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.  (SD1)

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


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

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

 
 1           insurance issued or to be issued, (iv) for a secondary
 
 2           obligation incurred or to be incurred, (v) for energy
 
 3           provided or to be provided, (vi) for the use or hire of
 
 4           a vessel under a charter or other contract, (vii)
 
 5           arising out of the use of a credit or charge card or
 
 6           information contained on or for use with the card, or
 
 7           (viii) as winnings in a lottery or other game of chance
 
 8           operated or sponsored by a state, governmental unit of
 
 9           a state, or person licensed or authorized to operate
 
10           the game by a state or governmental unit of a state.
 
11           The term includes health-care-insurance receivables.
 
12      (2)  Does not include (i) rights to payment evidenced by
 
13           chattel paper or an instrument, (ii) commercial tort
 
14           claims, (iii) deposit accounts, (iv) investment
 
15           property, (v) letter-of-credit rights or letters of
 
16           credit, or (vi) rights to payment for money or funds
 
17           advanced or sold, other than rights arising out of the
 
18           use of a credit or charge card or information contained
 
19           on or for use with the card.
 
20      "Account debtor" means a person obligated on an account,
 
21 chattel paper, or general intangible.  The term does not include
 
22 persons obligated to pay a negotiable instrument, even if the
 
23 instrument constitutes part of chattel paper.
 

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

 
 1      "Accounting", except as used in "accounting for", means a
 
 2 record:
 
 3      (1)  Authenticated by a secured party;
 
 4      (2)  Indicating the aggregate unpaid secured obligations as
 
 5           of a date not more than thirty-five days earlier or
 
 6           thirty-five days later than the date of the record; and
 
 7      (3)  Identifying the components of the obligations in
 
 8           reasonable detail.
 
 9      "Agricultural lien" means an interest, other than a security
 
10 interest, in farm products:
 
11      (1)  Which secures payment or performance of an obligation
 
12           for:
 
13           (A)  Goods or services furnished in connection with a
 
14                debtor's farming operation; or
 
15           (B)  Rent on real property leased by a debtor in
 
16                connection with its farming operation;
 
17      (2)  Which is created by statute in favor of a person that:
 
18           (A)  In the ordinary course of its business furnished
 
19                goods or services to a debtor in connection with a
 
20                debtor's farming operation; or
 
21           (B)  Leased real property to a debtor in connection
 
22                with the debtor's farming operation; and
 
23      (3)  Whose effectiveness does not depend on the person's
 

 
Page 4                                                     1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           possession of the personal property.
 
 2      "As-extracted collateral" means:
 
 3      (1)  Oil, gas, or other minerals that are subject to a
 
 4           security interest that:
 
 5           (A)  Is created by a debtor having an interest in the
 
 6                minerals before extraction; and
 
 7           (B)  Attaches to the minerals as extracted; or
 
 8      (2)  Accounts arising out of the sale at the wellhead or
 
 9           minehead of oil, gas, or other minerals in which the
 
10           debtor had an interest before extraction.
 
11      "Authenticate" means:
 
12      (1)  To sign; or
 
13      (2)  To execute or otherwise adopt a symbol, or encrypt or
 
14           similarly process a record in whole or in part, with
 
15           the present intent of the authenticating person to
 
16           identify the person and adopt or accept a record.
 
17      "Bank" means an organization that is engaged in the business
 
18 of banking.  The term includes savings banks, savings and loan
 
19 associations, credit unions, and trust companies.
 
20      "Cash proceeds" means proceeds that are money, checks,
 
21 deposit accounts, or the like.
 
22      "Certificate of title" means a certificate of title with
 
23 respect to which a statute provides for the security interest in
 

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

 
 1 question to be indicated on the certificate as a condition or
 
 2 result of the security interest's obtaining priority over the
 
 3 rights of a lien creditor with respect to the collateral.
 
 4      "Chattel paper" means a record or records that evidence both
 
 5 a monetary obligation and a security interest in specific goods,
 
 6 a security interest in specific goods and software used in the
 
 7 goods, a security interest in specific goods and license of
 
 8 software used in the goods, a lease of specific goods, or a lease
 
 9 of specific goods and license of software used in the goods.  In
 
10 this paragraph, "monetary obligation" means a monetary obligation
 
11 secured by the goods or owed under a lease of the goods and
 
12 includes a monetary obligation with respect to software used in
 
13 the goods.  The term does not include charters or other contracts
 
14 involving the use or hire of a vessel.  If a transaction is
 
15 evidenced by records that include an instrument or series of
 
16 instruments, the group of records taken together constitutes
 
17 chattel paper.
 
18      "Collateral" means the property subject to a security
 
19 interest or agricultural lien.  The term includes:
 
20      (1)  Proceeds to which a security interest attaches;
 
21      (2)  Accounts, chattel paper, payment intangibles, and
 
22           promissory notes that have been sold; and
 
23      (3)  Goods that are the subject of a consignment.
 

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

 
 1      "Commercial tort claim" means a claim arising in tort with
 
 2 respect to which:
 
 3      (1)  The claimant is an organization; or
 
 4      (2)  The claimant is an individual and the claim:
 
 5           (A)  Arose in the course of the claimant's business or
 
 6                profession; and
 
 7           (B)  Does not include damages arising out of personal
 
 8                injury to or the death of an individual.
 
 9      "Commodity account" means an account maintained by a
 
10 commodity intermediary in which a commodity contract is carried
 
11 for a commodity customer.
 
12      "Commodity contract" means a commodity futures contract, an
 
13 option on a commodity futures contract, a commodity option, or
 
14 another contract if the contract or option is:
 
15      (1)  Traded on or subject to the rules of a board of trade
 
16           that has been designated as a contract market for such
 
17           a contract pursuant to federal commodities laws; or
 
18      (2)  Traded on a foreign commodity board of trade, exchange,
 
19           or market, and is carried on the books of a commodity
 
20           intermediary for a commodity customer.
 
21      "Commodity customer" means a person for which a commodity
 
22 intermediary carries a commodity contract on its books.
 
23      "Commodity intermediary" means a person that:
 

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

 
 1      (1)  Is registered as a futures commission merchant under
 
 2           federal commodities law; or
 
 3      (2)  In the ordinary course of its business provides
 
 4           clearance or settlement services for a board of trade
 
 5           that has been designated as a contract market pursuant
 
 6           to federal commodities law.
 
 7      "Communicate" means:
 
 8      (1)  To send a written or other tangible record;
 
 9      (2)  To transmit a record by any means agreed upon by the
 
10           persons sending and receiving the record; or
 
11      (3)  In the case of transmission of a record to or by a
 
12           filing office, to transmit a record by any means
 
13           prescribed by filing-office rule.
 
14      "Consignee" means a merchant to which goods are delivered in
 
15 a consignment.
 
16      "Consignment" means a transaction, regardless of its form,
 
17 in which a person delivers goods to a merchant for the purpose of
 
18 sale and:
 
19      (1)  The merchant:
 
20           (A)  Deals in goods of that kind under a name other
 
21                than the name of the person making delivery;
 
22           (B)  Is not an auctioneer; and
 
23           (C)  Is not generally known by its creditors to be
 

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

 
 1                substantially engaged in selling the goods of
 
 2                others;
 
 3      (2)  With respect to each delivery, the aggregate value of
 
 4           the goods is $1,000 or more at the time of delivery;
 
 5      (3)  The goods are not consumer goods immediately before
 
 6           delivery; and
 
 7      (4)  The transaction does not create a security interest
 
 8           that secures an obligation.
 
 9      "Consignor" means a person that delivers goods to a
 
10 consignee in a consignment.
 
11      "Consumer debtor" means a debtor in a consumer transaction.
 
12      "Consumer goods" means goods that are used or bought for use
 
13 primarily for personal, family, or household purposes.
 
14      "Consumer-goods transaction" means a consumer transaction in
 
15 which:
 
16      (1)  An individual incurs an obligation primarily for
 
17           personal, family, or household purposes; and
 
18      (2)  A security interest in consumer goods secures the
 
19           obligation.
 
20      "Consumer obligor" means an obligor who is an individual and
 
21 who incurred the obligation as part of a transaction entered into
 
22 primarily for personal, family, or household purposes.
 
23      "Consumer transaction" means a transaction in which (i) an
 

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

 
 1 individual incurs an obligation primarily for personal, family,
 
 2 or household purposes, (ii) a security interest secures the
 
 3 obligation, and (iii) the collateral is held or acquired
 
 4 primarily for personal, family, or household purposes.  The term
 
 5 includes consumer-goods transactions.
 
 6      "Continuation statement" means an amendment of a financing
 
 7 statement which:
 
 8      (1)  Identifies, by its file number, the initial financing
 
 9           statement to which it relates; and
 
10      (2)  Indicates that it is a continuation statement for, or
 
11           that it is filed to continue the effectiveness of, the
 
12           identified financing statement.
 
13      "Debtor" means:
 
14      (1)  A person having an interest, other than a security
 
15           interest or other lien, in the collateral, whether or
 
16           not the person is an obligor;
 
17      (2)  A seller of accounts, chattel paper, payment
 
18           intangibles, or promissory notes; or
 
19      (3)  A consignee.
 
20      "Deposit account" means a demand, time, savings, passbook,
 
21 or similar account maintained with a bank.  The term does not
 
22 include investment property or accounts evidenced by an
 
23 instrument.
 

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

 
 1      "Document" means a document of title or a receipt of the
 
 2 type described in section 490:7-201(2).
 
 3      "Electronic chattel paper" means chattel paper evidenced by
 
 4 a record or records consisting of information stored in an
 
 5 electronic medium.
 
 6      "Encumbrance" means a right, other than an ownership
 
 7 interest, in real property.  The term includes mortgages and
 
 8 other liens on real property.
 
 9      "Equipment" means goods other than inventory, farm products,
 
10 or consumer goods.
 
11      "Farm products" means goods, other than standing timber,
 
12 with respect to which the debtor is engaged in a farming
 
13 operation and which are:
 
14      (1)  Crops grown, growing, or to be grown, including:
 
15           (A)  Crops produced on trees, vines, and bushes; and
 
16           (B)  Aquatic goods produced in aquacultural operations;
 
17      (2)  Livestock, born or unborn, including aquatic goods
 
18           produced in aquacultural operations;
 
19      (3)  Supplies used or produced in a farming operation; or
 
20      (4)  Products of crops or livestock in their unmanufactured
 
21           states.
 
22      "Farming operation" means raising, cultivating, propagating,
 
23 fattening, grazing, or any other farming, livestock, or
 

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

 
 1 aquacultural operation.
 
 2      "File number" means the number assigned to an initial
 
 3 financing statement pursuant to section 490:9-519(a).
 
 4      "Filing office" means an office designated in section 490:9-
 
 5 501 as the place to file a financing statement.
 
 6      "Filing-office rule" means a rule adopted pursuant to
 
 7 section 490:9-526.
 
 8      "Financing statement" means a record or records composed of
 
 9 an initial financing statement and any filed record relating to
 
10 the initial financing statement.
 
11      "Fixture filing" means the filing of a financing statement
 
12 covering goods that are or are to become fixtures and satisfying
 
13 section 490:9-502(a) and (b).  The term includes the filing of a
 
14 financing statement covering goods of a transmitting utility
 
15 which are or are to become fixtures.
 
16      "Fixtures" means goods that have become so related to
 
17 particular real property that an interest in them arises under
 
18 real property law.
 
19      "General intangible" means any personal property, including
 
20 things in action, other than accounts, chattel paper, commercial
 
21 tort claims, deposit accounts, documents, goods, instruments,
 
22 investment property, letter-of-credit rights, letters of credit,
 
23 money, and oil, gas, or other minerals before extraction.  The
 

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

 
 1 term includes payment intangibles and software.
 
 2      "Good faith" means honesty in fact and the observance of
 
 3 reasonable commercial standards of fair dealing.
 
 4      "Goods" means all things that are movable when a security
 
 5 interest attaches.  The term includes (i) fixtures, (ii) standing
 
 6 timber that is to be cut and removed under a conveyance or
 
 7 contract for sale, (iii) the unborn young of animals, (iv) crops
 
 8 grown, growing, or to be grown, even if the crops are produced on
 
 9 trees, vines, or bushes, and (v) manufactured homes.  The term
 
10 also includes a computer program embedded in goods and any
 
11 supporting information provided in connection with a transaction
 
12 relating to the program if (i) the program is associated with the
 
13 goods in such a manner that it customarily is considered part of
 
14 the goods, or (ii) by becoming the owner of the goods, a person
 
15 acquires a right to use the program in connection with the goods.
 
16 The term does not include a computer program embedded in goods
 
17 that consist solely of the medium in which the program is
 
18 embedded.  The term also does not include accounts, chattel
 
19 paper, commercial tort claims, deposit accounts, documents,
 
20 general intangibles, instruments, investment property, letter-of-
 
21 credit rights, letters of credit, money, or oil, gas, or other
 
22 minerals before extraction.
 
23      "Governmental unit" means a subdivision, agency, department,
 

 
Page 13                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 county, parish, municipality, or other unit of the government of
 
 2 the United States, a State, or a foreign country.  The term
 
 3 includes an organization having a separate corporate existence if
 
 4 the organization is eligible to issue debt on which interest is
 
 5 exempt from income taxation under the laws of the United States.
 
 6      "Health-care-insurance receivable" means an interest in or
 
 7 claim under a policy of insurance which is a right to payment of
 
 8 a monetary obligation for health-care goods or services provided.
 
 9      "Instrument" means a negotiable instrument or any other
 
10 writing that evidences a right to the payment of a monetary
 
11 obligation, is not itself a security agreement or lease, and is
 
12 of a type that in ordinary course of business is transferred by
 
13 delivery with any necessary indorsement or assignment.  The term
 
14 does not include (i) investment property, (ii) letters of credit,
 
15 or (iii) writings that evidence a right to payment arising out of
 
16 the use of a credit or charge card or information contained on or
 
17 for use with the card.
 
18      "Inventory" means goods, other than farm products, which:
 
19      (1)  Are leased by a person as lessor;
 
20      (2)  Are held by a person for sale or lease or to be
 
21           furnished under a contract of service;
 
22      (3)  Are furnished by a person under a contract of service;
 
23           or
 

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

 
 1      (4)  Consist of raw materials, work in process, or materials
 
 2           used or consumed in a business.
 
 3      "Investment property" means a security, whether certificated
 
 4 or uncertificated, security entitlement, securities account,
 
 5 commodity contract, or commodity account.
 
 6      "Jurisdiction of organization", with respect to a registered
 
 7 organization, means the jurisdiction under whose law the
 
 8 organization is organized.
 
 9      "Letter-of-credit right" means a right to payment or
 
10 performance under a letter of credit, whether or not the
 
11 beneficiary has demanded or is at the time entitled to demand
 
12 payment or performance.  The term does not include the right of a
 
13 beneficiary to demand payment or performance under a letter of
 
14 credit.
 
15      "Lien creditor" means:
 
16      (1)  A creditor that has acquired a lien on the property
 
17           involved by attachment, levy, or the like;
 
18      (2)  An assignee for benefit of creditors from the time of
 
19           assignment;
 
20      (3)  A trustee in bankruptcy from the date of the filing of
 
21           the petition; or
 
22      (4)  A receiver in equity from the time of appointment.
 
23      "Manufactured home" means a structure, transportable in one
 

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

 
 1 or more sections, which, in the traveling mode, is eight body
 
 2 feet or more in width or forty body feet or more in length, or,
 
 3 when erected on site, is three hundred twenty or more square
 
 4 feet, and which is built on a permanent chassis and designed to
 
 5 be used as a dwelling with or without a permanent foundation when
 
 6 connected to the required utilities, and includes the plumbing,
 
 7 heating, air-conditioning, and electrical systems contained
 
 8 therein.  The term includes any structure that meets all of the
 
 9 requirements of this paragraph except the size requirements and
 
10 with respect to which the manufacturer voluntarily files a
 
11 certification required by the United States Secretary of Housing
 
12 and Urban Development and complies with the standards established
 
13 under Title 42 of the United States Code.
 
14      "Manufactured-home transaction" means a secured transaction:
 
15      (A)  That creates a purchase-money security interest in a
 
16           manufactured home, other than a manufactured home held
 
17           as inventory; or
 
18      (B)  In which a manufactured home, other than a manufactured
 
19           home held as inventory, is the primary collateral.
 
20      "Mortgage" means a consensual interest in real property,
 
21 including fixtures, which secures payment or performance of an
 
22 obligation.
 
23      "New debtor" means a person that becomes bound as debtor
 

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

 
 1 under section 490:9-203(d) by a security agreement previously
 
 2 entered into by another person.
 
 3      "New value" means (i) money, (ii) money's worth in property,
 
 4 services, or new credit, or (iii) release by a transferee of an
 
 5 interest in property previously transferred to the transferee.
 
 6 The term does not include an obligation substituted for another
 
 7 obligation.
 
 8      "Noncash proceeds" means proceeds other than cash proceeds.
 
 9      "Obligor" means a person that, with respect to an obligation
 
10 secured by a security interest in or an agricultural lien on the
 
11 collateral, (i) owes payment or other performance of the
 
12 obligation, (ii) has provided property other than the collateral
 
13 to secure payment or other performance of the obligation, or
 
14 (iii) is otherwise accountable in whole or in part for payment or
 
15 other performance of the obligation.  The term does not include
 
16 issuers or nominated persons under a letter of credit.
 
17      "Original debtor" means a person that, as debtor, entered
 
18 into a security agreement to which a new debtor has become bound
 
19 under section 490:9-203(d).
 
20      "Payment intangible" means a general intangible under which
 
21 the account debtor's principal obligation is a monetary
 
22 obligation.
 
23      "Person related to", with respect to an individual, means:
 

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

 
 1      (1)  The spouse of the individual;
 
 2      (2)  A brother, brother-in-law, sister, or sister-in-law of
 
 3           the individual;
 
 4      (3)  An ancestor or lineal descendant of the individual or
 
 5           the individual's spouse; or
 
 6      (4)  Any other relative, by blood or marriage, of the
 
 7           individual or the individual's spouse who shares the
 
 8           same home with the individual.
 
 9      "Person related to", with respect to an organization, means:
 
10      (1)  A person directly or indirectly controlling, controlled
 
11           by, or under common control with the organization;
 
12      (2)  An officer or director of, or a person performing
 
13           similar functions with respect to, the organization;
 
14      (3)  An officer or director of, or a person performing
 
15           similar functions with respect to, a person described
 
16           in paragraph (1);
 
17      (4)  The spouse of an individual described in paragraph (1),
 
18           (2), or (3); or
 
19      (5)  An individual who is related by blood or marriage to an
 
20           individual described in paragraph (1), (2), (3), or (4)
 
21           and shares the same home with the individual.
 
22      "Proceeds" means the following property:
 
23      (1)  Whatever is acquired upon the sale, lease, license,
 

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

 
 1           exchange, or other disposition of collateral;
 
 2      (2)  Whatever is collected on, or distributed on account of,
 
 3           collateral;
 
 4      (3)  Rights arising out of collateral;
 
 5      (4)  To the extent of the value of collateral, claims
 
 6           arising out of the loss, nonconformity, or interference
 
 7           with the use of, defects or infringement of rights in,
 
 8           or damage to, the collateral; or
 
 9      (5)  To the extent of the value of collateral and to the
 
10           extent payable to the debtor or the secured party,
 
11           insurance payable by reason of the loss or
 
12           nonconformity of, defects or infringement of rights in,
 
13           or damage to, the collateral.
 
14      "Promissory note" means an instrument that evidences a
 
15 promise to pay a monetary obligation, does not evidence an order
 
16 to pay, and does not contain an acknowledgment by a bank that the
 
17 bank has received for deposit a sum of money or funds.
 
18      "Proposal" means a record authenticated by a secured party
 
19 which includes the terms on which the secured party is willing to
 
20 accept collateral in full or partial satisfaction of the
 
21 obligation it secures pursuant to sections 490:9-620, 490:9-621,
 
22 and 490:9-622.
 
23      "Public-finance transaction" means a secured transaction in
 

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

 
 1 connection with which:
 
 2      (1)  Debt securities are issued;
 
 3      (2)  All or a portion of the securities issued have an
 
 4           initial stated maturity of at least twenty years; and
 
 5      (3)  The debtor, obligor, secured party, account debtor or
 
 6           other person obligated on collateral, assignor or
 
 7           assignee of a secured obligation, or assignor or
 
 8           assignee of a security interest is a state or a
 
 9           governmental unit of a state.
 
10      "Pursuant to commitment", with respect to an advance made or
 
11 other value given by a secured party, means pursuant to the
 
12 secured party's obligation, whether or not a subsequent event of
 
13 default or other event not within the secured party's control has
 
14 relieved or may relieve the secured party from its obligation.
 
15      "Record", except as used in "for record", "of record",
 
16 "record or legal title", and "record owner", means information
 
17 that is inscribed on a tangible medium or which is stored in an
 
18 electronic or other medium and is retrievable in perceivable
 
19 form.
 
20      "Registered organization" means an organization organized
 
21 solely under the law of a single state or the United States and
 
22 as to which the state or the United States must maintain a public
 
23 record showing the organization to have been organized.
 

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

 
 1      "Secondary obligor" means an obligor to the extent that:
 
 2      (1)  The obligor's obligation is secondary; or
 
 3      (2)  The obligor has a right of recourse with respect to an
 
 4           obligation secured by collateral against the debtor,
 
 5           another obligor, or property of either.
 
 6      "Secured party" means:
 
 7      (1)  A person in whose favor a security interest is created
 
 8           or provided for under a security agreement, whether or
 
 9           not any obligation to be secured is outstanding;
 
10      (2)  A person that holds an agricultural lien;
 
11      (3)  A consignor;
 
12      (4)  A person to which accounts, chattel paper, payment
 
13           intangibles, or promissory notes have been sold;
 
14      (5)  A trustee, indenture trustee, agent, collateral agent,
 
15           or other representative in whose favor a security
 
16           interest or agricultural lien is created or provided
 
17           for; or
 
18      (6)  A person that holds a security interest arising under
 
19           section 490:2-401, 490:2-505, 490:2-711(3),
 
20           490:2A-508(e), 490:4-210, or 490:5-118.
 
