a) or 490:9-324; or
 
21      (2)  Arose solely under section 490:2-711(3) or
 
22           490:2A-508(e).
 

 
 
 
Page 94                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-326  Priority of security interests created by new
 
 2 debtor.  (a)  Subject to subsection (b), a security interest
 
 3 created by a new debtor which is perfected by a filed financing
 
 4 statement that is effective solely under section 490:9-508 in
 
 5 collateral in which a new debtor has or acquires rights is
 
 6 subordinate to a security interest in the same collateral which
 
 7 is perfected other than by a filed financing statement that is
 
 8 effective solely under section 490:9-508.
 
 9      (b)  The other provisions of this part determine the
 
10 priority among conflicting security interests in the same
 
11 collateral perfected by filed financing statements that are
 
12 effective solely under section 490:9-508.  However, if the
 
13 security agreements to which a new debtor became bound as debtor
 
14 were not entered into by the same original debtor, the
 
15 conflicting security interests rank according to priority in time
 
16 of the new debtor's having become bound.
 
17      490:9-327  Priority of security interests in deposit
 
18 account.  The following rules govern priority among conflicting
 
19 security interests in the same deposit account:
 
20      (1)  A security interest held by a secured party having
 
21           control of the deposit account under section 490:9-104
 
22           has priority over a conflicting security interest held
 
23           by a secured party that does not have control.
 

 
Page 95                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Except as otherwise provided in paragraphs (3) and (4),
 
 2           security interests perfected by control under section
 
 3           490:9-314 rank according to priority in time of
 
 4           obtaining control.
 
 5      (3)  Except as otherwise provided in paragraph (4), a
 
 6           security interest held by the bank with which the
 
 7           deposit account is maintained has priority over a
 
 8           conflicting security interest held by another secured
 
 9           party.
 
10      (4)  A security interest perfected by control under section
 
11           490:9-104(a)(3) has priority over a security interest
 
12           held by the bank with which the deposit account is
 
13           maintained.
 
14      490:9-328  Priority of security interests in investment
 
15 property.  The following rules govern priority among conflicting
 
16 security interests in the same investment property:
 
17      (1)  A security interest held by a secured party having
 
18           control of investment property under section 490:9-106
 
19           has priority over a security interest held by a secured
 
20           party that does not have control of the investment
 
21           property.
 
22      (2)  Except as otherwise provided in paragraphs (3) and (4),
 
23           conflicting security interests held by secured parties
 

 
Page 96                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           each of which has control under section 490:9-106 rank
 
 2           according to priority in time of:
 
 3           (A)  If the collateral is a security, obtaining
 
 4                control;
 
 5           (B)  If the collateral is a security entitlement
 
 6                carried in a securities account and:
 
 7                (i)  If the secured party obtained control under
 
 8                     section 490:8-106(d)(1), the secured party's
 
 9                     becoming the person for which the securities
 
10                     account is maintained;
 
11               (ii)  If the secured party obtained control under
 
12                     section 490:8-106(d)(2), the securities
 
13                     intermediary's agreement to comply with the
 
14                     secured party's entitlement orders with
 
15                     respect to security entitlements carried or
 
16                     to be carried in the securities account; or
 
17              (iii)  If the secured party obtained control through
 
18                     another person under section 490:8-106(d)(3),
 
19                     the time on which priority would be based
 
20                     under this paragraph if the other person were
 
21                     the secured party; or
 
22           (C)  If the collateral is a commodity contract carried
 
23                with a commodity intermediary, the satisfaction of
 

 
Page 97                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1                the requirement for control specified in section
 
 2                490:9-106(b)(2) with respect to commodity
 
 3                contracts carried or to be carried with the
 
 4                commodity intermediary.
 
 5      (3)  A security interest held by a securities intermediary
 
 6           in a security entitlement or a securities account
 
 7           maintained with the securities intermediary has
 
 8           priority over a conflicting security interest held by
 
 9           another secured party.
 
10      (4)  A security interest held by a commodity intermediary in
 
11           a commodity contract or a commodity account maintained
 
12           with the commodity intermediary has priority over a
 
13           conflicting security interest held by another secured
 
14           party.
 
15      (5)  A security interest in a certificated security in
 
16           registered form which is perfected by taking delivery
 
17           under section 490:9-313(a) and not by control under
 
18           section 490:9-314 has priority over a conflicting
 
19           security interest perfected by a method other than
 
20           control.
 
21      (6)  Conflicting security interests created by a broker
 
22           securities intermediary, or commodity intermediary
 
23           which are perfected without control under section
 
24           490:9-106 rank equally.
 

 
Page 98                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (7)  In all other cases, priority among conflicting security
 
 2           interests in investment property is governed by
 
 3           sections 490:9-322 and 490:9-323.
 
 4      490:9-329  Priority of security interests in letter-of-
 
 5 credit right.  The following rules govern priority among
 
 6 conflicting security interests in the same letter-of-credit
 
 7 right:
 
 8      (1)  A security interest held by a secured party having
 
 9           control of the letter-of-credit right under section
 
10           490:9-107 has priority to the extent of its control
 
11           over a conflicting security interest held by a secured
 
12           party that does not have control.
 
13      (2)  Security interests perfected by control under section
 
14           490:9-314 rank according to priority in time of
 
15           obtaining control.
 
16      490:9-330  Priority of purchaser of chattel paper or
 
17 instrument.  (a)  A purchaser of chattel paper has priority over
 
18 a security interest in the chattel paper which is claimed merely
 
19 as proceeds of inventory subject to a security interest if:
 
20      (1)  In good faith and in the ordinary course of the
 
21           purchaser's business, the purchaser gives new value and
 
22           takes possession of the chattel paper or obtains
 
23           control of the chattel paper under section 490:9-105;
 
24           and
 

 
Page 99                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  The chattel paper does not indicate that it has been
 
 2           assigned to an identified assignee other than the
 
 3           purchaser.
 
 4      (b)  A purchaser of chattel paper has priority over a
 
 5 security interest in the chattel paper which is claimed other
 
 6 than merely as proceeds of inventory subject to a security
 
 7 interest if the purchaser gives new value and takes possession of
 
 8 the chattel paper or obtains control of the chattel paper under
 
 9 section 490:9-105 in good faith, in the ordinary course of the
 
10 purchaser's business, and without knowledge that the purchase
 
11 violates the rights of the secured party.
 
12      (c)  Except as otherwise provided in section 490:9-327, a
 
13 purchaser having priority in chattel paper under subsection (a)
 
14 or (b) also has priority in proceeds of the chattel paper to the
 
15 extent that:
 
16      (1)  Section 490:9-322 provides for priority in the
 
17           proceeds; or
 
18      (2)  The proceeds consist of the specific goods covered by
 
19           the chattel paper or cash proceeds of the specific
 
20           goods, even if the purchaser's security interest in the
 
21           proceeds is unperfected.
 
22      (d)  Except as otherwise provided in section 490:9-331(a), a
 
23 purchaser of an instrument has priority over a security interest
 

 
Page 100                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 in the instrument perfected by a method other than possession if
 
 2 the purchaser gives value and takes possession of the instrument
 
 3 in good faith and without knowledge that the purchase violates
 
 4 the rights of the secured party.
 
 5      (e)  For purposes of subsections (a) and (b), the holder of
 
 6 a purchase-money security interest in inventory gives new value
 
 7 for chattel paper constituting proceeds of the inventory.
 
 8      (f)  For purposes of subsections (b) and (d), if chattel
 
 9 paper or an instrument indicates that it has been assigned to an
 
10 identified secured party other than the purchaser, a purchaser of
 
11 the chattel paper or instrument has knowledge that the purchase
 
12 violates the rights of the secured party.
 
13      490:9-331  Priority of rights of purchasers of instruments,
 
14 documents, and securities under other articles; priority of
 
15 interests in financial assets and security entitlements under
 
16 Article 8.  (a)  This article does not limit the rights of a
 
17 holder in due course of a negotiable instrument, a holder to
 
18 which a negotiable document of title has been duly negotiated, or
 
19 a protected purchaser of a security.  These holders or purchasers
 
20 take priority over an earlier security interest, even if
 
21 perfected, to the extent provided in Articles 3, 7, and 8.
 
22      (b)  This article does not limit the rights of or impose
 
23 liability on a person to the extent that the person is protected
 
24 against the assertion of a claim under Article 8.
 

 
Page 101                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (c)  Filing under this article does not constitute notice of
 
 2 a claim or defense to the holders, or purchasers, or persons
 
 3 described in subsections (a) and (b).
 
 4      490:9-332  Transfer of money; transfer of funds from
 
 5 deposit account.  (a)  A transferee of money takes the money free
 
 6 of a security interest unless the transferee acts in collusion
 
 7 with the debtor in violating the rights of the secured party.
 
 8      (b)  A transferee of funds from a deposit account takes the
 
 9 funds free of a security interest in the deposit account unless
 
10 the transferee acts in collusion with the debtor in violating the
 
11 rights of the secured party.
 
12      490:9-333  Priority of certain liens arising by operation
 
13 of law.  (a)  In this section, "possessory lien" means an
 
14 interest, other than a security interest or an agricultural lien:
 
15      (1)  Which secures payment or performance of an obligation
 
16           for services or materials furnished with respect to
 
17           goods by a person in the ordinary course of the
 
18           person's business;
 
19      (2)  Which is created by statute or rule of law in favor of
 
20           the person; and
 
21      (3)  Whose effectiveness depends on the person's possession
 
22           of the goods.
 

 
 
 
Page 102                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  A possessory lien on goods has priority over a security
 
 2 interest in the goods unless the lien is created by a statute
 
 3 that expressly provides otherwise.
 
 4      490:9-334  Priority of security interests in fixtures and
 
 5 crops.  (a)  A security interest under this article may be
 
 6 created in goods that are fixtures or may continue in goods that
 
 7 become fixtures.  A security interest does not exist under this
 
 8 article in ordinary building materials incorporated into an
 
 9 improvement on land.
 
10      (b)  This article does not prevent creation of an
 
11 encumbrance upon fixtures under real property law.
 
12      (c)  In cases not governed by subsections (d) through (h), a
 
13 security interest in fixtures is subordinate to a conflicting
 
14 interest of an encumbrancer or owner of the related real property
 
15 other than the debtor.
 
16      (d)  Except as otherwise provided in subsection (h), a
 
17 perfected security interest in fixtures has priority over a
 
18 conflicting interest of an encumbrancer or owner of the real
 
19 property if the debtor has an interest of record in or is in
 
20 possession of the real property and:
 
21      (1)  The security interest is a purchase-money security
 
22           interest;
 

 
 
 
Page 103                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  The interest of the encumbrancer or owner arises before
 
 2           the goods become fixtures; and
 
 3      (3)  The security interest is perfected by a fixture filing
 
 4           before the goods become fixtures or within twenty days
 
 5           thereafter.
 
 6      (e)  A perfected security interest in fixtures has priority
 
 7 over a conflicting interest of an encumbrancer or owner of the
 
 8 real property if:
 
 9      (1)  The debtor has an interest of record in the real
 
10           property or is in possession of the real property and
 
11           the security interest:
 
12           (A)  Is perfected by a fixture filing before the
 
13                interest of the encumbrancer or owner is of
 
14                record; and
 
15           (B)  Has priority over any conflicting interest of a
 
16                predecessor in title of the encumbrancer or owner;
 
17      (2)  Before the goods become fixtures, the security interest
 
18           is perfected by any method permitted by this article
 
19           and the fixtures are readily removable:
 
20           (A)  Factory or office machines;
 
21           (B)  Equipment that is not primarily used or leased for
 
22                use in the operation of the real property; or
 

 
 
 
Page 104                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           (C)  Replacements of domestic appliances that are
 
 2                consumer goods;
 
 3      (3)  The conflicting interest is a lien on the real property
 
 4           obtained by legal or equitable proceedings after the
 
 5           security interest was perfected by any method permitted
 
 6           by this article; or
 
 7      (4)  The security interest is:
 
 8           (A)  Created in a manufactured home in a manufactured-
 
 9                home transaction; and
 
10           (B)  Perfected pursuant to a statute described in
 
11                section 490:9-311(a)(2).
 
12      (f)  A security interest in fixtures, whether or not
 
13 perfected, has priority over a conflicting interest of an
 
14 encumbrancer or owner of the real property if:
 
15      (1)  The encumbrancer or owner has, in an authenticated
 
16           record, consented to the security interest or
 
17           disclaimed an interest in the goods as fixtures; or
 
18      (2)  The debtor has a right to remove the goods as against
 
19           the encumbrancer or owner.
 
20      (g)  The priority of the security interest under subsection
 
21 (f) continues for a reasonable time if the debtor's right to
 
22 remove the goods as against the encumbrancer or owner terminates.
 

 
 
 
Page 105                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (h)  A mortgage is a construction mortgage to the extent
 
 2 that it secures an obligation incurred for the construction of an
 
 3 improvement on land, including the acquisition cost of the land,
 
 4 if a recorded record of the mortgage so indicates.  Except as
 
 5 otherwise provided in subsections (e) and (f), a security
 
 6 interest in fixtures is subordinate to a construction mortgage if
 
 7 a record of the mortgage is recorded before the goods become
 
 8 fixtures and the goods become fixtures before the completion of
 
 9 the construction.  A mortgage has this priority to the same
 
10 extent as a construction mortgage to the extent that it is given
 
11 to refinance a construction mortgage.
 
12      (i)  A perfected security interest in crops growing on real
 
13 property has priority over a conflicting interest of an
 
14 encumbrancer or owner of the real property if the debtor has an
 
15 interest of record in or is in possession of the real property.
 
16      490:9-335  Accessions.  (a)  A security interest may be
 
17 created in an accession and continues in collateral that becomes
 
18 an accession.
 
19      (b)  If a security interest is perfected when the collateral
 
20 becomes an accession, the security interest remains perfected in
 
21 the collateral.
 
22      (c)  Except as otherwise provided in subsection (d), the
 
23 other provisions of this part determine the priority of a
 
24 security interest in an accession.
 

 
Page 106                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (d)  A security interest in an accession is subordinate to a
 
 2 security interest in the whole which is perfected by compliance
 
 3 with the requirements of a certificate-of-title statute under
 
 4 section 490:9-311(b).
 
 5      (e)  After default, subject to part 6, a secured party may
 
 6 remove an accession from other goods if the security interest in
 
 7 the accession has priority over the claims of every person having
 
 8 an interest in the whole.
 
 9      (f)  A secured party that removes an accession from other
 
10 goods under subsection (e) shall promptly reimburse any holder of
 
11 a security interest or other lien on, or owner of, the whole or
 
12 of the other goods, other than the debtor, for the cost of repair
 
13 of any physical injury to the whole or the other goods.  The
 
14 secured party need not reimburse the holder or owner for any
 
15 diminution in value of the whole or the other goods caused by the
 
16 absence of the accession removed or by any necessity for
 
17 replacing it.  A person entitled to reimbursement may refuse
 
18 permission to remove until the secured party gives adequate
 
19 assurance for the performance of the obligation to reimburse.
 
20      490:9-336  Commingled goods.  (a)  In this section,
 
21 "commingled goods" means goods that are physically united with
 
22 other goods in such a manner that their identity is lost in a
 
23 product or mass.
 

 
Page 107                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  A security interest does not exist in commingled goods
 
 2 as such.  However, a security interest may attach to a product or
 
 3 mass that results when goods become commingled goods.
 
 4      (c)  If collateral becomes commingled goods, a security
 
 5 interest attaches to the product or mass.
 
 6      (d)  If a security interest in collateral is perfected
 
 7 before the collateral becomes commingled goods, the security
 
 8 interest that attaches to the product or mass under subsection
 
 9 (c) is perfected.
 
10      (e)  Except as otherwise provided in subsection (f), the
 
11 other provisions of this part determine the priority of a
 
12 security interest that attaches to the product or mass under
 
13 subsection (c).
 
14      (f)  If more than one security interest attaches to the
 
15 product or mass under subsection (c), the following rules
 
16 determine priority:
 
17      (1)  A security interest that is perfected under subsection
 
18           (d) has priority over a security interest that is
 
19           unperfected at the time the collateral becomes
 
20           commingled goods.
 
21      (2)  If more than one security interest is perfected under
 
22           subsection (d), the security interests rank equally in
 
23           proportion to value of the collateral at the time it
 
24           became commingled goods.
 

 
Page 108                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-337  Priority of security interests in goods covered
 
 2 by certificate of title.  If, while a security interest in goods
 
 3 is perfected by any method under the law of another jurisdiction,
 
 4 this State issues a certificate of title that does not show that
 
 5 the goods are subject to the security interest or contain a
 
 6 statement that they may be subject to security interests not
 
 7 shown on the certificate:
 
 8      (1)  A buyer of the goods, other than a person in the
 
 9           business of selling goods of that kind, takes free of
 
10           the security interest if the buyer gives value and
 
11           receives delivery of the goods after issuance of the
 
12           certificate and without knowledge of the security
 
13           interest; and
 
14      (2)  The security interest is subordinate to a conflicting
 
15           security interest in the goods that attaches, and is
 
16           perfected under section 490:9-311(b), after issuance of
 
17           the certificate and without the conflicting secured
 
18           party's knowledge of the security interest.
 
19      490:9-338  Priority of security interest or agricultural
 
20 lien perfected by filed financing statement providing certain
 
21 incorrect information.  If a security interest or agricultural
 
22 lien is perfected by a filed financing statement providing
 
23 information described in section 490:9-516(b)(5) which is
 
24 incorrect at the time the financing statement is filed:
 

 
Page 109                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  The security interest or agricultural lien is
 
 2           subordinate to a conflicting perfected security
 
 3           interest in the collateral to the extent that the
 
 4           holder of the conflicting security interest gives value
 
 5           in reasonable reliance upon the incorrect information;
 
 6           and
 
 7      (2)  A purchaser, other than a secured party, of the
 
 8           collateral takes free of the security interest or
 
 9           agricultural lien to the extent that, in reasonable
 
10           reliance upon the incorrect information, the purchaser
 
11           gives value and, in the case of chattel paper
 
12           documents, goods, instruments, or a security
 
13           certificate, receives delivery of the collateral.
 
14      490:9-339  Priority subject to subordination.  This article
 
15 does not preclude subordination by agreement by a person entitled
 
16 to priority.
 
17                    SUBPART 4.  RIGHTS OF BANK
 
18      490:9-340  Effectiveness of right of recoupment or set-off
 
19 against deposit account.  (a)  Except as otherwise provided in
 
20 subsection (c), a bank with which a deposit account is maintained
 
21 may exercise any right of recoupment or set-off against a secured
 
22 party that holds a security interest in the deposit account.
 

 
 
 
Page 110                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  Except as otherwise provided in subsection (c), the
 
 2 application of this article to a security interest in a deposit
 
 3 account does not affect a right of recoupment or set-off of the
 
 4 secured party as to a deposit account maintained with the secured
 
 5 party.
 
 6      (c)  The exercise by a bank of a set-off against a deposit
 
 7 account is ineffective against a secured party that holds a
 
 8 security interest in the deposit account which is perfected by
 
 9 control under section 490:9-104(a)(3), if the set-off is based on
 
10 a claim against the debtor.
 
11      490:9-341  Bank's rights and duties with respect to deposit
 
12 account.  Except as otherwise provided in section 490:9-340(c),
 
13 and unless the bank otherwise agrees in an authenticated record,
 
14 a bank's rights and duties with respect to a deposit account
 
15 maintained with the bank are not terminated, suspended, or
 
16 modified by:
 
17      (1)  The creation, attachment, or perfection of a security
 
18           interest in the deposit account;
 
19      (2)  The bank's knowledge of the security interest; or
 
20      (3)  The bank's receipt of instructions from the secured
 
21           party.
 
22      490:9-342  Bank's right to refuse to enter into or disclose
 
23 existence of control agreement.  This article does not require a
 

 
Page 111                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 bank to enter into an agreement of the kind described in section
 
 2 490:9-104(a)(2), even if its customer so requests or directs.  A
 
 3 bank that has entered into such an agreement is not required to
 
 4 confirm the existence of the agreement to another person unless
 
 5 requested to do so by its customer.
 
 6                 PART 4.  RIGHTS OF THIRD PARTIES
 
 7      490:9-401  Alienability of debtor's rights.  (a)  Except as
 
 8 otherwise provided in subsection (b) and sections 490:9-406,
 
 9 490:9-407, 490:9-408, and 490:9-409, whether a debtor's rights in
 
10 collateral may be voluntarily or involuntarily transferred is
 
11 governed by law other than this article.
 
12      (b)  An agreement between the debtor and secured party which
 
13 prohibits a transfer of the debtor's rights in collateral or
 
14 makes the transfer a default does not prevent the transfer from
 
15 taking effect.
 
16      490:9-402  Secured party not obligated on contract of
 
17 debtor or in tort.  The existence of a security interest,
 
18 agricultural lien, or authority given to a debtor to dispose of
 
19 or use collateral, without more, does not subject a secured party
 
20 to liability in contract or tort for the debtor's acts or
 
21 omissions.
 
22      490:9-403  Agreement not to assert defenses against
 
23 assignee.  (a)  In this section, "value" has the meaning provided
 
24 in section 490:3-303(a).
 

 
Page 112                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  Except as otherwise provided in this section, an
 
 2 agreement between an account debtor and an assignor not to assert
 
 3 against an assignee any claim or defense that the account debtor
 
 4 may have against the assignor is enforceable by an assignee that
 
 5 takes an assignment:
 
 6      (1)  For value;
 
 7      (2)  In good faith;
 
 8      (3)  Without notice of a claim of a property or possessory
 
 9           right to the property assigned; and
 
10      (4)  Without notice of a defense or claim in recoupment of
 
11           the type that may be asserted against a person entitled
 
12           to enforce a negotiable instrument under section
 
13           490:3-305(a).
 
14      (c)  Subsection (b) does not apply to defenses of a type
 
15 that may be asserted against a holder in due course of a
 
16 negotiable instrument under section 490:3-305(b).
 
17      (d)  In a consumer transaction, if a record evidences the
 
18 account debtor's obligation, law other than this article requires
 
19 that the record include a statement to the effect that the rights
 
20 of an assignee are subject to claims or defenses that the account
 
21 debtor could assert against the original obligee, and the record
 
22 does not include such a statement:
 

 
 
 
Page 113                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  The record has the same effect as if the record
 
 2           included such a statement; and
 
 3      (2)  The account debtor may assert against an assignee those
 
 4           claims and defenses that would have been available if
 
 5           the record included such a statement.
 
 6      (e)  This section is subject to law other than this article
 
 7 which establishes a different rule for an account debtor who is
 
 8 an individual and who incurred the obligation primarily for
 
 9 personal, family, or household purposes.
 
10      (f)  Except as otherwise provided in subsection (d), this
 
11 section does not displace law other than this article which gives
 
12 effect to an agreement by an account debtor not to assert a claim
 
13 or defense against an assignee.
 
14      490:9-404  Rights acquired by assignee; claims and defenses
 
15 against assignee.  (a)  Unless an account debtor has made an
 
16 enforceable agreement not to assert defenses or claims, and
 
17 subject to subsections (b) through (e), the rights of an assignee
 
18 are subject to:
 
19      (1)  All terms of the agreement between the account debtor
 
20           and assignor and any defense or claim in recoupment
 
21           arising from the transaction that gave rise to the
 
22           contract; and
 

 
 
 
Page 114                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Any other defense or claim of the account debtor
 
 2           against the assignor which accrues before the account
 
 3           debtor receives a notification of the assignment
 
 4           authenticated by the assignor or the assignee.
 
 5      (b)  Subject to subsection (c) and except as otherwise
 
 6 provided in subsection (d), the claim of an account debtor
 
 7 against an assignor may be asserted against an assignee under
 
 8 subsection (a) only to reduce the amount the account debtor owes.
 
 9      (c)  This section is subject to law other than this article
 
10 which establishes a different rule for an account debtor who is
 
11 an individual and who incurred the obligation primarily for
 
12 personal, family, or household purposes.
 
13      (d)  In a consumer transaction, if a record evidences the
 
14 account debtor's obligation, law other than this article requires
 
15 that the record include a statement to the effect that the
 
16 account debtor's recovery against an assignee with respect to
 
17 claims and defenses against the assignor may not exceed amounts
 
18 paid by the account debtor under the record, and the record does
 
19 not include such a statement, the extent to which a claim of an
 
20 account debtor against the assignor may be asserted against an
 
21 assignee is determined as if the record included such a
 
22 statement.
 

 
 
 
Page 115                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (e)  This section does not apply to an assignment of a
 
 2 health-care-insurance receivable.
 
 3      409:9-405  Modification of assigned contract.  (a)  A
 
 4 modification of or substitution for an assigned contract is
 
 5 effective against an assignee if made in good faith.  The
 
 6 assignee acquires corresponding rights under the modified or
 
 7 substituted contract.  The assignment may provide that the
 
 8 modification or substitution is a breach of contract by the
 
 9 assignor.  This subsection is subject to subsections (b) through
 
10 (d).
 
11      (b)  Subsection (a) applies to the extent that:
 
12      (1)  The right to payment or a part thereof under an
 
13           assigned contract has not been fully earned by
 
14           performance; or
 
15      (2)  The right to payment or a part thereof has been fully
 
16           earned by performance and the account debtor has not
 
17           received notification of the assignment under section
 
18           490:9-406(a).
 
19      (c)  This section is subject to law other than this article
 
20 which establishes a different rule for an account debtor who is
 
21 an individual and who incurred the obligation primarily for
 
22 personal, family, or household purposes.
 

 
 
 
Page 116                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (d)  This section does not apply to an assignment of a
 
 2 health-care-insurance receivable.
 
 3      490:9-406  Discharge of account debtor; notification of
 
 4 assignment; identification and proof of assignment; restrictions
 
 5 on assignment of accounts, chattel paper, payment intangibles,
 
 6 and promissory notes ineffective.  (a)  Subject to subsections
 
 7 (b) through (i), an account debtor on an account, chattel paper,
 
 8 or a payment intangible may discharge its obligation by paying
 
 9 the assignor until, but not after, the account debtor receives a
 
10 notification, authenticated by the assignor or the assignee, that
 
11 the amount due or to become due has been assigned and that
 
12 payment is to be made to the assignee.  After receipt of the
 
13 notification, the account debtor may discharge its obligation by
 
14 paying the assignee and may not discharge the obligation by
 
15 paying the assignor.
 
16      (b)  Subject to subsection (h), notification is ineffective
 
17 under subsection (a):
 
18      (1)  If it does not reasonably identify the rights assigned;
 
19      (2)  To the extent that an agreement between an account
 
20           debtor and a seller of a payment intangible limits the
 
21           account debtor's duty to pay a person other than the
 
22           seller and the limitation is effective under law other
 
23           than this article; or
 

 
Page 117                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (3)  At the option of an account debtor, if the notification
 
 2           notifies the account debtor to make less than the full
 
 3           amount of any installment or other periodic payment to
 
 4           the assignee, even if:
 
 5           (A)  Only a portion of the account, chattel paper, or
 
 6                general intangible has been assigned to that
 
 7                assignee;
 
 8           (B)  A portion has been assigned to another assignee;
 
 9                or
 
10           (C)  The account debtor knows that the assignment to
 
11                that assignee is limited.
 
12      (c)  Subject to subsection (h), if requested by the account
 
13 debtor, an assignee shall seasonably furnish reasonable proof
 
14 that the assignment has been made.  Unless the assignee complies,
 
15 the account debtor may discharge its obligation by paying the
 
16 assignor, even if the account debtor has received a notification
 
17 under subsection (a).
 
18      (d)  Except as otherwise provided in subsection (e) and
 
19 sections 490:2A-303 and 490:9-407, and subject to subsection (h),
 
20 a term in an agreement between an account debtor and an assignor
 
21 or in a promissory note is ineffective to the extent that it:
 
22      (1)  Prohibits, restricts, or requires the consent of the
 
23           account debtor or person obligated on the promissory
 

 
Page 118                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           note to the assignment or transfer of, or the creation,
 
 2           attachment, perfection, or enforcement of a security
 
 3           interest in, the account, chattel paper payment
 
 4           intangible, or promissory note; or
 
 5      (2)  Provides that the assignment or transfer or the
 
 6           creation, attachment, perfection, or enforcement of the
 
 7           security interest may give rise to a default breach,
 
 8           right of recoupment, claim, defense termination, right
 
 9           of termination, or remedy under the account, chattel
 
10           paper, payment intangible, or promissory note.
 
11      (e)  Subsection (d) does not apply to the sale of a payment
 
12 intangible or promissory note.
 
13      (f)  Except as otherwise provided in sections 490:2A-303 and
 
14 490:9-407, and subject to subsections (h) and (i), a rule of law,
 
15 statute, or regulation, that prohibits, restricts, or requires
 
16 the consent of a government, governmental body or official, or
 
17 account debtor to the assignment or transfer of, or creation of a
 
18 security interest in, an account or chattel paper is ineffective
 
19 to the extent that the rule of law, statute, or regulation:
 
20      (1)  Prohibits, restricts, or requires the consent of the
 
21           government, governmental body or official, or account
 
22           debtor to the assignment or transfer of, or the
 
23           creation, attachment, perfection, or enforcement of a
 
24           security interest in the account or chattel paper; or
 

 
Page 119                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Provides that the assignment or transfer or the
 
 2           creation, attachment, perfection, or enforcement of the
 
 3           security interest may give rise to a default breach,
 
 4           right of recoupment, claim, defense termination, right
 
 5           of termination, or remedy under the account or chattel
 
 6           paper.
 
 7      (g)  Subject to subsection (h), an account debtor may not
 
 8 waive or vary its option under subsection (b)(3).
 
 9      (h)  This section is subject to law other than this article
 
10 which establishes a different rule for an account debtor who is
 
11 an individual and who incurred the obligation primarily for
 
12 personal, family, or household purposes.
 
13      (i)  This section does not apply to an assignment of a
 
14 health-care-insurance receivable.
 
15      490:9-407  Restrictions on creation or enforcement of
 
16 security interest in leasehold interest or in lessor's residual
 
17 interest.  (a)  Except as otherwise provided in subsection (b), a
 
18 term in a lease agreement is ineffective to the extent that it:
 
19      (1)  Prohibits, restricts, or requires the consent of a
 
20           party to the lease to the assignment or transfer of to
 
21           the creation, attachment, perfection, or enforcement of
 
22           a security interest in, an interest of a party under
 
23           the lease contract or in the lessor's residual interest
 
24           in the goods; or
 

 
Page 120                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Provides that the assignment or transfer or the
 
 2           creation, attachment, perfection, or enforcement of the
 
 3           security interest may give rise to a default breach,
 
 4           right of recoupment, claim, defense termination, right
 
 5           of termination, or remedy under the lease.
 
 6      (b)  Except as otherwise provided in section 490:2A-303(g),
 
 7 a term described in subsection (a)(2) is effective to the extent
 
 8 that there is:
 
 9      (1)  A transfer by the lessee of the lessee's right of
 
10           possession or use of the goods in violation of the
 
11           term; or
 
12      (2)  A delegation of a material performance of either party
 
13           to the lease contract in violation of the term.
 
14      (c)  The creation, attachment, perfection, or enforcement of
 
15 a security interest in the lessor's interest under the lease
 
16 contract or the lessor's residual interest in the goods is not a
 
17 transfer that materially impairs the lessee's prospect of
 
18 obtaining return performance or materially changes the duty of or
 
19 materially increases the burden or risk imposed on the lessee
 
20 within the purview of section 490:2A-303(d) unless, and then only
 
21 to the extent that, enforcement actually results in a delegation
 
22 of material performance of the lessor.
 

 
 
 
Page 121                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-408  Restrictions on assignment of promissory notes,
 
 2 health-care-insurance receivables, and certain general
 
 3 intangibles ineffective.  (a)  Except as otherwise provided in
 
 4 subsection (b), a term in a promissory note or in an agreement
 
 5 between an account debtor and a debtor which relates to a health-
 
 6 care-insurance receivable or a general intangible, including a
 
 7 contract, permit, license, or franchise, and which term
 
 8 prohibits, restricts, or requires the consent of the person
 
 9 obligated on the promissory note or the account debtor to, the
 
10 assignment or transfer of, or creation, attachment, or perfection
 
11 of a security interest in, the promissory note, health-care-
 
12 insurance receivable, or general intangible, is ineffective to
 
13 the extent that the term:
 
14      (1)  Would impair the creation, attachment, or perfection of
 
15           a security interest; or
 
16      (2)  Provides that the assignment or transfer or the
 
17           creation, attachment, or perfection of the security
 
18           interest may give rise to a default, breach, right of
 
19           recoupment, claim, defense, termination, right of
 
20           termination, or remedy under the promissory note
 
21           health-care-insurance receivable, or general
 
22           intangible.
 

 
 
 
Page 122                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  Subsection (a) applies to a security interest in a
 
 2 payment intangible or promissory note only if the security
 
 3 interest arises out of a sale of the payment intangible or
 
 4 promissory note.
 
 5      (c)  A rule of law, statute, or regulation, that prohibits,
 
 6 restricts, or requires the consent of a government, governmental
 
 7 body or official, person obligated on a promissory note, or
 
 8 account debtor to the assignment or transfer of, or creation of a
 
 9 security interest in, a promissory note, health-care-insurance
 
10 receivable, or general intangible, including a contract, permit,
 
11 license, or franchise between an account debtor and a debtor, is
 
12 ineffective to the extent that the rule of law, statute, or
 
13 regulation:
 
14      (1)  Would impair the creation, attachment, or perfection of
 
15           a security interest; or
 
16      (2)  Provides that the assignment or transfer or the
 
17           creation, attachment, or perfection of the security
 
18           interest may give rise to a default, breach, right of
 
19           recoupment, claim, defense, termination, right of
 
20           termination, or remedy under the promissory note
 
21           health-care-insurance receivable, or general
 
22           intangible.
 

 
 
 
Page 123                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (d)  To the extent that a term in a promissory note or in an
 
 2 agreement between an account debtor and a debtor which relates to
 
 3 a health-care-insurance receivable or general intangible or a
 
 4 rule of law, statute, or regulation described in subsection (c)
 
 5 would be effective under law other than this article but is
 
 6 ineffective under subsection (a) or (c), the creation,
 
 7 attachment, or perfection of a security interest in the
 
 8 promissory note, health-care-insurance receivable, or general
 
 9 intangible:
 
10      (1)  Is not enforceable against the person obligated on the
 
11           promissory note or the account debtor;
 
12      (2)  Does not impose a duty or obligation on the person
 
13           obligated on the promissory note or the account debtor;
 
14      (3)  Does not require the person obligated on the promissory
 
15           note or the account debtor to recognize the security
 
16           interest, pay or render performance to the secured
 
17           party, or accept payment or performance from the
 
18           secured party;
 
19      (4)  Does not entitle the secured party to use or assign the
 
20           debtor's rights under the promissory note, health-
 
21           care-insurance receivable, or general intangible
 
22           including any related information or materials
 
23           furnished to the debtor in the transaction giving rise
 

 
Page 124                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           to the promissory note, health-care-insurance
 
 2           receivable, or general intangible;
 
 3      (5)  Does not entitle the secured party to use, assign
 
 4           possess, or have access to any trade secrets or
 
 5           confidential information of the person obligated on the
 
 6           promissory note or the account debtor; and
 
 7      (6)  Does not entitle the secured party to enforce the
 
 8           security interest in the promissory note, health-care-
 
 9           insurance receivable, or general intangible.
 
10      490:9-409  Restrictions on assignment of letter-of-credit
 
11 rights ineffective.  (a)  A term in a letter of credit or a rule
 
12 of law, statute, regulation, custom, or practice applicable to
 
13 the letter of credit which prohibits, restricts, or requires the
 
14 consent of an applicant, issuer, or nominated person to a
 
15 beneficiary's assignment of or creation of a security interest in
 
16 a letter-of-credit right is ineffective to the extent that the
 
17 term or rule of law, statute, regulation, custom, or practice:
 
18      (1)  Would impair the creation, attachment, or perfection of
 
19           a security interest in the letter-of-credit right; or
 
20      (2)  Provides that the assignment or the creation
 
21           attachment, or perfection of the security interest may
 
22           give rise to a default, breach, right of recoupment
 
23           claim, defense, termination, right of termination, or
 
24           remedy under the letter-of-credit right.
 

 
Page 125                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  To the extent that a term in a letter of credit is
 
 2 ineffective under subsection (a) but would be effective under law
 
 3 other than this article or a custom or practice applicable to the
 
 4 letter of credit, to the transfer of a right to draw or otherwise
 
 5 demand performance under the letter of credit, or to the
 
 6 assignment of a right to proceeds of the letter of credit, the
 
 7 creation, attachment, or perfection of a security interest in the
 
 8 letter-of-credit right:
 
 9      (1)  Is not enforceable against the applicant, issuer
 
10           nominated person, or transferee beneficiary;
 
11      (2)  Imposes no duties or obligations on the applicant
 
12           issuer, nominated person, or transferee beneficiary;
 
13           and
 
14      (3)  Does not require the applicant, issuer, nominated
 
15           person, or transferee beneficiary to recognize the
 
16           security interest, pay or render performance to the
 
17           secured party, or accept payment or other performance
 
18           from the secured party.
 
19                          PART 5.  FILING
 
20              SUBPART 1.  FILING OFFICE; CONTENTS AND
 
21               EFFECTIVENESS OF FINANCING STATEMENT
 
22      490:9-501  Filing office.  (a)  Except as otherwise
 
23 provided in subsection (b), if the local law of this State
 

 
Page 126                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 governs perfection of a security interest or agricultural lien,
 
 2 the office in which to file a financing statement to perfect the
 
 3 security interest or agricultural lien is:
 
 4      (1)  The office designated for the filing or recording of a
 
 5           record of a mortgage on the related real property, if:
 
 6           (A)  The collateral is as-extracted collateral or
 
 7                timber to be cut; or
 
 8           (B)  The financing statement is filed as a fixture
 
 9                filing and the collateral is goods that are or are
 
10                to become fixtures; or
 
11      (2)  The bureau of conveyances, in all other cases including
 
12           a case in which the collateral is goods that are or are
 
13           to become fixtures and the financing statement is not
 
14           filed as a fixture filing.
 
15      (b)  The office in which to file a financing statement to
 
16 perfect a security interest in collateral, including fixtures, of
 
17 a transmitting utility is the bureau of conveyances.  The
 
18 financing statement also constitutes a fixture filing as to the
 
19 collateral indicated in the financing statement which is or is to
 
20 become fixtures.
 
21      490:9-502  Contents of financing statement; record of
 
22 mortgage as financing statement; time of filing financing
 
23 statement.  (a)  Subject to subsection (b), a financing statement
 
24 is sufficient only if it:
 

 
Page 127                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Provides the name of the debtor;
 
 2      (2)  Provides the name of the secured party or a
 
 3           representative of the secured party; and
 
 4      (3)  Indicates the collateral covered by the financing
 
 5           statement.
 
 6      (b)  Except as otherwise provided in section 490:9-501(b),
 
 7 to be sufficient, a financing statement that covers as-extracted
 
 8 collateral or timber to be cut, or which is filed as a fixture
 
 9 filing and covers goods that are or are to become fixtures, must
 
10 satisfy subsection (a) and also:
 
11      (1)  Indicate that it covers this type of collateral;
 
12      (2)  Indicate that it is to be filed for record in the real
 
13           property records;
 
14      (3)  Provide a description of the real property to which the
 
15           collateral is related; and
 
16      (4)  If the debtor does not have an interest of record in
 
17           the real property, provide the name of a record owner.
 
18      (c)  A record of a mortgage is effective, from the date of
 
19 recording, as a financing statement filed as a fixture filing or
 
20 as a financing statement covering as-extracted collateral or
 
21 timber to be cut only if:
 
22      (1)  The record indicates the goods or accounts that it
 
23           covers;
 

 
Page 128                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  The goods are or are to become fixtures related to the
 
 2           real property described in the record or the collateral
 
 3           is related to the real property described in the record
 
 4           and is as-extracted collateral or timber to be cut;
 
 5      (3)  The record satisfies with the requirements for a
 
 6           financing statement in this section other than an
 
 7           indication that it is to be filed in the real property
 
 8           records; and
 
 9      (4)  The record is duly recorded.
 
10      (d)  A financing statement may be filed before a security
 
11 agreement is made or a security interest otherwise attaches.
 
12      490:9-503  Name of debtor and secured party.  (a)  A
 
13 financing statement sufficiently provides the name of the debtor:
 
14      (1)  If the debtor is a registered organization, only if the
 
15           financing statement provides the name of the debtor
 
16           indicated on the public record of the debtor's
 
17           jurisdiction of organization which shows the debtor to
 
18           have been organized;
 
19      (2)  If the debtor is a decedent's estate, only if the
 
20           financing statement provides the name of the decedent
 
21           and indicates that the debtor is an estate;
 
22      (3)  If the debtor is a trust or a trustee acting with
 
23           respect to property held in trust, only if the
 
24           financing statement:
 

 
Page 129                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           (A)  Provides the name specified for the trust in its
 
 2                organic documents or, if no name is specified
 
 3                provides the name of the settlor and additional
 
 4                information sufficient to distinguish the debtor
 
 5                from other trusts having one or more of the same
 
 6                settlors; and
 
 7           (B)  Indicates, in the debtor's name or otherwise that
 
 8                the debtor is a trust or is a trustee acting with
 
 9                respect to property held in trust; and
 
10      (4)  In other cases:
 
11           (A)  If the debtor has a name, only if it provides the
 
12                individual or organizational name of the debtor;
 
13                and
 
14           (B)  If the debtor does not have a name, only if it
 
15                provides the names of the partners, members
 
16                associates, or other persons comprising the
 
17                debtor.
 
18      (b)  A financing statement that provides the name of the
 
19 debtor in accordance with subsection (a) is not rendered
 
20 ineffective by the absence of:
 
21      (1)  A trade name or other name of the debtor; or
 
22      (2)  Unless required under subsection (a)(4)(B), names of
 
23           partners, members, associates, or other persons
 
24           comprising the debtor.
 

 
Page 130                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (c)  A financing statement that provides only the debtor's
 
 2 trade name does not sufficiently provide the name of the debtor.
 
 3      (d)  Failure to indicate the representative capacity of a
 
 4 secured party or representative of a secured party does not
 
 5 affect the sufficiency of a financing statement.
 
 6      (e)  A financing statement may provide the name of more than
 
 7 one debtor and the name of more than one secured party.
 
 8      490:9-504  Indication of collateral.  A financing statement
 
 9 sufficiently indicates the collateral that it covers only if the
 
10 financing statement provides:
 
11      (1)  A description of the collateral pursuant to section
 
12           490:9-108; or
 
13      (2)  An indication that the financing statement covers all
 
14           assets or all personal property.
 
15      490:9-505  Filing and compliance with other statutes and
 
16 treaties for consignments, leases, other bailments, and other
 
17 transactions.  (a)  A consignor, lessor, or other bailor of
 
18 goods, a licensor, or a buyer of a payment intangible or
 
19 promissory note may file a financing statement, or may comply
 
20 with a statute or treaty described in section 490:9-311(a), using
 
21 the terms "consignor", "consignee", "lessor", "lessee", "bailor",
 
22 "bailee", "licensor", "licensee", "owner", "registered owner",
 
23 "buyer", "seller", or words of similar import, instead of the
 
24 terms "secured party" and "debtor".
 

 
Page 131                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  This part applies to the filing of a financing
 
 2 statement under subsection (a) and, as appropriate, to compliance
 
 3 that is equivalent to filing a financing statement under section
 
 4 490:9-311(b), but the filing or compliance is not of itself a
 
 5 factor in determining whether the collateral secures an
 
 6 obligation.  If it is determined for another reason that the
 
 7 collateral secures an obligation, a security interest held by the
 
 8 consignor, lessor, bailor, licensor, owner, or buyer which
 
 9 attaches to the collateral is perfected by the filing or
 
10 compliance.
 
11      490:9-506  Effect of errors or omissions.  (a)  A financing
 
12 statement substantially satisfying the requirements of this part
 
13 is effective, even if it has minor errors or omissions, unless
 
14 the errors or omissions make the financing statement seriously
 
15 misleading.
 
16      (b)  Except as otherwise provided in subsection (c), a
 
17 financing statement that fails sufficiently to provide the name
 
18 of the debtor in accordance with section 490:9-503(a) is
 
19 seriously misleading.
 
20      (c)  If a search of the records of the filing office under
 
21 the debtor's correct name, using the filing office's standard
 
22 search logic, if any, would disclose a financing statement that
 
23 fails sufficiently to provide the name of the debtor in
 

 
Page 132                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 accordance with section 490:9-503(a), the name provided does not
 
 2 make the financing statement seriously misleading.
 
 3      (d)  For purposes of section 490:9-508(b), the "debtor's
 
 4 correct name" in subsection (c) means the correct name of the new
 
 5 debtor.
 
 6      490:9-507  Effect of certain events on effectiveness of
 
 7 financing statement.  (a)  A filed financing statement remains
 
 8 effective with respect to collateral that is sold, exchanged,
 
 9 leased, licensed, or otherwise disposed of and in which a
 
10 security interest or agricultural lien continues, even if the
 
11 secured party knows of or consents to the disposition.
 
12      (b)  Except as otherwise provided in subsection (c) and
 
13 section 490:9-508, a financing statement is not rendered
 
14 ineffective if, after the financing statement is filed, the
 
15 information provided in the financing statement becomes seriously
 
16 misleading under section 490:9-506.
 
17      (c)  If a debtor so changes its name that a filed financing
 
18 statement becomes seriously misleading under section 490:9-506:
 
19      (1)  The financing statement is effective to perfect a
 
20           security interest in collateral acquired by the debtor
 
21           before, or within four months after, the change; and
 
22      (2)  The financing statement is not effective to perfect a
 
23           security interest in collateral acquired by the debtor
 

 
Page 133                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           more than four months after the change, unless an
 
 2           amendment to the financing statement which renders the
 
 3           financing statement not seriously misleading is filed
 
 4           within four months after the change.
 
 5      490:9-508  Effectiveness of financing statement if new
 
 6 debtor becomes bound by security agreement.  (a)  Except as
 
 7 otherwise provided in this section, a filed financing statement
 
 8 naming an original debtor is effective to perfect a security
 
 9 interest in collateral in which a new debtor has or acquires
 
10 rights to the extent that the financing statement would have been
 
11 effective had the original debtor acquired rights in the
 
12 collateral.
 
13      (b)  If the difference between the name of the original
 
14 debtor and that of the new debtor causes a filed financing
 
15 statement that is effective under subsection (a) to be seriously
 
16 misleading under section 490:9-506:
 
17      (1)  The financing statement is effective to perfect a
 
18           security interest in collateral acquired by the new
 
19           debtor before, and within four months after, the new
 
20           debtor becomes bound under section 490:9-203(d); and
 
21      (2)  The financing statement is not effective to perfect a
 
22           security interest in collateral acquired by the new
 
23           debtor more than four months after the new debtor
 

 
Page 134                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           becomes bound under section 490:9-203(d) unless an
 
 2           initial financing statement providing the name of the
 
 3           new debtor is filed before the expiration of that time.
 
 4      (c)  This section does not apply to collateral as to which a
 
 5 filed financing statement remains effective against the new
 
 6 debtor under section 490:9-507(a).
 
 7      490:9-509  Persons entitled to file a record.  (a)  A
 
 8 person may file an initial financing statement, amendment that
 
 9 adds collateral covered by a financing statement, or amendment
 
10 that adds a debtor to a financing statement only if:
 
11      (1)  The debtor authorizes the filing in an authenticated
 
12           record; or
 
13      (2)  The person holds an agricultural lien that has become
 
14           effective at the time of filing and the financing
 
15           statement covers only collateral in which the person
 
16           holds an agricultural lien.
 