21      "Security agreement" means an agreement that creates or
 
22 provides for a security interest.
 
23      "Send", in connection with a record or notification, means:
 

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

 
 1      (1)  To deposit in the mail, deliver for transmission, or
 
 2           transmit by any other usual means of communication,
 
 3           with postage or cost of transmission provided for,
 
 4           addressed to any address reasonable under the
 
 5           circumstances; or
 
 6      (2)  To cause the record or notification to be received
 
 7           within the time that it would have been received if
 
 8           properly sent under paragraph (1).
 
 9      "Software" means a computer program and any supporting
 
10 information provided in connection with a transaction relating to
 
11 the program.  The term does not include a computer program that
 
12 is included in the definition of goods.
 
13      "State" means a state of the United States, the District of
 
14 Columbia, Puerto Rico, the United States Virgin Islands, or any
 
15 territory or insular possession subject to the jurisdiction of
 
16 the United States.
 
17      "Supporting obligation" means a letter-of-credit right or
 
18 secondary obligation that supports the payment or performance of
 
19 an account, chattel paper, a document, a general intangible, an
 
20 instrument, or investment property.
 
21      "Tangible chattel paper" means chattel paper evidenced by a
 
22 record or records consisting of information that is inscribed on
 
23 a tangible medium.
 

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

 
 1      "Termination statement" means an amendment of a financing
 
 2 statement which:
 
 3      (1)  Identifies, by its file number, the initial financing
 
 4           statement to which it relates; and
 
 5      (2)  Indicates either that it is a termination statement or
 
 6           that the identified financing statement is no longer
 
 7           effective.
 
 8      "Transmitting utility" means a person primarily engaged in
 
 9 the business of:
 
10      (1)  Operating a railroad, subway, street railway, or
 
11           trolley bus;
 
12      (2)  Transmitting communications electrically,
 
13           electromagnetically, or by light;
 
14      (3)  Transmitting goods by pipeline or sewer; or
 
15      (4)  Transmitting or producing and transmitting electricity,
 
16           steam, gas, or water.
 
17      (b)  The following definitions in other articles apply to
 
18 this article:
 
19      "Applicant".  Section 490:5-102.
 
20      "Beneficiary".  Section 490:5-102.
 
21      "Broker".  Section 490:8-102.
 
22      "Certificated security".  Section 490:8-102.
 
23      "Check".  Section 490:3-104.
 

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

 
 1      "Clearing corporation".  Section 490:8-102.
 
 2      "Contract for sale".  Section 490:2-106.
 
 3      "Customer".  Section 490:4-104.
 
 4      "Entitlement holder".  Section 490:8-102.
 
 5      "Financial asset".  Section 490:8-102.
 
 6      "Holder in due course".  Section 490:3-302.
 
 7      "Issuer" (with respect to a letter of credit or letter-of-
 
 8 credit right).  Section 490:5-102.
 
 9      "Issuer" (with respect to a security).  Section 490:8-201.
 
10      "Lease".  Section 490:2A-103.
 
11      "Lease agreement".  Section 490:2A-103.
 
12      "Lease contract".  Section 490:2A-103.
 
13      "Leasehold interest".  Section 490:2A-103.
 
14      "Lessee".  Section 490:2A-103.
 
15      "Lessee in ordinary course of business".  Section
 
16 490:2A-103.
 
17      "Lessor".  Section 490:2A-103.
 
18      "Lessor's residual interest".  Section 490:2A-103.
 
19      "Letter of credit".  Section 490:5-102.
 
20      "Merchant".  Section 490:2-104.
 
21      "Negotiable instrument".  Section 490:3-104.
 
22      "Nominated person".  Section 490:5-102.
 
23      "Note".  Section 490:3-104.
 

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

 
 1      "Proceeds of a letter of credit".  Section 490:5-114.
 
 2      "Prove".  Section 490:3-103.
 
 3      "Sale".  Section 490:2-106.
 
 4      "Securities account".  Section 490:8-501.
 
 5      "Securities intermediary".  Section 490:8-102.
 
 6      "Security".  Section 490:8-102.
 
 7      "Security certificate".  Section 490:8-102.
 
 8      "Security entitlement".  Section 490:8-102.
 
 9      "Uncertificated security".  Section 490:8-102.
 
10      (c)  Article 1 contains general definitions and principles
 
11 of construction and interpretation applicable throughout this
 
12 article.
 
13      §490:9-103  Purchase-money security interest; application of
 
14 payments; burden of establishing.(a)  In this section:
 
15      (1)  "Purchase-money collateral" means goods or software
 
16           that secures a purchase-money obligation incurred with
 
17           respect to that collateral; and
 
18      (2)  "Purchase-money obligation" means an obligation of an
 
19           obligor incurred as all or part of the price of the
 
20           collateral or for value given to enable the debtor to
 
21           acquire rights in or the use of the collateral if the
 
22           value is in fact so used.
 
23      (b)  A security interest in goods is a purchase-money
 

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

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

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

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

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

 
 1 transaction, a purchase-money security interest does not lose its
 
 2 status as such, even if:
 
 3      (1)  The purchase-money collateral also secures an
 
 4           obligation that is not a purchase-money obligation;
 
 5      (2)  Collateral that is not purchase-money collateral also
 
 6           secures the purchase-money obligation; or
 
 7      (3)  The purchase-money obligation has been renewed,
 
 8           refinanced, consolidated, or restructured.
 
 9      (g)  In a transaction other than a consumer-goods
 
10 transaction, a secured party claiming a purchase-money security
 
11 interest has the burden of establishing the extent to which the
 
12 security interest is a purchase-money security interest.
 
13      (h)  The limitation of the rules in subsections (e), (f),
 
14 and (g) to transactions other than consumer-goods transactions is
 
15 intended to leave to the court the determination of the proper
 
16 rules in consumer-goods transactions.  The court may not infer
 
17 from that limitation the nature of the proper rule in consumer-
 
18 goods transactions and may continue to apply established
 
19 approaches.
 
20      §490:9-104  Control of deposit account.  (a)  A secured
 
21 party has control of a deposit account if:
 
22      (1)  The secured party is the bank with which the deposit
 
23           account is maintained;
 

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

 
 1      (2)  The debtor, secured party, and bank have agreed in an
 
 2           authenticated record that the bank will comply with
 
 3           instructions originated by the secured party directing
 
 4           disposition of the funds in the deposit account without
 
 5           further consent by the debtor; or
 
 6      (3)  The secured party becomes the bank's customer with
 
 7           respect to the deposit account.
 
 8      (b)  A secured party that has satisfied subsection (a) has
 
 9 control, even if the debtor retains the right to direct the
 
10 disposition of funds from the deposit account.
 
11      §490:9-105  Control of electronic chattel paper.  A secured
 
12 party has control of electronic chattel paper if the record or
 
13 records comprising the chattel paper are created, stored, and
 
14 assigned in such a manner that:
 
15      (1)  A single authoritative copy of the record or records
 
16           exists which is unique, identifiable and, except as
 
17           otherwise provided in paragraphs (4), (5), and (6),
 
18           unalterable;
 
19      (2)  The authoritative copy identifies the secured party as
 
20           the assignee of the record or records;
 
21      (3)  The authoritative copy is communicated to and
 
22           maintained by the secured party or its designated
 
23           custodian;
 

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

 
 1      (4)  Copies or revisions that add or change an identified
 
 2           assignee of the authoritative copy can be made only
 
 3           with the participation of the secured party;
 
 4      (5)  Each copy of the authoritative copy and any copy of a
 
 5           copy is readily identifiable as a copy that is not the
 
 6           authoritative copy; and
 
 7      (6)  Any revision of the authoritative copy is readily
 
 8           identifiable as an authorized or unauthorized revision.
 
 9      §490:9-106  Control of investment property.  (a)  A person
 
10 has control of a certificated security, uncertificated security,
 
11 or security entitlement as provided in section 490:8-106.
 
12      (b)  A secured party has control of a commodity contract if:
 
13      (1)  The secured party is the commodity intermediary with
 
14           which the commodity contract is carried; or
 
15      (2)  The commodity customer, secured party, and commodity
 
16           intermediary have agreed that the commodity
 
17           intermediary will apply any value distributed on
 
18           account of the commodity contract as directed by the
 
19           secured party without further consent by the commodity
 
20           customer.
 
21      (c)  A secured party having control of all security
 
22 entitlements or commodity contracts carried in a securities
 
23 account or commodity account has control over the securities
 

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

 
 1 account or commodity account.
 
 2      §490:9-107  Control of letter-of-credit right.  A secured
 
 3 party has control of a letter-of-credit right to the extent of
 
 4 any right to payment or performance by the issuer or any
 
 5 nominated person if the issuer or nominated person has consented
 
 6 to an assignment of proceeds of the letter of credit under
 
 7 section 490:5-114(c) or otherwise applicable law or practice.
 
 8      §490:9-108  Sufficiency of description.  (a)  Except as
 
 9 otherwise provided in subsections (c), (d), and (e), a
 
10 description of personal or real property is sufficient, whether
 
11 or not it is specific, if it reasonably identifies what is
 
12 described.
 
13      (b)  Except as otherwise provided in subsection (d), a
 
14 description of collateral reasonably identifies the collateral if
 
15 it identifies the collateral by:
 
16      (1)  Specific listing;
 
17      (2)  Category;
 
18      (3)  Except as otherwise provided in subsection (e), a type
 
19           of collateral defined in this chapter;
 
20      (4)  Quantity;
 
21      (5)  Computational or allocational formula or procedure; or
 
22      (6)  Except as otherwise provided in subsection (c), any
 
23           other method, if the identity of the collateral is
 

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

 
 1           objectively determinable.
 
 2      (c)  A description of collateral as "all the debtor's
 
 3 assets" or "all the debtor's personal property" or using words of
 
 4 similar import does not reasonably identify the collateral.
 
 5      (d)  Except as otherwise provided in subsection (e), a
 
 6 description of a security entitlement, securities account, or
 
 7 commodity account is sufficient if it describes:
 
 8      (1)  The collateral by those terms or as investment
 
 9           property; or
 
10      (2)  The underlying financial asset or commodity contract.
 
11      (e)  A description only by type of collateral defined in
 
12 this chapter is an insufficient description of:
 
13      (1)  A commercial tort claim; or
 
14      (2)  In a consumer transaction, consumer goods, a security
 
15           entitlement, a securities account, or a commodity
 
16           account.
 
17               SUBPART 2.  APPLICABILITY OF ARTICLE
 
18      §490:9-109  Scope.  (a)  Except as otherwise provided in
 
19 subsections (c) and (d), this article applies to:
 
20      (1)  A transaction, regardless of its form, that creates a
 
21           security interest in personal property or fixtures by
 
22           contract;
 
23      (2)  An agricultural lien;
 

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

 
 1      (3)  A sale of accounts, chattel paper, payment intangibles,
 
 2           or promissory notes;
 
 3      (4)  A consignment;
 
 4      (5)  A security interest arising under section 490:2-401,
 
 5           490:2-505, 490:2-711(3), or 490:2A-508(e), as provided
 
 6           in section 490:9-110; and
 
 7      (6)  A security interest arising under section 490:4-210 or
 
 8           490:5-118.
 
 9      (b)  The application of this article to a security interest
 
10 in a secured obligation is not affected by the fact that the
 
11 obligation is itself secured by a transaction or interest to
 
12 which this article does not apply.
 
13      (c)  This article does not apply to the extent that:
 
14      (1)  A statute, regulation, or treaty of the United States
 
15           preempts this article;
 
16      (2)  Another statute of this State expressly governs the
 
17           creation, perfection, priority, or enforcement of a
 
18           security interest created by this State or a
 
19           governmental unit of this State;
 
20      (3)  A statute of another state, a foreign country, or a
 
21           governmental unit of another state or a foreign
 
22           country, other than a statute generally applicable to
 
23           security interests, expressly governs creation,
 

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

 
 1           perfection, priority, or enforcement of a security
 
 2           interest created by the state, country, or governmental
 
 3           unit; or
 
 4      (4)  The rights of a transferee beneficiary or nominated
 
 5           person under a letter of credit are independent and
 
 6           superior under section 490:5-114.
 
 7      (d)  This article does not apply to:
 
 8      (1)  A landlord's lien, other than an agricultural lien;
 
 9      (2)  A lien, other than an agricultural lien, given by
 
10           statute or other rule of law for services or materials,
 
11           but section 490:9-333 applies with respect to priority
 
12           of the lien;
 
13      (3)  An assignment of a claim for wages, salary, or other
 
14           compensation of an employee;
 
15      (4)  A sale of accounts, chattel paper, payment intangibles,
 
16           or promissory notes as part of a sale of the business
 
17           out of which they arose;
 
18      (5)  An assignment of accounts, chattel paper, payment
 
19           intangibles, or promissory notes which is for the
 
20           purpose of collection only;
 
21      (6)  An assignment of a right to payment under a contract to
 
22           an assignee that is also obligated to perform under the
 
23           contract;
 

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

 
 1      (7)  An assignment of a single account, payment intangible,
 
 2           or promissory note to an assignee in full or partial
 
 3           satisfaction of a preexisting indebtedness;
 
 4      (8)  A transfer of  an interest in or an assignment of a
 
 5           claim under a policy of insurance, other than an
 
 6           assignment by or to a health-care provider of a health-
 
 7           care-insurance receivable and any subsequent assignment
 
 8           of the right to payment, but sections 490:9-315 and
 
 9           490:9-322 apply with respect to proceeds and priorities
 
10           in proceeds;
 
11      (9)  An assignment of a right represented by a judgment,
 
12           other than a judgment taken on a right to payment that
 
13           was collateral;
 
14     (10)  A right of recoupment or set-off, but:
 
15           (A)  Section 490:9-340 applies with respect to the
 
16                effectiveness of rights of recoupment or set-off
 
17                against deposit accounts; and
 
18           (B)  Section 490:9-404 applies with respect to defenses
 
19                or claims of an account debtor;
 
20     (11)  The creation or transfer of an interest in or lien on
 
21           real property, including a lease or rents thereunder,
 
22           except to the extent that provision is made for:
 
23           (A)  Liens on real property in sections 490:9-203 and
 

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

 
 1                490:9-308;
 
 2           (B)  Fixtures in section 490:9-334;
 
 3           (C)  Fixture filings in sections 490:9-501, 490:9-502,
 
 4                490:9-512, 490:9-516, and 490:9-519; and
 
 5           (D)  Security agreements covering personal and real
 
 6                property in section 490:9-604;
 
 7     (12)  An assignment of a claim arising in tort, other than a
 
 8           commercial tort claim, but sections 490:9-315 and
 
 9           490:9-322 apply with respect to proceeds and priorities
 
10           in proceeds; 
 
11     (13)  An assignment of a deposit account in a consumer
 
12           transaction, but sections 490:9-315 and 490:9-322 apply
 
13           with respect to proceeds and priorities in proceeds;
 
14     (14)  Any grant of a security interest by a governmental unit
 
15           as a debtor;
 
16     (15)  A claim or right to receive compensation for injuries
 
17           or sickness as described in section 386-57 or title 26
 
18           United States Code section 104(a)(1) or (2), as amended
 
19           from time to time; or
 
20     (16)  A claim or right to receive benefits under a special
 
21           needs trust as described in title 42 United States Code
 
22           section 1396p(d)(4), as amended from time to time.
 
23      §490:9-110  Security interests arising under Article 2 or
 

 


 

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

 
 1 2A.  A security interest arising under section 490:2-401,
 
 2 490:2-505, 490:2-711(3), or 490:2A-508(e) is subject to this
 
 3 article.  However, until the debtor obtains possession of the
 
 4 goods:
 
 5      (1)  The security interest is enforceable, even if section
 
 6           490:9-203(b)(3) has not been satisfied;
 
 7      (2)  Filing is not required to perfect the security
 
 8           interest;
 
 9      (3)  The rights of the secured party after default by the
 
10           debtor are governed by Article 2 or 2A; and
 
11      (4)  The security interest has priority over a conflicting
 
12           security interest created by the debtor.
 
13     PART 2.  EFFECTIVENESS OF SECURITY AGREEMENT; ATTACHMENT
 
14   OF SECURITY INTEREST; RIGHTS OF PARTIES TO SECURITY AGREEMENT
 
15             SUBPART 1.  EFFECTIVENESS AND ATTACHMENT
 
16      §490:9-201  General effectiveness of security agreement.
 
17 (a)  Except as otherwise provided in this chapter, a security
 
18 agreement is effective according to its terms between the
 
19 parties, against purchasers of the collateral, and against
 
20 creditors.
 
21      (b)  A transaction subject to this article is subject to any
 
22 applicable rule of law which establishes a different rule for
 
23 consumers and (i) any other statute or regulation that regulates
 

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

 
 1 the rates, charges, agreements, and practices for loans, credit
 
 2 sales, or other extensions of credit and (ii) any consumer-
 
 3 protection statute or regulation.
 
 4      (c)  In case of conflict between this article and a rule of
 
 5 law, statute, or regulation described in subsection (b), the rule
 
 6 of law, statute, or regulation controls.  Failure to comply with
 
 7 a statute or regulation described in subsection (b) has only the
 
 8 effect the statute or regulation specifies.
 
 9      (d)  This article does not:
 
10      (1)  Validate any rate, charge, agreement, or practice that
 
11           violates a rule of law, statute, or regulation
 
12           described in subsection (b); or
 
13      (2)  Extend the application of the rule of law, statute, or
 
14           regulation to a transaction not otherwise subject to
 
15           it.
 
16      §490:9-202  Title to collateral immaterial.  Except as
 
17 otherwise provided with respect to consignments or sales of
 
18 accounts, chattel paper, payment intangibles, or promissory
 
19 notes, the provisions of this article with regard to rights and
 
20 obligations apply whether title to collateral is in the secured
 
21 party or the debtor.
 
22      §490:9-203  Attachment and enforceability of security
 
23 interest; proceeds; supporting obligations; formal requisites.
 

 


 

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

 
 1 (a)  A security interest attaches to collateral when it becomes
 
 2 enforceable against the debtor with respect to the collateral,
 
 3 unless an agreement expressly postpones the time of attachment.
 
 4      (b)  Except as otherwise provided in subsections (c) through
 
 5 (i), a security interest is enforceable against the debtor and
 
 6 third parties with respect to the collateral only if:
 
 7      (1)  Value has been given;
 
 8      (2)  The debtor has rights in the collateral or the power to
 
 9           transfer rights in the collateral to a secured party;
 
10           and
 
11      (3)  One of the following conditions is met:
 
12           (A)  The debtor has authenticated a security agreement
 
13                that provides a description of the collateral and,
 
14                if the security interest covers timber to be cut,a
 
15                description of the land concerned;
 
16           (B)  The collateral is not a certificated security and
 
17                is in the possession of the secured party under
 
18                section 490:9-313 pursuant to the debtor's
 
19                security agreement;
 
20           (C)  The collateral is a certificated security in
 
21                registered form and the security certificate has
 
22                been delivered to the secured party under section
 
23                490:8-301 pursuant to the debtor's security
 

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

 
 1                agreement; or
 
 2           (D)  The collateral is deposit accounts, electronic
 
 3                chattel paper, investment property, or letter-of-
 
 4                credit rights, and the secured party has control
 
 5                under section 490:9-104, 490:9-105, 490:9-106, or
 
 6                490:9-107 pursuant to the debtor's security
 
 7                agreement.
 
 8      (c)  Subsection (b) is subject to section 490:4-210 on the
 
 9 security interest of a collecting bank, section 490:5-118 on the
 
10 security interest of a letter-of-credit issuer or nominated
 
11 person, section 490:9-110 on a security interest arising under
 
12 Article 2 or 2A, and section 490:9-206 on security interests in
 
13 investment property.
 
14      (d)  A person becomes bound as debtor by a security
 
15 agreement entered into by another person if, by operation of law
 
16 other than this article or by contract:
 
17      (1)  The security agreement becomes effective to create a
 
18           security interest in the person's property; or
 
19      (2)  The person becomes generally obligated for the
 
20           obligations of the other person, including the
 
21           obligation secured under the security agreement, and
 
22           acquires or succeeds to all or substantially all of the
 
23           assets of the other person.
 

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

 
 1      (e)  If a new debtor becomes bound as debtor by a security
 
 2 agreement entered into by another person:
 
 3      (1)  The agreement satisfies subsection (b)(3) with respect
 
 4           to existing or after-acquired property of the new
 
 5           debtor to the extent the property is described in the
 
 6           agreement; and
 
 7      (2)  Another agreement is not necessary to make a security
 
 8           interest in the property enforceable.
 
 9      (f)  The attachment of a security interest in collateral
 
10 gives the secured party the rights to proceeds provided by
 
11 section 490:9-315 and is also attachment of a security interest
 
12 in a supporting obligation for the collateral.
 
13      (g)  The attachment of a security interest in a right to
 
14 payment or performance secured by a security interest or other
 
15 lien on personal or real property is also attachment of a
 
16 security interest in the security interest, mortgage, or other
 
17 lien.
 
18      (h)  The attachment of a security interest in a securities
 
19 account is also attachment of a security interest in the security
 
20 entitlements carried in the securities account.
 
21      (i)  The attachment of a security interest in a commodity
 
22 account is also attachment of a security interest in the
 
23 commodity contracts carried in the commodity account.
 

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

 
 1      §490:9-204  After-acquired property; future advances.  (a)
 
 2 Except as otherwise provided in subsection (b), a security
 
 3 agreement may create or provide for a security interest in after-
 
 4 acquired collateral.
 
 5      (b)  A security interest does not attach under a term
 
 6 constituting an after-acquired property clause to:
 
 7      (1)  Consumer goods, other than an accession when given as
 
 8           additional security, unless the debtor acquires rights
 
 9           in them within ten days after the secured party gives
 
10           value; or
 
11      (2)  A commercial tort claim.
 
12      (c)  A security agreement may provide that collateral
 
13 secures, or that accounts, chattel paper, payment intangibles, or
 
14 promissory notes are sold in connection with, future advances or
 
15 other value, whether or not the advances or value are given
 
16 pursuant to commitment.
 
17      §490:9-205  Use or disposition of collateral permissible.
 