17      (b)  By authenticating or becoming bound as debtor by a
 
18 security agreement, a debtor or new debtor authorizes the filing
 
19 of an initial financing statement, and an amendment, covering:
 
20      (1)  The collateral described in the security agreement; and
 
21      (2)  Property that becomes collateral under section
 
22           490:9-315(a)(2), whether or not the security agreement
 
23           expressly covers proceeds.
 

 
Page 135                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (c)  By acquiring collateral in which a security interest or
 
 2 agricultural lien continues under section 490:9-315(a)(1), a
 
 3 debtor authorizes the filing of an initial financing statement,
 
 4 and an amendment, covering the collateral and property that
 
 5 becomes collateral under section 490:9-315(a)(2).
 
 6      (d)  A person may file an amendment other than an amendment
 
 7 that adds collateral covered by a financing statement or an
 
 8 amendment that adds a debtor to a financing statement only if:
 
 9      (1)  The secured party of record authorizes the filing; or
 
10      (2)  The amendment is a termination statement for a
 
11           financing statement as to which the secured party of
 
12           record has failed to file or send a termination
 
13           statement as required by section 490:9-513(a) or (c)
 
14           the debtor authorizes the filing, and the termination
 
15           statement indicates that the debtor authorized it to be
 
16           filed.
 
17      (e)  If there is more than one secured party of record for a
 
18 financing statement, each secured party of record may authorize
 
19 the filing of an amendment under subsection (c).
 
20      490:9-510  Effectiveness of filed record.  (a)  A filed
 
21 record is effective only to the extent that it was filed by a
 
22 person that may file it under section 490:9-509.
 

 
 
 
Page 136                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  A record authorized by one secured party of record does
 
 2 not affect the financing statement with respect to another
 
 3 secured party of record.
 
 4      (c)  A continuation statement that is not filed within the
 
 5 six-month period prescribed by section 490:9-515(d) is
 
 6 ineffective.
 
 7      490:9-511  Secured party of record.  (a)  A secured party
 
 8 of record with respect to a financing statement is a person whose
 
 9 name is provided as the name of the secured party or a
 
10 representative of the secured party in an initial financing
 
11 statement that has been filed.  If an initial financing statement
 
12 is filed under section 490:9-514(a), the assignee named in the
 
13 initial financing statement is the secured party of record with
 
14 respect to the financing statement.
 
15      (b)  If an amendment of a financing statement which provides
 
16 the name of a person as a secured party or a representative of a
 
17 secured party is filed, the person named in the amendment is a
 
18 secured party of record.  If an amendment is filed under section
 
19 490:9-514(b), the assignee named in the amendment is a secured
 
20 party of record.
 
21      (c)  A person remains a secured party of record until the
 
22 filing of an amendment of the financing statement which deletes
 
23 the person.
 

 
Page 137                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-512  Amendment of financing statement.  (a)  Subject
 
 2 to section 490:9-509, a person may add or delete collateral
 
 3 covered by, continue or terminate the effectiveness of, or,
 
 4 subject to subsection (e), otherwise amend the information
 
 5 provided in, a financing statement by filing an amendment that:
 
 6      (1)  Identifies, by its file number, the initial financing
 
 7           statement to which the amendment relates; and
 
 8      (2)  If the amendment relates to an initial financing
 
 9           statement filed or recorded in a filing office
 
10           described in section 490:9-501(a)(1), provides the
 
11           information specified in section 490:9-502(b).
 
12      (b)  Except as otherwise provided in section 490:9-515, the
 
13 filing of an amendment does not extend the period of
 
14 effectiveness of the financing statement.
 
15      (c)  A financing statement that is amended by an amendment
 
16 that adds collateral is effective as to the added collateral only
 
17 from the date of the filing of the amendment.
 
18      (d)  A financing statement that is amended by an amendment
 
19 that adds a debtor is effective as to the added debtor only from
 
20 the date of the filing of the amendment.
 
21      (e)  An amendment is ineffective to the extent it:
 
22      (1)  Purports to delete all debtors and fails to provide the
 
23           name of a debtor to be covered by the financing
 
24           statement; or
 

 
Page 138                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Purports to delete all secured parties of record and
 
 2           fails to provide the name of a new secured party of
 
 3           record.
 
 4      490:9-513  Termination statement.  (a)  A secured party
 
 5 shall cause the secured party of record for a financing statement
 
 6 to file a termination statement for the financing statement if
 
 7 the financing statement covers consumer goods and:
 
 8      (1)  There is no obligation secured by the collateral
 
 9           covered by the financing statement and no commitment to
 
10           make an advance, incur an obligation, or otherwise give
 
11           value; or
 
12      (2)  The debtor did not authorize the filing of the initial
 
13           financing statement.
 
14      (b)  To comply with subsection (a), a secured party shall
 
15 cause the secured party of record to file the termination
 
16 statement:
 
17      (1)  Within one month after there is no obligation secured
 
18           by the collateral covered by the financing statement
 
19           and no commitment to make an advance, incur an
 
20           obligation, or otherwise give value; or
 
21      (2)  If earlier, within twenty days after the secured party
 
22           receives an authenticated demand from a debtor.
 

 
 
 
Page 139                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (c)  In cases not governed by subsection (a), within twenty
 
 2 days after a secured party receives an authenticated demand from
 
 3 a debtor, the secured party shall cause the secured party of
 
 4 record for a financing statement to send to the debtor a
 
 5 termination statement for the financing statement or file the
 
 6 termination statement in the filing office if:
 
 7      (1)  Except in the case of a financing statement covering
 
 8           accounts or chattel paper that has been sold or goods
 
 9           that are the subject of a consignment, there is no
 
10           obligation secured by the collateral covered by the
 
11           financing statement and no commitment to make an
 
12           advance, incur an obligation, or otherwise give value;
 
13      (2)  The financing statement covers accounts or chattel
 
14           paper that has been sold but as to which the account
 
15           debtor or other person obligated has discharged its
 
16           obligation;
 
17      (3)  The financing statement covers goods that were the
 
18           subject of a consignment to the debtor but are not in
 
19           the debtor's possession; or
 
20      (4)  The debtor did not authorize the filing of the initial
 
21           financing statement.
 
22      (d)  Except as otherwise provided in section 490:9-510, upon
 
23 the filing of a termination statement with the filing office, the
 

 
Page 140                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 financing statement to which the termination statement relates
 
 2 ceases to be effective.
 
 3      490:9-514  Assignment of powers of secured party of record.
 
 4 (a)  Except as otherwise provided in subsection (c), an initial
 
 5 financing statement may reflect an assignment of all of the
 
 6 secured party's power to authorize an amendment to the financing
 
 7 statement by providing the name and mailing address of the
 
 8 assignee as the name and address of the secured party.
 
 9      (b)  Except as otherwise provided in subsection (c), a
 
10 secured party of record may assign of record all or part of its
 
11 power to authorize an amendment to a financing statement by
 
12 filing in the filing office an amendment of the financing
 
13 statement which:
 
14      (1)  Identifies, by its file number, the initial financing
 
15           statement to which it relates;
 
16      (2)  Provides the name of the assignor; and
 
17      (3)  Provides the name and mailing address of the assignee.
 
18      (c)  An assignment of record of a security interest in a
 
19 fixture covered by a record of a mortgage which is effective as a
 
20 financing statement filed as a fixture filing under section
 
21 490:9-502(c) may be made only by an assignment of record of the
 
22 mortgage in the manner provided by law of this State other than
 
23 this chapter.
 

 
Page 141                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-515  Duration and effectiveness of financing
 
 2 statement; effect of lapsed financing statement.  (a)  Except as
 
 3 otherwise provided in subsections (b), (e), (f), and (g), a filed
 
 4 financing statement is effective for a period of five years after
 
 5 the date of filing.
 
 6      (b)  Except as otherwise provided in subsections (e), (f),
 
 7 and (g), an initial financing statement filed in connection with
 
 8 a public-finance transaction or manufactured-home transaction is
 
 9 effective for a period of thirty years after the date of filing
 
10 if it indicates that it is filed in connection with a public-
 
11 finance transaction or manufactured-home transaction.
 
12      (c)  The effectiveness of a filed financing statement lapses
 
13 on the expiration of the period of its effectiveness unless
 
14 before the lapse a continuation statement is filed pursuant to
 
15 subsection (d).  Upon lapse, a financing statement ceases to be
 
16 effective and any security interest or agricultural lien that was
 
17 perfected by the financing statement becomes unperfected, unless
 
18 the security interest is perfected otherwise.  If the security
 
19 interest or agricultural lien becomes unperfected upon lapse, it
 
20 is deemed never to have been perfected as against a purchaser of
 
21 the collateral for value.
 
22      (d)  A continuation statement may be filed only within six
 
23 months before the expiration of the five-year period specified in
 

 
Page 142                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 subsection (a) or the thirty-year period specified in subsection
 
 2 (b), whichever is applicable.
 
 3      (e)  Except as otherwise provided in section 490:9-510, upon
 
 4 timely filing of a continuation statement, the effectiveness of
 
 5 the initial financing statement continues for a period of five
 
 6 years commencing on the day on which the financing statement
 
 7 would have become ineffective in the absence of the filing.  Upon
 
 8 the expiration of the five-year period, the financing statement
 
 9 lapses in the same manner as provided in subsection (c), unless,
 
10 before the lapse, another continuation statement is filed
 
11 pursuant to subsection (d).  Succeeding continuation statements
 
12 may be filed in the same manner to continue the effectiveness of
 
13 the initial financing statement.
 
14      (f)  If a debtor is a transmitting utility and a filed
 
15 financing statement so indicates, the financing statement is
 
16 effective until a termination statement is filed.
 
17      (g)  A record of a mortgage that is effective as a financing
 
18 statement filed as a fixture filing under section 490:9-502(c)
 
19 remains effective as a financing statement filed as a fixture
 
20 filing until the mortgage is released or satisfied of record or
 
21 its effectiveness otherwise terminates as to the real property.
 
22      490:9-516  What constitutes filing; effectiveness of
 
23 filing.  (a)  Except as otherwise provided in subsection (b),
 

 
Page 143                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 communication of a record to a filing office and tender of the
 
 2 filing fee or acceptance of the record by the filing office
 
 3 constitutes filing.
 
 4      (b)  Filing does not occur with respect to a record that a
 
 5 filing office refuses to accept because:
 
 6      (1)  The record is not communicated by a method or medium of
 
 7           communication authorized by the filing office;
 
 8      (2)  An amount equal to or greater than the applicable
 
 9           filing fee is not tendered;
 
10      (3)  The filing office is unable to index the record
 
11           because:
 
12           (A)  In the case of an initial financing statement, the
 
13                record does not provide a name for the debtor;
 
14           (B)  In the case of an amendment or correction
 
15                statement, the record:
 
16                (i)  Does not identify the initial financing
 
17                     statement as required by section 490:9-512 or
 
18                     490:9-518, as applicable; or
 
19               (ii)  Identifies an initial financing statement
 
20                     whose effectiveness has lapsed under section
 
21                     490:9-515;
 
22           (C)  In the case of an initial financing statement that
 
23                provides the name of a debtor identified as an
 

 
Page 144                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1                individual or an amendment that provides a name of
 
 2                a debtor identified as an individual which was not
 
 3                previously provided in the financing statement to
 
 4                which the record relates the record does not
 
 5                identify the debtor's last name; or
 
 6           (D)  In the case of a record filed in the filing office
 
 7                described in section 490:9-501(a)(1), the record
 
 8                does not provide a sufficient description of the
 
 9                real property to which it relates;
 
10      (4)  In the case of an initial financing statement or an
 
11           amendment that adds a secured party of record, the
 
12           record does not provide a name and mailing address for
 
13           the secured party of record;
 
14      (5)  In the case of an initial financing statement or an
 
15           amendment that provides a name of a debtor which was
 
16           not previously provided in the financing statement to
 
17           which the amendment relates, the record does not:
 
18           (A)  Provide a mailing address for the debtor;
 
19           (B)  Indicate whether the debtor is an individual or an
 
20                organization; or
 
21           (C)  If the financing statement indicates that the
 
22                debtor is an organization, provide:
 
23                (i)  A type of organization for the debtor;
 

 
Page 145                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1               (ii)  A jurisdiction of organization for the
 
 2                     debtor; or
 
 3              (iii)  An organizational identification number for
 
 4                     the debtor or indicate that the debtor has
 
 5                     none;
 
 6      (6)  In the case of an assignment reflected in an initial
 
 7           financing statement under section 490:9-514(a) or an
 
 8           amendment filed under section 490:9-514(b), the record
 
 9           does not provide a name and mailing address for the
 
10           assignee; or
 
11      (7)  In the case of a continuation statement, the record is
 
12           not filed within the six-month period prescribed by
 
13           section 490:9-515(d).
 
14      (c)  For purposes of subsection (b):
 
15      (1)  A record does not provide information if the filing
 
16           office is unable to read or decipher the information;
 
17           and
 
18      (2)  A record that does not indicate that it is an amendment
 
19           or identify an initial financing statement to which it
 
20           relates, as required by section 490:9-512, 490:9-514,
 
21           or 490:9-518, is an initial financing statement.
 
22      (d)  A record that is communicated to the filing office with
 
23 tender of the filing fee, but which the filing office refuses to
 

 
Page 146                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 accept for a reason other than one set forth in subsection (b),
 
 2 is effective as a filed record except as against a purchaser of
 
 3 the collateral which gives value in reasonable reliance upon the
 
 4 absence of the record from the files.
 
 5      490:9-517  Effect of indexing errors.  The failure of the
 
 6 filing office to index a record correctly does not affect the
 
 7 effectiveness of the filed record.
 
 8      490:9-518  Claim concerning inaccurate or wrongfully filed
 
 9 record.  (a)  A person may file in the filing office a correction
 
10 statement with respect to a record indexed there under the
 
11 person's name if the person believes that the record is
 
12 inaccurate or was wrongfully filed.
 
13      (b)  A correction statement must:
 
14      (1)  Identify the record to which it relates by the file
 
15           number assigned to the initial financing statement to
 
16           which the record relates;
 
17      (2)  Indicate that it is a correction statement; and
 
18      (3)  Provide the basis for the person's belief that the
 
19           record is inaccurate and indicate the manner in which
 
20           the person believes the record should be amended to
 
21           cure any inaccuracy or provide the basis for the
 
22           person's belief that the record was wrongfully filed.
 

 
 
 
Page 147                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (c)  The filing of a correction statement does not affect
 
 2 the effectiveness of an initial financing statement or other
 
 3 filed record.
 
 4         SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE.
 
 5      490:9-519  Numbering, maintaining, and indexing records;
 
 6 communicating information provided in records.  (a)  For each
 
 7 record filed in a filing office, the filing office shall:
 
 8      (1)  Assign a unique number to the filed record;
 
 9      (2)  Create a record that bears the number assigned to the
 
10           filed record and the date and time of filing;
 
11      (3)  Maintain the filed record for public inspection; and
 
12      (4)  Index the filed record in accordance with subsections
 
13           (c), (d), and (e).
 
14      (b)  A file number must include a digit that:
 
15      (1)  Is mathematically derived from or related to the other
 
16           digits of the file number; and
 
17      (2)  Aids the filing office in determining whether a number
 
18           communicated as the file number includes a single-digit
 
19           or transpositional error.
 
20      (c)  Except as otherwise provided in subsections (d) and
 
21 (e), the filing office shall:
 
22      (1)  Index an initial financing statement according to the
 
23           name of the debtor and index all filed records relating
 

 
Page 148                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           to the initial financing statement in a manner that
 
 2           associates with one another an initial financing
 
 3           statement and all filed records relating to the initial
 
 4           financing statement; and
 
 5      (2)  Index a record that provides a name of a debtor which
 
 6           was not previously provided in the financing statement
 
 7           to which the record relates also according to the name
 
 8           that was not previously provided.
 
 9      (d)  If a financing statement is filed as a fixture filing
 
10 or covers as-extracted collateral or timber to be cut, the filing
 
11 office shall index it:
 
12      (1)  Under the names of the debtor and of each owner of
 
13           record shown on the financing statement as if they were
 
14           the mortgagors under a mortgage of the real property
 
15           described; and
 
16      (2)  To the extent that the law of this State provides for
 
17           indexing of records of mortgages under the name of the
 
18           mortgagee, under the name of the secured party as if
 
19           the secured party were the mortgagee thereunder, or if
 
20           indexing is by description, as if the financing
 
21           statement were a record of a mortgage of the real
 
22           property described.
 

 
 
 
Page 149                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (e)  If a financing statement is filed as a fixture filing
 
 2 or covers as-extracted collateral or timber to be cut, the filing
 
 3 office shall index an assignment filed under section 490:9-514(a)
 
 4 or an amendment filed under section 490:9-514(b):
 
 5      (1)  Under the name of the assignor as grantor; and
 
 6      (2)  To the extent that the law of this State provides for
 
 7           indexing a record of the assignment of a mortgage under
 
 8           the name of the assignee, under the name of the
 
 9           assignee.
 
10      (f)  The filing office shall maintain a capability:
 
11      (1)  To retrieve a record by the name of the debtor and by
 
12           the file number assigned to the initial financing
 
13           statement to which the record relates; and
 
14      (2)  To associate and retrieve with one another an initial
 
15           financing statement and each filed record relating to
 
16           the initial financing statement.
 
17      (g)  The filing office may not remove a debtor's name from
 
18 the index until one year after the effectiveness of a financing
 
19 statement naming the debtor lapses under section 490:9-515 with
 
20 respect to all secured parties of record.
 
21      (h)  The filing office shall perform the acts required by
 
22 subsections (a) through (e) at the time and in the manner
 
23 prescribed by filing-office rule, but not later than two business
 
24 days after the filing office receives the record in question.
 

 
Page 150                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-520  Acceptance and refusal to accept record.  (a)  A
 
 2 filing office shall refuse to accept a record for filing for a
 
 3 reason set forth in section 490:9-516(b) and may refuse to accept
 
 4 a record for filing only for a reason set forth in section
 
 5 490:9-516(b).
 
 6      (b)  If a filing office refuses to accept a record for
 
 7 filing, it shall communicate to the person that presented the
 
 8 record the fact of and reason for the refusal and the date and
 
 9 time the record would have been filed had the filing office
 
10 accepted it.  The communication must be made at the time and in
 
11 the manner prescribed by filing-office rule but in no event more
 
12 than two business days after the filing office receives the
 
13 record.
 
14      (c)  A filed financing statement satisfying section
 
15 490:9-502(a) and (b) is effective, even if the filing office is
 
16 required to refuse to accept it for filing under subsection (a).
 
17 However, section 490:9-338 applies to a filed financing statement
 
18 providing information described in section 490:9-516(b)(5) which
 
19 is incorrect at the time the financing statement is filed.
 
20      (d)  If a record communicated to a filing office provides
 
21 information that relates to more than one debtor, this part
 
22 applies as to each debtor separately.
 

 
 
 
Page 151                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-521  Uniform form of written financing statement and
 
 2 amendment.  (a)  A filing office that accepts written records for
 
 3 filing may not refuse to accept a written initial financing
 
 4 statement in the following form, except for a reason set forth in
 
 5 section 490:9-516(b):
 
 6 UCC FINANCING STATEMENT
 
 7 FOLLOW INSTRUCTIONS (front and back) CAREFULLY
 
 8 A.   NAME AND PHONE OF CONTACT AT FILER [optional]
 
 9      ___________________________________
 
10 B.   SEND ACKNOWLEDGMENT TO:  (Name and Address)
 
11      ___________________________________ THE ABOVE SPACE IS
 
12 FOR  ___________________________________ FILING OFFICE USE ONLY
 
13 1.   DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name
 
14      (1a or 1b) - Do not abbreviate or combine names
 
15      1a.  ORGANIZATION'S NAME
 
16 
 
17 _________________________________________________________________
 
18 or   1b.  INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
 
19 
 
20 _________________________________________________________________
 
21      1c.  MAILING ADDRESS    CITY      STATE POSTAL CODE COUNTRY
 
22 
 
23 _________________________________________________________________
 

 
Page 152                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      1d.  TAX ID. NO.  ADD'L INFO. RE   1e. TYPE OF ORGANIZATION
 
 2           SSN OR EIN  ORGANIZATION DEBTOR
 
 3 
 
 4 ________________________________________________________________
 
 5      1f. JURISDICTION OF ORGANIZATION 1g. ORGANIZATIONAL ID No.,
 
 6                                           if any
 
 7 
 
 8      ___________________________________________________ [ ] NONE
 
 9 2.   ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one
 
10      debtor name (2a or 2b) - do not abbreviate or combine names
 
11      2a.  ORGANIZATION'S NAME
 
12 
 
13 _________________________________________________________________
 
14 OR   2b.  INDIVIDUAL'S LAST NAME  FIRST NAME  MIDDLE NAME  SUFFIX
 
15 
 
16 _________________________________________________________________
 
17      2c. MAILING ADDRESS     CITY      STATE POSTAL CODE  COUNTRY
 
18 
 
19 _________________________________________________________________
 
20      2d. TAX ID. NO. ADD'L INFO. RE    2e. TYPE OF ORGANIZATION
 
21          SSN OR EIN  ORGANIZATION DEBTOR
 
22 
 
23 _________________________________________________________________
 

 
Page 153                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      2f. JURISDICTION OF ORGANIZATION  2g. ORGANIZATION ID NO.,
 
 2                                            if any
 
 3 
 
 4      ____________________________________________________[ ] NONE
 
 5 3.   SECURED PARTY'S NAME (or name of total assignee of assignor
 
 6 S/P) - insert only one secured party name (3a or 3b)
 
 7      3a.  ORGANIZATION'S NAME
 
 8 
 
 9 _________________________________________________________________
 
10 OR   3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
 
11   
 
12 _________________________________________________________________
 
13      3c. MAILING ADDRESS      CITY     STATE POSTAL CODE  COUNTRY
 
14 
 
15 _________________________________________________________________
 
16 4.   This FINANCING STATEMENT covers the following collateral:
 
17 
 
18 _________________________________________________________________
 
19 5.   ALTERNATIVE DESIGNATION [if applicable]: [ ] LESSEE/LESSOR
 
20      [ ] CONSIGNEE/CONSIGNOR [ ] BAILEE/BAILOR [ ] SELLER/BUYER
 
21      [ ] AG. LIEN [ ] NON-UCC FILING
 
22 6.   [ ] This FINANCING STATEMENT is to be filed (for record)
 
23      (or recorded) in the REAL ESTATE RECORDS.
 
24      Attach Addendum [if applicable]
 

 
Page 154                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 7.   Check to REQUEST SEARCH REPORT(S) on Debtor(s)
 
 2      [ ] All Debtors   [ ] Debtor 1   [ ] Debtor 2
 
 3      [ADDITIONAL FEE]                   [optional]
 
 4 
 
 5      -----------------------------------------------------------
 
 6 8.   OPTIONAL FILER REFERENCE DATA
 
 7   _______________________________________________________________
 
 8 FILING OFFICE COPY - NATIONAL UCC FILING STATEMENT (FORM UCC 1)
 
 9 (REV.  071/29/98)
 
10                          [BACK OF FORM]
 
11 UCC FINANCING STATEMENT ADDENDUM
 
12 Follow instructions (front and back) CAREFULLY.
 
13 9.   NAME OF FIRST DEBTOR (1a or 1b) ON RELATED FINANCING
 
14 STATEMENT
 
15 
 
16 _________________________________________________________________
 
17      9a. ORGANIZATION'S NAME
 
18 
 
19 _________________________________________________________________
 
20 OR   9b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
21 
 
22 _________________________________________________________________
 

 
 
 
Page 155                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 10.  MISCELLANEOUS:
 
 2 
 
 3      ______________________________________THE ABOVE SPACE IS FOR
 
 4 
 
 5      ______________________________________FILING OFFICE USE ONLY
 
 6 11.  ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one
 
 7 name
 
 8      (11a or 11b) - do not abbreviate or combine names
 
 9      11a. ORGANIZATION'S NAME
 
10 
 
11 _________________________________________________________________
 
12 OR   11b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
13 
 
14 _________________________________________________________________
 
15      11c. MAILING ADDRESS    CITY      STATE POSTAL CODE  COUNTRY
 
16 
 
17 _________________________________________________________________
 
18      11d. TAX ID. NO.  ADD'L INFO. RE  11e. TYPE OF ORGANIZATION
 
19           SSN OR EIN  ORGANIZATION DEBTOR
 
20 
 
21 _________________________________________________________________
 
22      11f. JURISDICTION OF ORGANIZATION 11g ORGANIZATIONAL ID.
 
23                                            No., if any
 
24 
 

 
Page 156                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      _____________________________________________________[ ] NONE
 
 2 12.  [ ] ADDITIONAL SECURED PARTY'S or  [ ] ASSIGNOR S/P'S NAME -
 
 3 insert only one name (12a or 12b).
 
 4      12a.ORGANIZATION'S NAME
 
 5 
 
 6 __________________________________________________________________
 
 7 OR   12b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
 8 
 
 9 __________________________________________________________________
 
10      12c. MAILING ADDRESS    CITY      STATE POSTAL CODE  COUNTRY
 
11 
 
12 __________________________________________________________________
 
13 13.  This FINANCING STATEMENT covers [ ] timber to be cut or
 
14      [ ] as-extracted collateral, or is filed as a [ ] fixture
 
15      filing.
 
16 14.  Description of real estate:
 
17 
 
18 __________________________________________________________________
 
19 15.  Name and address of a RECORD OWNER of the above-described
 
20      real estate (if Debtor does not have record interest):
 
21 16.  Additional collateral description:
 
22 
 
23 __________________________________________________________________
 

 
Page 157                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 17.  Check only if applicable and check only one box:
 
 2      Debtor is a [ ] Trust or [ ] Trustee acting with respect to
 
 3      property held in trust or [ ] Decedent's Estate
 
 4 18.  Check only if applicable and check only one box:
 
 5      [ ] Debtor is a TRANSMITTING UTILITY
 
 6      [ ] Filed in connection with a Manufactured-Home Transaction
 
 7          - effective 30 years
 
 8      [ ] Filed in connection with a Public-Finance Transaction -
 
 9          effective 30 years
 
10      FILING OFFICE COPY - NATIONAL UCC FILING STATEMENT
 
11      (FORM UCC 1Ad)(REV. 07/29/98)
 
12      (b)  A filing office that accepts written records for filing
 
13 may not refuse to accept a written financing statement amendment
 
14 in the following form, except for a reason set forth in section
 
15 490:9-516(b):
 
16 UCC FINANCING STATEMENT AMENDMENT
 
17 FOLLOW INSTRUCTIONS (front and back) CAREFULLY
 
18 A.   NAME AND PHONE OF CONTACT AT FILER [optional]
 
19      _______________________________________
 
20 B.   SEND ACKNOWLEDGMENT TO:  (Name and Address)
 
21      ___________________________________THE ABOVE SPACE IS FOR
 
22      ___________________________________FILING OFFICE USE ONLY
 

 
 
 
Page 158                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 1a.  INITIAL FINANCING STATEMENT FILE NO.  1b. [ ] This FINANCING
 
 2      STATEMENT AMENDMENT is to be filed (for record) (or
 
 3      recorded) in the REAL ESTATE RECORDS.
 
 4 2.   [ ] TERMINATION:  Effectiveness of the Financing Statement
 
 5      identified above is terminated with respect to security
 
 6      interest(s) of the Secured Party authorizing this
 
 7      Termination Statement.
 
 8 3.   [ ] CONTINUATION:  Effectiveness of the Financing Statement
 
 9      identified above with respect to security interest(s) of the
 
10      Secured Party authorizing this Continuation Statement is
 
11      continued for the additional period provided by applicable
 
12      law.
 
13 4.   [ ] ASSIGNMENT (full or partial):  Give name of assignee in
 
14      item 7a or 7b and address of assignee in item 7c; and also
 
15      give name of assignor in item 9.
 
16 
 
17 _________________________________________________________________
 
18 5.   AMENDMENT (PARTY INFORMATION): This Amendment affects
 
19      [ ] Debtor or [ ] Secured Party of record.  Check only one
 
20      of these two boxes.  Also check one of the following three
 
21      boxes and provide appropriate information in items 6 and/or
 
22      7.
 

 
 
 
Page 159                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      [ ] CHANGE name and/or address:  Give current record name in
 
 2      item 6a or 6b; also give new name (if name change) in item
 
 3      7a or 7b and/or new address (if address change in item 7c.
 
 4      [ ] DELETE name:  Give record name to be deleted in item 6a
 
 5      or 6b.
 
 6      [ ] ADD name: Complete item 7a or 7b, and also item 7c; also
 
 7      complete items 7d-7g (if applicable).
 
 8 6.   CURRENT RECORD INFORMATION:
 
 9      6a.  ORGANIZATION'S NAME
 
10 
 
11 _________________________________________________________________
 
12 OR   6b.  INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
13 
 
14 _________________________________________________________________
 
15 7.   CHANGED (NEW) OR ADDED INFORMATION:
 
16      7a.  ORGANIZATION'S NAME
 
17 
 
18 _________________________________________________________________
 
19 OR   7b.  INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
20 
 
21 _________________________________________________________________
 
22      7c.  MAILING ADDRESS    CITY      STATE POSTAL CODE  COUNTRY
 
23 
 
24 _________________________________________________________________
 

 
Page 160                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      7d.  TAX ID. NO.  ADD'L INFO. RE  7e.  TYPE OF ORGANIZATION
 
 2           SSN OR EIN  ORGANIZATION DEBTOR
 
 3 
 
 4 _________________________________________________________________
 
 5      7f.  JURISDICTION OF ORGANIZATION 7g. ORGANIZATIONAL ID.
 
 6                                            No., if any
 
 7       __________________________________________________ [ ] NONE
 
 8 8.   AMENDMENT (COLLATERAL CHANGE): check only one box
 
 9      Describe collateral [ ] deleted or [ ] added, or give entire
 
10      [ ] restated collateral description, or describe collateral
 
11      [ ] assigned.
 
12 
 
13 _________________________________________________________________
 
14 9.   NAME OF SECURED PARTY OF RECORD AUTHORIZING THIS AMENDMENT
 
15      (name of assignor, if this is an Assignment).  If this is an
 
16      Amendment authorized by a Debtor which adds collateral or
 
17      adds the authorizing Debtor, or if this is a Termination
 
18      authorized by a Debtor, check here [ ] and enter name of
 
19      DEBTOR authorizing this Amendment.
 
20      9a.  ORGANIZATION'S NAME
 
21 
 
22 _________________________________________________________________
 

 
 
 
Page 161                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 OR   9b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
 2 
 
 3 _________________________________________________________________
 
 4 10.  OPTIONAL FILE REFERENCE DATA
 
 5 
 
 6 _________________________________________________________________
 
 7 FILING OFFICE COPY - NATIONAL UCC FINANCING STATEMENT AMENDMENT
 
 8 (FORM UCC3) (REV. 07/29/98)
 
 9                          [BACK OF FORM]
 
10 UCC FINANCING STATEMENT AMENDMENT ADDENDUM
 
11 FOLLOW INSTRUCTIONS (front and back) CAREFULLY
 
12 11.  INITIAL FINANCING STATEMENT FILE NO. (same as item 1a on
 
13      Amendment form)
 
14 
 
15 _________________________________________________________________
 
16 12.  NAME OF PARTY AUTHORIZING THIS AMENDMENT (same as item 9 on
 
17      Amendment form)
 
18      12a. ORGANIZATION'S NAME
 
19 
 
20 _________________________________________________________________
 
21 OR   12b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
22 
 
23 _________________________________________________________________
 

 
Page 162                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 13.  USE THIS SPACE FOR ADDITIONAL INFORMATION
 
 2      ___________________________________THIS SPACE IS FOR
 
 3      ___________________________________FILING OFFICE USE ONLY
 
 4 FILING OFFICE COPY - NATIONAL UCC FINANCING STATEMENT AMENDMENT
 
 5 ADDENDUM (FORM UCC3Ad) (REV. 07/29/98)
 
 6      (c)  A form that a filing office may not refuse to accept
 
 7 under subsection (a) or (b) must conform to the format prescribed
 
 8 for the form by the National Conference of Commissioners on
 
 9 Uniform State Laws.
 
10      490:9-522  Maintenance and destruction of records.  (a)
 
11 The filing office shall maintain a record of the information
 
12 provided in a filed financing statement for at least one year
 
13 after the effectiveness of the financing statement has lapsed
 
14 under section 490:9-515 with respect to all secured parties of
 
15 record.  The record must be retrievable by using the name of the
 
16 debtor and by using the file number assigned to the initial
 
17 financing statement to which the record relates.
 
18      (b)  Except to the extent that a statute governing
 
19 disposition of public records provides otherwise, the filing
 
20 office immediately may destroy any written record evidencing a
 
21 financing statement.  However, if the filing office destroys a
 
22 written record, it shall maintain another record of the financing
 
23 statement which complies with subsection (a).
 

 
Page 163                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-523  Information from filing office; sale or license
 
 2 of records.  (a)  If a person that files a written record
 
 3 requests an acknowledgment of the filing, the filing office shall
 
 4 send to the person an image of the record showing the number
 
 5 assigned to the record pursuant to section 490:9-519(a)(1) and
 
 6 the date and time of the filing of the record.  However, if the
 
 7 person furnishes a copy of the record to the filing office, the
 
 8 filing office may instead:
 
 9      (1)  Note upon the copy the number assigned to the record
 
10           pursuant to section 490:9-519(a)(1) and the date and
 
11           time of the filing of the record; and
 
12      (2)  Send the copy to the person.
 
13      (b)  If a person files a record other than a written record,
 
14 the filing office shall communicate to the person an
 
15 acknowledgment that provides:
 
16      (1)  The information in the record;
 
17      (2)  The number assigned to the record pursuant to section
 
18           490:9-519(a)(1); and
 
19      (3)  The date and time of the filing of the record.
 
20      (c)  The filing office shall communicate or otherwise make
 
21 available in a record the following information to any person
 
22 that requests it:
 

 
 
 
Page 164                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Whether there is on file on a date and time specified
 
 2           by the filing office, but not a date earlier than three
 
 3           business days before the filing office receives the
 
 4           request, any financing statement that:
 
 5           (A)  Designates a particular debtor;
 
 6           (B)  Has not lapsed under section 490:9-515 with
 
 7                respect to all secured parties of record; and
 
 8           (C)  If the request so states, has lapsed under section
 
 9                490:9-515 and a record of which is maintained by
 
10                the filing office under section 490:9-522(a);
 
11      (2)  The date and time of filing of each financing
 
12           statement; and
 
13      (3)  The information provided in each financing statement.
 
14      (d)  In complying with its duty under subsection (c), the
 
15 filing office may communicate information in any medium.
 
16 However, if requested, the filing office shall communicate
 
17 information by issuing its written certificate.
 
18      (e)  The filing office shall perform the acts required by
 
19 subsections (a) through (d) at the time and in the manner
 
20 prescribed by filing-office rule, but not later than two business
 
21 days after the filing office receives the request.
 
22      (f)  At least weekly, the filing office shall offer to sell
 
23 or license to the public on a nonexclusive basis, in bulk, copies
 

 
Page 165                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 of all records filed in it under this part, in every medium from
 
 2 time to time available to the filing office.
 
 3      490:9-524  Delay by filing office.  Delay by the filing
 
 4 office beyond a time limit prescribed by this part is excused if:
 
 5      (1)  The delay is caused by interruption of communication or
 
 6           computer facilities, war, emergency conditions failure
 
 7           of equipment, or other circumstances beyond control of
 
 8           the filing office; and
 
 9      (2)  The filing office exercises reasonable diligence under
 
10           the circumstances.
 
11      490:9-525  Fees.  (a)  Except as otherwise provided in
 
12 subsection (e), the fee for filing and indexing a record under
 
13 this part, other than an initial financing statement of the kind
 
14 described in section 490:9-502(c), shall be as specified by rules
 
15 adopted under section 502-25 by the department of land and
 
16 natural resources pursuant to chapter 91.
 
17      (b)  Except as otherwise provided in subsection (e), the fee
 
18 for filing and indexing an initial financing statement of the
 
19 kind described in section 490:9-502(c) shall be as specified by
 
20 rules adopted under section 502-25 by the department of land and
 
21 natural resources pursuant to chapter 91.
 
22      (c)  The number of names required to be indexed does not
 
23 affect the amount of the fee in subsections (a) and (b).
 

 
Page 166                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (d)  The fee for responding to a request for information
 
 2 from the filing office, including for issuing a certificate
 
 3 showing whether there is on file any financing statement naming a
 
 4 particular debtor shall be as specified by rules adopted under
 
 5 section 502-25 by the department of land and natural resources
 
 6 pursuant to chapter 91.
 
 7      (e)  This section does not require a fee with respect to a
 
 8 record of a mortgage which is effective as a financing statement
 
 9 filed as a fixture filing or as a financing statement covering
 
10 as-extracted collateral or timber to be cut under section
 
11 490:9-502(c).  However, the recording and satisfaction fees that
 
12 otherwise would be applicable to the record of the mortgage
 
13 apply.
 
14      490:9-526  Filing-office rules.  (a)  The department of
 
15 land and natural resources shall adopt and publish rules to
 
16 implement this article.  The filing-office rules must be:
 
17      (1)  Consistent with this article; and
 
18      (2)  Adopted and published in accordance with chapter 91.
 
19      (b)  To keep the filing-office rules and practices of the
 
20 filing office in harmony with the rules and practices of filing
 
21 offices in other jurisdictions that enact substantially this
 
22 part, and to keep the technology used by the filing office
 
23 compatible with the technology used by filing offices in other
 

 
Page 167                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 jurisdictions that enact substantially this part, the filing
 
 2 office, so far as is consistent with the purposes, policies, and
 
 3 provisions of this article, in adopting, amending, and repealing
 
 4 filing-office rules, shall:
 
 5      (1)  Consult with filing offices in other jurisdictions that
 
 6           enact substantially this part; and
 
 7      (2)  Consult the most recent version of the Model Rules
 
 8           promulgated by the International Association of
 
 9           Corporate Administrators or any successor organization;
 
10           and
 
11      (3)  Take into consideration the rules and practices of and
 
12           the technology used by, filing offices in other
 
13           jurisdictions that enact substantially this part.
 
14      490:9-527  Duty to report.  The department of land and
 
15 natural resources shall report annually, twenty days before the
 
16 convening of each regular session of the legislature, to the
 
17 governor and the legislature on the operation of the filing
 
18 office.  The report must contain a statement of the extent to
 
19 which:
 
20      (1)  The filing-office rules are not in harmony with the
 
21           rules of filing offices in other jurisdictions that
 
22           enact substantially this part and the reasons for these
 
23           variations; and
 

 
Page 168                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  The filing-office rules are not in harmony with the
 
 2           most recent version of the Model Rules promulgated by
 
 3           the International Association of Corporate
 
 4           Administrators, or any successor organization, and the
 
 5           reasons for these variations.
 
 6                         PART 6.  DEFAULT
 
 7     SUBPART 1.  DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
 
 8      490:9-601  Rights after default; judicial enforcement;
 
 9 consignor or buyer of accounts, chattel paper, payment
 
10 intangibles, or promissory notes.  (a)  After default, a secured
 
11 party has the rights provided in this part and, except as
 
12 otherwise provided in section 490:9-602, those provided by
 
13 agreement of the parties.  A secured party:
 
14      (1)  May reduce a claim to judgment, foreclose, or otherwise
 
15           enforce the claim, security interest, or agricultural
 
16           lien by any available judicial procedure; and
 
17      (2)  If the collateral is documents, may proceed either as
 
18           to the documents or as to the goods they cover.
 
19      (b)  A secured party in possession of collateral or control
 
20 of collateral under section 490:9-104, 490:9-105, 490:9-106, or
 
21 490:9-107 has the rights and duties provided in section
 
22 490:9-207.
 

 
 
 
Page 169                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (c)  The rights under subsections (a) and (b) are cumulative
 
 2 and may be exercised simultaneously.
 
 3      (d)  Except as otherwise provided in subsection (g) and
 
 4 section 490:9-605, after default, a debtor and an obligor have
 
 5 the rights provided in this part and by agreement of the parties.
 
 6      (e)  If a secured party has reduced its claim to judgment,
 
 7 the lien of any levy that may be made upon the collateral by
 
 8 virtue of an execution based upon the judgment relates back to
 
 9 the earliest of:
 
10      (1)  The date of perfection of the security interest or
 
11           agricultural lien in the collateral;
 
12      (2)  The date of filing a financing statement covering the
 
13           collateral; or
 
14      (3)  Any date specified in a statute under which the
 
15           agricultural lien was created.
 
16      (f)  A sale pursuant to an execution is a foreclosure of the
 
17 security interest or agricultural lien by judicial procedure
 
18 within the meaning of this section.  A secured party may purchase
 
19 at the sale and thereafter hold the collateral free of any other
 
20 requirements of this article.
 
21      (g)  Except as otherwise provided in section 490:9-607(c),
 
22 this part imposes no duties upon a secured party that is a
 
23 consignor or is a buyer of accounts, chattel paper, payment
 
24 intangibles, or promissory notes.
 

 
Page 170                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-602  Waiver and variance of rights and duties.
 
 2 Except as otherwise provided in section 490:9-624, to the extent
 
 3 that they give rights to a debtor or obligor and impose duties on
 
 4 a secured party, the debtor or obligor may not waive or vary the
 
 5 rules stated in the following listed sections:
 
 6      (1)  Section 490:9-207(b)(4)(C), which deals with use and
 
 7           operation of the collateral by the secured party;
 
 8      (2)  Section 490:9-210, which deals with requests for an
 
 9           accounting and requests concerning a list of collateral
 
10           and statement of account;
 
11      (3)  Section 490:9-607(c), which deals with collection and
 
12           enforcement of collateral;
 
13      (4)  Sections 490:9-608(a) and 490:9-615(c) to the extent
 
14           that they deal with application or payment of noncash
 
15           proceeds of collection, enforcement, or disposition;
 
16      (5)  Sections 490:9-608(a) and 490:9-615(d) to the extent
 
17           that they require accounting for or payment of surplus
 
18           proceeds of collateral;
 
19      (6)  Section 490:9-609 to the extent that it imposes upon a
 
20           secured party that takes possession of collateral
 
21           without judicial process the duty to do so without
 
22           breach of the peace;
 

 
 
 
Page 171                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (7)  Sections 490:9-610(b), 490:9-611, 490:9-613, and
 
 2           490:9-614, which deal with disposition of collateral;
 
 3      (8)  Section 490:9-615(f), which deals with calculation of a
 
 4           deficiency or surplus when a disposition is made to the
 
 5           secured party, a person related to the secured party,
 
 6           or a secondary obligor;
 
 7      (9)  Section 490:9-616, which deals with explanation of the
 
 8           calculation of a surplus or deficiency;
 
 9     (10)   Section 490:9-620, 490:9-621, and 490:9-622, which
 
10           deal with acceptance of collateral in satisfaction of
 
11           obligation;
 
12     (11)   Section 490:9-623, which deals with redemption of
 
13           collateral;
 
14     (12)   Section 490:9-624, which deals with permissible
 
15           waivers; and
 
16     (13)   Sections 490:9-625 and 490:9-626, which deal with the
 
17           secured party's liability for failure to comply with
 
18           this article.
 
19      490:9-603  Agreement on standards concerning rights and
 
20 duties.  (a)  The parties may determine by agreement the
 
21 standards measuring the fulfillment of the rights of a debtor or
 
22 obligor and the duties of a secured party under a rule stated in
 
23 section 490:9-602 if the standards are not manifestly
 
24 unreasonable.
 

 
Page 172                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  Subsection (a) does not apply to the duty under section
 
 2 490:9-609 to refrain from breaching the peace.
 
 3      490:9-604  Procedure if security agreement covers real
 
 4 property or fixtures.  (a)  If a security agreement covers both
 
 5 personal and real property, a secured party may proceed:
 
 6      (1)  Under this part as to the personal property without
 
 7           prejudicing any rights with respect to the real
 
 8           property; or
 
 9      (2)  As to both the personal property and the real property
 
10           in accordance with the rights with respect to the real
 
11           property, in which case the other provisions of this
 
12           part do not apply.
 
13      (b)  Subject to subsection (c), if a security agreement
 
14 covers goods that are or become fixtures, a secured party may
 
15 proceed:
 
16      (1)  Under this part; or
 
17      (2)  In accordance with the rights with respect to real
 
18           property, in which case the other provisions of this
 
19           part do not apply.
 
20      (c)  Subject to the other provisions of this part, if a
 
21 secured party holding a security interest in fixtures has
 
22 priority over all owners and encumbrancers of the real property,
 
23 the secured party, after default, may remove the collateral from
 
24 the real property.
 

 
Page 173                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (d)  A secured party that removes collateral shall promptly
 
 2 reimburse any encumbrancer or owner of the real property, other
 
 3 than the debtor, for the cost of repair of any physical injury
 
 4 caused by the removal.  The secured party need not reimburse the
 
 5 encumbrancer or owner for any diminution in value of the real
 
 6 property caused by the absence of the goods removed or by any
 
 7 necessity of replacing them.  A person entitled to reimbursement
 
 8 may refuse permission to remove until the secured party gives
 
 9 adequate assurance for the performance of the obligation to
 
10 reimburse.
 
11      490:9-605  Unknown debtor or secondary obligor.  A secured
 
12 party does not owe a duty based on its status as secured party:
 
13      (1)  To a person that is a debtor or obligor, unless the
 
14           secured party knows:
 
15           (A)  That the person is a debtor or obligor;
 
16           (B)  The identity of the person; and
 
17           (C)  How to communicate with the person; or
 
18      (2)  To a secured party or lienholder that has filed a
 
19           financing statement against a person, unless the
 
20           secured party knows:
 
21           (A)  That the person is a debtor; and
 
22           (B)  The identity of the person.
 

 
 
 
Page 174                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-606  Time of default for agricultural lien.  For
 
 2 purposes of this part, a default occurs in connection with an
 
 3 agricultural lien at the time the secured party becomes entitled
 
 4 to enforce the lien in accordance with the statute under which it
 
 5 was created.
 
 6      490:9-607  Collection and enforcement by secured party.
 
 7 (a)  If so agreed, and in any event after default, a secured
 
 8 party:
 
 9      (1)  May notify an account debtor or other person obligated
 
10           on collateral to make payment or otherwise render
 
11           performance to or for the benefit of the secured party;
 
12      (2)  May take any proceeds to which the secured party is
 
13           entitled under section 490:9-315;
 
14      (3)  May enforce the obligations of an account debtor or
 
15           other person obligated on collateral and exercise the
 
16           rights of the debtor with respect to the obligation of
 
17           the account debtor or other person obligated on
 
18           collateral to make payment or otherwise render
 
19           performance to the debtor, and with respect to any
 
20           property that secures the obligations of the account
 
21           debtor or other person obligated on the collateral;
 
22      (4)  If it holds a security interest in a deposit account
 
23           perfected by control under section 490:9-104(a)(1) may
 

 
Page 175                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           apply the balance of the deposit account to the
 
 2           obligation secured by the deposit account; and
 
 3      (5)  If it holds a security interest in a deposit account
 
 4           perfected by control under section 490:9-104(a)(2) or
 
 5           (3), may instruct the bank to pay the balance of the
 
 6           deposit account to or for the benefit of the secured
 
 7           party.
 