18 (a)  A security interest is not invalid or fraudulent against
 
19 creditors solely because:
 
20      (1)  The debtor has the right or ability to:
 
21           (A)  Use, commingle, or dispose of all or part of the
 
22                collateral, including returned or repossessed
 
23                goods;
 

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

 
 1           (B)  Collect, compromise, enforce, or otherwise deal
 
 2                with collateral;
 
 3           (C)  Accept the return of collateral or make
 
 4                repossessions; or
 
 5           (D)  Use, commingle, or dispose of proceeds; or
 
 6      (2)  The secured party fails to require the debtor to
 
 7           account for proceeds or replace collateral.
 
 8      (b)  This section does not relax the requirements of
 
 9 possession if attachment, perfection, or enforcement of a
 
10 security interest depends upon possession of the collateral by
 
11 the secured party.
 
12      §490:9-206  Security interest arising in purchase or
 
13 delivery of financial asset.  (a)  A security interest in favor
 
14 of a securities intermediary attaches to a person's security
 
15 entitlement if:
 
16      (1)  The person buys a financial asset through the
 
17           securities intermediary in a transaction in which the
 
18           person is obligated to pay the purchase price to the
 
19           securities intermediary at the time of the purchase;
 
20           and
 
21      (2)  The securities intermediary credits the financial asset
 
22           to the buyer's securities account before the buyer pays
 
23           the securities intermediary.
 

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

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

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

 
 1      (b)  Except as otherwise provided in subsection (d), if a
 
 2 secured party has possession of collateral:
 
 3      (1)  Reasonable expenses, including the cost of insurance
 
 4           and payment of taxes or other charges, incurred in the
 
 5           custody, preservation, use, or operation of the
 
 6           collateral are chargeable to the debtor and are secured
 
 7           by the collateral;
 
 8      (2)  The risk of accidental loss or damage is on the debtor
 
 9           to the extent of a deficiency in any effective
 
10           insurance coverage;
 
11      (3)  The secured party shall keep the collateral
 
12           identifiable, but fungible collateral may be
 
13           commingled; and
 
14      (4)  The secured party may use or operate the collateral:
 
15           (A)  For the purpose of preserving the collateral or
 
16                its value;
 
17           (B)  As permitted by an order of a court having
 
18                competent jurisdiction; or
 
19           (C)  Except in the case of consumer goods, in the
 
20                manner and to the extent agreed by the debtor.
 
21      (c)  Except as otherwise provided in subsection (d), a
 
22 secured party having possession of collateral or control of
 
23 collateral under section 490:9-104, 490:9-105, 490:9-106, or
 

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

 
 1 490:9-107:
 
 2      (1)  May hold as additional security any proceeds, except
 
 3           money or funds, received from the collateral;
 
 4      (2)  Shall apply money or funds received from the collateral
 
 5           to reduce the secured obligation, unless remitted to
 
 6           the debtor; and
 
 7      (3)  May create a security interest in the collateral.
 
 8      (d)  If the secured party is a buyer of accounts, chattel
 
 9 paper, payment intangibles, or promissory notes or a consignor:
 
10      (1)  Subsection (a) does not apply unless the secured party
 
11           is entitled under an agreement:
 
12           (A)  To charge back uncollected collateral; or
 
13           (B)  Otherwise to full or limited recourse against the
 
14                debtor or a secondary obligor based on the
 
15                nonpayment or other default of an account debtor
 
16                or other obligor on the collateral; and
 
17      (2)  Subsections (b) and (c) do not apply.
 
18      §490:9-208  Additional duties of secured party having
 
19 control of collateral.  (a)  This section applies to cases in
 
20 which there is no outstanding secured obligation and the secured
 
21 party is not committed to make advances, incur obligations, or
 
22 otherwise give value.
 
23      (b)  Within ten days after receiving an authenticated demand
 

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

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

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

 
 1                designated custodian from any further obligation
 
 2                to comply with instructions originated by the
 
 3                secured party and instructing the custodian to
 
 4                comply with instructions originated by the debtor;
 
 5                and
 
 6           (C)  Take appropriate action to enable the debtor or
 
 7                its designated custodian to make copies of or
 
 8                revisions to the authoritative copy which add or
 
 9                change an identified assignee of the authoritative
 
10                copy without the consent of the secured party;
 
11      (4)  A secured party having control of investment property
 
12           under section 490:8-106(d)(2) or 490:9-106(b) shall
 
13           send to the securities intermediary or commodity
 
14           intermediary with which the security entitlement or
 
15           commodity contract is maintained an authenticated
 
16           record that releases the securities intermediary or
 
17           commodity intermediary from any further obligation to
 
18           comply with entitlement orders or directions originated
 
19           by the secured party; and
 
20      (5)  A secured party having control of a letter-of-credit
 
21           right under section 490:9-107 shall send to each person
 
22           having an unfulfilled obligation to pay or deliver
 
23           proceeds of the letter of credit to the secured party
 

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

 
 1           an authenticated release from any further obligation to
 
 2           pay or deliver proceeds of the letter of credit to the
 
 3           secured party.
 
 4      §490:9-209  Duties of secured party if account debtor has
 
 5 been notified of assignment.  (a)  Except as otherwise provided
 
 6 in subsection (c), this section applies if:
 
 7      (1)  There is no outstanding secured obligation; and
 
 8      (2)  The secured party is not committed to make advances,
 
 9           incur obligations, or otherwise give value.
 
10      (b)  Within ten days after receiving an authenticated demand
 
11 by the debtor, a secured party shall send to an account debtor
 
12 that has received notification of an assignment to the secured
 
13 party as assignee under section 490:9-406(a) an authenticated
 
14 record that releases the account debtor from any further
 
15 obligation to the secured party.
 
16      (c)  This section does not apply to an assignment
 
17 constituting the sale of an account, chattel paper, or payment
 
18 intangible.
 
19      §490:9-210  Request for accounting; request regarding list
 
20 of collateral or statement of account.  (a)  In this section:
 
21      (1)  "Request" means a record of a type described in
 
22           paragraph (2), (3), or (4).
 
23      (2)  "Request for an accounting" means a record
 

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

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

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

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

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

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

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

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

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

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

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

 
 1      §490:9-304  Law governing perfection and priority of
 
 2 security interests in deposit accounts.  (a)  The local law of a
 
 3 bank's jurisdiction governs perfection, the effect of perfection
 
 4 or nonperfection, and the priority of a security interest in a
 
 5 deposit account maintained with that bank.
 
 6      (b)  The following rules determine a bank's jurisdiction for
 
 7 purposes of this part:
 
 8      (1)  If an agreement between the bank and the debtor
 
 9           governing the deposit account expressly provides that a
 
10           particular jurisdiction is the bank's jurisdiction for
 
11           purposes of this part, this article, or this chapter,
 
12           that jurisdiction is the bank's jurisdiction.
 
13      (2)  If paragraph (1) does not apply and an agreement
 
14           between the bank and its customer governing the deposit
 
15           account expressly provides that the agreement is
 
16           governed by the law of a particular jurisdiction, that
 
17           jurisdiction is the bank's jurisdiction.
 
18      (3)  If neither paragraph (1) nor paragraph (2) applies and
 
19           an agreement between the bank and its customer
 
20           governing the deposit account expressly provides that
 
21           the deposit account is maintained at an office in a
 
22           particular jurisdiction, that jurisdiction is the
 
23           bank's jurisdiction.
 

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

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

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

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

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

 
 1           commodity customer governing the commodity account
 
 2           expressly provides that the commodity account is
 
 3           maintained at an office in a particular jurisdiction,
 
 4           that jurisdiction is the commodity intermediary's
 
 5           jurisdiction.
 
 6      (4)  If none of the preceding paragraphs applies, the
 
 7           commodity intermediary's jurisdiction is the
 
 8           jurisdiction in which the office identified in an
 
 9           account statement as the office serving the commodity
 
10           customer's account is located.
 
11      (5)  If none of the preceding paragraphs applies, the
 
12           commodity intermediary's jurisdiction is the
 
13           jurisdiction in which the chief executive office of the
 
14           commodity intermediary is located.
 
15      (c)  The local law of the jurisdiction in which the debtor
 
16 is located governs:
 
17      (1)  Perfection of a security interest in investment
 
18           property by filing;
 
19      (2)  Automatic perfection of a security interest in
 
20           investment property created by a broker or securities
 
21           intermediary; and
 
22      (3)  Automatic perfection of a security interest in a
 
23           commodity contract or commodity account created by a
 

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

 
 1           commodity intermediary.
 
 2      §490:9-306  Law governing perfection and priority of
 
 3 security interests in letter-of-credit rights.  (a)  Subject to
 
 4 subsection (c), the local law of the issuer's jurisdiction or a
 
 5 nominated person's jurisdiction governs perfection, the effect of
 
 6 perfection or nonperfection, and the priority of a security
 
 7 interest in a letter-of-credit right if the issuer's jurisdiction
 
 8 or nominated person's jurisdiction is a state.
 
 9      (b)  For purposes of this part, an issuer's jurisdiction or
 
10 nominated person's jurisdiction is the jurisdiction whose law
 
11 governs the liability of the issuer or nominated person with
 
12 respect to the letter-of-credit right as provided in section
 
13 490:5-116.
 
14      (c)  This section does not apply to a security interest that
 
15 is perfected only under section 490:9-308(d).
 
16      §490:9-307  Location of debtor.  (a)  In this section,
 
17 "place of business" means a place where a debtor conducts its
 
18 affairs.
 
19      (b)  Except as otherwise provided in this section, the
 
20 following rules determine a debtor's location:
 
21      (1)  An debtor who is an individual is located at the
 
22           individual's principal residence.
 
23      (2)  A debtor that is an organization and has only one place
 

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

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

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

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

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

 
 1 1958, as amended, is located at the designated office of the
 
 2 agent upon which service of process may be made on behalf of the
 
 3 carrier.
 
 4      (k)  This section applies only for purposes of this part.
 
 5                      SUBPART 2.  PERFECTION
 
 6      §490:9-308  When security interest or agricultural lien is
 
 7 perfected; continuity of perfection.  (a)  Except as otherwise
 
 8 provided in this section and section 490:9-309, a security
 
 9 interest is perfected if it has attached and all of the
 
10 applicable requirements for perfection in sections 490:9-310
 
11 through 490:9-316 have been satisfied.  A security interest is
 
12 perfected when it attaches if the applicable requirements are
 
13 satisfied before the security interest attaches.
 
14      (b)  An agricultural lien is perfected if it has become
 
15 effective and all of the applicable requirements for perfection
 
16 in section 490:9-310 have been satisfied.  An agricultural lien
 
17 is perfected when it becomes effective if the applicable
 
18 requirements are satisfied before the agricultural lien becomes
 
19 effective.
 
20      (c)  A security interest or agricultural lien is perfected
 
21 continuously if it is originally perfected by one method under
 
22 this article and is later perfected by another method under this
 
23 article, without an intermediate period when it was unperfected.
 

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

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

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

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

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

 
 1           beneficial interest in a decedent's estate.
 
 2      §490:9-310  When filing required to perfect security
 
 3 interest or agricultural lien; security interests and
 
 4 agricultural liens to which filing provisions do not apply.  (a)
 
 5 Except as otherwise provided in subsection (b) and section
 
 6 490:9-312(b), a financing statement must be filed to perfect all
 
 7 security interests and agricultural liens.
 
 8      (b)  The filing of a financing statement is not necessary to
 
 9 perfect a security interest:
 
10      (1)  That is perfected under section 490:9-308(d), (e), (f),
 
11           or (g);
 
12      (2)  That is perfected under section 490:9-309 when it
 
13           attaches;
 
14      (3)  In property subject to a statute, regulation, or treaty
 
15           described in section 490:9-311(a);
 
16      (4)  In goods in possession of a bailee which is perfected
 
17           under section 490:9-312(d)(1) or (2);
 
18      (5)  In certificated securities, documents, goods, or
 
19           instruments which is perfected without filing or
 
20           possession under section 490:9-312(e), (f), or (g);
 
21      (6)  In collateral in the secured party's possession under
 
22           section 490:9-313;
 
23      (7)  In a certificated security which is perfected by
 

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

 
 1           delivery of the security certificate to the secured
 
 2           party under section 490:9-313;
 
 3      (8)  In deposit accounts, electronic chattel paper
 
 4           investment property, or letter-of-credit rights which
 
 5           is perfected by control under section 490:9-314;
 
 6      (9)  In proceeds which is perfected under section 490:9-315;
 
 7           or
 
 8     (10)  That is perfected under section 490:9-316.
 
 9      (c)  If a secured party assigns a perfected security
 
10 interest or agricultural lien, a filing under this article is not
 
11 required to continue the perfected status of the security
 
12 interest against creditors of and transferees from the original
 
13 debtor.
 
14      §490:9-311  Perfection of security interests in property
 
15 subject to certain statutes, regulations, and treaties.  (a)
 
16 Except as otherwise provided in subsection (d), the filing of a
 
17 financing statement is not necessary or effective to perfect a
 
18 security interest in property subject to:
 
19      (1)  A statute, regulation, or treaty of the United States
 
20           whose requirements for a security interest's obtaining
 
21           priority over the rights of a lien creditor with
 
22           respect to the property preempt section 490:9-310(a);
 
23      (2)  Chapter 286; or
 

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

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

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

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

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

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

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

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

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

 
 1 collateral.  A secured party may perfect a security interest in
 
 2 certificated securities by taking delivery of the certificated
 
 3 securities under section 490:8-301.
 
 4      (b)  With respect to goods covered by a certificate of title
 
 5 issued by this State, a secured party may perfect a security
 
 6 interest in the goods by taking possession of the goods only in
 
 7 the circumstances described in section 490:9-316(d).
 
 8      (c)  With respect to collateral other than certificated
 
 9 securities and goods covered by a document, a secured party takes
 
10 possession of collateral in the possession of a person other than
 
11 the debtor, the secured party, or a lessee of the collateral from
 
12 the debtor in the ordinary course of the debtor's business, when:
 
13      (1)  The person in possession authenticates a record
 
14           acknowledging that it holds possession of the
 
15           collateral for the secured party's benefit; or
 
16      (2)  The person takes possession of the collateral after
 
17           having authenticated a record acknowledging that it
 
18           will hold possession of collateral for the secured
 
19           party's benefit.
 
20      (d)  If perfection of a security interest depends upon
 
21 possession of the collateral by a secured party, perfection
 
22 occurs no earlier than the time the secured party takes
 
23 possession and continues only while the secured party retains
 

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

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

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

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

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

 
 1 party obtains control and remains perfected by control until:
 
 2      (1)  The secured party does not have control; and
 
 3      (2)  One of the following occurs:
 
 4           (A)  If the collateral is a certificated security, the
 
 5                debtor has or acquires possession of the security
 
 6                certificate;
 
 7           (B)  If the collateral is an uncertificated security
 
 8                the issuer has registered or registers the debtor
 
 9                as the registered owner; or
 
10           (C)  If the collateral is a security entitlement, the
 
11                debtor is or becomes the entitlement holder.
 
12      §490:9-315  Secured party's rights on disposition of
 
13 collateral and in proceeds.  (a)  Except as otherwise provided in
 
14 this article and in section 490:2-403(2):
 
15      (1)  A security interest or agricultural lien continues in
 
16           collateral notwithstanding sale, lease, license
 
17           exchange, or other disposition thereof unless the
 
18           secured party authorized the disposition free of the
 
19           security interest or agricultural lien; and
 
20      (2)  A security interest attaches to any identifiable
 
21           proceeds of collateral.
 
22      (b)  Proceeds that are commingled with other property are
 
23 identifiable proceeds:
 

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

 
 1      (1)  If the proceeds are goods, to the extent provided by
 
 2           section 490:9-336; and
 
 3      (2)  If the proceeds are not goods, to the extent that the
 
 4           secured party identifies the proceeds by a method of
 
 5           tracing, including application of equitable principles,
 
 6           that is permitted under law other than this article
 
 7           with respect to commingled property of the type
 
 8           involved.
 
 9      (c)  A security interest in proceeds is a perfected security
 
10 interest if the security interest in the original collateral was
 
11 perfected.
 
12      (d)  A perfected security interest in proceeds becomes
 
13 unperfected on the twenty-first day after the security interest
 
14 attaches to the proceeds unless:
 
15      (1)  The following conditions are satisfied:
 
16           (A)  A filed financing statement covers the original
 
17                collateral;
 
18           (B)  The proceeds are collateral in which a security
 
19                interest may be perfected by filing in the office
 
20                in which the financing statement has been filed;
 
21                and
 
22           (C)  The proceeds are not acquired with cash proceeds;
 
23      (2)  The proceeds are identifiable cash proceeds; or
 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 
Page 82                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.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.
 
23      (b)  A licensee in ordinary course of business takes its
 

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

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

 
Page 84                                                    1938
                                     H.B. NO.           H.D. 1
                                                        S.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
 
23           (C)  In the case of proceeds that are proceeds of
 

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

 
 1                proceeds, all intervening proceeds are cash
 
 2                proceeds, proceeds of the same type as the
 
 3                collateral, or an account relating to the
 
 4                collateral.
 
 5      (d)  Subject to subsection (e) and except as otherwise
 
 6 provided in subsection (f), if a security interest in chattel
 
 7 paper, deposit accounts, negotiable documents, instruments,
 
 8 investment property, or letter-of-credit rights is perfected by a
 
 9 method other than filing, conflicting perfected security
 
10 interests in proceeds of the collateral rank according to
 
11 priority in time of filing.
 
12      (e)  Subsection (d) applies only if the proceeds of the
 
13 collateral are not cash proceeds, chattel paper, negotiable
 
14 documents, instruments, investment property, or letter-of-credit
 
15 rights.
 
16      (f)  Subsections (a) through (e) are subject to:
 
17      (1)  Subsection (g) and the other provisions of this part;
 
18      (2)  Section 490:4-210 with respect to a security interest
 
19           of a collecting bank;
 
20      (3)  Section 490:5-118 with respect to a security interest
 
21           of an issuer or nominated person; and
 
22      (4)  Section 490:9-110 with respect to a security interest
 
23           arising under Article 2 or 2A.
 

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

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

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

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

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

 
 1      (1)  The time the secured party acquires knowledge of the
 
 2           lease; or
 
 3      (2)  Forty-five days after the lease contract becomes
 
 4           enforceable.
 
 5      (g)  Subsection (f) does not apply if the advance is made
 
 6 pursuant to a commitment entered into without knowledge of the
 
 7 lease and before the expiration of the forty-five-day period.
 
 8      §490:9-324  Priority of purchase-money security interests.
 
 9 (a)  Except as otherwise provided in subsection (g), a perfected
 
10 purchase-money security interest in goods other than inventory or
 
11 livestock has priority over a conflicting security interest in
 
12 the same goods, and, except as otherwise provided in section
 
13 490:9-327, a perfected security interest in its identifiable
 
14 proceeds also has priority, if the purchase-money security
 
15 interest is perfected when the debtor receives possession of the
 
16 collateral or within twenty days thereafter.
 
17      (b)  Subject to subsection (c) and except as otherwise
 
18 provided in subsection (g), a perfected purchase-money security
 
19 interest in inventory has priority over a conflicting security
 
20 interest in the same inventory, has priority over a conflicting
 
21 security interest in chattel paper or an instrument constituting
 
22 proceeds of the inventory and in proceeds of the chattel paper,
 
23 if so provided in section 490:9-330, and, except as otherwise
 

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

 
 1 provided in section 490:9-327, also has priority in identifiable
 
 2 cash proceeds of the inventory to the extent the identifiable
 
 3 cash proceeds are received on or before the delivery of the
 
 4 inventory to a buyer, if:
 
 5      (1)  The purchase-money security interest is perfected when
 
 6           the debtor receives possession of the inventory;
 
 7      (2)  The purchase-money secured party sends an authenticated
 
 8           notification to the holder of the conflicting security
 
 9           interest;
 
10      (3)  The holder of the conflicting security interest
 
11           receives the notification within five years before the
 
12           debtor receives possession of the inventory; and
 
13      (4)  The notification states that the person sending the
 
14           notification has or expects to acquire a purchase-
 
15           money security interest in inventory of the debtor and
 
16           describes the inventory.
 
17      (c)  Subsection (b)(2) through (4) applies only if the
 
18 holder of the conflicting security interest had filed a financing
 
19 statement covering the same types of inventory:
 
20      (1)  If the purchase-money security interest is perfected by
 
21           filing, before the date of the filing; or
 
22      (2)  If the purchase-money security interest is temporarily
 
23           perfected without filing or possession under section
 

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

 
 1           490:9-312(f), before the beginning of the twenty-day
 
 2           period thereunder.
 
 3      (d)  Subject to subsection (e) and except as otherwise
 
 4 provided in subsection (g), a perfected purchase-money security
 
 5 interest in livestock that are farm products has priority over a
 
 6 conflicting security interest in the same livestock, and, except
 
 7 as otherwise provided in section 490:9-327, a perfected security
 
 8 interest in their identifiable proceeds and identifiable products
 
 9 in their unmanufactured states also has priority, if:
 
10      (1)  The purchase-money security interest is perfected when
 
11           the debtor receives possession of the livestock;
 
12      (2)  The purchase-money secured party sends an authenticated
 
13           notification to the holder of the conflicting security
 
14           interest;
 
15      (3)  The holder of the conflicting security interest
 
16           receives the notification within six months before the
 
17           debtor receives possession of the livestock; and
 
18      (4)  The notification states that the person sending the
 
19           notification has or expects to acquire a purchase-
 
20           money security interest in livestock of the debtor and
 
21           describes the livestock.
 
22      (e)  Subsection (d)(2) through (4) applies only if the
 
23 holder of the conflicting security interest had filed a financing
 

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

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

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

 
 1           acquire rights in or the use of collateral; and
 
 2      (2)  In all other cases, section 490:9-322(a) applies to the
 
 3           qualifying security interests.
 
 4      §490:9-325  Priority of security interests in transferred
 
 5 collateral.  (a)  Except as otherwise provided in subsection (b),
 
 6 a security interest created by a debtor is subordinate to a
 
 7 security interest in the same collateral created by another
 
 8 person if:
 
 9      (1)  The debtor acquired the collateral subject to the
 
10           security interest created by the other person;
 
11      (2)  The security interest created by the other person was
 
12           perfected when the debtor acquired the collateral; and
 
13      (3)  There is no period thereafter when the security
 
14           interest is unperfected.
 