 8      (b)  If necessary to enable a secured party to exercise
 
 9 under subsection (a)(3) the right of a debtor to enforce a
 
10 mortgage nonjudicially, the secured party may record in the
 
11 office in which a record of the mortgage is recorded:
 
12      (1)  A copy of the security agreement that creates or
 
13           provides for a security interest in the obligation
 
14           secured by the mortgage; and
 
15      (2)  The secured party's sworn affidavit in recordable form
 
16           stating that:
 
17           (A)  A default has occurred; and
 
18           (B)  The secured party is entitled to enforce the
 
19                mortgage nonjudicially.
 
20      (c)  A secured party shall proceed in a commercially
 
21 reasonable manner if the secured party:
 
22      (1)  Undertakes to collect from or enforce an obligation of
 
23           an account debtor or other person obligated on
 
24           collateral; and
 

 
Page 176                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Is entitled to charge back uncollected collateral or
 
 2           otherwise to full or limited recourse against the
 
 3           debtor or a secondary obligor.
 
 4      (d)  A secured party may deduct from the collections made
 
 5 pursuant to subsection (c) reasonable expenses of collection and
 
 6 enforcement, including reasonable attorney's fees and legal
 
 7 expenses incurred by the secured party.
 
 8      (e)  This section does not determine whether an account
 
 9 debtor, bank, or other person obligated on collateral owes a duty
 
10 to a secured party.
 
11      490:9-608  Application of proceeds of collection or
 
12 enforcement; liability for deficiency and right to surplus.  (a)
 
13 If a security interest or agricultural lien secures payment or
 
14 performance of an obligation, the following rules apply:
 
15      (1)  A secured party shall apply or pay over for application
 
16           the cash proceeds of collection or enforcement under
 
17           this section in the following order to:
 
18           (A)  The reasonable expenses of collection and
 
19                enforcement and, to the extent provided for by
 
20                agreement and not prohibited by law, reasonable
 
21                attorney's fees and legal expenses incurred by the
 
22                secured party;
 

 
 
 
Page 177                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           (B)  The satisfaction of obligations secured by the
 
 2                security interest or agricultural lien under which
 
 3                the collection or enforcement is made; and
 
 4           (C)  The satisfaction of obligations secured by any
 
 5                subordinate security interest in or other lien on
 
 6                the collateral subject to the security interest or
 
 7                agricultural lien under which the collection or
 
 8                enforcement is made if the secured party receives
 
 9                an authenticated demand for proceeds before
 
10                distribution of the proceeds is completed.
 
11      (2)  If requested by a secured party, a holder of a
 
12           subordinate security interest or other lien shall
 
13           furnish reasonable proof of the interest or lien within
 
14           a reasonable time.  Unless the holder complies the
 
15           secured party need not comply with the holder's demand
 
16           under paragraph (1)(C).
 
17      (3)  A secured party need not apply or pay over for
 
18           application noncash proceeds of collection and
 
19           enforcement under this section unless the failure to do
 
20           so would be commercially unreasonable.  A secured party
 
21           that applies or pays over for application noncash
 
22           proceeds shall do so in a commercially reasonable
 
23           manner.
 

 
Page 178                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (4)  A secured party shall account to and pay a debtor for
 
 2           any surplus, and the obligor is liable for any
 
 3           deficiency.
 
 4      (b)  If the underlying transaction is a sale of accounts,
 
 5 chattel paper, payment intangibles, or promissory notes, the
 
 6 debtor is not entitled to any surplus, and the obligor is not
 
 7 liable for any deficiency.
 
 8      490:9-609  Secured party's right to take possession after
 
 9 default.  (a)  After default, a secured party:
 
10      (1)  May take possession of the collateral; and
 
11      (2)  Without removal, may render equipment unusable and
 
12           dispose of collateral on a debtor's premises under
 
13           section 490:9-610.
 
14      (b)  A secured party may proceed under subsection (a):
 
15      (1)  Pursuant to judicial process; or
 
16      (2)  Without judicial process, if it proceeds without breach
 
17           of the peace.
 
18      (c)  If so agreed, and in any event after default, a secured
 
19 party may require the debtor to assemble the collateral and make
 
20 it available to the secured party at a place to be designated by
 
21 the secured party which is reasonably convenient to both parties.
 
22      490:9-610  Disposition of collateral after default.  (a)
 
23 After default, a secured party may sell, lease, license, or
 
24 otherwise dispose of any or all of the collateral in its present
 

 
Page 179                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 condition or following any commercially reasonable preparation or
 
 2 processing.
 
 3      (b)  Every aspect of a disposition of collateral, including
 
 4 the method, manner, time, place, and other terms, must be
 
 5 commercially reasonable.  If commercially reasonable, a secured
 
 6 party may dispose of collateral by public or private proceedings,
 
 7 by one or more contracts, as a unit or in parcels, and at any
 
 8 time and place and on any terms.
 
 9      (c)  A secured party may purchase collateral:
 
10      (1)  At a public disposition; or
 
11      (2)  At a private disposition only if the collateral is of a
 
12           kind that is customarily sold on a recognized market or
 
13           the subject of widely distributed standard price
 
14           quotations.
 
15      (d)  A contract for sale, lease, license, or other
 
16 disposition includes the warranties relating to title,
 
17 possession, quiet enjoyment, and the like which by operation of
 
18 law accompany a voluntary disposition of property of the kind
 
19 subject to the contract.
 
20      (e)  A secured party may disclaim or modify warranties under
 
21 subsection (d):
 
22      (1)  In a manner that would be effective to disclaim or
 
23           modify the warranties in a voluntary disposition of
 

 
Page 180                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           property of the kind subject to the contract of
 
 2           disposition; or
 
 3      (2)  By communicating to the purchaser a record evidencing
 
 4           the contract for disposition and including an express
 
 5           disclaimer or modification of the warranties.
 
 6      (f)  A record is sufficient to disclaim warranties under
 
 7 subsection (e) if it indicates "There is no warranty relating to
 
 8 title, possession, quiet enjoyment, or the like in this
 
 9 disposition" or uses words of similar import.
 
10      490:9-611  Notification before disposition of collateral.
 
11 (a)  In this section, "notification date" means the earlier of
 
12 the date on which:
 
13      (1)  A secured party sends to the debtor and any secondary
 
14           obligor an authenticated notification of disposition;
 
15           or
 
16      (2)  The debtor and any secondary obligor waive the right to
 
17           notification.
 
18      (b)  Except as otherwise provided in subsection (d), a
 
19 secured party that disposes of collateral under section 490:9-610
 
20 shall send to the persons specified in subsection (c)  a
 
21 reasonable authenticated notification of disposition.
 
22      (c)  To comply with subsection (b), the secured party shall
 
23 send an authenticated notification of disposition to:
 

 
Page 181                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  The debtor;
 
 2      (2)  Any secondary obligor; and
 
 3      (3)  If the collateral is other than consumer goods:
 
 4           (A)  Any other person from which the secured party has
 
 5                received, before the notification date, an
 
 6                authenticated notification of a claim of an
 
 7                interest in the collateral;
 
 8           (B)  Any other secured party or lienholder that, ten
 
 9                days before the notification date, held a security
 
10                interest in or other lien on the collateral
 
11                perfected by the filing of a financing statement
 
12                that:
 
13                (i)  Identified the collateral;
 
14               (ii)  Was indexed under the debtor's name as of
 
15                     that date; and
 
16              (iii)  Was filed in the office in which to file a
 
17                     financing statement against the debtor
 
18                     covering the collateral as of that date; and
 
19           (C)  Any other secured party that, ten days before the
 
20                notification date, held a security interest in the
 
21                collateral perfected by compliance with a statute,
 
22                regulation, or treaty described in section
 
23                490:9-311(a).
 

 
Page 182                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (d)  Subsection (b) does not apply if the collateral is
 
 2 perishable or threatens to decline speedily in value or is of a
 
 3 type customarily sold on a recognized market.
 
 4      (e)  A secured party complies with the requirement for
 
 5 notification prescribed by subsection (c)(3)(B) if:
 
 6      (1)  Not later than twenty days or earlier than thirty days
 
 7           before the notification date, the secured party
 
 8           requests, in a commercially reasonable manner
 
 9           information concerning financing statements indexed
 
10           under the debtor's name in the office indicated in
 
11           subsection (c)(3)(B); and
 
12      (2)  Before the notification date, the secured party:
 
13           (A)  Did not receive a response to the request for
 
14                information; or
 
15           (B)  Received a response to the request for information
 
16                and sent an authenticated notification of
 
17                disposition to each secured party named in that
 
18                response whose financing statement covered the
 
19                collateral.
 
20      490:9-612  Timeliness of notification before disposition of
 
21 collateral.  (a)  Except as otherwise provided in subsection (b),
 
22 whether a notification is sent within a reasonable time is a
 
23 question of fact.
 

 
Page 183                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  In a transaction other than a consumer transaction, a
 
 2 notification of disposition sent after default and ten days or
 
 3 more before the earliest time of disposition set forth in the
 
 4 notification is sent within a reasonable time before the
 
 5 disposition.
 
 6      490:9-613  Contents and form of notification before
 
 7 disposition of collateral: general.  Except in a consumer-goods
 
 8 transaction, the following rules apply:
 
 9      (1)  The contents of a notification of disposition are
 
10           sufficient if the notification:
 
11           (A)  Describes the debtor and the secured party;
 
12           (B)  Describes the collateral that is the subject of
 
13                the intended disposition;
 
14           (C)  States the method of intended disposition;
 
15           (D)  States that the debtor is entitled to an
 
16                accounting of the unpaid indebtedness and states
 
17                the charge, if any, for an accounting; and
 
18           (E)  States the time and place of a public sale or the
 
19                time after which any other disposition is to be
 
20                made.
 
21      (2)  Whether the contents of a notification that lacks any
 
22           of the information specified in paragraph (1) are
 
23           nevertheless sufficient is a question of fact.
 

 
Page 184                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (3)  The contents of a notification providing substantially
 
 2           the information specified in paragraph (1) are
 
 3           sufficient, even if the notification includes:
 
 4           (A)  Information not specified by that paragraph; or
 
 5           (B)  Minor errors that are not seriously misleading.
 
 6      (4)  A particular phrasing of the notification is not
 
 7           required.
 
 8      (5)  The following form of notification and the form
 
 9           appearing in section 490:9-614(3), when completed each
 
10           provides sufficient information:
 
11             NOTIFICATION OF DISPOSITION OF COLLATERAL
 
12      TO:         [Name of debtor, obligor, or other person to
 
13             which the notification is sent]     
 
14      From:       [Name, address, and telephone number of secured
 
15             party]     
 
16      Name of Debtor(s):       [Include only if debtor(s) are not
 
17                          an addressee]     
 
18      [For a public disposition:]
 
19      We will sell [or lease or license, as applicable] the
 
20      [describe collateral]      [to the highest qualified bidder]
 
21 in public as follows:
 
22      Day and Date:      _______________________________
 
23      Time:              _______________________________
 
24      Place:             _______________________________
 
25      [For a private disposition:]
 

 
Page 185                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      We will sell [or lease or license, as applicable]  the
 
 2      [describe collateral]      privately sometime after
 
 3      [day and date]     .
 
 4      You are entitled to an accounting of the unpaid indebtedness
 
 5 secured by the property that we intend to sell [or lease or
 
 6 license, as applicable] [for a charge of $          ].  You may
 
 7 request an accounting by calling us at      [telephone
 
 8 number]     
 
 9                           [End of Form]
 
10      490:9-614  Contents and form of notification before
 
11 disposition of collateral:  Consumer-goods transaction.  In a
 
12 consumer-goods transaction, the following rules apply:
 
13      (1)  A notification of disposition must provide the
 
14           following information:
 
15           (A)  The information specified in section 490:9-613(1);
 
16           (B)  A description of any liability for a deficiency of
 
17                the person to which the notification is sent;
 
18           (C)  A telephone number from which the amount that must
 
19                be paid to the secured party to redeem the
 
20                collateral under section 490:9-623 is available;
 
21                and
 
22           (D)  A telephone number or mailing address from which
 
23                additional information concerning the disposition
 
24                and the obligation secured is available.
 

 
Page 186                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  A particular phrasing of the notification is not
 
 2           required.
 
 3      (3)  The following form of notification, when completed
 
 4           provides sufficient information:
 
 5      [Name and address of secured party]     
 
 6      [Date]     
 
 7                NOTICE OF OUR PLAN TO SELL PROPERTY
 
 8      [Name and address of any obligor who is also a debtor]     
 
 9 Subject:       [Identification of Transaction]     
 
10 
 
11 We have your      [describe collateral]     , because you broke
 
12 promises in our agreement.
 
13 [For a public disposition:]
 
14 We will sell      [describe collateral]      at public sale
 
15 sometime after      [date]     .  A sale could include a lease or
 
16 license.
 
17   The sale will be held as follows:
 
18      Date:         ____________________________________
 
19      Time:         ____________________________________
 
20      Place:        ____________________________________
 
21 You may attend the sale and bring bidders if you want.
 
22 
 

 
 
 
Page 187                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 [For a private disposition:]
 
 2 We will sell      [describe collateral]      at private sale
 
 3 sometime after      [date]     .  A sale could include a lease or
 
 4 license.
 
 5 
 
 6 The money that we get from the sale (after paying our costs) will
 
 7 reduce the amount you owe.  If we get less money than you   owe,
 
 8 you      [will or will not, as applicable]      still owe us the
 
 9 difference.  If we get more money than you owe, you will get the
 
10 extra money, unless we must pay it to someone else.
 
11 
 
12 You can get the property back at any time before we sell it by
 
13 paying us the full amount you owe (not just the past due
 
14 payments), including our expenses.  To learn the exact amount you
 
15 must pay, call us at      [telephone number]     .
 
16 
 
17 If you want us to explain to you in writing how we have figured
 
18 the amount that you owe us, you may call us at      [telephone
 
19 number]      [or write us at      [secured party's address]     ]
 
20 and request a written explanation.  [We will charge you
 
21 $           for the explanation if we sent you   another written
 
22 explanation of the amount you owe us within the last six months.]
 
23 
 

 
Page 188                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 If you need more information about the sale call us at
 
 2      [telephone number]     ] [or write us at      [secured
 
 3 party's address]     ].
 
 4 
 
 5 We are sending this notice to the following other people who have
 
 6 an interest in     [describe collateral]      or who owe money
 
 7 under your agreement:
 
 8      [Names of all other debtors and obligors, if any]     
 
 9                           [End of Form]
 
10      (4)  A notification in the form of paragraph (3) is
 
11           sufficient, even if additional information appears at
 
12           the end of the form.
 
13      (5)  A notification in the form of paragraph (3) is
 
14           sufficient, even if it includes errors in information
 
15           not required by paragraph (1), unless the error is
 
16           misleading with respect to rights arising under this
 
17           article.
 
18      (6)  If a notification under this section is not in the form
 
19           of paragraph (3), law other than this article
 
20           determines the effect of including information not
 
21           required by paragraph (1).
 
22      490:9-615  Application of proceeds of disposition;
 
23 liability for deficiency and right to surplus.  (a)  A secured
 

 
Page 189                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 party shall apply or pay over for application the cash proceeds
 
 2 of disposition in the following order to:
 
 3      (1)  The reasonable expenses of retaking, holding preparing
 
 4           for disposition, processing, and disposing and, to the
 
 5           extent provided for by agreement and not prohibited by
 
 6           law, reasonable attorney's fees and legal expenses
 
 7           incurred by the secured party;
 
 8      (2)  The satisfaction of obligations secured by the security
 
 9           interest or agricultural lien under which the
 
10           disposition is made;
 
11      (3)  The satisfaction of obligations secured by any
 
12           subordinate security interest in or other subordinate
 
13           lien on the collateral if:
 
14           (A)  The secured party receives from the holder of the
 
15                subordinate security interest or other lien an
 
16                authenticated demand for proceeds before
 
17                distribution of the proceeds is completed; and
 
18           (B)  In a case in which a consignor has an interest in
 
19                the collateral, the subordinate security interest
 
20                or other lien is senior to the interest of the
 
21                consignor; and
 
22      (4)  A secured party that is a consignor of the collateral
 
23           if the secured party receives from the consignor an
 

 
Page 190                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           authenticated demand for proceeds before distribution
 
 2           of the proceeds is completed.
 
 3      (b)  If requested by a secured party, a holder of a
 
 4 subordinate security interest or other lien shall furnish
 
 5 reasonable proof of the interest or lien within a reasonable
 
 6 time.  Unless the holder does so, the secured party need not
 
 7 comply with the holder's demand under subsection (a)(3).
 
 8      (c)  A secured party need not apply or pay over for
 
 9 application noncash proceeds of disposition under this section
 
10 unless the failure to do so would be commercially unreasonable.
 
11 A secured party that applies or pays over for application noncash
 
12 proceeds shall do so in a commercially reasonable manner.
 
13      (d)  If the security interest under which a disposition is
 
14 made secures payment or performance of an obligation, after
 
15 making the payments and applications required by subsection (a)
 
16 and permitted by subsection (c):
 
17      (1)  Unless subsection (a)(4) requires the secured party to
 
18           apply or pay over cash proceeds to a consignor, the
 
19           secured party shall account to and pay a debtor for any
 
20           surplus; and
 
21      (2)  The obligor is liable for any deficiency.
 
22      (e)  If the underlying transaction is a sale of accounts,
 
23 chattel paper, payment intangibles, or promissory notes:
 

 
Page 191                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  The debtor is not entitled to any surplus; and
 
 2      (2)  The obligor is not liable for any deficiency.
 
 3      (f)  The surplus or deficiency following a disposition is
 
 4 calculated based on the amount of proceeds that would have been
 
 5 realized in a disposition complying with this part to a
 
 6 transferee other than the secured party, a person related to the
 
 7 secured party, or a secondary obligor if:
 
 8      (1)  The transferee in the disposition is the secured party,
 
 9           a person related to the secured party, or a secondary
 
10           obligor; and
 
11      (2)  The amount of proceeds of the disposition is
 
12           significantly below the range of proceeds that a
 
13           complying disposition to a person other than the
 
14           secured party, a person related to the secured party or
 
15           a secondary obligor would have brought.
 
16      (g)  A secured party that receives cash proceeds of a
 
17 disposition in good faith and without knowledge that the receipt
 
18 violates the rights of the holder of a security interest or other
 
19 lien that is not subordinate to the security interest or
 
20 agricultural lien under which the disposition is made:
 
21      (1)  Takes the cash proceeds free of the security interest
 
22           or other lien;
 

 
 
 
Page 192                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Is not obligated to apply the proceeds of the
 
 2           disposition to the satisfaction of obligations secured
 
 3           by the security interest or other lien; and
 
 4      (3)  Is not obligated to account to or pay the holder of the
 
 5           security interest or other lien for any surplus.
 
 6      490:9-616  Explanation of calculation of surplus or
 
 7 deficiency.  (a)  In this section:
 
 8      (1)  "Explanation" means a writing that:
 
 9           (A)  States the amount of the surplus or deficiency;
 
10           (B)  Provides an explanation in accordance with
 
11                subsection (c) of how the secured party calculated
 
12                the surplus or deficiency;
 
13           (C)  States, if applicable, that future debits,
 
14                credits, charges, including additional credit
 
15                service charges or interest, rebates, and expenses
 
16                may affect the amount of the surplus or
 
17                deficiency; and
 
18           (D)  Provides a telephone number or mailing address
 
19                from which additional information concerning the
 
20                transaction is available.
 
21      (2)  "Request" means a record:
 
22           (A)  Authenticated by a debtor or consumer obligor;
 

 
 
 
Page 193                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           (B)  Requesting that the recipient provide an
 
 2                explanation; and
 
 3           (C)  Sent after disposition of the collateral under
 
 4                section 490:9-610.
 
 5      (b)  In a consumer-goods transaction in which the debtor is
 
 6 entitled to a surplus or a consumer obligor is liable for a
 
 7 deficiency under section 490:9-615, the secured party shall:
 
 8      (1)  Send an explanation to the debtor or consumer obligor
 
 9           as applicable, after the disposition and:
 
10           (A)  Before or when the secured party accounts to the
 
11                debtor and pays any surplus or first makes written
 
12                demand on the consumer obligor after the
 
13                disposition for payment of the deficiency; and
 
14           (B)  Within fourteen days after receipt of a request;
 
15                or
 
16      (2)  In the case of a consumer obligor who is liable for a
 
17           deficiency, within fourteen days after receipt of a
 
18           request, send to the consumer obligor a record waiving
 
19           the secured party's right to a deficiency.
 
20      (c)  To comply with subsection (a)(1)(B), a writing must
 
21 provide the following information in the following order:
 
22      (1)  The aggregate amount of obligations secured by the
 
23           security interest under which the disposition was made,
 

 
Page 194                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           and, if the amount reflects a rebate of unearned
 
 2           interest or credit service charge, an indication of
 
 3           that fact, calculated as of a specified date:
 
 4           (A)  If the secured party takes or receives possession
 
 5                of the collateral after default, not more than
 
 6                thirty-five days before the secured party takes or
 
 7                receives possession; or
 
 8           (B)  If the secured party takes or receives possession
 
 9                of the collateral before default or does not take
 
10                possession of the collateral, not more than
 
11                thirty-five days before the disposition;
 
12      (2)  The amount of proceeds of the disposition;
 
13      (3)  The aggregate amount of the obligations after deducting
 
14           the amount of proceeds;
 
15      (4)  The amount, in the aggregate or by type, and types of
 
16           expenses, including expenses of retaking, holding
 
17           preparing for disposition, processing, and disposing of
 
18           the collateral, and attorney's fees secured by the
 
19           collateral which are known to the secured party and
 
20           relate to the current disposition;
 
21      (5)  The amount, in the aggregate or by type, and types of
 
22           credits, including rebates of interest or credit
 
23           service charges, to which the obligor is known to be
 

 
Page 195                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           entitled and which are not reflected in the amount in
 
 2           paragraph (1); and
 
 3      (6)  The amount of the surplus or deficiency.
 
 4      (d)  A particular phrasing of the explanation is not
 
 5 required.  An explanation complying substantially with the
 
 6 requirements of subsection (a) is sufficient, even if it includes
 
 7 minor errors that are not seriously misleading.
 
 8      (e)  A debtor or consumer obligor is entitled without charge
 
 9 to one response to a request under this section during any six-
 
10 month period in which the secured party did not send to the
 
11 debtor or consumer obligor an explanation pursuant to subsection
 
12 (b)(1).  The secured party may require payment of a charge not
 
13 exceeding $25 for each additional response.
 
14      490:9-617  Rights of transferee of collateral.  (a)  A
 
15 secured party's disposition of collateral after default:
 
16      (1)  Transfers to a transferee for value all of the debtor's
 
17           rights in the collateral;
 
18      (2)  Discharges the security interest under which the
 
19           disposition is made; and
 
20      (3)  Discharges any subordinate security interest or other
 
21           subordinate lien.
 
22      (b)  A transferee that acts in good faith takes free of the
 
23 rights and interests described in subsection (a), even if the
 

 
Page 196                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 secured party fails to comply with this article or the
 
 2 requirements of any judicial proceeding.
 
 3      (c)  If a transferee does not take free of the rights and
 
 4 interests described in subsection (a), the transferee takes the
 
 5 collateral subject to:
 
 6      (1)  The debtor's rights in the collateral;
 
 7      (2)  The security interest or agricultural lien under which
 
 8           the disposition is made; and
 
 9      (3)  Any other security interest or other lien.
 
10      490:9-618  Rights and duties of certain secondary obligors.
 
11 (a)  A secondary obligor acquires the rights and becomes
 
12 obligated to perform the duties of the secured party after the
 
13 secondary obligor:
 
14      (1)  Receives an assignment of a secured obligation from the
 
15           secured party;
 
16      (2)  Receives a transfer of collateral from the secured
 
17           party and agrees to accept the rights and assume the
 
18           duties of the secured party; or
 
19      (3)  Is subrogated to the rights of a secured party with
 
20           respect to collateral.
 
21      (b)  An assignment, transfer, or subrogation described in
 
22 subsection (a):
 

 
 
 
Page 197                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Is not a disposition of collateral under section
 
 2           490:9-610; and
 
 3      (2)  Relieves the secured party of further duties under this
 
 4           article.
 
 5      490:9-619  Transfer of record or legal title.  (a)  In this
 
 6 section, "transfer statement" means a record authenticated by a
 
 7 secured party stating:
 
 8      (1)  That the debtor has defaulted in connection with an
 
 9           obligation secured by specified collateral;
 
10      (2)  That the secured party has exercised its post-default
 
11           remedies with respect to the collateral;
 
12      (3)  That, by reason of the exercise, a transferee has
 
13           acquired the rights of the debtor in the collateral;
 
14           and
 
15      (4)  The name and mailing address of the secured party
 
16           debtor, and transferee.
 
17      (b)  A transfer statement entitles the transferee to the
 
18 transfer of record of all rights of the debtor in the collateral
 
19 specified in the statement in any official filing, recording,
 
20 registration, or certificate-of-title system covering the
 
21 collateral.  If a transfer statement is presented with the
 
22 applicable fee and request form to the official or office
 
23 responsible for maintaining the system, the official or office
 
24 shall:
 

 
Page 198                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Accept the transfer statement;
 
 2      (2)  Promptly amend its records to reflect the transfer; and
 
 3      (3)  If applicable, issue a new appropriate certificate of
 
 4           title in the name of the transferee.
 
 5      (c)  A transfer of the record or legal title to collateral
 
 6 to a secured party under subsection (b) or otherwise is not of
 
 7 itself a disposition of collateral under this article and does
 
 8 not of itself relieve the secured party of its duties under this
 
 9 article.
 
10      490:9-620  Acceptance of collateral in full or partial
 
11 satisfaction of obligation; compulsory disposition of collateral.
 
12 (a)  Except as otherwise provided in subsection (g), a secured
 
13 party may accept collateral in full or partial satisfaction of
 
14 the obligation it secures only if:
 
15      (1)  The debtor consents to the acceptance under subsection
 
16           (c);
 
17      (2)  The secured party does not receive, within the time set
 
18           forth in subsection (d), a notification of objection to
 
19           the proposal authenticated by:
 
20           (A)  A person to which the secured party was required
 
21                to send a proposal under section 490:9-621; or
 
22           (B)  Any other person, other than the debtor, holding
 
23                an interest in the collateral subordinate to the
 

 
Page 199                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1                security interest that is the subject of the
 
 2                proposal;
 
 3      (3)  If the collateral is consumer goods, the collateral is
 
 4           not in the possession of the debtor when the debtor
 
 5           consents to the acceptance; and
 
 6      (4)  Subsection (e) does not require the secured party to
 
 7           dispose of the collateral or the debtor waives the
 
 8           requirement pursuant to section 490:9-624.
 
 9      (b)  A purported or apparent acceptance of collateral under
 
10 this section is ineffective unless:
 
11      (1)  The secured party consents to the acceptance in an
 
12           authenticated record or sends a proposal to the debtor;
 
13           and
 
14      (2)  The conditions of subsection (a) are met.
 
15      (c)  For purposes of this section:
 
16      (1)  A debtor consents to an acceptance of collateral in
 
17           partial satisfaction of the obligation it secures only
 
18           if the debtor agrees to the terms of the acceptance in
 
19           a record authenticated after default; and
 
20      (2)  A debtor consents to an acceptance of collateral in
 
21           full satisfaction of the obligation it secures only if
 
22           the debtor agrees to the terms of the acceptance in a
 
23           record authenticated after default or the secured
 
24           party:
 

 
Page 200                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           (A)  Sends to the debtor after default a proposal that
 
 2                is unconditional or subject only to a condition
 
 3                that collateral not in the possession of the
 
 4                secured party be preserved or maintained;
 
 5           (B)  In the proposal, proposes to accept collateral in
 
 6                full satisfaction of the obligation it secures;
 
 7                and
 
 8           (C)  Does not receive a notification of objection
 
 9                authenticated by the debtor within twenty days
 
10                after the proposal is sent.
 
11      (d)  To be effective under subsection (a)(2), a notification
 
12 of objection must be received by the secured party:
 
13      (1)  In the case of a person to which the proposal was sent
 
14           pursuant to section 490:9-621, within twenty days after
 
15           notification was sent to that person; and
 
16      (2)  In other cases:
 
17           (A)  Within twenty days after the last notification was
 
18                sent pursuant to section 490:9-621; or
 
19           (B)  If a notification was not sent, before the debtor
 
20                consents to the acceptance under subsection (c).
 
21      (e)  A secured party that has taken possession of collateral
 
22 shall dispose of the collateral pursuant to section 490:9-610
 
23 within the time specified in subsection (f) if:
 

 
Page 201                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Sixty per cent of the cash price has been paid in the
 
 2           case of a purchase-money security interest in consumer
 
 3           goods; or
 
 4      (2)  Sixty per cent of the principal amount of the
 
 5           obligation secured has been paid in the case of a non-
 
 6           purchase-money security interest in consumer goods.
 
 7      (f)  To comply with subsection (e), the secured party shall
 
 8 dispose of the collateral:
 
 9      (1)  Within ninety days after taking possession; or
 
10      (2)  Within any longer period to which the debtor and all
 
11           secondary obligors have agreed in an agreement to that
 
12           effect entered into and authenticated after default.
 
13      (g)  In a consumer transaction, a secured party may not
 
14 accept collateral in partial satisfaction of the obligation it
 
15 secures.
 
16      490:9-621  Notification of proposal to accept collateral.
 
17 (a)  A secured party that desires to accept collateral in full or
 
18 partial satisfaction of the obligation it secures shall send its
 
19 proposal to:
 
20      (1)  Any person from which the secured party has received
 
21           before the debtor consented to the acceptance, an
 
22           authenticated notification of a claim of an interest in
 
23           the collateral;
 

 
Page 202                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Any other secured party or lienholder that, ten days
 
 2           before the debtor consented to the acceptance, held a
 
 3           security interest in or other lien on the collateral
 
 4           perfected by the filing of a financing statement that:
 
 5           (A)  Identified the collateral;
 
 6           (B)  Was indexed under the debtor's name as of that
 
 7                date; and
 
 8           (C)  Was filed in the office or offices in which to
 
 9                file a financing statement against the debtor
 
10                covering the collateral as of that date; and
 
11      (3)  Any other secured party that, ten days before the
 
12           debtor consented to the acceptance, held a security
 
13           interest in the collateral perfected by compliance with
 
14           a statute, regulation, or treaty described in section
 
15           490:9-311(a).
 
16      (b)  A secured party that desires to accept collateral in
 
17 partial satisfaction of the obligation it secures shall send its
 
18 proposal to any secondary obligor in addition to the persons
 
19 described in subsection (a).
 
20      490:9-622  Effect of acceptance of collateral.  (a)  A
 
21 secured party's acceptance of collateral in full or partial
 
22 satisfaction of the obligation it secures:
 

 
 
 
Page 203                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Discharges the obligation to the extent consented to by
 
 2           the debtor;
 
 3      (2)  Transfers to the secured party all of a debtor's rights
 
 4           in the collateral;
 
 5      (3)  Discharges the security interest or agricultural lien
 
 6           that is the subject of the debtor's consent and any
 
 7           subordinate security interest or other subordinate
 
 8           lien; and
 
 9      (4)  Terminates any other subordinate interest.
 
10      (b)  A subordinate interest is discharged or terminated
 
11 under subsection (a), even if the secured party fails to comply
 
12 with this article.
 
13      490:9-623  Right to redeem collateral.  (a)  A debtor, any
 
14 secondary obligor, or any other secured party or lienholder may
 
15 redeem collateral.
 
16      (b)  To redeem collateral, a person shall tender:
 
17      (1)  Fulfillment of all obligations secured by the
 
18           collateral; and
 
19      (2)  The reasonable expenses and attorney's fees described
 
20           in section 490:9-615(a)(1).
 
21      (c)  A redemption may occur at any time before a secured
 
22 party:
 

 
 
 
Page 204                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  Has collected collateral under section 490:9-607;
 
 2      (2)  Has disposed of collateral or entered into a contract
 
 3           for its disposition under section 490:9-610; or
 
 4      (3)  Has accepted collateral in full or partial satisfaction
 
 5           of the obligation it secures under section 490:9-622.
 
 6      490:9-624  Waiver.  (a)  A debtor or secondary obligor may
 
 7 waive the right to notification of disposition of collateral
 
 8 under section 490:9-611 only by an agreement to that effect
 
 9 entered into and authenticated after default.
 
10      (b)  A debtor may waive the right to require disposition of
 
11 collateral under section 490:9-620(e) only by an agreement to
 
12 that effect entered into and authenticated after default.
 
13      (c)  Except in a consumer-goods transaction, a debtor or
 
14 secondary obligor may waive the right to redeem collateral under
 
15 section 490:9-623 only by an agreement to that effect entered
 
16 into and authenticated after default.
 
17              SUBPART 2.  NONCOMPLIANCE WITH ARTICLE
 
18      490:9-625  Remedies for secured party's failure to comply
 
19 with article.  (a)  If it is established that a secured party is
 
20 not proceeding in accordance with this article, a court may order
 
21 or restrain collection, enforcement, or disposition of collateral
 
22 on appropriate terms and conditions.
 

 
 
 
Page 205                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  Subject to subsections (c), (d), and (f), a person is
 
 2 liable for damages in the amount of any loss caused by a failure
 
 3 to comply with this article.  Loss caused by a failure to comply
 
 4 with a request under section 490:9-210 may include loss resulting
 
 5 from the debtor's inability to obtain, or increased costs of,
 
 6 alternative financing.
 
 7      (c)  Except as otherwise provided in section 490:9-628:
 
 8      (1)  A person that, at the time of the failure, was a
 
 9           debtor, was an obligor, or held a security interest in
 
10           or other lien on the collateral may recover damages
 
11           under subsection (b) for its loss; and
 
12      (2)  If the collateral is consumer goods, a person that was
 
13           a debtor or a secondary obligor at the time a secured
 
14           party failed to comply with this part may recover for
 
15           that failure in any event an amount not less than the
 
16           credit service charge plus ten per cent of the
 
17           principal amount of the obligation or the time-price
 
18           differential plus ten per cent of the cash price.
 
19      (d)  A debtor whose deficiency is eliminated under section
 
20 490:9-626 may recover damages for the loss of any surplus.
 
21 However, a debtor or secondary obligor whose deficiency is
 
22 eliminated or reduced under section 490:9-626 may not otherwise
 

 
 
 
Page 206                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 recover under subsection (b) for noncompliance with the
 
 2 provisions of this part relating to collection, enforcement,
 
 3 disposition, or acceptance.
 
 4      (e)  In addition to any damages recoverable under subsection
 
 5 (b), the debtor, consumer obligor, or person named as a debtor in
 
 6 a filed record, as applicable, may recover $500 in each case from
 
 7 a person that:
 
 8      (1)  Fails to comply with section 490:9-208;
 
 9      (2)  Fails to comply with section 490:9-209;
 
10      (3)  Files a record that the person is not entitled to file
 
11           under section 490:9-509(a);
 
12      (4)  Fails to cause the secured party of record to file or
 
13           send a termination statement as required by section
 
14           490:9-513(a) or (c);
 
15      (5)  Fails to comply with section 490:9-616(b)(1) and whose
 
16           failure is part of a pattern, or consistent with a
 
17           practice, of noncompliance; or
 
18      (6)  Fails to comply with section 490:9-616(b)(2).
 
19      (f)  A debtor or consumer obligor may recover damages under
 
20 subsection (b) and, in addition, $500 in each case from a person
 
21 that, without reasonable cause, fails to comply with a request
 
22 under section 490:9-210.  A recipient of a request under section
 
23 490:9-210 which never claimed an interest in the collateral or
 

 
Page 207                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1 obligations that are the subject of a request under that section
 
 2 has a reasonable excuse for failure to comply with the request
 
 3 within the meaning of this subsection.
 
 4      (g)  If a secured party fails to comply with a request
 
 5 regarding a list of collateral or a statement of account under
 
 6 section 490:9-210, the secured party may claim a security
 
 7 interest only as shown in the statement included in the request
 
 8 as against a person that is reasonably misled by the failure.
 
 9      490:9-626  Action in which deficiency or surplus is in
 
10 issue.  (a)  In an action arising from a transaction, other than
 
11 a consumer transaction, in which the amount of a deficiency or
 
12 surplus is in issue, the following rules apply:
 
13      (1)  A secured party need not prove compliance with the
 
14           provisions of this part relating to collection
 
15           enforcement, disposition, or acceptance unless the
 
16           debtor or a secondary obligor places the secured
 
17           party's compliance in issue.
 
18      (2)  If the secured party's compliance is placed in issue
 
19           the secured party has the burden of establishing that
 
20           the collection, enforcement, disposition, or acceptance
 
21           was conducted in accordance with this part.
 
22      (3)  Except as otherwise provided in section 490:9-628, if a
 
23           secured party fails to prove that the collection
 

 
Page 208                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           enforcement, disposition, or acceptance was conducted
 
 2           in accordance with the provisions of this part relating
 
 3           to collection, enforcement, disposition, or acceptance,
 
 4           the liability of a debtor or a secondary obligor for a
 
 5           deficiency is limited to an amount by which the sum of
 
 6           the secured obligation, expenses, and attorney's fees
 
 7           exceeds the greater of:
 
 8           (A)  The proceeds of the collection, enforcement
 
 9                disposition, or acceptance; or
 
10           (B)  The amount of proceeds that would have been
 
11                realized had the noncomplying secured party
 
12                proceeded in accordance with the provisions of
 
13                this part relating to collection, enforcement
 
14                disposition, or acceptance.
 
15      (4)  For purposes of paragraph (3)(B), the amount of
 
16           proceeds that would have been realized is equal to the
 
17           sum of the secured obligation, expenses, and attorney's
 
18           fees unless the secured party proves that the amount is
 
19           less than that sum.
 
20      (5)  If a deficiency or surplus is calculated under section
 
21           490:9-615(f), the debtor or obligor has the burden of
 
22           establishing that the amount of proceeds of the
 
23           disposition is significantly below the range of prices
 

 
Page 209                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1           that a complying disposition to a person other than the
 
 2           secured party, a person related to the secured party,
 
 3           or a secondary obligor would have brought.
 
 4      (b)  The limitation of the rules in subsection (a) to
 
 5 transactions other than consumer transactions is intended to
 
 6 leave to the court the determination of the proper rules in
 
 7 consumer transactions.  The court may not infer from that
 
 8 limitation the nature of the proper rule in consumer transactions
 
 9 and may continue to apply established approaches.
 
10      490:9-627  Determination of whether conduct was
 
11 commercially reasonable.  (a)  The fact that a greater amount
 
12 could have been obtained by a collection, enforcement,
 
13 disposition, or acceptance at a different time or in a different
 
14 method from that selected by the secured party is not of itself
 
15 sufficient to preclude the secured party from establishing that
 
16 the collection, enforcement, disposition, or acceptance was made
 
17 in a commercially reasonable manner.
 
18      (b)  A disposition of collateral is made in a commercially
 
19 reasonable manner if the disposition is made:
 
20      (1)  In the usual manner on any recognized market;
 
21      (2)  At the price current in any recognized market at the
 
22           time of the disposition; or
 

 
 
 
Page 210                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (3)  Otherwise in conformity with reasonable commercial
 
 2           practices among dealers in the type of property that
 
 3           was the subject of the disposition.
 
 4      (c)  A collection, enforcement, disposition, or acceptance
 
 5 is commercially reasonable if it has been approved:
 
 6      (1)  In a judicial proceeding;
 
 7      (2)  By a bona fide creditors' committee;
 
 8      (3)  By a representative of creditors; or
 
 9      (4)  By an assignee for the benefit of creditors.
 
10      (d)  Approval under subsection (c) need not be obtained, and
 
11 lack of approval does not mean that the collection, enforcement,
 
12 disposition, or acceptance is not commercially reasonable.
 
13      490:9-628  Nonliability and limitation on liability of
 
14 secured party; liability of secondary obligor.  (a)  Unless a
 
15 secured party knows that a person is a debtor or obligor, knows
 
16 the identity of the person, and knows how to communicate with the
 
17 person:
 
18      (1)  The secured party is not liable to the person, or to a
 
19           secured party or lienholder that has filed a financing
 
20           statement against the person, for failure to comply
 
21           with this article; and
 
22      (2)  The secured party's failure to comply with this article
 
23           does not affect the liability of the person for a
 
24           deficiency.
 

 
Page 211                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (b)  A secured party is not liable because of its status as
 
 2 secured party:
 
 3      (1)  To a person that is a debtor or obligor, unless the
 
 4           secured party knows:
 
 5           (A)  That the person is a debtor or obligor;
 
 6           (B)  The identity of the person; and
 
 7           (C)  How to communicate with the person; or
 
 8      (2)  To a secured party or lienholder that has filed a
 
 9           financing statement against a person, unless the
 
10           secured party knows:
 
11           (A)  That the person is a debtor; and
 
12           (B)  The identity of the person.
 
13      (c)  A secured party is not liable to any person, and a
 
14 person's liability for a deficiency is not affected, because of
 
15 any act or omission arising out of the secured party's reasonable
 
16 belief that a transaction is not a consumer-goods transaction or
 
17 a consumer transaction or that goods are not consumer goods, if
 
18 the secured party's belief is based on its reasonable reliance
 
19 on:
 
20      (1)  A debtor's representation concerning the purpose for
 
21           which collateral was to be used, acquired, or held; or
 
22      (2)  An obligor's representation concerning the purpose for
 
23           which a secured obligation was incurred.
 

 
Page 212                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (d)  A secured party is not liable to any person under
 
 2 section 490:9-625(c)(2) for its failure to comply with section
 
 3 490:9-616.
 
 4      (e)  A secured party is not liable under section
 
 5 490:9-625(c)(2) more than once with respect to any one secured
 
 6 obligation.
 
 7                        PART 7.  TRANSITION
 
 8      490:9-701  Effective date.  This article takes effect on
 
 9 July 1, 2001.
 
10      490:9-702  Savings clause.  (a)  Except as otherwise
 
11 provided in this part, this article applies to a transaction or
 
12 lien within its scope, even if the transaction or lien was
 
13 entered into or created before this article takes effect.
 
14      (b)  Except as otherwise provided in subsection (c) and
 
15 sections 490:9-703 through 490:9-708:
 
16      (1)  Transactions and liens that were not governed by former
 
17           Article 9, were validly entered into or created before
 
18           this article takes effect, and would be subject to this
 
19           article if they had been entered into or created after
 
20           this article takes effect, and the rights, duties, and
 
21           interests flowing from those transactions and liens,
 
22           remain valid after this article takes effect; and
 

 
 
 
Page 213                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  The transactions and liens may be terminated,
 
 2           completed, consummated, and enforced as required or
 
 3           permitted by this article or by the law that otherwise
 
 4           would apply if this article had not taken effect.
 
 5      (c)  This article does not affect an action, case, or
 
 6 proceeding commenced before this article takes effect.
 
 7      490:9-703  Security interest perfected before effective
 
 8 date.  (a)  A security interest that is enforceable immediately
 
 9 before this article takes effect and would have priority over the
 
10 rights of a person that becomes a lien creditor at that time is a
 
11 perfected security interest under this article if, when this
 
12 article takes effect, the applicable requirements for
 
13 enforceability and perfection under this article are satisfied
 
14 without further action.
 
15      (b)  Except as otherwise provided in section 490:9-705, if,
 
16 immediately before this article takes effect, a security interest
 
17 is enforceable and would have priority over the rights of a
 
18 person that becomes a lien creditor at that time, but the
 
19 applicable requirements for enforceability or perfection under
 
20 this article are not satisfied when this article takes effect,
 
21 the security interest:
 
22      (1)  Is a perfected security interest for one year after
 
23           this article takes effect;
 

 
Page 214                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (2)  Remains enforceable thereafter only if the security
 
 2           interest becomes enforceable under section 490:9-203
 
 3           before the year expires; and
 
 4      (3)  Remains perfected thereafter only if the applicable
 
 5           requirements for perfection under this article are
 
 6           satisfied before the year expires.
 
 7      490:9-704  Security interest unperfected before effective
 
 8 date.  A security interest that is enforceable immediately before
 
 9 this article takes effect but which would be subordinate to the
 
10 rights of a person that becomes a lien creditor at that time:
 
11      (1)  Remains an enforceable security interest for one year
 
12           after this article takes effect;
 
13      (2)  Remains enforceable thereafter if the security interest
 
14           becomes enforceable under section 490:9-203 when this
 
15           article takes effect or within one year thereafter; and
 
16      (3)  Becomes perfected:
 
17           (A)  Without further action, when this article takes
 
18                effect if the applicable requirements for
 
19                perfection under this article are satisfied before
 
20                or at that time; or
 
21           (B)  When the applicable requirements for perfection
 
22                are satisfied if the requirements are satisfied
 
23                after that time.
 

 
Page 215                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      490:9-705  Effectiveness of action taken before effective
 
 2 date.  (a)  If action, other than the filing of a financing
 
 3 statement, is taken before this article takes effect and the
 
 4 action would have resulted in priority of a security interest
 
 5 over the rights of a person that becomes a lien creditor had the
 
 6 security interest become enforceable before this article takes
 
 7 effect, the action is effective to perfect a security interest
 
 8 that attaches under this article within one year after this
 
 9 article takes effect.  An attached security interest becomes
 
10 unperfected one year after this article takes effect unless the
 
11 security interest becomes a perfected security interest under
 
12 this article before the expiration of that period.
 
13      (b)  The filing of a financing statement before this article
 
14 takes effect is effective to perfect a security interest to the
 
15 extent the filing would satisfy the applicable requirements for
 
16 perfection under this article.
 
17      (c)  This article does not render ineffective an effective
 
18 financing statement that, before this article takes effect, is
 
19 filed and satisfies the applicable requirements for perfection
 
20 under the law of the jurisdiction governing perfection as
 
21 provided in the former section 490:9-103.  However, except as
 
22 otherwise provided in subsections (d) and (e) and section 490:9-
 
23 706, the financing statement ceases to be effective at the
 
24 earlier of:
 

 
Page 216                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        C.D. 1

 
 1      (1)  The time the financing statement would have ceased to
 
 2           be effective under the law of the jurisdiction in which
 
 3           it is filed; or
 
 4      (2)  June 30, 2006.
 
 5      (d)  The filing of a continuation statement after this
 
 6 article takes effect does not continue the effectiveness of the
 
 7 financing statement filed before this article takes effect.
 
 8 However, upon the timely filing of a continuation statement after
 
 9 this article takes effect and in accordance with the law of the
 
10 jurisdiction governing perfection as provided in part 3, the
 
11 effectiveness of a financing statement filed in the same office
 
12 in that jurisdiction before this article takes effect continues
 
13 for the period provided by the law of that jurisdiction.
 
14      (e)  Subsection (c)(2) applies to a financing statement
 
15 that, before this article takes effect, is filed against a
 
16 transmitting utility and satisfies the applicable requirements
 
17 for perfection under the law of the jurisdiction governing
 
18 perfection as provided in the former section 490:9-103 only to
 
19 the extent that part 3 provides that the law of a jurisdiction
 
20 other than a jurisdiction in which the financing statement is
 
21 filed governs perfection of a security interest in collateral
 
22 covered by the financing statement.
 

 
 
 
Page 217                                                   1938
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 1      (f)  A financing statement that includes a financing
 
 2 statement filed before this article takes effect and a
 
 3 continuation statement filed after this article takes effect is
 
 4 effective only to the extent that it satisfies the requirements
 
 5 of part 5 for an initial financing statement.
 
 6      490:9-706  When initial financing statement suffices to
 
 7 continue effectiveness of financing statement.  (a)  The filing
 
 8 of an initial financing statement in the office specified in
 
 9 section 490:9-501 continues the effectiveness of a financing
 
10 statement filed before this article takes effect if:
 
11      (1)  The filing of an initial financing statement in that
 
12           office would be effective to perfect a security
 
13           interest under this article;
 
14      (2)  The pre-effective-date financing statement was filed in
 
15           an office in another state or another office in this
 
16           State; and
 
17      (3)  The initial financing statement satisfies subsection
 
18           (c).
 