15      (b)  Subsection (a) subordinates a security interest only if
 
16 the security interest:
 
17      (1)  Otherwise would have priority solely under section
 
18           490:9-322(a) or 490:9-324; or
 
19      (2)  Arose solely under section 490:2-711(3) or
 
20           490:2A-508(e).
 
21      §490:9-326  Priority of security interests created by new
 
22 debtor.  (a)  Subject to subsection (b), a security interest
 
23 created by a new debtor which is perfected by a filed financing
 

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

 
 1 statement that is effective solely under section 490:9-508 in
 
 2 collateral in which a new debtor has or acquires rights is
 
 3 subordinate to a security interest in the same collateral which
 
 4 is perfected other than by a filed financing statement that is
 
 5 effective solely under section 490:9-508.
 
 6      (b)  The other provisions of this part determine the
 
 7 priority among conflicting security interests in the same
 
 8 collateral perfected by filed financing statements that are
 
 9 effective solely under section 490:9-508.  However, if the
 
10 security agreements to which a new debtor became bound as debtor
 
11 were not entered into by the same original debtor, the
 
12 conflicting security interests rank according to priority in time
 
13 of the new debtor's having become bound.
 
14      §490:9-327  Priority of security interests in deposit
 
15 account.  The following rules govern priority among conflicting
 
16 security interests in the same deposit account:
 
17      (1)  A security interest held by a secured party having
 
18           control of the deposit account under section 490:9-104
 
19           has priority over a conflicting security interest held
 
20           by a secured party that does not have control.
 
21      (2)  Except as otherwise provided in paragraphs (3) and (4),
 
22           security interests perfected by control under section
 
23           490:9-314 rank according to priority in time of
 

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

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

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

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

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

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

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

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

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

 
 1           assigned to an identified assignee other than the
 
 2           purchaser.
 
 3      (b)  A purchaser of chattel paper has priority over a
 
 4 security interest in the chattel paper which is claimed other
 
 5 than merely as proceeds of inventory subject to a security
 
 6 interest if the purchaser gives new value and takes possession of
 
 7 the chattel paper or obtains control of the chattel paper under
 
 8 section 490:9-105 in good faith, in the ordinary course of the
 
 9 purchaser's business, and without knowledge that the purchase
 
10 violates the rights of the secured party.
 
11      (c)  Except as otherwise provided in section 490:9-327, a
 
12 purchaser having priority in chattel paper under subsection (a)
 
13 or (b) also has priority in proceeds of the chattel paper to the
 
14 extent that:
 
15      (1)  Section 490:9-322 provides for priority in the
 
16           proceeds; or
 
17      (2)  The proceeds consist of the specific goods covered by
 
18           the chattel paper or cash proceeds of the specific
 
19           goods, even if the purchaser's security interest in the
 
20           proceeds is unperfected.
 
21      (d)  Except as otherwise provided in section 490:9-331(a), a
 
22 purchaser of an instrument has priority over a security interest
 
23 in the instrument perfected by a method other than possession if
 

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

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

 
Page 100                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.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.
 
23      (b)  A possessory lien on goods has priority over a security
 

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

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

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

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

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

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

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

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

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

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

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

 
 1      (c)  If collateral becomes commingled goods, a security
 
 2 interest attaches to the product or mass.
 
 3      (d)  If a security interest in collateral is perfected
 
 4 before the collateral becomes commingled goods, the security
 
 5 interest that attaches to the product or mass under subsection
 
 6 (c) is perfected.
 
 7      (e)  Except as otherwise provided in subsection (f), the
 
 8 other provisions of this part determine the priority of a
 
 9 security interest that attaches to the product or mass under
 
10 subsection (c).
 
11      (f)  If more than one security interest attaches to the
 
12 product or mass under subsection (c), the following rules
 
13 determine priority:
 
14      (1)  A security interest that is perfected under subsection
 
15           (d) has priority over a security interest that is
 
16           unperfected at the time the collateral becomes
 
17           commingled goods.
 
18      (2)  If more than one security interest is perfected under
 
19           subsection (d), the security interests rank equally in
 
20           proportion to value of the collateral at the time it
 
21           became commingled goods.
 
22      §490:9-337  Priority of security interests in goods covered
 
23 by certificate of title.  If, while a security interest in goods
 

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

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

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

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

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

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

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

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

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

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

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

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

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

 
 1           authenticated by the assignor or the assignee.
 
 2      (b)  Subject to subsection (c) and except as otherwise
 
 3 provided in subsection (d), the claim of an account debtor
 
 4 against an assignor may be asserted against an assignee under
 
 5 subsection (a) only to reduce the amount the account debtor owes.
 
 6      (c)  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      (d)  In a consumer transaction, if a record evidences the
 
11 account debtor's obligation, law other than this article requires
 
12 that the record include a statement to the effect that the
 
13 account debtor's recovery against an assignee with respect to
 
14 claims and defenses against the assignor may not exceed amounts
 
15 paid by the account debtor under the record, and the record does
 
16 not include such a statement, the extent to which a claim of an
 
17 account debtor against the assignor may be asserted against an
 
18 assignee is determined as if the record included such a
 
19 statement.
 
20      (e)  This section does not apply to an assignment of a
 
21 health-care-insurance receivable.
 
22      §409:9-405  Modification of assigned contract.  (a)  A
 
23 modification of or substitution for an assigned contract is
 

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

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

 


 

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

 
 1 and promissory notes ineffective.  (a)  Subject to subsections
 
 2 (b) through (i), an account debtor on an account, chattel paper,
 
 3 or a payment intangible may discharge its obligation by paying
 
 4 the assignor until, but not after, the account debtor receives a
 
 5 notification, authenticated by the assignor or the assignee, that
 
 6 the amount due or to become due has been assigned and that
 
 7 payment is to be made to the assignee.  After receipt of the
 
 8 notification, the account debtor may discharge its obligation by
 
 9 paying the assignee and may not discharge the obligation by
 
10 paying the assignor.
 
11      (b)  Subject to subsection (h), notification is ineffective
 
12 under subsection (a):
 
13      (1)  If it does not reasonably identify the rights assigned;
 
14      (2)  To the extent that an agreement between an account
 
15           debtor and a seller of a payment intangible limits the
 
16           account debtor's duty to pay a person other than the
 
17           seller and the limitation is effective under law other
 
18           than this article; or
 
19      (3)  At the option of an account debtor, if the notification
 
20           notifies the account debtor to make less than the full
 
21           amount of any installment or other periodic payment to
 
22           the assignee, even if:
 
23           (A)  Only a portion of the account, chattel paper, or
 

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

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

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

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

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

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

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

 
 1           right of recoupment, claim, defense termination, right
 
 2           of termination, or remedy under the lease.
 
 3      (b)  Except as otherwise provided in section 490:2A-303(g),
 
 4 a term described in subsection (a)(2) is effective to the extent
 
 5 that there is:
 
 6      (1)  A transfer by the lessee of the lessee's right of
 
 7           possession or use of the goods in violation of the
 
 8           term; or
 
 9      (2)  A delegation of a material performance of either party
 
10           to the lease contract in violation of the term.
 
11      (c)  The creation, attachment, perfection, or enforcement of
 
12 a security interest in the lessor's interest under the lease
 
13 contract or the lessor's residual interest in the goods is not a
 
14 transfer that materially impairs the lessee's prospect of
 
15 obtaining return performance or materially changes the duty of or
 
16 materially increases the burden or risk imposed on the lessee
 
17 within the purview of section 490:2A-303(d) unless, and then only
 
18 to the extent that, enforcement actually results in a delegation
 
19 of material performance of the lessor.
 
20      §490:9-408  Restrictions on assignment of promissory notes,
 
21 health-care-insurance receivables, and certain general
 
22 intangibles ineffective.  (a)  Except as otherwise provided in
 
23 subsection (b), a term in a promissory note or in an agreement
 

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

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

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

 
 1 restricts, or requires the consent of a government, governmental
 
 2 body or official, person obligated on a promissory note, or
 
 3 account debtor to the assignment or transfer of, or creation of a
 
 4 security interest in, a promissory note, health-care-insurance
 
 5 receivable, or general intangible, including a contract, permit,
 
 6 license, or franchise between an account debtor and a debtor, is
 
 7 ineffective to the extent that the rule of law, statute, or
 
 8 regulation:
 
 9      (1)  Would impair the creation, attachment, or perfection of
 
10           a security interest; or
 
11      (2)  Provides that the assignment or transfer or the
 
12           creation, attachment, or perfection of the security
 
13           interest may give rise to a default, breach, right of
 
14           recoupment, claim, defense, termination, right of
 
15           termination, or remedy under the promissory note
 
16           health-care-insurance receivable, or general
 
17           intangible.
 
18      (d)  To the extent that a term in a promissory note or in an
 
19 agreement between an account debtor and a debtor which relates to
 
20 a health-care-insurance receivable or general intangible or a
 
21 rule of law, statute, or regulation described in subsection (c)
 
22 would be effective under law other than this article but is
 
23 ineffective under subsection (a) or (c), the creation,
 

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

 
 1 attachment, or perfection of a security interest in the
 
 2 promissory note, health-care-insurance receivable, or general
 
 3 intangible:
 
 4      (1)  Is not enforceable against the person obligated on the
 
 5           promissory note or the account debtor;
 
 6      (2)  Does not impose a duty or obligation on the person
 
 7           obligated on the promissory note or the account debtor;
 
 8      (3)  Does not require the person obligated on the promissory
 
 9           note or the account debtor to recognize the security
 
10           interest, pay or render performance to the secured
 
11           party, or accept payment or performance from the
 
12           secured party;
 
13      (4)  Does not entitle the secured party to use or assign the
 
14           debtor's rights under the promissory note, health-
 
15           care-insurance receivable, or general intangible
 
16           including any related information or materials
 
17           furnished to the debtor in the transaction giving rise
 
18           to the promissory note, health-care-insurance
 
19           receivable, or general intangible;
 
20      (5)  Does not entitle the secured party to use, assign
 
21           possess, or have access to any trade secrets or
 
22           confidential information of the person obligated on the
 
23           promissory note or the account debtor; and
 

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

 
 1      (6)  Does not entitle the secured party to enforce the
 
 2           security interest in the promissory note, health-care-
 
 3           insurance receivable, or general intangible.
 
 4      §490:9-409  Restrictions on assignment of letter-of-credit
 
 5 rights ineffective.  (a)  A term in a letter of credit or a rule
 
 6 of law, statute, regulation, custom, or practice applicable to
 
 7 the letter of credit which prohibits, restricts, or requires the
 
 8 consent of an applicant, issuer, or nominated person to a
 
 9 beneficiary's assignment of or creation of a security interest in
 
10 a letter-of-credit right is ineffective to the extent that the
 
11 term or rule of law, statute, regulation, custom, or practice:
 
12      (1)  Would impair the creation, attachment, or perfection of
 
13           a security interest in the letter-of-credit right; or
 
14      (2)  Provides that the assignment or the creation
 
15           attachment, or perfection of the security interest may
 
16           give rise to a default, breach, right of recoupment
 
17           claim, defense, termination, right of termination, or
 
18           remedy under the letter-of-credit right.
 
19      (b)  To the extent that a term in a letter of credit is
 
20 ineffective under subsection (a) but would be effective under law
 
21 other than this article or a custom or practice applicable to the
 
22 letter of credit, to the transfer of a right to draw or otherwise
 
23 demand performance under the letter of credit, or to the
 

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

 
 1 assignment of a right to proceeds of the letter of credit, the
 
 2 creation, attachment, or perfection of a security interest in the
 
 3 letter-of-credit right:
 
 4      (1)  Is not enforceable against the applicant, issuer
 
 5           nominated person, or transferee beneficiary;
 
 6      (2)  Imposes no duties or obligations on the applicant
 
 7           issuer, nominated person, or transferee beneficiary;
 
 8           and
 
 9      (3)  Does not require the applicant, issuer, nominated
 
10           person, or transferee beneficiary to recognize the
 
11           security interest, pay or render performance to the
 
12           secured party, or accept payment or other performance
 
13           from the secured party.
 
14                          PART 5.  FILING
 
15              SUBPART 1.  FILING OFFICE; CONTENTS AND
 
16               EFFECTIVENESS OF FINANCING STATEMENT
 
17      §490:9-501  Filing office.  (a)  Except as otherwise
 
18 provided in subsection (b), if the local law of this State
 
19 governs perfection of a security interest or agricultural lien,
 
20 the office in which to file a financing statement to perfect the
 
21 security interest or agricultural lien is:
 
22      (1)  The office designated for the filing or recording of a
 
23           record of a mortgage on the related real property, if:
 

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

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

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

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

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

 
 1      (3)  The record satisfies with the requirements for a
 
 2           financing statement in this section other than an
 
 3           indication that it is to be filed in the real property
 
 4           records; and
 
 5      (4)  The record is duly recorded.
 
 6      (d)  A financing statement may be filed before a security
 
 7 agreement is made or a security interest otherwise attaches.
 
 8      §490:9-503  Name of debtor and secured party.  (a)  A
 
 9 financing statement sufficiently provides the name of the debtor:
 
10      (1)  If the debtor is a registered organization, only if the
 
11           financing statement provides the name of the debtor
 
12           indicated on the public record of the debtor's
 
13           jurisdiction of organization which shows the debtor to
 
14           have been organized;
 
15      (2)  If the debtor is a decedent's estate, only if the
 
16           financing statement provides the name of the decedent
 
17           and indicates that the debtor is an estate;
 
18      (3)  If the debtor is a trust or a trustee acting with
 
19           respect to property held in trust, only if the
 
20           financing statement:
 
21           (A)  Provides the name specified for the trust in its
 
22                organic documents or, if no name is specified
 
23                provides the name of the settlor and additional
 

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

 
 1                information sufficient to distinguish the debtor
 
 2                from other trusts having one or more of the same
 
 3                settlors; and
 
 4           (B)  Indicates, in the debtor's name or otherwise that
 
 5                the debtor is a trust or is a trustee acting with
 
 6                respect to property held in trust; and
 
 7      (4)  In other cases:
 
 8           (A)  If the debtor has a name, only if it provides the
 
 9                individual or organizational name of the debtor;
 
10                and
 
11           (B)  If the debtor does not have a name, only if it
 
12                provides the names of the partners, members
 
13                associates, or other persons comprising the
 
14                debtor.
 
15      (b)  A financing statement that provides the name of the
 
16 debtor in accordance with subsection (a) is not rendered
 
17 ineffective by the absence of:
 
18      (1)  A trade name or other name of the debtor; or
 
19      (2)  Unless required under subsection (a)(4)(B), names of
 
20           partners, members, associates, or other persons
 
21           comprising the debtor.
 
22      (c)  A financing statement that provides only the debtor's
 
23 trade name does not sufficiently provide the name of the debtor.
 

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

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

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

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

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

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

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

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

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

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

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

 
 1 agricultural lien continues under section 490:9-315(a)(1), a
 
 2 debtor authorizes the filing of an initial financing statement,
 
 3 and an amendment, covering the collateral and property that
 
 4 becomes collateral under section 490:9-315(a)(2).
 
 5      (d)  A person may file an amendment other than an amendment
 
 6 that adds collateral covered by a financing statement or an
 
 7 amendment that adds a debtor to a financing statement only if:
 
 8      (1)  The secured party of record authorizes the filing; or
 
 9      (2)  The amendment is a termination statement for a
 
10           financing statement as to which the secured party of
 
11           record has failed to file or send a termination
 
12           statement as required by section 490:9-513(a) or (c)
 
13           the debtor authorizes the filing, and the termination
 
14           statement indicates that the debtor authorized it to be
 
15           filed.
 
16      (e)  If there is more than one secured party of record for a
 
17 financing statement, each secured party of record may authorize
 
18 the filing of an amendment under subsection (c).
 
19      §490:9-510  Effectiveness of filed record.  (a)  A filed
 
20 record is effective only to the extent that it was filed by a
 
21 person that may file it under section 490:9-509.
 
22      (b)  A record authorized by one secured party of record does
 
23 not affect the financing statement with respect to another
 

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

 
 1 secured party of record.
 
 2      (c)  A continuation statement that is not filed within the
 
 3 six-month period prescribed by section 490:9-515(d) is
 
 4 ineffective.
 
 5      §490:9-511  Secured party of record.  (a)  A secured party
 
 6 of record with respect to a financing statement is a person whose
 
 7 name is provided as the name of the secured party or a
 
 8 representative of the secured party in an initial financing
 
 9 statement that has been filed.  If an initial financing statement
 
10 is filed under section 490:9-514(a), the assignee named in the
 
11 initial financing statement is the secured party of record with
 
12 respect to the financing statement.
 
13      (b)  If an amendment of a financing statement which provides
 
14 the name of a person as a secured party or a representative of a
 
15 secured party is filed, the person named in the amendment is a
 
16 secured party of record.  If an amendment is filed under section
 
17 490:9-514(b), the assignee named in the amendment is a secured
 
18 party of record.
 
19      (c)  A person remains a secured party of record until the
 
20 filing of an amendment of the financing statement which deletes
 
21 the person.
 
22      §490:9-512  Amendment of financing statement.  (a)  Subject
 
23 to section 490:9-509, a person may add or delete collateral
 

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

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

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

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

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

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

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

 
 1      §490:9-514  Assignment of powers of secured party of record.
 
 2 (a)  Except as otherwise provided in subsection (c), an initial
 
 3 financing statement may reflect an assignment of all of the
 
 4 secured party's power to authorize an amendment to the financing
 
 5 statement by providing the name and mailing address of the
 
 6 assignee as the name and address of the secured party.
 
 7      (b)  Except as otherwise provided in subsection (c), a
 
 8 secured party of record may assign of record all or part of its
 
 9 power to authorize an amendment to a financing statement by
 
10 filing in the filing office an amendment of the financing
 
11 statement which:
 
12      (1)  Identifies, by its file number, the initial financing
 
13           statement to which it relates;
 
14      (2)  Provides the name of the assignor; and
 
15      (3)  Provides the name and mailing address of the assignee.
 
16      (c)  An assignment of record of a security interest in a
 
17 fixture covered by a record of a mortgage which is effective as a
 
18 financing statement filed as a fixture filing under section
 
19 490:9-502(c) may be made only by an assignment of record of the
 
20 mortgage in the manner provided by law of this State other than
 
21 this chapter.
 
22      §490:9-515  Duration and effectiveness of financing
 
23 statement; effect of lapsed financing statement.  (a)  Except as
 

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

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

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

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

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

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

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

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

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

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

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

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

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

 
 1         SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE.
 
 2      §490:9-519  Numbering, maintaining, and indexing records;
 
 3 communicating information provided in records.  (a)  For each
 
 4 record filed in a filing office, the filing office shall:
 
 5      (1)  Assign a unique number to the filed record;
 
 6      (2)  Create a record that bears the number assigned to the
 
 7           filed record and the date and time of filing;
 
 8      (3)  Maintain the filed record for public inspection; and
 
 9      (4)  Index the filed record in accordance with subsections
 
10           (c), (d), and (e).
 
11      (b)  A file number must include a digit that:
 
12      (1)  Is mathematically derived from or related to the other
 
13           digits of the file number; and
 
14      (2)  Aids the filing office in determining whether a number
 
15           communicated as the file number includes a single-digit
 
16           or transpositional error.
 
17      (c)  Except as otherwise provided in subsections (d) and
 
18 (e), the filing office shall:
 
19      (1)  Index an initial financing statement according to the
 
20           name of the debtor and index all filed records relating
 
21           to the initial financing statement in a manner that
 
22           associates with one another an initial financing
 
23           statement and all filed records relating to the initial
 

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

 
 1           financing statement; and
 
 2      (2)  Index a record that provides a name of a debtor which
 
 3           was not previously provided in the financing statement
 
 4           to which the record relates also according to the name
 
 5           that was not previously provided.
 
 6      (d)  If a financing statement is filed as a fixture filing
 
 7 or covers as-extracted collateral or timber to be cut, the filing
 
 8 office shall index it:
 
 9      (1)  Under the names of the debtor and of each owner of
 
10           record shown on the financing statement as if they were
 
11           the mortgagors under a mortgage of the real property
 
12           described; and
 
13      (2)  To the extent that the law of this State provides for
 
14           indexing of records of mortgages under the name of the
 
15           mortgagee, under the name of the secured party as if
 
16           the secured party were the mortgagee thereunder, or if
 
17           indexing is by description, as if the financing
 
18           statement were a record of a mortgage of the real
 
19           property described.
 
20      (e)  If a financing statement is filed as a fixture filing
 
21 or covers as-extracted collateral or timber to be cut, the filing
 
22 office shall index an assignment filed under section 490:9-514(a)
 
23 or an amendment filed under section 490:9-514(b):
 

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

 
 1      (1)  Under the name of the assignor as grantor; and
 
 2      (2)  To the extent that the law of this State provides for
 
 3           indexing a record of the assignment of a mortgage under
 
 4           the name of the assignee, under the name of the
 
 5           assignee.
 
 6      (f)  The filing office shall maintain a capability:
 
 7      (1)  To retrieve a record by the name of the debtor and by
 
 8           the file number assigned to the initial financing
 
 9           statement to which the record relates; and
 
10      (2)  To associate and retrieve with one another an initial
 
11           financing statement and each filed record relating to
 
12           the initial financing statement.
 
13      (g)  The filing office may not remove a debtor's name from
 
14 the index until one year after the effectiveness of a financing
 
15 statement naming the debtor lapses under section 490:9-515 with
 
16 respect to all secured parties of record.
 
17      (h)  The filing office shall perform the acts required by
 
18 subsections (a) through (e) at the time and in the manner
 
19 prescribed by filing-office rule, but not later than two business
 
20 days after the filing office receives the record in question.
 
21      §490:9-520  Acceptance and refusal to accept record.  (a)  A
 
22 filing office shall refuse to accept a record for filing for a
 
23 reason set forth in section 490:9-516(b) and may refuse to accept
 

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

 
 1 a record for filing only for a reason set forth in section
 
 2 490:9-516(b).
 