19      (b)  The filing of an initial financing statement under
 
20 subsection (a) continues the effectiveness of the pre-effective-
 
21 date financing statement:
 
22      (1)  If the initial financing statement is filed before this
 
23           article takes effect, for the period provided in the
 

 
Page 218                                                   1938
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 1           former section 490:9-403 with respect to a financing
 
 2           statement; and
 
 3      (2)  If the initial financing statement is filed after this
 
 4           article takes effect, for the period provided in
 
 5           section 490:9-515 with respect to an initial financing
 
 6           statement.
 
 7      (c)  To be effective for purposes of subsection (a), an
 
 8 initial financing statement must:
 
 9      (1)  Satisfy the requirements of part 5 for an initial
 
10           financing statement;
 
11      (2)  Identify the pre-effective-date financing statement by
 
12           indicating the office in which the financing statement
 
13           was filed and providing the dates of filing and file
 
14           numbers, if any, of the financing statement and of the
 
15           most recent continuation statement filed with respect
 
16           to the financing statement; and
 
17      (3)  Indicate that the pre-effective-date financing
 
18           statement remains effective.
 
19      490:9-707  Persons entitled to file initial financing
 
20 statement or continuation statement.  A person may file an
 
21 initial financing statement or a continuation statement under
 
22 this part if:
 

 
 
 
Page 219                                                   1938
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 1      (1)  The secured party of record authorizes the filing; and
 
 2      (2)  The filing is necessary under this part:
 
 3           (A)  To continue the effectiveness of a financing
 
 4                statement filed before this article takes effect;
 
 5                or
 
 6           (B)  To perfect or continue the perfection of a
 
 7                security interest.
 
 8      490:9-708  Priority.  (a)  This article determines the
 
 9 priority of conflicting claims to collateral.  However, if the
 
10 relative priorities of the claims were established before this
 
11 article takes effect, the former Article 9 determines priority.
 
12      (b)  For purposes of section 490:9-322(a), the priority of a
 
13 security interest that becomes enforceable under section
 
14 490:9-203 of this article dates from the time this article takes
 
15 effect if the security interest is perfected under this article
 
16 by the filing of a financing statement before this article takes
 
17 effect which would not have been effective to perfect the
 
18 security interest under the former Article 9.  This subsection
 
19 does not apply to conflicting security interests each of which is
 
20 perfected by the filing of such a financing statement."
 
21      SECTION 2.  Chapter 490, Hawaii Revised Statutes, is amended
 
22 by adding to article 5 a new section to be appropriately
 
23 designated and to read as follows:
 

 
Page 220                                                   1938
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 1      "490:5-     Security interest of issuer or nominated
 
 2 person.  (a)  An issuer or nominated person has a security
 
 3 interest in a document presented under a letter of credit to the
 
 4 extent that the issuer or nominated person honors or gives value
 
 5 for the presentation.
 
 6      (b)  So long as and to the extent that an issuer or
 
 7 nominated person has not been reimbursed or has not otherwise
 
 8 recovered the value given with respect to a security interest in
 
 9 a document under subsection (a), the security interest continues
 
10 and is subject to Article 9, but:
 
11      (1)  A security agreement is not necessary to make the
 
12           security interest enforceable under section
 
13           490:9-203(b)(3);
 
14      (2)  If the document is presented in a medium other than a
 
15           written or other tangible medium, the security interest
 
16           is perfected; and
 
17      (3)  If the document is presented in a written or other
 
18           tangible medium and is not a certificated security
 
19           chattel paper, a document of title, an instrument, or a
 
20           letter of credit, the security interest is perfected
 
21           and has priority over a conflicting security interest
 
22           in the document so long as the debtor does not have
 
23           possession of the document."
 

 
Page 221                                                   1938
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 1      SECTION 3.  Section 286-52, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (e) to read as follows:
 
 3      "(e)  Until the director of finance has issued the new
 
 4 certificate of registration and certificate of ownership as in
 
 5 subsection (d) provided, delivery of such vehicle shall be deemed
 
 6 not to have been made and title thereto shall be deemed not to
 
 7 have passed, and the intended transfer shall be deemed to be
 
 8 incomplete and not to be valid or effective for any purpose,
 
 9 notwithstanding any provision of the Uniform Commercial Code;
 
10 provided that a security interest in a motor vehicle shall be
 
11 perfected as provided in the Uniform Commercial Code, [sections
 
12 490:9-302(3)(b) and 490:9-302(4),] section 490:9-311 and that the
 
13 validity, attachment, priority, and enforcement of such security
 
14 interest shall be governed by Article 9 of the Code."
 
15      SECTION 4.  Section 476-1, Hawaii Revised Statutes, is
 
16 amended by amending the definition of "goods" to read as follows:
 
17      ""Goods" include all things which are movable at the time
 
18 the credit sale is entered into or which will be movable when
 
19 they thereafter come into existence or which are or will be
 
20 fixtures [(section 490:9-313),] (sections 490:9-334 and
 
21 490:9-604), but except as provided in this paragraph does not
 
22 include money, documents, instruments, accounts, chattel paper,
 
23 general intangibles, or minerals or the like (including oil and
 

 
Page 222                                                   1938
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 1 gas) before extraction.  "Goods" include standing timber which is
 
 2 to be cut and removed under a conveyance or contract for sale,
 
 3 the unborn young animals, growing crops, and merchandise
 
 4 certificates or coupons, issued by a credit seller, to be used in
 
 5 the face amount in lieu of cash in exchange for goods sold by
 
 6 such a seller."
 
 7      SECTION 5.  Section 506-1, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (b) to read as follows:
 
 9      "(b)  A mortgage may secure the repayment of past debt, a
 
10 debt incurred at the time the mortgage is executed, or a debt
 
11 incurred for advances which may be made by the mortgagee
 
12 subsequent to the execution of the mortgage even though the
 
13 mortgagee is under no contractual duty to make these advances.
 
14 Except as otherwise provided in [section 490:9-313] sections
 
15 490:9-334 and 490:9-604 of the Uniform Commercial Code with
 
16 respect to security interests in fixtures, a mortgage which
 
17 secures future advances, up to but not exceeding the maximum
 
18 amount of future advances stated in the mortgage, shall be
 
19 superior to any subsequently recorded mortgage, lien, or other
 
20 encumbrances or conveyance, other than liens for real property
 
21 taxes and assessments for public improvements, even though the
 
22 subsequently recorded mortgage, lien, or other encumbrance or
 
23 conveyance is recorded prior to the date upon which any advance
 
24 or advances have been made."
 

 
Page 223                                                   1938
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 1      SECTION 6.  Section 506-2, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  Subject to the limitations contained in this chapter
 
 4 and to [section 490:9-313] sections 490:9-334 and 490:9-604 of
 
 5 the Uniform Commercial Code respecting security interests in
 
 6 fixtures, if the mortgage so provides, the lien of the mortgage
 
 7 may attach to additions, improvements, and purchases or
 
 8 substitutions made to supply the place of any real property or
 
 9 fixtures disposed of and to all other after-acquired real
 
10 property or fixtures referred to in the mortgage when the
 
11 mortgagor acquires an interest therein to the extent of the
 
12 interest, but subject to existing liens and the lien of a
 
13 purchase money mortgage given by the mortgagor of any such after-
 
14 acquired real property or fixtures."
 
15      SECTION 7.  Section 712A-1, Hawaii Revised Statutes, is
 
16 amended by amending the definition of "owner" to read as follows:
 
17      ""Owner" means a person who is not a secured party within
 
18 the meaning of section [[490:9-105(1)]] 490:9-102 and who has an
 
19 interest in property, whether legal or equitable.  A purported
 
20 interest which is not in compliance with any statute requiring
 
21 its recordation or reflection in public records in order to
 
22 perfect the interest against a bona fide purchaser for value
 
23 shall not be recognized as an interest against this State in an
 

 
Page 224                                                   1938
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 1 action pursuant to this chapter.  An owner with power to convey
 
 2 property binds other owners, and a spouse binds the person's
 
 3 spouse, by any act or omission."
 
 4      SECTION 8.  Section 490:1-105, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (2) to read as follows:
 
 6      "(2)  Where one of the following provisions of this chapter
 
 7 specifies the applicable law, that provision governs and a
 
 8 contrary agreement is effective only to the extent permitted by
 
 9 the law (including the conflict of laws rules) so specified:
 
10      Rights of creditors against sold goods.  Section 490:2-402.
 
11      Applicability of the Article on Leases.  Sections 490:2A-105
 
12 and 490:2A-106.
 
13      Applicability of the Article on Bank Deposits and
 
14 Collections.  Section 490:4-102.
 
15      Governing law in the Article on Funds Transfers.  Section
 
16 490:4A-507.
 
17      Letters of Credit.  Section 490:5-116.
 
18      Applicability of the Article on Investment Securities.
 
19 Section 490:8-110.
 
20      [Perfection provisions of the Article on Secured
 
21 Transactions.  Section 490:9-103.]
 
22      Law governing perfection, the effect of perfection or
 
23 nonperfection, and the priority of security interests and
 
24 agricultural liens.  Sections 490:9-301 through 490:9-339."
 

 
Page 225                                                   1938
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 1      SECTION 9.  Section 490:1-201, Hawaii Revised Statutes, is
 
 2 amended as follows:
 
 3      1.  By amending the definition of "buyer in ordinary course
 
 4 of business" to read:
 
 5      "(9)  "Buyer in ordinary course of business" means a person
 
 6 [who] that buys goods in good faith [and], without knowledge that
 
 7 the sale [to him is in violation of] violates the [ownership]
 
 8 rights [or security interest] of [a third party] another person
 
 9 in the goods [buys], and in the ordinary course from a person,
 
10 other than a pawnbroker, in the business of selling goods of that
 
11 kind [but does not include a pawnbroker.  All persons who sell
 
12 minerals or the like (including oil and gas) at wellhead or
 
13 minehead shall be deemed to be persons].  A person buys goods in
 
14 in the ordinary course if the sale to the person comports with
 
15 the usual or customary practices in the kind of business in which
 
16 the seller is engaged or with the seller's own usual or customary
 
17 practices.  A person that sells oil, gas, or other minerals at
 
18 the wellhead or minehead is a person in the business of selling
 
19 goods of that kind.  ["Buying"] A buyer in ordinary course of
 
20 business may [be] buy for cash [or], by exchange of other
 
21 property, or on secured or unsecured credit, and [includes
 
22 receiving] may acquire goods or documents of title under a
 
23 preexisting contract for sale [but does not include a transfer in
 

 
Page 226                                                   1938
                                     H.B. NO.           H.D. 1
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 1 bulk or as security for or in total or partial satisfaction of a
 
 2 money debt].  Only a buyer that takes possession of the goods or
 
 3 has a right to recover the goods from the seller under Article 2
 
 4 may be a buyer in ordinary course of business.  A person that
 
 5 acquires goods in a transfer in bulk or as security for or in
 
 6 total or partial satisfaction of a money debt is not a buyer in
 
 7 ordinary course of business."
 
 8      2.  By amending the definition of "purchase" to read:
 
 9      "(32)  "Purchase" includes taking by sale, discount,
 
10 negotiation, mortgage, pledge, lien, security interest, issue or
 
11 reissue, gift, or any other voluntary transaction creating an
 
12 interest in property."
 
13      3.  By amending the definition of "security interest" to
 
14 read:
 
15      "(37)  "Security interest" means an interest in personal
 
16 property or fixtures which secures payment or performance of an
 
17 obligation.  [The retention or reservation of title by a seller
 
18 of goods notwithstanding shipment or delivery to the buyer
 
19 (section 490:2-401) is limited in effect to a reservation of a
 
20 "security interest".] The term also includes any interest of a
 
21 consignor and a buyer of accounts [or], chattel paper [which], a
 
22 payment intangible, or a promissory note in a transaction that is
 
23 subject to Article 9.  The special property interest of a buyer
 

 
Page 227                                                   1938
                                     H.B. NO.           H.D. 1
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 1 of goods on identification of those goods to a contract for sale
 
 2 under section 490:2-401 is not a "security interest", but a buyer
 
 3 may also acquire a "security interest" by complying with Article
 
 4 9.  [Unless a consignment is intended as security, reservation of
 
 5 title thereunder is not a "security interest", but a consignment
 
 6 in any event is subject to the provisions on consignment sales
 
 7 (section 490:2-326).] Except as otherwise provided in section
 
 8 490:2-505, the right of a seller or lessor of goods under Article
 
 9 2 or 2A to retain or acquire possession of the goods is not a
 
10 "security interest", but a seller or lessor may also acquire a
 
11 "security interest" by complying with Article 9.  The retention
 
12 or reservation of title by a seller of goods notwithstanding
 
13 shipment or delivery to the buyer (section 490:2-401) is limited
 
14 in effect to a reservation of a "security interest".
 
15      Whether a transaction creates a lease or security interest
 
16 is determined by the facts of each case; however, a transaction
 
17 creates a security interest if the consideration the lessee is to
 
18 pay the lessor for the right to possession and use of the goods
 
19 is an obligation for the term of the lease not subject to
 
20 termination by the lessee, and:
 
21      (a)  The original term of the lease is equal to or greater
 
22           than the remaining economic life of the goods;
 

 
 
 
Page 228                                                   1938
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 1      (b)  The lessee is bound to renew the lease for the
 
 2           remaining economic life of the goods or is bound to
 
 3           become the owner of the goods;
 
 4      (c)  The lessee has an option to renew the lease for the
 
 5           remaining economic life of the goods for no additional
 
 6           consideration or nominal additional consideration upon
 
 7           compliance with the lease agreement; or
 
 8      (d)  The lessee has an option to become the owner of the
 
 9           goods for no additional consideration or nominal
 
10           additional consideration upon compliance with the lease
 
11           agreement.
 
12      A transaction does not create a security interest merely
 
13 because it provides that:
 
14      (a)  The present value of the consideration the lessee is
 
15           obligated to pay the lessor for the right to possession
 
16           and use of the goods is substantially equal to or is
 
17           greater than the fair market value of the goods at the
 
18           time the lease is entered into;
 
19      (b)  The lessee assumes risk of loss of the goods, or agrees
 
20           to pay taxes, insurance, filing, recording, or
 
21           registration fees, or service or maintenance costs with
 
22           respect to the goods;
 

 
 
 
Page 229                                                   1938
                                     H.B. NO.           H.D. 1
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 1      (c)  The lessee has an option to renew the lease or to
 
 2           become the owner of the goods;
 
 3      (d)  The lessee has an option to renew the lease for a fixed
 
 4           rent that is equal to or greater than the reasonably
 
 5           predictable fair market rent for the use of the goods
 
 6           for the term of the renewal at the time the option is
 
 7           to be performed; or
 
 8      (e)  The lessee has an option to become the owner of the
 
 9           goods for a fixed price that is equal to or greater
 
10           than the reasonably predictable fair market value of
 
11           the goods at the time the option is to be performed.
 
12      For purposes of this subsection (37):
 
13      (x)  Additional consideration is not nominal if (i) when the
 
14           option to renew the lease is granted to the lessee the
 
15           rent is stated to be the fair market rent for the use
 
16           of the goods for the term of the renewal determined at
 
17           the time the option is to be performed, or (ii) when
 
18           the option to become the owner of the goods is granted
 
19           to the lessee the price is stated to be the fair market
 
20           value of the goods determined at the time the option is
 
21           to be performed.  Additional consideration is nominal
 
22           if it is less than the lessee's reasonably predictable
 
23           cost of performing under the lease agreement if the
 
24           option is not exercised;
 

 
Page 230                                                   1938
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 1      (y)  "Reasonably predictable" and "remaining economic life
 
 2           of the goods" are to be determined with reference to
 
 3           the facts and circumstances at the time the transaction
 
 4           is entered into; and
 
 5      (z)  "Present value" means the amount as of a date certain
 
 6           of one or more sums payable in the future, discounted
 
 7           to the date certain.  The discount is determined by the
 
 8           interest rate specified by the parties if the rate is
 
 9           not manifestly unreasonable at the time the transaction
 
10           is entered into; otherwise, the discount is determined
 
11           by a commercially reasonable rate that takes into
 
12           account the facts and circumstances of each case at the
 
13           time the transaction was entered into."
 
14      SECTION 10.  Section 490:1-206, Hawaii Revised Statutes, is
 
15 amended by amending subsection (2) to read as follows:
 
16      "(2)  Subsection (1) [of this section] does not apply to
 
17 contracts for the sale of goods (section 490:2-201) nor of
 
18 securities (section 490:8-113) nor to security agreements
 
19 (section [490:9-203).] 490:9-201 or 490:9-203)."
 
20      SECTION 11.  Section 490:2-103, Hawaii Revised Statutes, is
 
21 amended by amending subsection (3) to read as follows:
 
22      "(3)  The following definitions in other Articles apply to
 
23 this Article:
 

 
Page 231                                                   1938
                                     H.B. NO.           H.D. 1
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 1      "Check".  Section 490:3-104.
 
 2      "Consignee".  Section 490:7-102.
 
 3      "Consignor".  Section 490:7-102.
 
 4      "Consumer goods".  Section [490:9-109.] 490:9-102.
 
 5      "Dishonor".  Section 490:3-502.
 
 6      "Draft".  Section 490:3-104."
 
 7      SECTION 12.  Section 490:2-210, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "490:2-210  Delegation of performance; assignment of
 
10 rights.(1)  A party may perform [his] the party's duty through
 
11 a delegate unless otherwise agreed or unless the other party has
 
12 a substantial interest in having [his] the other party's original
 
13 promisor perform or control the acts required by the contract.
 
14 No delegation of performance relieves the party delegating of any
 
15 duty to perform or any liability for breach.
 
16      (2)  [Unless] Except as otherwise provided in section
 
17 490:9-406, unless otherwise agreed, all rights of either seller
 
18 or buyer can be assigned except where the assignment would
 
19 materially change the duty of the other party, or increase
 
20 materially the burden or risk imposed on [him] the other party by
 
21 [his] the other party's contract, or impair materially [his] the
 
22 other party's chance of obtaining return performance.  A right to
 
23 damages for breach of the whole contract or a right arising out
 

 
Page 232                                                   1938
                                     H.B. NO.           H.D. 1
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 1 of the assignor's due performance of [his] the assignor's entire
 
 2 obligation can be assigned despite agreement otherwise.
 
 3      (3)  The creation, attachment, perfection, or enforcement of
 
 4 a security interest in the seller's interest under a contract is
 
 5 not a transfer that materially changes the duty of or increases
 
 6 materially the burden or risk imposed on the buyer or impairs
 
 7 materially the buyer's chance of obtaining return performance
 
 8 within the purview of subsection (2) unless, and then only to the
 
 9 extent that, enforcement actually results in a delegation of
 
10 material performance of the seller.  Even in that event, the
 
11 creation, attachment, perfection, and enforcement of the security
 
12 interest remain effective, but:
 
13      (a)  The seller is liable to the buyer for damages caused by
 
14           the delegation to the extent that the damages could not
 
15           reasonably be prevented by the buyer; and
 
16      (b)  A court having jurisdiction may grant other appropriate
 
17           relief, including cancellation of the contract for sale
 
18           or an injunction against enforcement of the security
 
19           interest or consummation of the enforcement.
 
20      [(3)] (4)  Unless the circumstances indicate the contrary a
 
21 prohibition of assignment of "the contract" is to be construed as
 
22 barring only the delegation to the assignee of the assignor's
 
23 performance.
 

 
Page 233                                                   1938
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 1      [(4)] (5)  An assignment of "the contract" or of "all my
 
 2 rights under the contract" or an assignment in similar general
 
 3 terms is an assignment of rights and unless the language or the
 
 4 circumstances (as in an assignment for security) indicate the
 
 5 contrary, it is a delegation of performance of the duties of the
 
 6 assignor and its acceptance by the assignee constitutes a promise
 
 7 by [him] the assignee to perform those duties.  This promise is
 
 8 enforceable by either the assignor or the other party to the
 
 9 original contract.
 
10      [(5)] (6)  The other party may treat any assignment which
 
11 delegates performance as creating reasonable grounds for
 
12 insecurity and may without prejudice to his rights against the
 
13 assignor demand assurances from the assignee (section
 
14 490:2-609)."
 
15      SECTION 13.  Section 490:2-326, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "490:2-326  Sale on approval and sale or return;
 
18 [consignment sales and] rights of creditors.(1)  Unless
 
19 otherwise agreed, if delivered goods may be returned by the buyer
 
20 even though they conform to the contract, the transaction is:
 
21      (a)  A "sale on approval" if the goods are delivered
 
22           primarily for use; and
 

 
 
 
Page 234                                                   1938
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 1      (b)  A "sale or return" if the goods are delivered primarily
 
 2           for resale.
 
 3      (2)  [Except as provided in subsection (3), goods] Goods
 
 4 held on approval are not subject to the claims of the buyer's
 
 5 creditors until acceptance; goods held on sale or return are
 
 6 subject to such claims while in the buyer's possession.
 
 7      [(3)  Where goods are delivered to a person for sale and
 
 8 such person maintains a place of business at which he deals in
 
 9 goods of the kind involved, under a name other than the name of
 
10 the person making delivery, then with respect to claims of
 
11 creditors of the person conducting the business the goods are
 
12 deemed to be on sale or return.  The provisions of this
 
13 subsection are applicable even though an agreement purports to
 
14 reserve title to the person making delivery until payment or
 
15 resale or uses such words as "on consignment" or "on memorandum".
 
16 However, this subsection is not applicable if the person making
 
17 delivery
 
18      (a)  Complies with an applicable law providing for a
 
19           consignor's interest or the like to be evidenced by a
 
20           sign, or
 
21      (b)  Establishes that the person conducting the business is
 
22           generally known by his creditors to be substantially
 
23           engaged in selling the goods of others, or
 

 
Page 235                                                   1938
                                     H.B. NO.           H.D. 1
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 1      (c)  Complies with the filing provisions of the Article on
 
 2           Secured Transactions (Article 9).
 
 3      (4)] (3)  Any "or return" term of a contract for sale is to
 
 4 be treated as a separate contract for sale within the statute of
 
 5 frauds section of this Article (section 490:2-201) and as
 
 6 contradicting the sale aspect of the contract within the
 
 7 provisions of this Article on parol or extrinsic evidence
 
 8 (section 490:2-202)."
 
 9      SECTION 14.  Section 490:2-502, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "490:2-502  Buyer's right to goods on seller's repudiation,
 
12 failure to deliver, or insolvency.(1)  Subject to [subsection]
 
13 subsections (2) and (3), and even though the goods have not been
 
14 shipped, a buyer who has paid a part or all of the price of goods
 
15 in which [he] the buyer has a special property under the
 
16 provisions of the immediately preceding section may on making and
 
17 keeping good a tender of any unpaid portion of their price
 
18 recover them from the seller if:
 
19      (a)  In the case of goods bought for personal, family, or
 
20           household purposes, the seller repudiates or fails to
 
21           deliver as required by the contract; or
 
22      (b)  In all cases, the seller becomes insolvent within ten
 
23           days after receipt of the first installment on their
 
24           price.
 

 
Page 236                                                   1938
                                     H.B. NO.           H.D. 1
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 1      (2)  The buyer's right to recover the goods under subsection
 
 2 (1)(a) vests upon acquisition of a special property, even if the
 
 3 seller had not then repudiated or failed to deliver.
 
 4      [(2)] (3)  If the identification creating [his] the buyer's
 
 5 special property has been made by the buyer [he], the buyer
 
 6 acquires the right to recover the goods only if they conform to
 
 7 the contract for sale."
 
 8      SECTION 15.  Section 490:2-716, Hawaii Revised Statutes, is
 
 9 amended by amending subsection (3) to read as follows:
 
10      "(3)  The buyer has a right of replevin for goods identified
 
11 to the contract if after reasonable effort [he] the buyer is
 
12 unable to effect cover for such goods or the circumstances
 
13 reasonably indicate that such effort will be unavailing or if the
 
14 goods have been shipped under reservation and satisfaction of the
 
15 security interest in them has been made or tendered. In the case
 
16 of goods bought for personal, family, or household purposes, the
 
17 buyer's right of replevin vests upon acquisition of a special
 
18 property, even if the seller had not then repudiated or failed to
 
19 deliver."
 
20      SECTION 16.  Section 490:2A-103, Hawaii Revised Statutes, is
 
21 amended by amending subsection (c) to read as follows:
 
22      "(c)  The following definitions in other Articles apply to
 
23 this Article:
 

 
Page 237                                                   1938
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 1      "Account".  Section [490:9-106.] 490:9-102(a).
 
 2      "Between merchants".  Section 490:2-104(3).
 
 3      "Buyer".  Section 490:2-103(1)(a).
 
 4      "Chattel paper".  Section [490:9-105(1)(b).] 490:9-102(a).
 
 5      "Consumer goods".  Section [490:9-109(1).] 490:9-102(a).
 
 6      "Document".  Section [490:9-105(1)(f).] 490:9-102(a).
 
 7      "Entrusting".  Section 490:2-403(3).
 
 8      ["General intangibles".  Section 490:9-106.]
 
 9      "General intangible".  Section 490:9-102(a).
 
10      "Good faith".  Section 490:2-103(1)(b).
 
11      "Instrument".  Section [490:9-105(1)(j).] 490:9-102(a).
 
12      "Merchant".  Section 490:2-104(1).
 
13      "Mortgage".  Section [490:9-105(1)(k).] 490:9-102(a).
 
14      "Pursuant to commitment".  Section [490:9-105(1)(l).]
 
15 490:9-102(a).
 
16      "Receipt".  Section 490:2-103(1)(c).
 
17      "Sale".  Section 490:2-106(1).
 
18      "Sale on approval".  Section 490:2-326.
 
19      "Sale or return".  Section 490:2-326.
 
20      "Seller".  Section 490:2-103(1)(d).
 
21      SECTION 17.  Section 490:2A-303, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 

 
 
 
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 1      "490:2A-303  Alienability of party's interest under lease
 
 2 contract or of lessor's residual interest in goods; delegation of
 
 3 performance; transfer of rights.(a)  As used in this section,
 
 4 "creation of a security interest" includes the sale of a lease
 
 5 contract that is subject to Article 9, Secured Transactions, by
 
 6 reason of section [490:9-102(1)(b).] 490:9-109(a)(3).
 
 7      (b)  Except as provided in [subsections] subsection (c) and
 
 8 [(d),] section 490:9-407, a provision in a lease agreement which
 
 9 (i) prohibits the voluntary or involuntary transfer, including a
 
10 transfer by sale, sublease, creation or enforcement of a security
 
11 interest, or attachment, levy, or other judicial process, of an
 
12 interest of a party under the lease contract or of the lessor's
 
13 residual interest in the goods, or (ii) makes such a transfer an
 
14 event of default, gives rise to the rights and remedies provided
 
15 in subsection [(e),] (d), but a transfer that is prohibited or is
 
16 an event of default under the lease agreement is otherwise
 
17 effective.
 
18      [(c)  A provision in a lease agreement which (i) prohibits
 
19 the creation or enforcement of a security interest in an interest
 
20 of a party under the lease contract or in the lessor's residual
 
21 interest in the goods, or (ii) makes such a transfer an event of
 
22 default, is not enforceable unless, and then only to the extent
 
23 that, there is an actual transfer by the lessee of the lessee's
 

 
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 1 right of possession or use of the goods in violation of the
 
 2 provision or an actual delegation of a material performance of
 
 3 either party to the lease contract in violation of the provision.
 
 4 Neither the granting nor the enforcement of a security interest
 
 5 in (i) the lessor's interest under the lease contract or (ii) the
 
 6 lessor's residual interest in the goods is a transfer that
 
 7 materially impairs the prospect of obtaining return performance
 
 8 by, materially changes the duty of, or materially increases the
 
 9 burden or risk imposed on, the lessee within the purview of
 
10 subsection (e) unless, and then only to the extent that, there is
 
11 an actual delegation of a material performance of the lessor.
 
12      (d)] (c)  A provision in a lease agreement which (i)
 
13 prohibits a transfer of a right to damages for default with
 
14 respect to the whole lease contract or of a right to payment
 
15 arising out of the transferor's due performance of the
 
16 transferor's entire obligation, or (ii) makes such a transfer an
 
17 event of default, is not enforceable, and such a transfer is not
 
18 a transfer that materially impairs the prospect of obtaining
 
19 return performance by, materially changes the duty of, or
 
20 materially increases the burden or risk imposed on, the other
 
21 party to the lease contract within the purview of subsection
 
22 [(e).] (d).
 

 
 
 
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 1      [(e)] (d)  Subject to [subsections] subsection (c) and
 
 2 [(d):] section 490:9-407:
 
 3      (1)  If a transfer is made which is made an event of default
 
 4           under a lease agreement, the party to the lease
 
 5           contract not making the transfer, unless that party
 
 6           waives the default or otherwise agrees, has the rights
 
 7           and remedies described in section 490:2A-501(b);
 
 8      (2)  If paragraph (1) is not applicable and if a transfer is
 
 9           made that (i) is prohibited under a lease agreement or
 
10           (ii) materially impairs the prospect of obtaining
 
11           return performance by, materially changes the duty of,
 
12           or materially increases the burden or risk imposed on,
 
13           the other party to the lease contract, unless the party
 
14           not making the transfer agrees at any time to the
 
15           transfer in the lease contract or otherwise, then,
 
16           except as limited by contract, (i) the transferor is
 
17           liable to the party not making the transfer for damages
 
18           caused by the transfer to the extent that the damages
 
19           could not reasonably be prevented by the party not
 
20           making the transfer and (ii) a court having
 
21           jurisdiction may grant other appropriate relief,
 
22           including cancellation of the lease contract or an
 
23           injunction against the transfer.
 

 
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 1      [(f)] (e)  A transfer of "the lease" or of "all my rights
 
 2 under the lease", or a transfer in similar general terms, is a
 
 3 transfer of rights and, unless the language or the circumstances,
 
 4 as in a transfer for security, indicate the contrary, the
 
 5 transfer is a delegation of duties by the transferor to the
 
 6 transferee.  Acceptance by the transferee constitutes a promise
 
 7 by the transferee to perform those duties.  The promise is
 
 8 enforceable by either the transferor or the other party to the
 
 9 lease contract.
 
10      [(g)] (f)  Unless otherwise agreed by the lessor and the
 
11 lessee, a delegation of performance does not relieve the
 
12 transferor as against the other party of any duty to perform or
 
13 of any liability for default.
 
14      [(h)] (g)  In a consumer lease, to prohibit the transfer of
 
15 an interest of a party under the lease contract or to make a
 
16 transfer an event of default, the language must be specific, by a
 
17 writing, and conspicuous."
 
18      SECTION 18.  Section 490:2A-307, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "490:2A-307  Priority of liens arising by attachment or
 
21 levy on, security interests in, and other claims to goods.  (a)
 
22 Except as otherwise provided in section 490:2A-306, a creditor of
 
23 a lessee takes subject to the lease contract.
 

 
Page 242                                                   1938
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 1      (b)  Except as otherwise provided in [subsections]
 
 2 subsection (c) and [(d) and in] sections 490:2A-306 and
 
 3 490:2A-308, a creditor of a lessor takes subject to the lease
 
 4 contract unless[:
 
 5      (1)  The] the creditor holds a lien that attached to the
 
 6           goods before the lease contract became enforceable[;
 
 7      (2)  The creditor holds a security interest in the goods and
 
 8           the lessee did not give value and receive delivery of
 
 9           the goods without knowledge of the security interest;
 
10           or
 
11      (3)  The creditor holds a security interest in the goods
 
12           which was perfected (section 490:9-303) before the
 
13           lease contract became enforceable.
 
14      (c)  A lessee in the ordinary course of business takes the
 
15 leasehold interest free of a security interest in the goods
 
16 created by the lessor even though the security interest is
 
17 perfected (section 490:9-303) and the lessee knows of its
 
18 existence.
 
19      (d)  A lessee other than a lessee in the ordinary course of
 
20 business takes the leasehold interest free of a security interest
 
21 to the extent that it secures future advances made after the
 
22 secured party acquires knowledge of the lease or more than forty-
 
23 five days after the lease contract becomes enforceable, whichever
 

 
Page 243                                                   1938
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 1 first occurs, unless the future advances are made pursuant to a
 
 2 commitment entered into without knowledge of the lease and before
 
 3 the expiration of the forty-five-day period].
 
 4      (c)  Except as otherwise provided in sections 490:9-317,
 
 5 490:9-321, and 490:9-323, a lessee takes a leasehold interest
 
 6 subject to a security interest held by a creditor of the lessor."
 
 7      SECTION 19.  Section 490:2A-309, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (a) to read as follows:
 
 9      "(a)  In this section:
 
10      (1)  Goods are "fixtures" when they become so related to
 
11           particular real estate that an interest in them arises
 
12           under real estate law;
 
13      (2)  A "fixture filing" is the filing, in the office where a
 
14           record of a mortgage on the real estate would be filed
 
15           or recorded, of a financing statement covering goods
 
16           that are or are to become fixtures and conforming to
 
17           the requirements of section [490:9-402(5);]
 
18           490:9-502(a) and (b);
 
19      (3)  A lease is a "purchase money lease" unless the lessee
 
20           has possession or use of the goods or the right to
 
21           possession or use of the goods before the lease
 
22           agreement is enforceable;
 

 
 
 
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 1      (4)  A mortgage is a "construction mortgage" to the extent
 
 2           it secures an obligation incurred for the construction
 
 3           of an improvement on land including the acquisition
 
 4           cost of the land, if the recorded writing so indicates;
 
 5           and
 
 6      (5)  "Encumbrance" includes real estate mortgages and other
 
 7           liens on real estate and all other rights in real
 
 8           estate that are not ownership interests."
 
 9      SECTION 20.  Section 490:4-210, Hawaii Revised Statutes, is
 
10 amended by amending subsection (c) to read as follows:
 
11      "(c)  Receipt by a collecting bank of a final settlement for
 
12 an item is a realization on its security interest in the item,
 
13 accompanying documents, and proceeds.  So long as the bank does
 
14 not receive final settlement for the item or give up possession
 
15 of the item or accompanying documents for purposes other than
 
16 collection, the security interest continues to that extent and is
 
17 subject to Article 9, but:
 
18      (1)  No security agreement is necessary to make the security
 
19           interest enforceable (section [490:9-203(1)(a));]
 
20           490:9-203(b)(3)(A));
 
21      (2)  No filing is required to perfect the security interest;
 
22           and
 

 
 
 
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 1      (3)  The security interest has priority over conflicting
 
 2           perfected security interests in the item, accompanying
 
 3           documents, or proceeds."
 
 4      SECTION 21.  Section 490:7-503, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (1) to read as follows:
 
 6      "(1)  A document of title confers no right in goods against
 
 7 a person who before issuance of the document had a legal interest
 
 8 or a perfected security interest in them and who neither:
 
 9      (a)  Delivered or entrusted them or any document of title
 
10           covering them to the bailor or [his] the bailor's
 
11           nominee with actual or apparent authority to ship,
 
12           store, or sell, or with power to obtain delivery under
 
13           this Article (section 490:7-403) or with power of
 
14           disposition under this chapter (sections 490:2-403 and
 
15           [490:9-307)] 490:9-320) or other statute or rule of
 
16           law; nor
 
17      (b)  Acquiesced in the procurement by the bailor or [his]
 
18           the bailor's nominee of any document of title."
 
19      SECTION 22.  Section 490:8-103, Hawaii Revised Statutes, is
 
20 amended by amending subsection (f) to read as follows:
 
21      "(f)  A commodity contract, as defined in section
 
22 [490:9-115,] 490:9-102(a), is not a security or a financial
 
23 asset."
 

 
Page 246                                                   1938
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 1      SECTION 23.  Section 490:8-106, Hawaii Revised Statutes, is
 
 2 amended as follows:
 
 3      1.  By amending subsection (d) to read:
 
 4      "(d)  A purchaser has "control" of a security entitlement
 
 5 if:
 
 6      (1)  The purchaser becomes the entitlement holder; [or]
 
 7      (2)  The securities intermediary has agreed that it will
 
 8           comply with entitlement orders originated by the
 
 9           purchaser without further consent by the entitlement
 
10           holder[.]; or
 
11      (3)  Another person has control of the security entitlement
 
12           on behalf of the purchaser or, having previously
 
13           acquired control of the security entitlement,
 
14           acknowledges that it has control on behalf of the
 
15           purchaser."
 
16      2.  By amending subsection (f) to read:
 
17      "(f)  A purchaser who has satisfied the requirements of
 
18 subsection [(c)(2)] (c) or [(d)(2)] (d) has control, even if the
 
19 registered owner in the case of subsection [(c)(2)] (c) or the
 
20 entitlement holder in the case of subsection [(d)(2)] (d) retains
 
21 the right to make substitutions for the uncertificated security
 
22 or security entitlement, to originate instructions or entitlement
 
23 orders to the issuer or securities intermediary, or otherwise to
 
24 deal with the uncertificated security or security entitlement."
 

 
Page 247                                                   1938
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 1      SECTION 24.  Section 490:8-110, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (e) to read as follows:
 
 3      "(e)  The following rules determine a "securities
 
 4 intermediary's jurisdiction" for purposes of this section:
 
 5      (1)  If an agreement between the securities intermediary and
 
 6           its entitlement holder [specifies that it is governed
 
 7           by the law of a particular jurisdiction,] governing the
 
 8           securities account expressly provides that a particular
 
 9           jurisdiction is the securities intermediary's
 
10           jurisdiction for purposes of this part, this article,
 
11           or this chapter, that jurisdiction is the securities
 
12           intermediary's jurisdiction.
 
13      (2)  If paragraph (1) does not apply and an agreement
 
14           between the securities intermediary and its entitlement
 
15           holder governing the securities account expressly
 
16           provides that the agreement is governed by the law of a
 
17           particular jurisdiction, that jurisdiction is the
 
18           securities intermediary's jurisdiction.
 
19     [(2)] (3)  If neither paragraph (1) nor paragraph (2) applies
 
20           and an agreement between the securities intermediary
 
21           and its entitlement holder [does not specify the
 
22           governing law as provided in paragraph (1), but]
 
23           governing the securities account expressly [specifies]
 

 
Page 248                                                   1938
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 1           provides that the securities account is maintained at
 
 2           an office in a particular jurisdiction, that
 
 3           jurisdiction is the securities intermediary's
 
 4           jurisdiction.
 
 5     [(3)] (4) If [an agreement between the securities
 
 6           intermediary and its entitlement holder does not
 
 7           specify a jurisdiction as provided in paragraph (1) or
 
 8           (2),] none of the preceding paragraphs applies, the
 
 9           securities intermediary's jurisdiction is the
 
10           jurisdiction in which [is located] the office
 
11           identified in an account statement as the office
 
12           serving the entitlement holder's account[.] is located.
 
13     [(4)] (5)  If [an agreement between the securities
 
14           intermediary and its entitlement holder does not
 
15           specify a jurisdiction as provided in paragraph (1) or
 
16           (2) and an account statement does not identify an
 
17           office serving the entitlement holder's account as
 
18           provided in paragraph (3),] none of the preceding
 
19           paragraphs applies, the securities intermediary's
 
20           jurisdiction is the jurisdiction in which [is located]
 
21           the chief executive office of the securities
 
22           intermediary[.] is located."
 

 
 
 
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 1      SECTION 25.  Section 490:8-301, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  Delivery of a certificated security to a purchaser
 
 4 occurs when:
 
 5      (1)  The purchaser acquires possession of the security
 
 6           certificate;
 
 7      (2)  Another person, other than a securities intermediary,
 
 8           either acquires possession of the security certificate
 
 9           on behalf of the purchaser or, having previously
 
10           acquired possession of the certificate, acknowledges
 
11           that it holds for the purchaser; or
 
12      (3)  A securities intermediary acting on behalf of the
 
13           purchaser acquires possession of the security
 
14           certificate, only if the certificate is in registered
 
15           form and [has been] is:
 
16           (A)  Registered in the name of the purchaser;
 
17           (B)  Payable to the order of the purchaser; or
 
18           (C)  [specially] Specially indorsed to the purchaser by
 
19                an effective indorsement[.] and has not been
 
20                indorsed to the securities intermediary or in
 
21                blank."
 
22      SECTION 26.  Section 490:8-302, Hawaii Revised Statutes, is
 
23 amended by amending subsection (a) to read as follows:
 

 
Page 250                                                   1938
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 1      "(a)  Except as otherwise provided in subsections (b) and
 
 2 (c), [upon delivery] a purchaser of a certificated or
 
 3 uncertificated security [to a purchaser, the purchaser] acquires
 
 4 all rights in the security that the transferor had or had power
 
 5 to transfer."
 
 6      SECTION 27.  Section 490:8-510, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      490:8-510  Rights of purchaser of security entitlement from
 
 9 entitlement holder.
 
10      "(a)  [An] In a case not covered by the priority rules in
 
11 Article 9 or the rules stated in subsection (c), an action based
 
12 on an adverse claim to a financial asset or security entitlement,
 
13 whether framed in conversion, replevin, constructive trust,
 
14 equitable lien, or other theory, may not be asserted against a
 
15 person who purchases a security entitlement, or an interest
 
16 therein, from an entitlement holder if the purchaser gives value,
 
17 does not have notice of the adverse claim, and obtains control.
 
18      (b)  If an adverse claim could not have been asserted
 
19 against an entitlement holder under section 490:8-502, the
 
20 adverse claim cannot be asserted against a person who purchases a
 
21 security entitlement, or an interest therein, from the
 
22 entitlement holder.
 

 
 
 
Page 251                                                   1938
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 1      (c)  In a case not covered by the priority rules in
 
 2 [article] Article 9, a purchaser for value of a security
 
 3 entitlement, or an interest therein, who obtains control has
 
 4 priority over a purchaser of a security entitlement, or an
 
 5 interest therein, who does not obtain control.  [Purchasers]
 
 6 Except as otherwise provided in subsection (d), purchasers who
 
 7 have control rank [equally, except that a] according to priority
 
 8 in time of:
 
 9      (1)  The purchaser's becoming the person for whom the
 
10           securities account, in which the security entitlement
 
11           is carried, is maintained, if the purchaser obtained
 
12           control under section 490:8-106(d)(1);
 
13      (2)  The securities intermediary's agreement to comply with
 
14           the purchaser's entitlement orders with respect to
 
15           security entitlements carried or to be carried in the
 
16           securities account in which the security entitlement is
 
17           carried, if the purchaser obtained control under
 
18           section 490:8-106(d)(2); or
 
19      (3)  If the purchaser obtained control through another
 
20           person under section 490:8-106(d)(3), the time on which
 
21           priority would be based under this subsection if the
 
22           other person were the secured party.
 

 
 
 
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 1      (d)  A securities intermediary as purchaser has priority
 
 2 over a conflicting purchaser who has control unless otherwise
 
 3 agreed by the securities intermediary."
 
 4      SECTION 28.  Section 490:10-102, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (2) to read as follows:
 
 6      "(2)  Transactions validly entered into before January 1,
 
 7 1967, and the rights, duties, and interests flowing from them
 
 8 remain valid thereafter and may be terminated, completed,
 
 9 consummated, or enforced as required or permitted by any statute
 
10 or other law repealed, amended, or modified by this chapter as
 
11 though such repeal, amendment, or modification had not occurred;
 
12 provided[, however,] that the perfection of a security interest,
 
13 as defined in this chapter and however denominated in any law
 
14 repealed, amended, or modified by this chapter:
 
15      (a)  Which was perfected on January 1, 1967, by a filing or
 
16           recording under a law repealed by this chapter and
 
17           requiring a further filing or recording to continue its
 
18           perfection, continues until and will lapse on the date
 
19           provided by the law so repealed for such further filing
 
20           or recording;
 
21      (b)  Which was perfected on January 1, 1967, by a filing or
 
22           recording under a law repealed by this chapter and
 
23           requiring no further filing or recording to continue
 

 
Page 253                                                   1938
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 1           its perfection, continues until and will lapse twelve
 
 2           months after January 1, 1967;
 
 3      (c)  Which was perfected on January 1, 1967, without any
 
 4           filing or recording, and for the perfection of which
 
 5           the filing of a financing statement would be required
 
 6           if this chapter applied, continues until and will lapse
 
 7           twelve months after January 1, 1967; unless, in each
 
 8           case, a continuation statement is filed by the secured
 
 9           party before the perfection of the security interest
 
10           would otherwise lapse.  Any such continuation statement
 
11           must be signed by the secured party, identify the
 
12           security agreement, statement or notice, however
 
13           denominated in any law repealed by this chapter, state
 
14           the office where and the date when the last filing or
 
15           recording was made with respect thereto, and the filing
 
16           number, if any, or book and page, if any, of recording
 
17           and further state that the security agreement,
 
18           statement or notice, however denominated in any law
 
19           repealed by this chapter, is still effective.  Section
 
20           [490:9-401(1)] 490:9-501 determines the proper place to
 
21           file [such a] the continuation statement.  Except as
 
22           specified in this subsection [the provisions of section
 
23           490:9-403(3)], sections 490:9-515 and 490:9-522 apply
 
24           to [such a] the continuation statement."
 

 
Page 254                                                   1938
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 1      SECTION 29.  Section 490:11-106, Hawaii Revised Statutes, is
 
 2 amended as follows:
 
 3      1.  By amending subsection (2) to read:
 
 4      "(2)   If a security interest is perfected when the new
 
 5 U.C.C. takes effect, under a law other than the U.C.C. which
 
 6 requires no further filing, refiling, or recording to continue
 
 7 its perfection, perfection continues until and will lapse three
 
 8 years after the new U.C.C. takes effect, unless a financing
 
 9 statement is filed as provided in subsection (4) or unless the
 
10 security interest is perfected otherwise than by filing, or
 
11 unless under [subsection (3) of] section [490:9-302] 490:9-311,
 
12 the other law continues to govern filing."
 
13      2.  By amending subsection (4) to read:
 
14      "(4)  A financing statement may be filed within six months
 
15 before the perfection of a security interest would otherwise
 
16 lapse.  Any such financing statement may be signed by either the
 
17 debtor or the secured party.  It must identify the security
 
18 agreement, statement, or notice (however denominated in any
 
19 statute or other law repealed or modified by this Act), state the
 
20 office where and the date when the last filing, refiling, or
 
21 recording, if any, was made with respect thereto, and the filing
 
22 number, if any, or book and page, if any, of recording and
 
23 further state that the security agreement, statement, or notice,
 

 
Page 255                                                   1938
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 1 however denominated, in another filing office under the U.C.C. or
 
 2 under any statute or other law repealed or modified by this Act
 
 3 is still effective.  Section [490:9-401 and section 490:9-103
 
 4 determine] 490:9-501 determines the proper place to file [such a]
 
 5 the financing statement.  Except as specified in this subsection,
 
 6 [the provisions of] section [490:9-403(3) for continuation
 
 7 statements apply] 490:9-515 applies to [such a] the financing
 
 8 statement."
 
 9      SECTION 30.  Article 9 of chapter 490, Hawaii Revised
 
10 Statutes, in effect on June 30, 2001, is repealed.
 
11      SECTION 31.  Statutory material to be repealed is bracketed,
 
12 except that bracketed instructions in the forms and the "end of
 
13 form" notations in sections 490:9-613 and 490:9-614 in section 1
 
14 of this Act shall not be repealed.  New statutory material is
 
15 underscored, except that the underscoring in the forms in
 
16 section 1 of this Act shall be set forth as part of the forms.
 
17      SECTION 32.  This Act shall take effect on July 1, 2001.