 3      (b)  If a filing office refuses to accept a record for
 
 4 filing, it shall communicate to the person that presented the
 
 5 record the fact of and reason for the refusal and the date and
 
 6 time the record would have been filed had the filing office
 
 7 accepted it.  The communication must be made at the time and in
 
 8 the manner prescribed by filing-office rule but in no event more
 
 9 than two business days after the filing office receives the
 
10 record.
 
11      (c)  A filed financing statement satisfying section
 
12 490:9-502(a) and (b) is effective, even if the filing office is
 
13 required to refuse to accept it for filing under subsection (a).
 
14 However, section 490:9-338 applies to a filed financing statement
 
15 providing information described in section 490:9-516(b)(5) which
 
16 is incorrect at the time the financing statement is filed.
 
17      (d)  If a record communicated to a filing office provides
 
18 information that relates to more than one debtor, this part
 
19 applies as to each debtor separately.
 
20      §490:9-521  Uniform form of written financing statement and
 
21 amendment.  (a)  A filing office that accepts written records for
 
22 filing may not refuse to accept a written initial financing
 
23 statement in the following form, except for a reason set forth in
 

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

 
 1 section 490:9-516(b):
 
 2 UCC FINANCING STATEMENT
 
 3 FOLLOW INSTRUCTIONS (front and back) CAREFULLY
 
 4 A.   NAME AND PHONE OF CONTACT AT FILER [optional]
 
 5      ___________________________________
 
 6 B.   SEND ACKNOWLEDGMENT TO:  (Name and Address)
 
 7      ___________________________________ THE ABOVE SPACE IS
 
 8 FOR  ___________________________________ FILING OFFICE USE ONLY
 
 9 1.   DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name
 
10      (1a or 1b) - Do not abbreviate or combine names
 
11      1a.  ORGANIZATION'S NAME
 
12 
 
13 _________________________________________________________________
 
14 or   1b.  INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
 
15 
 
16 _________________________________________________________________
 
17      1c.  MAILING ADDRESS    CITY      STATE POSTAL CODE COUNTRY
 
18 
 
19 _________________________________________________________________
 
20      1d.  TAX ID. NO.  ADD'L INFO. RE   1e. TYPE OF ORGANIZATION
 
21           SSN OR EIN  ORGANIZATION DEBTOR
 
22 
 
23 ________________________________________________________________
 

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

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

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

 
 1 3.   SECURED PARTY'S NAME (or name of total assignee of assignor
 
 2 S/P) - insert only one secured party name (3a or 3b)
 
 3      3a.  ORGANIZATION'S NAME
 
 4 
 
 5 _________________________________________________________________
 
 6 OR   3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
 
 7   
 
 8 _________________________________________________________________
 
 9      3c. MAILING ADDRESS      CITY     STATE POSTAL CODE  COUNTRY
 
10 
 
11 _________________________________________________________________
 
12 4.   This FINANCING STATEMENT covers the following collateral:
 
13 
 
14 _________________________________________________________________
 
15 5.   ALTERNATIVE DESIGNATION [if applicable]: [ ] LESSEE/LESSOR
 
16      [ ] CONSIGNEE/CONSIGNOR [ ] BAILEE/BAILOR [ ] SELLER/BUYER
 
17      [ ] AG. LIEN [ ] NON-UCC FILING
 
18 6.   [ ] This FINANCING STATEMENT is to be filed (for record)
 
19      (or recorded) in the REAL ESTATE RECORDS.
 
20      Attach Addendum [if applicable]
 
21 7.   Check to REQUEST SEARCH REPORT(S) on Debtor(s)
 
22      [ ] All Debtors   [ ] Debtor 1   [ ] Debtor 2
 
23      [ADDITIONAL FEE]                   [optional]
 

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

 
 1 
 
 2      -----------------------------------------------------------
 
 3 8.   OPTIONAL FILER REFERENCE DATA
 
 4   _______________________________________________________________
 
 5 FILING OFFICE COPY - NATIONAL UCC FILING STATEMENT (FORM UCC 1)
 
 6 (REV.  071/29/98)
 
 7                          [BACK OF FORM]
 
 8 UCC FINANCING STATEMENT ADDENDUM
 
 9 Follow instructions (front and back) CAREFULLY.
 
10 9.   NAME OF FIRST DEBTOR (1a or 1b) ON RELATED FINANCING
 
11 STATEMENT
 
12 
 
13 _________________________________________________________________
 
14      9a. ORGANIZATION'S NAME
 
15 
 
16 _________________________________________________________________
 
17 OR   9b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
18 
 
19 _________________________________________________________________
 
20 10.  MISCELLANEOUS:
 
21 
 
22      ______________________________________THE ABOVE SPACE IS FOR
 

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

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

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

 
 1 insert only one name (12a or 12b).
 
 2      12a.ORGANIZATION'S NAME
 
 3 
 
 4 __________________________________________________________________
 
 5 OR   12b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
 6 
 
 7 __________________________________________________________________
 
 8      12c. MAILING ADDRESS    CITY      STATE POSTAL CODE  COUNTRY
 
 9 
 
10 __________________________________________________________________
 
11 13.  This FINANCING STATEMENT covers [ ] timber to be cut or
 
12      [ ] as-extracted collateral, or is filed as a [ ] fixture
 
13      filing.
 
14 14.  Description of real estate:
 
15 
 
16 __________________________________________________________________
 
17 15.  Name and address of a RECORD OWNER of the above-described
 
18      real estate (if Debtor does not have record interest):
 
19 16.  Additional collateral description:
 
20 
 
21 __________________________________________________________________
 
22 17.  Check only if applicable and check only one box:
 
23      Debtor is a [ ] Trust or [ ] Trustee acting with respect to
 

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

 
 1      property held in trust or [ ] Decedent's Estate
 
 2 18.  Check only if applicable and check only one box:
 
 3      [ ] Debtor is a TRANSMITTING UTILITY
 
 4      [ ] Filed in connection with a Manufactured-Home Transaction
 
 5          - effective 30 years
 
 6      [ ] Filed in connection with a Public-Finance Transaction -
 
 7          effective 30 years
 
 8      FILING OFFICE COPY - NATIONAL UCC FILING STATEMENT
 
 9      (FORM UCC 1Ad)(REV. 07/29/98)
 
10      (b)  A filing office that accepts written records for filing
 
11 may not refuse to accept a written financing statement amendment
 
12 in the following form, except for a reason set forth in section
 
13 490:9-516(b):
 
14 UCC FINANCING STATEMENT AMENDMENT
 
15 FOLLOW INSTRUCTIONS (front and back) CAREFULLY
 
16 A.   NAME AND PHONE OF CONTACT AT FILER [optional]
 
17      _______________________________________
 
18 B.   SEND ACKNOWLEDGMENT TO:  (Name and Address)
 
19      ___________________________________THE ABOVE SPACE IS FOR
 
20      ___________________________________FILING OFFICE USE ONLY
 
21 1a.  INITIAL FINANCING STATEMENT FILE NO.  1b. [ ] This FINANCING
 
22      STATEMENT AMENDMENT is to be filed (for record) (or
 
23      recorded) in the REAL ESTATE RECORDS.
 

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

 
 1 2.   [ ] TERMINATION:  Effectiveness of the Financing Statement
 
 2      identified above is terminated with respect to security
 
 3      interest(s) of the Secured Party authorizing this
 
 4      Termination Statement.
 
 5 3.   [ ] CONTINUATION:  Effectiveness of the Financing Statement
 
 6      identified above with respect to security interest(s) of the
 
 7      Secured Party authorizing this Continuation Statement is
 
 8      continued for the additional period provided by applicable
 
 9      law.
 
10 4.   [ ] ASSIGNMENT (full or partial):  Give name of assignee in
 
11      item 7a or 7b and address of assignee in item 7c; and also
 
12      give name of assignor in item 9.
 
13 
 
14 _________________________________________________________________
 
15 5.   AMENDMENT (PARTY INFORMATION): This Amendment affects
 
16      [ ] Debtor or [ ] Secured Party of record.  Check only one
 
17      of these two boxes.  Also check one of the following three
 
18      boxes and provide appropriate information in items 6 and/or
 
19      7.
 
20      [ ] CHANGE name and/or address:  Give current record name in
 
21      item 6a or 6b; also give new name (if name change) in item
 
22      7a or 7b and/or new address (if address change in item 7c.
 
23      [ ] DELETE name:  Give record name to be deleted in item 6a
 

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

 
 1      or 6b.
 
 2      [ ] ADD name: Complete item 7a or 7b, and also item 7c; also
 
 3      complete items 7d-7g (if applicable).
 
 4 6.   CURRENT RECORD INFORMATION:
 
 5      6a.  ORGANIZATION'S NAME
 
 6 
 
 7 _________________________________________________________________
 
 8 OR   6b.  INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
 9 
 
10 _________________________________________________________________
 
11 7.   CHANGED (NEW) OR ADDED INFORMATION:
 
12      7a.  ORGANIZATION'S NAME
 
13 
 
14 _________________________________________________________________
 
15 OR   7b.  INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
16 
 
17 _________________________________________________________________
 
18      7c.  MAILING ADDRESS    CITY      STATE POSTAL CODE  COUNTRY
 
19 
 
20 _________________________________________________________________
 
21      7d.  TAX ID. NO.  ADD'L INFO. RE  7e.  TYPE OF ORGANIZATION
 
22           SSN OR EIN  ORGANIZATION DEBTOR
 
23 
 

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

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

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

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

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

 
 1 FILING OFFICE COPY - NATIONAL UCC FINANCING STATEMENT AMENDMENT
 
 2 ADDENDUM (FORM UCC3Ad) (REV. 07/29/98)
 
 3      (c)  A form that a filing office may not refuse to accept
 
 4 under subsection (a) or (b) must conform to the format prescribed
 
 5 for the form by the National Conference of Commissioners on
 
 6 Uniform State Laws.
 
 7      §490:9-522  Maintenance and destruction of records.  (a)
 
 8 The filing office shall maintain a record of the information
 
 9 provided in a filed financing statement for at least one year
 
10 after the effectiveness of the financing statement has lapsed
 
11 under section 490:9-515 with respect to all secured parties of
 
12 record.  The record must be retrievable by using the name of the
 
13 debtor and by using the file number assigned to the initial
 
14 financing statement to which the record relates.
 
15      (b)  Except to the extent that a statute governing
 
16 disposition of public records provides otherwise, the filing
 
17 office immediately may destroy any written record evidencing a
 
18 financing statement.  However, if the filing office destroys a
 
19 written record, it shall maintain another record of the financing
 
20 statement which complies with subsection (a).
 
21      §490:9-523  Information from filing office; sale or license
 
22 of records.  (a)  If a person that files a written record
 
23 requests an acknowledgment of the filing, the filing office shall
 

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

 
 1 send to the person an image of the record showing the number
 
 2 assigned to the record pursuant to section 490:9-519(a)(1) and
 
 3 the date and time of the filing of the record.  However, if the
 
 4 person furnishes a copy of the record to the filing office, the
 
 5 filing office may instead:
 
 6      (1)  Note upon the copy the number assigned to the record
 
 7           pursuant to section 490:9-519(a)(1) and the date and
 
 8           time of the filing of the record; and
 
 9      (2)  Send the copy to the person.
 
10      (b)  If a person files a record other than a written record,
 
11 the filing office shall communicate to the person an
 
12 acknowledgment that provides:
 
13      (1)  The information in the record;
 
14      (2)  The number assigned to the record pursuant to section
 
15           490:9-519(a)(1); and
 
16      (3)  The date and time of the filing of the record.
 
17      (c)  The filing office shall communicate or otherwise make
 
18 available in a record the following information to any person
 
19 that requests it:
 
20      (1)  Whether there is on file on a date and time specified
 
21           by the filing office, but not a date earlier than three
 
22           business days before the filing office receives the
 
23           request, any financing statement that:
 

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

 
 1           (A)  Designates a particular debtor;
 
 2           (B)  Has not lapsed under section 490:9-515 with
 
 3                respect to all secured parties of record; and
 
 4           (C)  If the request so states, has lapsed under section
 
 5                490:9-515 and a record of which is maintained by
 
 6                the filing office under section 490:9-522(a);
 
 7      (2)  The date and time of filing of each financing
 
 8           statement; and
 
 9      (3)  The information provided in each financing statement.
 
10      (d)  In complying with its duty under subsection (c), the
 
11 filing office may communicate information in any medium.
 
12 However, if requested, the filing office shall communicate
 
13 information by issuing its written certificate.
 
14      (e)  The filing office shall perform the acts required by
 
15 subsections (a) through (d) at the time and in the manner
 
16 prescribed by filing-office rule, but not later than two business
 
17 days after the filing office receives the request.
 
18      (f)  At least weekly, the filing office shall offer to sell
 
19 or license to the public on a nonexclusive basis, in bulk, copies
 
20 of all records filed in it under this part, in every medium from
 
21 time to time available to the filing office.
 
22      §490:9-524  Delay by filing office.  Delay by the filing
 
23 office beyond a time limit prescribed by this part is excused if:
 

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

 
 1      (1)  The delay is caused by interruption of communication or
 
 2           computer facilities, war, emergency conditions failure
 
 3           of equipment, or other circumstances beyond control of
 
 4           the filing office; and
 
 5      (2)  The filing office exercises reasonable diligence under
 
 6           the circumstances.
 
 7      §490:9-525  Fees.  (a)  Except as otherwise provided in
 
 8 subsection (e), the fee for filing and indexing a record under
 
 9 this part, other than an initial financing statement of the kind
 
10 described in section 490:9-502(c), shall be as specified by rules
 
11 adopted under section 502-25 by the department of land and
 
12 natural resources pursuant to chapter 91.
 
13      (b)  Except as otherwise provided in subsection (e), the fee
 
14 for filing and indexing an initial financing statement of the
 
15 kind described in section 490:9-502(c) shall be as specified by
 
16 rules adopted under section 502-25 by the department of land and
 
17 natural resources pursuant to chapter 91.
 
18      (c)  The number of names required to be indexed does not
 
19 affect the amount of the fee in subsections (a) and (b).
 
20      (d)  The fee for responding to a request for information
 
21 from the filing office, including for issuing a certificate
 
22 showing whether there is on file any financing statement naming a
 
23 particular debtor shall be as specified by rules adopted under
 

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

 
 1 section 502-25 by the department of land and natural resources
 
 2 pursuant to chapter 91.
 
 3      (e)  This section does not require a fee with respect to a
 
 4 record of a mortgage which is effective as a financing statement
 
 5 filed as a fixture filing or as a financing statement covering
 
 6 as-extracted collateral or timber to be cut under section
 
 7 490:9-502(c).  However, the recording and satisfaction fees that
 
 8 otherwise would be applicable to the record of the mortgage
 
 9 apply.
 
10      §490:9-526  Filing-office rules.  (a)  The department of
 
11 land and natural resources shall adopt and publish rules to
 
12 implement this article.  The filing-office rules must be:
 
13      (1)  Consistent with this article; and
 
14      (2)  Adopted and published in accordance with chapter 91.
 
15      (b)  To keep the filing-office rules and practices of the
 
16 filing office in harmony with the rules and practices of filing
 
17 offices in other jurisdictions that enact substantially this
 
18 part, and to keep the technology used by the filing office
 
19 compatible with the technology used by filing offices in other
 
20 jurisdictions that enact substantially this part, the filing
 
21 office, so far as is consistent with the purposes, policies, and
 
22 provisions of this article, in adopting, amending, and repealing
 
23 filing-office rules, shall:
 

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

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

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

 
 1           reasons for these variations.
 
 2                         PART 6.  DEFAULT
 
 3     SUBPART 1.  DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
 
 4      §490:9-601  Rights after default; judicial enforcement;
 
 5 consignor or buyer of accounts, chattel paper, payment
 
 6 intangibles, or promissory notes.  (a)  After default, a secured
 
 7 party has the rights provided in this part and, except as
 
 8 otherwise provided in section 490:9-602, those provided by
 
 9 agreement of the parties.  A secured party:
 
10      (1)  May reduce a claim to judgment, foreclose, or otherwise
 
11           enforce the claim, security interest, or agricultural
 
12           lien by any available judicial procedure; and
 
13      (2)  If the collateral is documents, may proceed either as
 
14           to the documents or as to the goods they cover.
 
15      (b)  A secured party in possession of collateral or control
 
16 of collateral under section 490:9-104, 490:9-105, 490:9-106, or
 
17 490:9-107 has the rights and duties provided in section
 
18 490:9-207.
 
19      (c)  The rights under subsections (a) and (b) are cumulative
 
20 and may be exercised simultaneously.
 
21      (d)  Except as otherwise provided in subsection (g) and
 
22 section 490:9-605, after default, a debtor and an obligor have
 
23 the rights provided in this part and by agreement of the parties.
 

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

 
 1      (e)  If a secured party has reduced its claim to judgment,
 
 2 the lien of any levy that may be made upon the collateral by
 
 3 virtue of an execution based upon the judgment relates back to
 
 4 the earliest of:
 
 5      (1)  The date of perfection of the security interest or
 
 6           agricultural lien in the collateral;
 
 7      (2)  The date of filing a financing statement covering the
 
 8           collateral; or
 
 9      (3)  Any date specified in a statute under which the
 
10           agricultural lien was created.
 
11      (f)  A sale pursuant to an execution is a foreclosure of the
 
12 security interest or agricultural lien by judicial procedure
 
13 within the meaning of this section.  A secured party may purchase
 
14 at the sale and thereafter hold the collateral free of any other
 
15 requirements of this article.
 
16      (g)  Except as otherwise provided in section 490:9-607(c),
 
17 this part imposes no duties upon a secured party that is a
 
18 consignor or is a buyer of accounts, chattel paper, payment
 
19 intangibles, or promissory notes.
 
20      §490:9-602  Waiver and variance of rights and duties.
 
21 Except as otherwise provided in section 490:9-624, to the extent
 
22 that they give rights to a debtor or obligor and impose duties on
 
23 a secured party, the debtor or obligor may not waive or vary the
 

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

 
 1 rules stated in the following listed sections:
 
 2      (1)  Section 490:9-207(b)(4)(C), which deals with use and
 
 3           operation of the collateral by the secured party;
 
 4      (2)  Section 490:9-210, which deals with requests for an
 
 5           accounting and requests concerning a list of collateral
 
 6           and statement of account;
 
 7      (3)  Section 490:9-607(c), which deals with collection and
 
 8           enforcement of collateral;
 
 9      (4)  Sections 490:9-608(a) and 490:9-615(c) to the extent
 
10           that they deal with application or payment of noncash
 
11           proceeds of collection, enforcement, or disposition;
 
12      (5)  Sections 490:9-608(a) and 490:9-615(d) to the extent
 
13           that they require accounting for or payment of surplus
 
14           proceeds of collateral;
 
15      (6)  Section 490:9-609 to the extent that it imposes upon a
 
16           secured party that takes possession of collateral
 
17           without judicial process the duty to do so without
 
18           breach of the peace;
 
19      (7)  Sections 490:9-610(b), 490:9-611, 490:9-613, and
 
20           490:9-614, which deal with disposition of collateral;
 
21      (8)  Section 490:9-615(f), which deals with calculation of a
 
22           deficiency or surplus when a disposition is made to the
 
23           secured party, a person related to the secured party,
 

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

 
 1           or a secondary obligor;
 
 2      (9)  Section 490:9-616, which deals with explanation of the
 
 3           calculation of a surplus or deficiency;
 
 4     (10)   Section 490:9-620, 490:9-621, and 490:9-622, which
 
 5           deal with acceptance of collateral in satisfaction of
 
 6           obligation;
 
 7     (11)   Section 490:9-623, which deals with redemption of
 
 8           collateral;
 
 9     (12)   Section 490:9-624, which deals with permissible
 
10           waivers; and
 
11     (13)   Sections 490:9-625 and 490:9-626, which deal with the
 
12           secured party's liability for failure to comply with
 
13           this article.
 
14      §490:9-603  Agreement on standards concerning rights and
 
15 duties.  (a)  The parties may determine by agreement the
 
16 standards measuring the fulfillment of the rights of a debtor or
 
17 obligor and the duties of a secured party under a rule stated in
 
18 section 490:9-602 if the standards are not manifestly
 
19 unreasonable.
 
20      (b)  Subsection (a) does not apply to the duty under section
 
21 490:9-609 to refrain from breaching the peace.
 
22      §490:9-604  Procedure if security agreement covers real
 
23 property or fixtures.  (a)  If a security agreement covers both
 

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

 
 1 personal and real property, a secured party may proceed:
 
 2      (1)  Under this part as to the personal property without
 
 3           prejudicing any rights with respect to the real
 
 4           property; or
 
 5      (2)  As to both the personal property and the real property
 
 6           in accordance with the rights with respect to the real
 
 7           property, in which case the other provisions of this
 
 8           part do not apply.
 
 9      (b)  Subject to subsection (c), if a security agreement
 
10 covers goods that are or become fixtures, a secured party may
 
11 proceed:
 
12      (1)  Under this part; or
 
13      (2)  In accordance with the rights with respect to real
 
14           property, in which case the other provisions of this
 
15           part do not apply.
 
16      (c)  Subject to the other provisions of this part, if a
 
17 secured party holding a security interest in fixtures has
 
18 priority over all owners and encumbrancers of the real property,
 
19 the secured party, after default, may remove the collateral from
 
20 the real property.
 
21      (d)  A secured party that removes collateral shall promptly
 
22 reimburse any encumbrancer or owner of the real property, other
 
23 than the debtor, for the cost of repair of any physical injury
 

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

 
 1 caused by the removal.  The secured party need not reimburse the
 
 2 encumbrancer or owner for any diminution in value of the real
 
 3 property caused by the absence of the goods removed or by any
 
 4 necessity of replacing them.  A person entitled to reimbursement
 
 5 may refuse permission to remove until the secured party gives
 
 6 adequate assurance for the performance of the obligation to
 
 7 reimburse.
 
 8      §490:9-605  Unknown debtor or secondary obligor.  A secured
 
 9 party does not owe a duty based on its status as secured party:
 
10      (1)  To a person that is a debtor or obligor, unless the
 
11           secured party knows:
 
12           (A)  That the person is a debtor or obligor;
 
13           (B)  The identity of the person; and
 
14           (C)  How to communicate with the person; or
 
15      (2)  To a secured party or lienholder that has filed a
 
16           financing statement against a person, unless the
 
17           secured party knows:
 
18           (A)  That the person is a debtor; and
 
19           (B)  The identity of the person.
 
20      §490:9-606  Time of default for agricultural lien.  For
 
21 purposes of this part, a default occurs in connection with an
 
22 agricultural lien at the time the secured party becomes entitled
 
23 to enforce the lien in accordance with the statute under which it
 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 
 1           (A)  Any other person from which the secured party has
 
 2                received, before the notification date, an
 
 3                authenticated notification of a claim of an
 
 4                interest in the collateral;
 
 5           (B)  Any other secured party or lienholder that, ten
 
 6                days before the notification date, held a security
 
 7                interest in or other lien on the collateral
 
 8                perfected by the filing of a financing statement
 
 9                that:
 
10                (i)  Identified the collateral;
 
11               (ii)  Was indexed under the debtor's name as of
 
12                     that date; and
 
13              (iii)  Was filed in the office in which to file a
 
14                     financing statement against the debtor
 
15                     covering the collateral as of that date; and
 
16           (C)  Any other secured party that, ten days before the
 
17                notification date, held a security interest in the
 
18                collateral perfected by compliance with a statute,
 
19                regulation, or treaty described in section
 
20                490:9-311(a).
 
21      (d)  Subsection (b) does not apply if the collateral is
 
22 perishable or threatens to decline speedily in value or is of a
 
23 type customarily sold on a recognized market.
 

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

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

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

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

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

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

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

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

 
Page 185                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.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 
 
23 [For a private disposition:]
 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 
 1 interests described in subsection (a), the transferee takes the
 
 2 collateral subject to:
 
 3      (1)  The debtor's rights in the collateral;
 
 4      (2)  The security interest or agricultural lien under which
 
 5           the disposition is made; and
 
 6      (3)  Any other security interest or other lien.
 
 7      §490:9-618  Rights and duties of certain secondary obligors.
 
 8 (a)  A secondary obligor acquires the rights and becomes
 
 9 obligated to perform the duties of the secured party after the
 
10 secondary obligor:
 
11      (1)  Receives an assignment of a secured obligation from the
 
12           secured party;
 
13      (2)  Receives a transfer of collateral from the secured
 
14           party and agrees to accept the rights and assume the
 
15           duties of the secured party; or
 
16      (3)  Is subrogated to the rights of a secured party with
 
17           respect to collateral.
 
18      (b)  An assignment, transfer, or subrogation described in
 
19 subsection (a):
 
20      (1)  Is not a disposition of collateral under section
 
21           490:9-610; and
 
22      (2)  Relieves the secured party of further duties under this
 
23           article.
 

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

 
 1      §490:9-619  Transfer of record or legal title.  (a)  In this
 
 2 section, "transfer statement" means a record authenticated by a
 
 3 secured party stating:
 
 4      (1)  That the debtor has defaulted in connection with an
 
 5           obligation secured by specified collateral;
 
 6      (2)  That the secured party has exercised its post-default
 
 7           remedies with respect to the collateral;
 
 8      (3)  That, by reason of the exercise, a transferee has
 
 9           acquired the rights of the debtor in the collateral;
 
10           and
 
11      (4)  The name and mailing address of the secured party
 
12           debtor, and transferee.
 
13      (b)  A transfer statement entitles the transferee to the
 
14 transfer of record of all rights of the debtor in the collateral
 
15 specified in the statement in any official filing, recording,
 
16 registration, or certificate-of-title system covering the
 
17 collateral.  If a transfer statement is presented with the
 
18 applicable fee and request form to the official or office
 
19 responsible for maintaining the system, the official or office
 
20 shall:
 
21      (1)  Accept the transfer statement;
 
22      (2)  Promptly amend its records to reflect the transfer; and
 
23      (3)  If applicable, issue a new appropriate certificate of
 

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

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

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

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

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

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

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

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

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

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

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

 
 1           in the collateral;
 
 2      (3)  Discharges the security interest or agricultural lien
 
 3           that is the subject of the debtor's consent and any
 
 4           subordinate security interest or other subordinate
 
 5           lien; and
 
 6      (4)  Terminates any other subordinate interest.
 
 7      (b)  A subordinate interest is discharged or terminated
 
 8 under subsection (a), even if the secured party fails to comply
 
 9 with this article.
 
10      §490:9-623  Right to redeem collateral.  (a)  A debtor, any
 
11 secondary obligor, or any other secured party or lienholder may
 
12 redeem collateral.
 
13      (b)  To redeem collateral, a person shall tender:
 
14      (1)  Fulfillment of all obligations secured by the
 
15           collateral; and
 
16      (2)  The reasonable expenses and attorney's fees described
 
17           in section 490:9-615(a)(1).
 
18      (c)  A redemption may occur at any time before a secured
 
19 party:
 
20      (1)  Has collected collateral under section 490:9-607;
 
21      (2)  Has disposed of collateral or entered into a contract
 
22           for its disposition under section 490:9-610; or
 
23      (3)  Has accepted collateral in full or partial satisfaction
 

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

 
 1           of the obligation it secures under section 490:9-622.
 
 2      §490:9-624  Waiver.  (a)  A debtor or secondary obligor may
 
 3 waive the right to notification of disposition of collateral
 
 4 under section 490:9-611 only by an agreement to that effect
 
 5 entered into and authenticated after default.
 
 6      (b)  A debtor may waive the right to require disposition of
 
 7 collateral under section 490:9-620(e) only by an agreement to
 
 8 that effect entered into and authenticated after default.
 
 9      (c)  Except in a consumer-goods transaction, a debtor or
 
10 secondary obligor may waive the right to redeem collateral under
 
11 section 490:9-623 only by an agreement to that effect entered
 
12 into and authenticated after default.
 
13              SUBPART 2.  NONCOMPLIANCE WITH ARTICLE
 
14      §490:9-625  Remedies for secured party's failure to comply
 
15 with article.  (a)  If it is established that a secured party is
 
16 not proceeding in accordance with this article, a court may order
 
17 or restrain collection, enforcement, or disposition of collateral
 
18 on appropriate terms and conditions.
 
19      (b)  Subject to subsections (c), (d), and (f), a person is
 
20 liable for damages in the amount of any loss caused by a failure
 
21 to comply with this article.  Loss caused by a failure to comply
 
22 with a request under section 490:9-210 may include loss resulting
 
23 from the debtor's inability to obtain, or increased costs of,
 

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

 
 1 alternative financing.
 
 2      (c)  Except as otherwise provided in section 490:9-628:
 
 3      (1)  A person that, at the time of the failure, was a
 
 4           debtor, was an obligor, or held a security interest in
 
 5           or other lien on the collateral may recover damages
 
 6           under subsection (b) for its loss; and
 
 7      (2)  If the collateral is consumer goods, a person that was
 
 8           a debtor or a secondary obligor at the time a secured
 
 9           party failed to comply with this part may recover for
 
10           that failure in any event an amount not less than the
 
11           credit service charge plus ten per cent of the
 
12           principal amount of the obligation or the time-price
 
13           differential plus ten per cent of the cash price.
 
14      (d)  A debtor whose deficiency is eliminated under section
 
15 490:9-626 may recover damages for the loss of any surplus.
 
16 However, a debtor or secondary obligor whose deficiency is
 
17 eliminated or reduced under section 490:9-626 may not otherwise
 
18 recover under subsection (b) for noncompliance with the
 
19 provisions of this part relating to collection, enforcement,
 
20 disposition, or acceptance.
 
21      (e)  In addition to any damages recoverable under subsection
 
22 (b), the debtor, consumer obligor, or person named as a debtor in
 
23 a filed record, as applicable, may recover $500 in each case from
 

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

 
 1 a person that:
 
 2      (1)  Fails to comply with section 490:9-208;
 
 3      (2)  Fails to comply with section 490:9-209;
 
 4      (3)  Files a record that the person is not entitled to file
 
 5           under section 490:9-509(a);
 
 6      (4)  Fails to cause the secured party of record to file or
 
 7           send a termination statement as required by section
 
 8           490:9-513(a) or (c);
 
 9      (5)  Fails to comply with section 490:9-616(b)(1) and whose
 
10           failure is part of a pattern, or consistent with a
 
11           practice, of noncompliance; or
 
12      (6)  Fails to comply with section 490:9-616(b)(2).
 
13      (f)  A debtor or consumer obligor may recover damages under
 
14 subsection (b) and, in addition, $500 in each case from a person
 
15 that, without reasonable cause, fails to comply with a request
 
16 under section 490:9-210.  A recipient of a request under section
 
17 490:9-210 which never claimed an interest in the collateral or
 
18 obligations that are the subject of a request under that section
 
19 has a reasonable excuse for failure to comply with the request
 
20 within the meaning of this subsection.
 
21      (g)  If a secured party fails to comply with a request
 
22 regarding a list of collateral or a statement of account under
 
23 section 490:9-210, the secured party may claim a security
 

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

 
 1 interest only as shown in the statement included in the request
 
 2 as against a person that is reasonably misled by the failure.
 
 3      §490:9-626  Action in which deficiency or surplus is in
 
 4 issue.  (a)  In an action arising from a transaction, other than
 
 5 a consumer transaction, in which the amount of a deficiency or
 
 6 surplus is in issue, the following rules apply:
 
 7      (1)  A secured party need not prove compliance with the
 
 8           provisions of this part relating to collection
 
 9           enforcement, disposition, or acceptance unless the
 
10           debtor or a secondary obligor places the secured
 
11           party's compliance in issue.
 
12      (2)  If the secured party's compliance is placed in issue
 
13           the secured party has the burden of establishing that
 
14           the collection, enforcement, disposition, or acceptance
 
15           was conducted in accordance with this part.
 
16      (3)  Except as otherwise provided in section 490:9-628, if a
 
17           secured party fails to prove that the collection
 
18           enforcement, disposition, or acceptance was conducted
 
19           in accordance with the provisions of this part relating
 
20           to collection, enforcement, disposition, or acceptance,
 
21           the liability of a debtor or a secondary obligor for a
 
22           deficiency is limited to an amount by which the sum of
 
23           the secured obligation, expenses, and attorney's fees
 

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

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

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

 
 1 consumer transactions.  The court may not infer from that
 
 2 limitation the nature of the proper rule in consumer transactions
 
 3 and may continue to apply established approaches.
 
 4      §490:9-627  Determination of whether conduct was
 
 5 commercially reasonable.  (a)  The fact that a greater amount
 
 6 could have been obtained by a collection, enforcement,
 
 7 disposition, or acceptance at a different time or in a different
 
 8 method from that selected by the secured party is not of itself
 
 9 sufficient to preclude the secured party from establishing that
 
10 the collection, enforcement, disposition, or acceptance was made
 
11 in a commercially reasonable manner.
 
12      (b)  A disposition of collateral is made in a commercially
 
13 reasonable manner if the disposition is made:
 
14      (1)  In the usual manner on any recognized market;
 
15      (2)  At the price current in any recognized market at the
 
16           time of the disposition; or
 
17      (3)  Otherwise in conformity with reasonable commercial
 
18           practices among dealers in the type of property that
 
19           was the subject of the disposition.
 
20      (c)  A collection, enforcement, disposition, or acceptance
 
21 is commercially reasonable if it has been approved:
 
22      (1)  In a judicial proceeding;
 
23      (2)  By a bona fide creditors' committee;
 

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

 
 1      (3)  By a representative of creditors; or
 
 2      (4)  By an assignee for the benefit of creditors.
 
 3      (d)  Approval under subsection (c) need not be obtained, and
 
 4 lack of approval does not mean that the collection, enforcement,
 
 5 disposition, or acceptance is not commercially reasonable.
 
 6      §490:9-628  Nonliability and limitation on liability of
 
 7 secured party; liability of secondary obligor.  (a)  Unless a
 
 8 secured party knows that a person is a debtor or obligor, knows
 
 9 the identity of the person, and knows how to communicate with the
 
10 person:
 
11      (1)  The secured party is not liable to the person, or to a
 
12           secured party or lienholder that has filed a financing
 
13           statement against the person, for failure to comply
 
14           with this article; and
 
15      (2)  The secured party's failure to comply with this article
 
16           does not affect the liability of the person for a
 
17           deficiency.
 
18      (b)  A secured party is not liable because of its status as
 
19 secured party:
 
20      (1)  To a person that is a debtor or obligor, unless the
 
21           secured party knows:
 
22           (A)  That the person is a debtor or obligor;
 
23           (B)  The identity of the person; and
 

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

 
 1           (C)  How to communicate with the person; or
 
 2      (2)  To a secured party or lienholder that has filed a
 
 3           financing statement against a person, unless the
 
 4           secured party knows:
 
 5           (A)  That the person is a debtor; and
 
 6           (B)  The identity of the person.
 
 7      (c)  A secured party is not liable to any person, and a
 
 8 person's liability for a deficiency is not affected, because of
 
 9 any act or omission arising out of the secured party's reasonable
 
10 belief that a transaction is not a consumer-goods transaction or
 
11 a consumer transaction or that goods are not consumer goods, if
 
12 the secured party's belief is based on its reasonable reliance
 
13 on:
 
14      (1)  A debtor's representation concerning the purpose for
 
15           which collateral was to be used, acquired, or held; or
 
16      (2)  An obligor's representation concerning the purpose for
 
17           which a secured obligation was incurred.
 
18      (d)  A secured party is not liable to any person under
 
19 section 490:9-625(c)(2) for its failure to comply with section
 
20 490:9-616.
 
21      (e)  A secured party is not liable under section
 
22 490:9-625(c)(2) more than once with respect to any one secured
 
23 obligation.
 

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

 
 1                        PART 7.  TRANSITION
 
 2      §490:9-701  Effective date.  This article takes effect on
 
 3 July 1, 2001.
 
 4      §490:9-702  Savings clause.  (a)  Except as otherwise
 
 5 provided in this part, this article applies to a transaction or
 
 6 lien within its scope, even if the transaction or lien was
 
 7 entered into or created before this article takes effect.
 
 8      (b)  Except as otherwise provided in subsection (c) and
 
 9 sections 490:9-703 through 490:9-708:
 
10      (1)  Transactions and liens that were not governed by former
 
11           Article 9, were validly entered into or created before
 
12           this article takes effect, and would be subject to this
 
13           article if they had been entered into or created after
 
14           this article takes effect, and the rights, duties, and
 
15           interests flowing from those transactions and liens,
 
16           remain valid after this article takes effect; and
 
17      (2)  The transactions and liens may be terminated,
 
18           completed, consummated, and enforced as required or
 
19           permitted by this article or by the law that otherwise
 
20           would apply if this article had not taken effect.
 
21      (c)  This article does not affect an action, case, or
 
22 proceeding commenced before this article takes effect.
 
23      §490:9-703  Security interest perfected before effective
 

 


 

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

 
 1 date.  (a)  A security interest that is enforceable immediately
 
 2 before this article takes effect and would have priority over the
 
 3 rights of a person that becomes a lien creditor at that time is a
 
 4 perfected security interest under this article if, when this
 
 5 article takes effect, the applicable requirements for
 
 6 enforceability and perfection under this article are satisfied
 
 7 without further action.
 
 8      (b)  Except as otherwise provided in section 490:9-705, if,
 
 9 immediately before this article takes effect, a security interest
 
10 is enforceable and would have priority over the rights of a
 
11 person that becomes a lien creditor at that time, but the
 
12 applicable requirements for enforceability or perfection under
 
13 this article are not satisfied when this article takes effect,
 
14 the security interest:
 
15      (1)  Is a perfected security interest for one year after
 
16           this article takes effect;
 
17      (2)  Remains enforceable thereafter only if the security
 
18           interest becomes enforceable under section 490:9-203
 
19           before the year expires; and
 
20      (3)  Remains perfected thereafter only if the applicable
 
21           requirements for perfection under this article are
 
22           satisfied before the year expires.
 
23      §490:9-704  Security interest unperfected before effective
 

 


 

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

 
 1 date.  A security interest that is enforceable immediately before
 
 2 this article takes effect but which would be subordinate to the
 
 3 rights of a person that becomes a lien creditor at that time:
 
 4      (1)  Remains an enforceable security interest for one year
 
 5           after this article takes effect;
 
 6      (2)  Remains enforceable thereafter if the security interest
 
 7           becomes enforceable under section 490:9-203 when this
 
 8           article takes effect or within one year thereafter; and
 
 9      (3)  Becomes perfected:
 
10           (A)  Without further action, when this article takes
 
11                effect if the applicable requirements for
 
12                perfection under this article are satisfied before
 
13                or at that time; or
 
14           (B)  When the applicable requirements for perfection
 
15                are satisfied if the requirements are satisfied
 
16                after that time.
 
17      §490:9-705  Effectiveness of action taken before effective
 
18 date.  (a)  If action, other than the filing of a financing
 
19 statement, is taken before this article takes effect and the
 
20 action would have resulted in priority of a security interest
 
21 over the rights of a person that becomes a lien creditor had the
 
22 security interest become enforceable before this article takes
 
23 effect, the action is effective to perfect a security interest
 

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

 
 1 that attaches under this article within one year after this
 
 2 article takes effect.  An attached security interest becomes
 
 3 unperfected one year after this article takes effect unless the
 
 4 security interest becomes a perfected security interest under
 
 5 this article before the expiration of that period.
 
 6      (b)  The filing of a financing statement before this article
 
 7 takes effect is effective to perfect a security interest to the
 
 8 extent the filing would satisfy the applicable requirements for
 
 9 perfection under this article.
 
10      (c)  This article does not render ineffective an effective
 
11 financing statement that, before this article takes effect, is
 
12 filed and satisfies the applicable requirements for perfection
 
13 under the law of the jurisdiction governing perfection as
 
14 provided in the former section 490:9-103.  However, except as
 
15 otherwise provided in subsections (d) and (e) and section 490:9-
 
16 706, the financing statement ceases to be effective at the
 
17 earlier of:
 
18      (1)  The time the financing statement would have ceased to
 
19           be effective under the law of the jurisdiction in which
 
20           it is filed; or
 
21      (2)  June 30, 2006.
 
22      (d)  The filing of a continuation statement after this
 
23 article takes effect does not continue the effectiveness of the
 

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

 
 1 financing statement filed before this article takes effect.
 
 2 However, upon the timely filing of a continuation statement after
 
 3 this article takes effect and in accordance with the law of the
 
 4 jurisdiction governing perfection as provided in part 3, the
 
 5 effectiveness of a financing statement filed in the same office
 
 6 in that jurisdiction before this article takes effect continues
 
 7 for the period provided by the law of that jurisdiction.
 
 8      (e)  Subsection (c)(2) applies to a financing statement
 
 9 that, before this article takes effect, is filed against a
 
10 transmitting utility and satisfies the applicable requirements
 
11 for perfection under the law of the jurisdiction governing
 
12 perfection as provided in the former section 490:9-103 only to
 
13 the extent that part 3 provides that the law of a jurisdiction
 
14 other than a jurisdiction in which the financing statement is
 
15 filed governs perfection of a security interest in collateral
 
16 covered by the financing statement.
 
17      (f)  A financing statement that includes a financing
 
18 statement filed before this article takes effect and a
 
19 continuation statement filed after this article takes effect is
 
20 effective only to the extent that it satisfies the requirements
 
21 of part 5 for an initial financing statement.
 
22      §490:9-706  When initial financing statement suffices to
 
23 continue effectiveness of financing statement.  (a)  The filing
 

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

 
 1 of an initial financing statement in the office specified in
 
 2 section 490:9-501 continues the effectiveness of a financing
 
 3 statement filed before this article takes effect if:
 
 4      (1)  The filing of an initial financing statement in that
 
 5           office would be effective to perfect a security
 
 6           interest under this article;
 
 7      (2)  The pre-effective-date financing statement was filed in
 
 8           an office in another state or another office in this
 
 9           State; and
 
10      (3)  The initial financing statement satisfies subsection
 
11           (c).
 
12      (b)  The filing of an initial financing statement under
 
13 subsection (a) continues the effectiveness of the pre-effective-
 
14 date financing statement:
 
15      (1)  If the initial financing statement is filed before this
 
16           article takes effect, for the period provided in the
 
17           former section 490:9-403 with respect to a financing
 
18           statement; and
 
19      (2)  If the initial financing statement is filed after this
 
20           article takes effect, for the period provided in
 
21           section 490:9-515 with respect to an initial financing
 
22           statement.
 
23      (c)  To be effective for purposes of subsection (a), an
 

 
Page 217                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 initial financing statement must:
 
 2      (1)  Satisfy the requirements of part 5 for an initial
 
 3           financing statement;
 
 4      (2)  Identify the pre-effective-date financing statement by
 
 5           indicating the office in which the financing statement
 
 6           was filed and providing the dates of filing and file
 
 7           numbers, if any, of the financing statement and of the
 
 8           most recent continuation statement filed with respect
 
 9           to the financing statement; and
 
10      (3)  Indicate that the pre-effective-date financing
 
11           statement remains effective.
 
12      §490:9-707  Persons entitled to file initial financing
 
13 statement or continuation statement.  A person may file an
 
14 initial financing statement or a continuation statement under
 
15 this part if:
 
16      (1)  The secured party of record authorizes the filing; and
 
17      (2)  The filing is necessary under this part:
 
18           (A)  To continue the effectiveness of a financing
 
19                statement filed before this article takes effect;
 
20                or
 
21           (B)  To perfect or continue the perfection of a
 
22                security interest.
 
23      §490:9-708  Priority.  (a)  This article determines the
 

 
Page 218                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 priority of conflicting claims to collateral.  However, if the
 
 2 relative priorities of the claims were established before this
 
 3 article takes effect, the former Article 9 determines priority.
 
 4      (b)  For purposes of section 490:9-322(a), the priority of a
 
 5 security interest that becomes enforceable under section
 
 6 490:9-203 of this article dates from the time this article takes
 
 7 effect if the security interest is perfected under this article
 
 8 by the filing of a financing statement before this article takes
 
 9 effect which would not have been effective to perfect the
 
10 security interest under the former Article 9.  This subsection
 
11 does not apply to conflicting security interests each of which is
 
12 perfected by the filing of such a financing statement."
 
13      SECTION 2.  Chapter 490, Hawaii Revised Statutes, is amended
 
14 by adding to article 5 a new section to be designated and to read
 
15 as follows:
 
16      "§490:5-118  Security interest of issuer or nominated
 
17 person.  (a)  An issuer or nominated person has a security
 
18 interest in a document presented under a letter of credit to the
 
19 extent that the issuer or nominated person honors or gives value
 
20 for the presentation.
 
21      (b)  So long as and to the extent that an issuer or
 
22 nominated person has not been reimbursed or has not otherwise
 
23 recovered the value given with respect to a security interest in
 

 
Page 219                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 a document under subsection (a), the security interest continues
 
 2 and is subject to Article 9, but:
 
 3      (1)  A security agreement is not necessary to make the
 
 4           security interest enforceable under section
 
 5           490:9-203(b)(3);
 
 6      (2)  If the document is presented in a medium other than a
 
 7           written or other tangible medium, the security interest
 
 8           is perfected; and
 
 9      (3)  If the document is presented in a written or other
 
10           tangible medium and is not a certificated security
 
11           chattel paper, a document of title, an instrument, or a
 
12           letter of credit, the security interest is perfected
 
13           and has priority over a conflicting security interest
 
14           in the document so long as the debtor does not have
 
15           possession of the document."
 
16      SECTION 3.  Section 286-52, Hawaii Revised Statutes, is
 
17 amended by amending subsection (e) to read as follows:
 
18      "(e)  Until the director of finance has issued the new
 
19 certificate of registration and certificate of ownership as in
 
20 subsection (d) provided, delivery of such vehicle shall be deemed
 
21 not to have been made and title thereto shall be deemed not to
 
22 have passed, and the intended transfer shall be deemed to be
 
23 incomplete and not to be valid or effective for any purpose,
 

 
Page 220                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 notwithstanding any provision of the Uniform Commercial Code;
 
 2 provided that a security interest in a motor vehicle shall be
 
 3 perfected as provided in the Uniform Commercial Code, [sections
 
 4 490:9-302(3)(b) and 490:9-302(4),] section 490:9-311 and that the
 
 5 validity, attachment, priority, and enforcement of such security
 
 6 interest shall be governed by Article 9 of the Code."
 
 7      SECTION 4.  Section 476-1, Hawaii Revised Statutes, is
 
 8 amended by amending the definition of "goods" to read as follows:
 
 9      ""Goods" include all things which are movable at the time
 
10 the credit sale is entered into or which will be movable when
 
11 they thereafter come into existence or which are or will be
 
12 fixtures [(section 490:9-313),] (sections 490:9-334 and
 
13 490:9-604), but except as provided in this paragraph does not
 
14 include money, documents, instruments, accounts, chattel paper,
 
15 general intangibles, or minerals or the like (including oil and
 
16 gas) before extraction.  "Goods" include standing timber which is
 
17 to be cut and removed under a conveyance or contract for sale,
 
18 the unborn young animals, growing crops, and merchandise
 
19 certificates or coupons, issued by a credit seller, to be used in
 
20 the face amount in lieu of cash in exchange for goods sold by
 
21 such a seller."
 
22      SECTION 5.  Section 506-1, Hawaii Revised Statutes, is
 
23 amended by amending subsection (b) to read as follows:
 

 
Page 221                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1      "(b)  A mortgage may secure the repayment of past debt, a
 
 2 debt incurred at the time the mortgage is executed, or a debt
 
 3 incurred for advances which may be made by the mortgagee
 
 4 subsequent to the execution of the mortgage even though the
 
 5 mortgagee is under no contractual duty to make these advances.
 
 6 Except as otherwise provided in [section 490:9-313] sections
 
 7 490:9-334 and 490:9-604 of the Uniform Commercial Code with
 
 8 respect to security interests in fixtures, a mortgage which
 
 9 secures future advances, up to but not exceeding the maximum
 
10 amount of future advances stated in the mortgage, shall be
 
11 superior to any subsequently recorded mortgage, lien, or other
 
12 encumbrances or conveyance, other than liens for real property
 
13 taxes and assessments for public improvements, even though the
 
14 subsequently recorded mortgage, lien, or other encumbrance or
 
15 conveyance is recorded prior to the date upon which any advance
 
16 or advances have been made."
 
17      SECTION 6.  Section 506-2, Hawaii Revised Statutes, is
 
18 amended by amending subsection (a) to read as follows:
 
19      "(a)  Subject to the limitations contained in this chapter
 
20 and to [section 490:9-313] sections 490:9-334 and 490:9-604 of
 
21 the Uniform Commercial Code respecting security interests in
 
22 fixtures, if the mortgage so provides, the lien of the mortgage
 
23 may attach to additions, improvements, and purchases or
 

 
Page 222                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 substitutions made to supply the place of any real property or
 
 2 fixtures disposed of and to all other after-acquired real
 
 3 property or fixtures referred to in the mortgage when the
 
 4 mortgagor acquires an interest therein to the extent of the
 
 5 interest, but subject to existing liens and the lien of a
 
 6 purchase money mortgage given by the mortgagor of any such after-
 
 7 acquired real property or fixtures."
 
 8      SECTION 7.  Section 712A-1, Hawaii Revised Statutes, is
 
 9 amended by amending the definition of "owner" to read as follows:
 
10      ""Owner" means a person who is not a secured party within
 
11 the meaning of section [[490:9-105(1)]] 490:9-102 and who has an
 
12 interest in property, whether legal or equitable.  A purported
 
13 interest which is not in compliance with any statute requiring
 
14 its recordation or reflection in public records in order to
 
15 perfect the interest against a bona fide purchaser for value
 
16 shall not be recognized as an interest against this State in an
 
17 action pursuant to this chapter.  An owner with power to convey
 
18 property binds other owners, and a spouse binds the person's
 
19 spouse, by any act or omission."
 
20      SECTION 8.  Section 490:1-105, Hawaii Revised Statutes, is
 
21 amended by amending subsection (2) to read as follows:
 
22      "(2)  Where one of the following provisions of this chapter
 
23 specifies the applicable law, that provision governs and a
 

 
Page 223                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 contrary agreement is effective only to the extent permitted by
 
 2 the law (including the conflict of laws rules) so specified:
 
 3      Rights of creditors against sold goods.  Section 490:2-402.
 
 4      Applicability of the Article on Leases.  Sections 490:2A-105
 
 5 and 490:2A-106.
 
 6      Applicability of the Article on Bank Deposits and
 
 7 Collections.  Section 490:4-102.
 
 8      Governing law in the Article on Funds Transfers.  Section
 
 9 490:4A-507.
 
10      Letters of Credit.  Section 490:5-116.
 
11      Applicability of the Article on Investment Securities.
 
12 Section 490:8-110.
 
13      [Perfection provisions of the Article on Secured
 
14 Transactions.  Section 490:9-103.]
 
15      Law governing perfection, the effect of perfection or
 
16 nonperfection, and the priority of security interests and
 
17 agricultural liens.  Sections 490:9-301 through 490:9-339."
 
18      SECTION 9.  Section 490:1-201, Hawaii Revised Statutes, is
 
19 amended as follows:
 
20      1.  By amending the definition of "buyer in ordinary course
 
21 of business" to read:
 
22      "(9)  "Buyer in ordinary course of business" means a person
 
23 [who] that buys goods in good faith [and], without knowledge that
 

 
Page 224                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 the sale [to him is in violation of] violates the [ownership]
 
 2 rights [or security interest] of [a third party] another person
 
 3 in the goods [buys], and in the ordinary course from a person,
 
 4 other than a pawnbroker, in the business of selling goods of that
 
 5 kind [but does not include a pawnbroker.  All persons who sell
 
 6 minerals or the like (including oil and gas) at wellhead or
 
 7 minehead shall be deemed to be persons].  A person buys goods in
 
 8 in the ordinary course if the sale to the person comports with
 
 9 the usual or customary practices in the kind of business in which
 
10 the seller is engaged or with the seller's own usual or customary
 
11 practices.  A person that sells oil, gas, or other minerals at
 
12 the wellhead or minehead is a person in the business of selling
 
13 goods of that kind.  ["Buying"] A buyer in ordinary course of
 
14 business may [be] buy for cash [or], by exchange of other
 
15 property, or on secured or unsecured credit, and [includes
 
16 receiving] may acquire goods or documents of title under a
 
17 preexisting contract for sale [but does not include a transfer in
 
18 bulk or as security for or in total or partial satisfaction of a
 
19 money debt].  Only a buyer that takes possession of the goods or
 
20 has a right to recover the goods from the seller under Article 2
 
21 may be a buyer in ordinary course of business.  A person that
 
22 acquires goods in a transfer in bulk or as security for or in
 
23 total or partial satisfaction of a money debt is not a buyer in
 

 
Page 225                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 ordinary course of business."
 
 2      2.  By amending the definition of "purchase" to read:
 
 3      "(32)  "Purchase" includes taking by sale, discount,
 
 4 negotiation, mortgage, pledge, lien, security interest, issue or
 
 5 reissue, gift, or any other voluntary transaction creating an
 
 6 interest in property."
 
 7      3.  By amending the definition of "security interest" to
 
 8 read:
 
 9      "(37)  "Security interest" means an interest in personal
 
10 property or fixtures which secures payment or performance of an
 
11 obligation.  [The retention or reservation of title by a seller
 
12 of goods notwithstanding shipment or delivery to the buyer
 
13 (section 490:2-401) is limited in effect to a reservation of a
 
14 "security interest".] The term also includes any interest of a
 
15 consignor and a buyer of accounts [or], chattel paper [which], a
 
16 payment intangible, or a promissory note in a transaction that is
 
17 subject to Article 9.  The special property interest of a buyer
 
18 of goods on identification of those goods to a contract for sale
 
19 under section 490:2-401 is not a "security interest", but a buyer
 
20 may also acquire a "security interest" by complying with Article
 
21 9.  [Unless a consignment is intended as security, reservation of
 
22 title thereunder is not a "security interest", but a consignment
 
23 in any event is subject to the provisions on consignment sales
 

 
Page 226                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 (section 490:2-326).] Except as otherwise provided in section
 
 2 490:2-505, the right of a seller or lessor of goods under Article
 
 3 2 or 2A to retain or acquire possession of the goods is not a
 
 4 "security interest", but a seller or lessor may also acquire a
 
 5 "security interest" by complying with Article 9.  The retention
 
 6 or reservation of title by a seller of goods notwithstanding
 
 7 shipment or delivery to the buyer (section 490:2-401) is limited
 
 8 in effect to a reservation of a "security interest".
 
 9      Whether a transaction creates a lease or security interest
 
10 is determined by the facts of each case; however, a transaction
 
11 creates a security interest if the consideration the lessee is to
 
12 pay the lessor for the right to possession and use of the goods
 
13 is an obligation for the term of the lease not subject to
 
14 termination by the lessee, and:
 
15      (a)  The original term of the lease is equal to or greater
 
16           than the remaining economic life of the goods;
 
17      (b)  The lessee is bound to renew the lease for the
 
18           remaining economic life of the goods or is bound to
 
19           become the owner of the goods;
 
20      (c)  The lessee has an option to renew the lease for the
 
21           remaining economic life of the goods for no additional
 
22           consideration or nominal additional consideration upon
 
23           compliance with the lease agreement; or
 

 
Page 227                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

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

 
Page 228                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           goods for a fixed price that is equal to or greater
 
 2           than the reasonably predictable fair market value of
 
 3           the goods at the time the option is to be performed.
 
 4      For purposes of this subsection (37):
 
 5      (x)  Additional consideration is not nominal if (i) when the
 
 6           option to renew the lease is granted to the lessee the
 
 7           rent is stated to be the fair market rent for the use
 
 8           of the goods for the term of the renewal determined at
 
 9           the time the option is to be performed, or (ii) when
 
10           the option to become the owner of the goods is granted
 
11           to the lessee the price is stated to be the fair market
 
12           value of the goods determined at the time the option is
 
13           to be performed.  Additional consideration is nominal
 
14           if it is less than the lessee's reasonably predictable
 
15           cost of performing under the lease agreement if the
 
16           option is not exercised;
 
17      (y)  "Reasonably predictable" and "remaining economic life
 
18           of the goods" are to be determined with reference to
 
19           the facts and circumstances at the time the transaction
 
20           is entered into; and
 
21      (z)  "Present value" means the amount as of a date certain
 
22           of one or more sums payable in the future, discounted
 
23           to the date certain.  The discount is determined by the
 

 
Page 229                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           interest rate specified by the parties if the rate is
 
 2           not manifestly unreasonable at the time the transaction
 
 3           is entered into; otherwise, the discount is determined
 
 4           by a commercially reasonable rate that takes into
 
 5           account the facts and circumstances of each case at the
 
 6           time the transaction was entered into."
 
 7      SECTION 10.  Section 490:1-206, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (2) to read as follows:
 
 9      "(2)  Subsection (1) [of this section] does not apply to
 
10 contracts for the sale of goods (section 490:2-201) nor of
 
11 securities (section 490:8-113) nor to security agreements
 
12 (section [490:9-203).] 490:9-201 or 490:9-203)."
 
13      SECTION 11.  Section 490:2-103, Hawaii Revised Statutes, is
 
14 amended by amending subsection (3) to read as follows:
 
15      "(3)  The following definitions in other Articles apply to
 
16 this Article:
 
17      "Check".  Section 490:3-104.
 
18      "Consignee".  Section 490:7-102.
 
19      "Consignor".  Section 490:7-102.
 
20      "Consumer goods".  Section [490:9-109.] 490:9-102.
 
21      "Dishonor".  Section 490:3-502.
 
22      "Draft".  Section 490:3-104."
 
23      SECTION 12.  Section 490:2-210, Hawaii Revised Statutes, is
 

 
Page 230                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 amended to read as follows:
 
 2      "§490:2-210  Delegation of performance; assignment of
 
 3 rights.(1)  A party may perform [his] the party's duty through
 
 4 a delegate unless otherwise agreed or unless the other party has
 
 5 a substantial interest in having [his] the other party's original
 
 6 promisor perform or control the acts required by the contract.
 
 7 No delegation of performance relieves the party delegating of any
 
 8 duty to perform or any liability for breach.
 
 9      (2)  [Unless] Except as otherwise provided in section
 
10 490:9-406, unless otherwise agreed, all rights of either seller
 
11 or buyer can be assigned except where the assignment would
 
12 materially change the duty of the other party, or increase
 
13 materially the burden or risk imposed on [him] the other party by
 
14 [his] the other party's contract, or impair materially [his] the
 
15 other party chance of obtaining return performance.  A right to
 
16 damages for breach of the whole contract or a right arising out
 
17 of the assignor's due performance of [his] the assignor's entire
 
18 obligation can be assigned despite agreement otherwise.
 
19      (3)  The creation, attachment, perfection, or enforcement of
 
20 a security interest in the seller's interest under a contract is
 
21 not a transfer that materially changes the duty of or increases
 
22 materially the burden or risk imposed on the buyer or impairs
 
23 materially the buyer's chance of obtaining return performance
 

 
Page 231                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 within the purview of subsection (2) unless, and then only to the
 
 2 extent that, enforcement actually results in a delegation of
 
 3 material performance of the seller.  Even in that event, the
 
 4 creation, attachment, perfection, and enforcement of the security
 
 5 interest remain effective, but (i) the seller is liable to the
 
 6 buyer for damages caused by the delegation to the extent that the
 
 7 damages could not reasonably be prevented by the buyer, and (ii)
 
 8 a court having jurisdiction may grant other appropriate relief,
 
 9 including cancellation of the contract for sale or an injunction
 
10 against enforcement of the security interest or consummation of
 
11 the enforcement.
 
12      [(3)] (4)  Unless the circumstances indicate the contrary a
 
13 prohibition of assignment of "the contract" is to be construed as
 
14 barring only the delegation to the assignee of the assignor's
 
15 performance.
 
16      [(4)] (5)  An assignment of "the contract" or of "all my
 
17 rights under the contract" or an assignment in similar general
 
18 terms is an assignment of rights and unless the language or the
 
19 circumstances (as in an assignment for security) indicate the
 
20 contrary, it is a delegation of performance of the duties of the
 
21 assignor and its acceptance by the assignee constitutes a promise
 
22 by [him] the assignee to perform those duties.  This promise is
 
23 enforceable by either the assignor or the other party to the
 

 
Page 232                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 original contract.
 
 2      [(5)] (6)  The other party may treat any assignment which
 
 3 delegates performance as creating reasonable grounds for
 
 4 insecurity and may without prejudice to his rights against the
 
 5 assignor demand assurances from the assignee (section
 
 6 490:2-609)."
 
 7      SECTION 13.  Section 490:2-326, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "§490:2-326  Sale on approval and sale or return;
 
10 [consignment sales and] rights of creditors.(1)  Unless
 
11 otherwise agreed, if delivered goods may be returned by the buyer
 
12 even though they conform to the contract, the transaction is
 
13      (a)  A "sale on approval" if the goods are delivered
 
14           primarily for use; and
 
15      (b)  A "sale or return" if the goods are delivered primarily
 
16           for resale.
 
17      (2)  [Except as provided in subsection (3), goods] Goods
 
18 held on approval are not subject to the claims of the buyer's
 
19 creditors until acceptance; goods held on sale or return are
 
20 subject to such claims while in the buyer's possession.
 
21      [(3)  Where goods are delivered to a person for sale and
 
22 such person maintains a place of business at which he deals in
 
23 goods of the kind involved, under a name other than the name of
 

 
Page 233                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 the person making delivery, then with respect to claims of
 
 2 creditors of the person conducting the business the goods are
 
 3 deemed to be on sale or return.  The provisions of this
 
 4 subsection are applicable even though an agreement purports to
 
 5 reserve title to the person making delivery until payment or
 
 6 resale or uses such words as "on consignment" or "on memorandum".
 
 7 However, this subsection is not applicable if the person making
 
 8 delivery
 
 9      (a)  Complies with an applicable law providing for a
 
10           consignor's interest or the like to be evidenced by a
 
11           sign, or
 
12      (b)  Establishes that the person conducting the business is
 
13           generally known by his creditors to be substantially
 
14           engaged in selling the goods of others, or
 
15      (c)  Complies with the filing provisions of the Article on
 
16           Secured Transactions (Article 9).
 
17      (4)] (3)  Any "or return" term of a contract for sale is to
 
18 be treated as a separate contract for sale within the statute of
 
19 frauds section of this Article (section 490:2-201) and as
 
20 contradicting the sale aspect of the contract within the
 
21 provisions of this Article on parol or extrinsic evidence
 
22 (section 490:2-202)."
 
23      SECTION 14.  Section 490:2-502, Hawaii Revised Statutes, is
 

 
Page 234                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 amended to read as follows:
 
 2      "§490:2-502  Buyer's right to goods on seller's repudiation,
 
 3 failure to deliver, or insolvency.(1)  Subject to [subsection]
 
 4 subsections (2) and (3), and even though the goods have not been
 
 5 shipped, a buyer who has paid a part or all of the price of goods
 
 6 in which [he] the buyer has a special property under the
 
 7 provisions of the immediately preceding section may on making and
 
 8 keeping good a tender of any unpaid portion of their price
 
 9 recover them from the seller if:
 
10      (a)  In the case of goods bought for personal, family, or
 
11           household purposes, the seller repudiates or fails to
 
12           deliver as required by the contract; or
 
13      (b)  In all cases, the seller becomes insolvent within ten
 
14           days after receipt of the first installment on their
 
15           price.
 
16      (2)  The buyer's right to recover the goods under subsection
 
17 (1)(a) vests upon acquisition of a special property, even if the
 
18 seller had not then repudiated or failed to deliver.
 
19      [(2)] (3)  If the identification creating [his] the buyer's
 
20 special property has been made by the buyer [he], the buyer
 
21 acquires the right to recover the goods only if they conform to
 
22 the contract for sale."
 
23      SECTION 15.  Section 490:2-716, Hawaii Revised Statutes, is
 

 
Page 235                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 amended by amending subsection (3) to read as follows:
 
 2      "(3)  The buyer has a right of replevin for goods identified
 
 3 to the contract if after reasonable effort [he] the buyer is
 
 4 unable to effect cover for such goods or the circumstances
 
 5 reasonably indicate that such effort will be unavailing or if the
 
 6 goods have been shipped under reservation and satisfaction of the
 
 7 security interest in them has been made or tendered. In the case
 
 8 of goods bought for personal, family, or household purposes, the
 
 9 buyer's right of replevin vests upon acquisition of a special
 
10 property, even if the seller had not then repudiated or failed to
 
11 deliver."
 
12      SECTION 16.  Section 490:2A-103, Hawaii Revised Statutes, is
 
13 amended by amending subsection (c) to read as follows:
 
14      "(c)  The following definitions in other Articles apply to
 
15 this Article:
 
16      "Account".  Section [490:9-106.] 490:9-102(a).
 
17      "Between merchants".  Section 490:2-104(3).
 
18      "Buyer".  Section 490:2-103(1)(a).
 
19      "Chattel paper".  Section [490:9-105(1)(b).] 490:9-102(a).
 
20      "Consumer goods".  Section [490:9-109(1).] 490:9-102(a).
 
21      "Document".  Section [490:9-105(1)(f).] 490:9-102(a).
 
22      "Entrusting".  Section 490:2-403(3).
 
23      ["General intangibles".  Section 490:9-106.]
 

 
Page 236                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1      "General intangible".  Section 490:9-102(a).
 
 2      "Good faith".  Section 490:2-103(1)(b).
 
 3      "Instrument".  Section [490:9-105(1)(j).] 490:9-102(a).
 
 4      "Merchant".  Section 490:2-104(1).
 
 5      "Mortgage".  Section [490:9-105(1)(k).] 490:9-102(a).
 
 6      "Pursuant to commitment".  Section [490:9-105(1)(l).]
 
 7 490:9-102(a).
 
 8      "Receipt".  Section 490:2-103(1)(c).
 
 9      "Sale".  Section 490:2-106(1).
 
10      "Sale on approval".  Section 490:2-326.
 
11      "Sale or return".  Section 490:2-326.
 
12      "Seller".  Section 490:2-103(1)(d).
 
13      SECTION 17.  Section 490:2A-303, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "§490:2A-303  Alienability of party's interest under lease
 
16 contract or of lessor's residual interest in goods; delegation of
 
17 performance; transfer of rights.(a)  As used in this section,
 
18 "creation of a security interest" includes the sale of a lease
 
19 contract that is subject to Article 9, Secured Transactions, by
 
20 reason of section [490:9-102(1)(b).] 490:9-109(a)(3).
 
21      (b)  Except as provided in [subsections] subsection (c) and
 
22 [(d),] section 490:9-407, a provision in a lease agreement which
 
23 (i) prohibits the voluntary or involuntary transfer, including a
 

 
Page 237                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 transfer by sale, sublease, creation or enforcement of a security
 
 2 interest, or attachment, levy, or other judicial process, of an
 
 3 interest of a party under the lease contract or of the lessor's
 
 4 residual interest in the goods, or (ii) makes such a transfer an
 
 5 event of default, gives rise to the rights and remedies provided
 
 6 in subsection [(e),] (d), but a transfer that is prohibited or is
 
 7 an event of default under the lease agreement is otherwise
 
 8 effective.
 
 9      [(c)  A provision in a lease agreement which (i) prohibits
 
10 the creation or enforcement of a security interest in an interest
 
11 of a party under the lease contract or in the lessor's residual
 
12 interest in the goods, or (ii) makes such a transfer an event of
 
13 default, is not enforceable unless, and then only to the extent
 
14 that, there is an actual transfer by the lessee of the lessee's
 
15 right of possession or use of the goods in violation of the
 
16 provision or an actual delegation of a material performance of
 
17 either party to the lease contract in violation of the provision.
 
18 Neither the granting nor the enforcement of a security interest
 
19 in (i) the lessor's interest under the lease contract or (ii) the
 
20 lessor's residual interest in the goods is a transfer that
 
21 materially impairs the prospect of obtaining return performance
 
22 by, materially changes the duty of, or materially increases the
 
23 burden or risk imposed on, the lessee within the purview of
 

 
Page 238                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 subsection (e) unless, and then only to the extent that, there is
 
 2 an actual delegation of a material performance of the lessor.
 
 3      (d)] (c)  A provision in a lease agreement which (i)
 
 4 prohibits a transfer of a right to damages for default with
 
 5 respect to the whole lease contract or of a right to payment
 
 6 arising out of the transferor's due performance of the
 
 7 transferor's entire obligation, or (ii) makes such a transfer an
 
 8 event of default, is not enforceable, and such a transfer is not
 
 9 a transfer that materially impairs the prospect of obtaining
 
10 return performance by, materially changes the duty of, or
 
11 materially increases the burden or risk imposed on, the other
 
12 party to the lease contract within the purview of subsection
 
13 [(e).] (d).
 
14      [(e)] (d)  Subject to [subsections] subsection (c) and
 
15 [(d):] section 490:9-407:
 
16      (1)  If a transfer is made which is made an event of default
 
17           under a lease agreement, the party to the lease
 
18           contract not making the transfer, unless that party
 
19           waives the default or otherwise agrees, has the rights
 
20           and remedies described in section 490:2A-501(b);
 
21      (2)  If paragraph (1) is not applicable and if a transfer is
 
22           made that (i) is prohibited under a lease agreement or
 
23           (ii) materially impairs the prospect of obtaining
 

 
Page 239                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           return performance by, materially changes the duty of,
 
 2           or materially increases the burden or risk imposed on,
 
 3           the other party to the lease contract, unless the party
 
 4           not making the transfer agrees at any time to the
 
 5           transfer in the lease contract or otherwise, then,
 
 6           except as limited by contract, (i) the transferor is
 
 7           liable to the party not making the transfer for damages
 
 8           caused by the transfer to the extent that the damages
 
 9           could not reasonably be prevented by the party not
 
10           making the transfer and (ii) a court having
 
11           jurisdiction may grant other appropriate relief,
 
12           including cancellation of the lease contract or an
 
13           injunction against the transfer.
 
14      [(f)] (e)  A transfer of "the lease" or of "all my rights
 
15 under the lease", or a transfer in similar general terms, is a
 
16 transfer of rights and, unless the language or the circumstances,
 
17 as in a transfer for security, indicate the contrary, the
 
18 transfer is a delegation of duties by the transferor to the
 
19 transferee.  Acceptance by the transferee constitutes a promise
 
20 by the transferee to perform those duties.  The promise is
 
21 enforceable by either the transferor or the other party to the
 
22 lease contract.
 
23      [(g)] (f)  Unless otherwise agreed by the lessor and the
 

 
Page 240                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 lessee, a delegation of performance does not relieve the
 
 2 transferor as against the other party of any duty to perform or
 
 3 of any liability for default.
 
 4      [(h)] (g)  In a consumer lease, to prohibit the transfer of
 
 5 an interest of a party under the lease contract or to make a
 
 6 transfer an event of default, the language must be specific, by a
 
 7 writing, and conspicuous."
 
 8      SECTION 18.  Section 490:2A-307, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "§490:2A-307  Priority of liens arising by attachment or
 
11 levy on, security interests in, and other claims to goods.  (a)
 
12 Except as otherwise provided in section 490:2A-306, a creditor of
 
13 a lessee takes subject to the lease contract.
 
14      (b)  Except as otherwise provided in [subsections]
 
15 subsection (c) and [(d) and in] sections 490:2A-306 and
 
16 490:2A-308, a creditor of a lessor takes subject to the lease
 
17 contract unless[:
 
18      (1)  The] the creditor holds a lien that attached to the
 
19           goods before the lease contract became enforceable[;
 
20      (2)  The creditor holds a security interest in the goods and
 
21           the lessee did not give value and receive delivery of
 
22           the goods without knowledge of the security interest;
 
23           or
 

 
Page 241                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1      (3)  The creditor holds a security interest in the goods
 
 2           which was perfected (section 490:9-303) before the
 
 3           lease contract became enforceable.
 
 4      (c)  A lessee in the ordinary course of business takes the
 
 5 leasehold interest free of a security interest in the goods
 
 6 created by the lessor even though the security interest is
 
 7 perfected (section 490:9-303) and the lessee knows of its
 
 8 existence.
 
 9      (d)  A lessee other than a lessee in the ordinary course of
 
10 business takes the leasehold interest free of a security interest
 
11 to the extent that it secures future advances made after the
 
12 secured party acquires knowledge of the lease or more than forty-
 
13 five days after the lease contract becomes enforceable, whichever
 
14 first occurs, unless the future advances are made pursuant to a
 
15 commitment entered into without knowledge of the lease and before
 
16 the expiration of the forty-five-day period].
 
17      (c)  Except as otherwise provided in sections 490:9-317,
 
18 490:9-321, and 490:9-323, a lessee takes a leasehold interest
 
19 subject to a security interest held by a creditor of the lessor."
 
20      SECTION 19.  Section 490:2A-309, Hawaii Revised Statutes, is
 
21 amended by amending subsection (a) to read as follows:
 
22      "(a)  In this section:
 
23      (1)  Goods are "fixtures" when they become so related to
 

 
Page 242                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           particular real estate that an interest in them arises
 
 2           under real estate law;
 
 3      (2)  A "fixture filing" is the filing, in the office where a
 
 4           record of a mortgage on the real estate would be filed
 
 5           or recorded, of a financing statement covering goods
 
 6           that are or are to become fixtures and conforming to
 
 7           the requirements of section [490:9-402(5);]
 
 8           490:9-502(a) and (b);
 
 9      (3)  A lease is a "purchase money lease" unless the lessee
 
10           has possession or use of the goods or the right to
 
11           possession or use of the goods before the lease
 
12           agreement is enforceable;
 
13      (4)  A mortgage is a "construction mortgage" to the extent
 
14           it secures an obligation incurred for the construction
 
15           of an improvement on land including the acquisition
 
16           cost of the land, if the recorded writing so indicates;
 
17           and
 
18      (5)  "Encumbrance" includes real estate mortgages and other
 
19           liens on real estate and all other rights in real
 
20           estate that are not ownership interests."
 
21      SECTION 20.  Section 490:4-210, Hawaii Revised Statutes, is
 
22 amended by amending subsection (c) to read as follows:
 
23      "(c)  Receipt by a collecting bank of a final settlement for
 

 
Page 243                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 an item is a realization on its security interest in the item,
 
 2 accompanying documents, and proceeds.  So long as the bank does
 
 3 not receive final settlement for the item or give up possession
 
 4 of the item or accompanying documents for purposes other than
 
 5 collection, the security interest continues to that extent and is
 
 6 subject to Article 9, but:
 
 7      (1)  No security agreement is necessary to make the security
 
 8           interest enforceable (section [490:9-203(1)(a));]
 
 9           490:9-203(b)(3)(A));
 
10      (2)  No filing is required to perfect the security interest;
 
11           and
 
12      (3)  The security interest has priority over conflicting
 
13           perfected security interests in the item, accompanying
 
14           documents, or proceeds."
 
15      SECTION 21.  Section 490:7-503, Hawaii Revised Statutes, is
 
16 amended by amending subsection (1) to read as follows:
 
17      "(1)  A document of title confers no right in goods against
 
18 a person who before issuance of the document had a legal interest
 
19 or a perfected security interest in them and who neither:
 
20      (a)  Delivered or entrusted them or any document of title
 
21           covering them to the bailor or [his] the bailor's
 
22           nominee with actual or apparent authority to ship,
 
23           store, or sell, or with power to obtain delivery under
 

 
Page 244                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           this Article (section 490:7-403) or with power of
 
 2           disposition under this chapter (sections 490:2-403 and
 
 3           [490:9-307)] 490:9-320) or other statute or rule of
 
 4           law; nor
 
 5      (b)  Acquiesced in the procurement by the bailor or [his]
 
 6           the bailor's nominee of any document of title."
 
 7      SECTION 22.  Section 490:8-103, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (f) to read as follows:
 
 9      "(f)  A commodity contract, as defined in section
 
10 [490:9-115,] 490:9-102(a), is not a security or a financial
 
11 asset."
 
12      SECTION 23.  Section 490:8-106, Hawaii Revised Statutes, is
 
13 amended as follows:
 
14      1.  By amending subsection (d) to read:
 
15      "(d)  A purchaser has "control" of a security entitlement
 
16 if:
 
17      (1)  The purchaser becomes the entitlement holder; [or]
 
18      (2)  The securities intermediary has agreed that it will
 
19           comply with entitlement orders originated by the
 
20           purchaser without further consent by the entitlement
 
21           holder[.]; or
 
22      (3)  Another person has control of the security entitlement
 
23           on behalf of the purchaser or, having previously
 

 
Page 245                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           acquired control of the security entitlement,
 
 2           acknowledges that it has control on behalf of the
 
 3           purchaser."
 
 4      2.  By amending subsection (f) to read:
 
 5      "(f)  A purchaser who has satisfied the requirements of
 
 6 subsection [(c)(2)] (c) or [(d)(2)] (d) has control, even if the
 
 7 registered owner in the case of subsection [(c)(2)] (c) or the
 
 8 entitlement holder in the case of subsection [(d)(2)] (d) retains
 
 9 the right to make substitutions for the uncertificated security
 
10 or security entitlement, to originate instructions or entitlement
 
11 orders to the issuer or securities intermediary, or otherwise to
 
12 deal with the uncertificated security or security entitlement."
 
13      SECTION 24.  Section 490:8-110, Hawaii Revised Statutes, is
 
14 amended by amending subsection (e) to read as follows:
 
15      "(e)  The following rules determine a "securities
 
16 intermediary's jurisdiction" for purposes of this section:
 
17      (1)  If an agreement between the securities intermediary and
 
18           its entitlement holder [specifies that it is governed
 
19           by the law of a particular jurisdiction,] governing the
 
20           securities account expressly provides that a particular
 
21           jurisdiction is the securities intermediary's
 
22           jurisdiction for purposes of this part, this article,
 
23           or this chapter, that jurisdiction is the securities
 

 
Page 246                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           intermediary's jurisdiction.
 
 2      (2)  If paragraph (1) does not apply and an agreement
 
 3           between the securities intermediary and its entitlement
 
 4           holder governing the securities account expressly
 
 5           provides that the agreement is governed by the law of a
 
 6           particular jurisdiction, that jurisdiction is the
 
 7           securities intermediary's jurisdiction.
 
 8     [(2)] (3)  If neither paragraph (1) nor paragraph (2) applies
 
 9           and an agreement between the securities intermediary
 
10           and its entitlement holder [does not specify the
 
11           governing law as provided in paragraph (1), but]
 
12           governing the securities account expressly [specifies]
 
13           provides that the securities account is maintained at
 
14           an office in a particular jurisdiction, that
 
15           jurisdiction is the securities intermediary's
 
16           jurisdiction.
 
17     [(3)] (4) If [an agreement between the securities
 
18           intermediary and its entitlement holder does not
 
19           specify a jurisdiction as provided in paragraph (1) or
 
20           (2),] none of the preceding paragraphs applies, the
 
21           securities intermediary's jurisdiction is the
 
22           jurisdiction in which [is located] the office
 
23           identified in an account statement as the office
 

 
Page 247                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           serving the entitlement holder's account[.] is located.
 
 2     [(4)] (5)  If [an agreement between the securities
 
 3           intermediary and its entitlement holder does not
 
 4           specify a jurisdiction as provided in paragraph (1) or
 
 5           (2) and an account statement does not identify an
 
 6           office serving the entitlement holder's account as
 
 7           provided in paragraph (3),] none of the preceding
 
 8           paragraphs applies, the securities intermediary's
 
 9           jurisdiction is the jurisdiction in which [is located]
 
10           the chief executive office of the securities
 
11           intermediary[.] is located."
 
12      SECTION 25.  Section 490:8-301, Hawaii Revised Statutes, is
 
13 amended by amending subsection (a) to read as follows:
 
14      "(a)  Delivery of a certificated security to a purchaser
 
15 occurs when:
 
16      (1)  The purchaser acquires possession of the security
 
17           certificate;
 
18      (2)  Another person, other than a securities intermediary,
 
19           either acquires possession of the security certificate
 
20           on behalf of the purchaser or, having previously
 
21           acquired possession of the certificate, acknowledges
 
22           that it holds for the purchaser; or
 
23      (3)  A securities intermediary acting on behalf of the
 

 
Page 248                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           purchaser acquires possession of the security
 
 2           certificate, only if the certificate is in registered
 
 3           form and [has been] is (i) registered in the name of
 
 4           the purchaser, (ii) payable to the order of the
 
 5           purchaser, or (iii) specially indorsed to the purchaser
 
 6           by an effective indorsement[.] and has not been
 
 7           indorsed to the securities intermediary or in blank."
 
 8      SECTION 26.  Section 490:8-302, Hawaii Revised Statutes, is
 
 9 amended by amending subsection (a) to read as follows:
 
10      "(a)  Except as otherwise provided in subsections (b) and
 
11 (c), [upon delivery] a purchaser of a certificated or
 
12 uncertificated security [to a purchaser, the purchaser] acquires
 
13 all rights in the security that the transferor had or had power
 
14 to transfer."
 
15      SECTION 27.  Section 490:8-510, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      §490:8-510  Rights of purchaser of security entitlement from
 
18 entitlement holder.
 
19      "(a)  [An] In a case not covered by the priority rules in
 
20 Article 9 or the rules stated in subsection (c), an action based
 
21 on an adverse claim to a financial asset or security entitlement,
 
22 whether framed in conversion, replevin, constructive trust,
 
23 equitable lien, or other theory, may not be asserted against a
 

 
Page 249                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 person who purchases a security entitlement, or an interest
 
 2 therein, from an entitlement holder if the purchaser gives value,
 
 3 does not have notice of the adverse claim, and obtains control.
 
 4      (b)  If an adverse claim could not have been asserted
 
 5 against an entitlement holder under section 490:8-502, the
 
 6 adverse claim cannot be asserted against a person who purchases a
 
 7 security entitlement, or an interest therein, from the
 
 8 entitlement holder.
 
 9      (c)  In a case not covered by the priority rules in
 
10 [article] Article 9, a purchaser for value of a security
 
11 entitlement, or an interest therein, who obtains control has
 
12 priority over a purchaser of a security entitlement, or an
 
13 interest therein, who does not obtain control.  [Purchasers]
 
14 Except as otherwise provided in subsection (d), purchasers who
 
15 have control rank [equally, except that a] according to priority
 
16 in time of:
 
17      (1)  The purchaser's becoming the person for whom the
 
18           securities account, in which the security entitlement
 
19           is carried, is maintained, if the purchaser obtained
 
20           control under section 490:8-106(d)(1);
 
21      (2)  The securities intermediary's agreement to comply with
 
22           the purchaser's entitlement orders with respect to
 
23           security entitlements carried or to be carried in the
 

 
Page 250                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           securities account in which the security entitlement is
 
 2           carried, if the purchaser obtained control under
 
 3           section 490:8-106(d)(2); or
 
 4      (3)  If the purchaser obtained control through another
 
 5           person under section 490:8-106(d)(3), the time on which
 
 6           priority would be based under this subsection if the
 
 7           other person were the secured party.
 
 8      (d)  A securities intermediary as purchaser has priority
 
 9 over a conflicting purchaser who has control unless otherwise
 
10 agreed by the securities intermediary."
 
11      SECTION 28.  Section 490:10-102, Hawaii Revised Statutes, is
 
12 amended by amending subsection (2) to read as follows:
 
13      "(2)  Transactions validly entered into before January 1,
 
14 1967 and the rights, duties, and interests flowing from them
 
15 remain valid thereafter and may be terminated, completed,
 
16 consummated, or enforced as required or permitted by any statute
 
17 or other law repealed, amended, or modified by this chapter as
 
18 though such repeal, amendment, or modification had not occurred;
 
19 provided[, however,] that the perfection of a security interest,
 
20 as defined in this chapter and however denominated in any law
 
21 repealed, amended, or modified by this chapter:
 
22      (a)  Which was perfected on January 1, 1967 by a filing or
 
23           recording under a law repealed by this chapter and
 

 
Page 251                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           requiring a further filing or recording to continue its
 
 2           perfection, continues until and will lapse on the date
 
 3           provided by the law so repealed for such further filing
 
 4           or recording;
 
 5      (b)  Which was perfected on January 1, 1967 by a filing or
 
 6           recording under a law repealed by this chapter and
 
 7           requiring no further filing or recording to continue
 
 8           its perfection, continues until and will lapse twelve
 
 9           months after January 1, 1967;
 
10      (c)  Which was perfected on January 1, 1967 without any
 
11           filing or recording, and for the perfection of which
 
12           the filing of a financing statement would be required
 
13           if this chapter applied, continues until and will lapse
 
14           twelve months after January 1, 1967; unless, in each
 
15           case, a continuation statement is filed by the secured
 
16           party before the perfection of the security interest
 
17           would otherwise lapse.  Any such continuation statement
 
18           must be signed by the secured party, identify the
 
19           security agreement, statement or notice, however
 
20           denominated in any law repealed by this chapter, state
 
21           the office where and the date when the last filing or
 
22           recording was made with respect thereto, and the filing
 
23           number, if any, or book and page, if any, of recording
 

 
Page 252                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1           and further state that the security agreement,
 
 2           statement or notice, however denominated in any law
 
 3           repealed by this chapter, is still effective.  Section
 
 4           [490:9-401(1)] 490:9-501 determines the proper place to
 
 5           file [such a] the continuation statement.  Except as
 
 6           specified in this subsection [the provisions of section
 
 7           490:9-403(3)], sections 490:9-515 and 490:9-522 apply
 
 8           to [such a] the continuation statement."
 
 9      SECTION 29.  Section 490:11-106, Hawaii Revised Statutes, is
 
10 amended as follows:
 
11      1.  By amending subsection (2) to read:
 
12      "(2)   If a security interest is perfected when the new
 
13 U.C.C. takes effect, under a law other than the U.C.C. which
 
14 requires no further filing, refiling, or recording to continue
 
15 its perfection, perfection continues until and will lapse three
 
16 years after the new U.C.C. takes effect, unless a financing
 
17 statement is filed as provided in subsection (4) or unless the
 
18 security interest is perfected otherwise than by filing, or
 
19 unless under [subsection (3) of] section [490:9-302] 490:9-311,
 
20 the other law continues to govern filing."
 
21      2.  By amending subsection (4) to read:
 
22      "(4)  A financing statement may be filed within six months
 
23 before the perfection of a security interest would otherwise
 

 
Page 253                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 lapse.  Any such financing statement may be signed by either the
 
 2 debtor or the secured party.  It must identify the security
 
 3 agreement, statement, or notice (however denominated in any
 
 4 statute or other law repealed or modified by this Act), state the
 
 5 office where and the date when the last filing, refiling, or
 
 6 recording, if any, was made with respect thereto, and the filing
 
 7 number, if any, or book and page, if any, of recording and
 
 8 further state that the security agreement, statement, or notice,
 
 9 however denominated, in another filing office under the U.C.C. or
 
10 under any statute or other law repealed or modified by this Act
 
11 is still effective.  Section [490:9-401 and section 490:9-103
 
12 determine] 490:9-501 determines the proper place to file [such a]
 
13 the financing statement.  Except as specified in this subsection,
 
14 [the provisions of] section [490:9-403(3) for continuation
 
15 statements apply] 490:9-515 applies to [such a] the financing
 
16 statement."
 
17      SECTION 30.  Article 9 of chapter 490, Hawaii Revised
 
18 Statutes, in effect on June 30, 2001, is repealed.
 
19      SECTION 31.  Statutory material to be repealed is bracketed,
 
20 except that bracketed instructions in the forms and the "end of
 
21 form" notations in sections 490:9-613 and 490:9-614 in section 1
 
22 of this Act shall not be repealed.  New statutory material is
 
23 underscored, except that the underscoring in the forms in
 

 
Page 254                                                   1938
                                     H.B. NO.           H.D. 1
                                                        S.D. 1
                                                        

 
 1 section 1 of this Act shall be set forth as part of the forms.
 
 2      SECTION 32.  This Act shall take effect on July 1, 2001.