REPORT TITLE:
UCC Secured Transaction

DESCRIPTION:
Adopts new UCC article 9, secured transactions.  Repeals old
article 9.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2276
TWENTIETH LEGISLATURE, 2000                                
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                    PART 1.  GENERAL PROVISIONS
 
 6    SUBPART 1.  SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
 
 7      §490:9-101  Short title.  This article may be cited as
 
 8 Uniform Commercial Code Secured Transactions.
 
 9      §490:9-102  Definitions and index of definitions.  (a)  In
 
10 this chapter:
 
11      "Accession" means goods that are physically united with
 
12 other goods in such a manner that the identity of the original
 
13 goods is not lost.
 
14      "Account", except as used in "account for":
 
15      (1)  Means a right to payment of a monetary obligation,
 
16           whether or not earned by performance, (i) for property
 
17           that has been or is to be sold, leased, licensed,
 
18           assigned, or otherwise disposed of, (ii) for services
 

 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1           (B)  Leased real property to a debtor in connection
 
 2                with the debtor's farming operation; and
 
 3      (3)  Whose effectiveness does not depend on the person's
 
 4           possession of the personal property.
 
 5      "As-extracted collateral" means:
 
 6      (1)  Oil, gas, or other minerals that are subject to a
 
 7           security interest that:
 
 8           (A)  Is created by a debtor having an interest in the
 
 9                minerals before extraction; and
 
10           (B)  Attaches to the minerals as extracted; or
 
11      (2)  Accounts arising out of the sale at the wellhead or
 
12           minehead of oil, gas, or other minerals in which the
 
13           debtor had an interest before extraction.
 
14      "Authenticate" means:
 
15      (1)  To sign; or
 
16      (2)  To execute or otherwise adopt a symbol, or encrypt or
 
17           similarly process a record in whole or in part, with
 
18           the present intent of the authenticating person to
 
19           identify the person and adopt or accept a record.
 
20      "Bank" means an organization that is engaged in the business
 
21 of banking.  The term includes savings banks, savings and loan
 
22 associations, credit unions, and trust companies.
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1      "Cash proceeds" means proceeds that are money, checks,
 
 2 deposit accounts, or the like.
 
 3      "Certificate of title" means a certificate of title with
 
 4 respect to which a statute provides for the security interest in
 
 5 question to be indicated on the certificate as a condition or
 
 6 result of the security interest's obtaining priority over the
 
 7 rights of a lien creditor with respect to the collateral.
 
 8      "Chattel paper" means a record or records that evidence both
 
 9 a monetary obligation and a security interest in specific goods,
 
10 a security interest in specific goods and software used in the
 
11 goods, a security interest in specific goods and license of
 
12 software used in the goods, a lease of specific goods, or a lease
 
13 of specific goods and license of software used in the goods.  In
 
14 this paragraph, "monetary obligation" means a monetary obligation
 
15 secured by the goods or owed under a lease of the goods and
 
16 includes a monetary obligation with respect to software used in
 
17 the goods.  The term does not include charters or other contracts
 
18 involving the use or hire of a vessel.  If a transaction is
 
19 evidenced by records that include an instrument or series of
 
20 instruments, the group of records taken together constitutes
 
21 chattel paper.
 
22      "Collateral" means the property subject to a security
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1 section 490:9-502(a) and (b).  The term includes the filing of a
 
 2 financing statement covering goods of a transmitting utility
 
 3 which are or are to become fixtures.
 
 4      "Fixtures" means goods that have become so related to
 
 5 particular real property that an interest in them arises under
 
 6 real property law.
 
 7      "General intangible" means any personal property, including
 
 8 things in action, other than accounts, chattel paper, commercial
 
 9 tort claims, deposit accounts, documents, goods, instruments,
 
10 investment property, letter-of-credit rights, letters of credit,
 
11 money, and oil, gas, or other minerals before extraction.  The
 
12 term includes payment intangibles and software.
 
13      "Good faith" means honesty in fact and the observance of
 
14 reasonable commercial standards of fair dealing.
 
15      "Goods" means all things that are movable when a security
 
16 interest attaches.  The term includes (i) fixtures, (ii) standing
 
17 timber that is to be cut and removed under a conveyance or
 
18 contract for sale, (iii) the unborn young of animals, (iv) crops
 
19 grown, growing, or to be grown, even if the crops are produced on
 
20 trees, vines, or bushes, and (v) manufactured homes.  The term
 
21 also includes a computer program embedded in goods and any
 
22 supporting information provided in connection with a transaction
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1 relating to the program if (i) the program is associated with the
 
 2 goods in such a manner that it customarily is considered part of
 
 3 the goods, or (ii) by becoming the owner of the goods, a person
 
 4 acquires a right to use the program in connection with the goods.
 
 5 The term does not include a computer program embedded in goods
 
 6 that consist solely of the medium in which the program is
 
 7 embedded.  The term also does not include accounts, chattel
 
 8 paper, commercial tort claims, deposit accounts, documents,
 
 9 general intangibles, instruments, investment property, letter-of-
 
10 credit rights, letters of credit, money, or oil, gas, or other
 
11 minerals before extraction.
 
12      "Governmental unit" means a subdivision, agency, department,
 
13 county, parish, municipality, or other unit of the government of
 
14 the United States, a State, or a foreign country.  The term
 
15 includes an organization having a separate corporate existence if
 
16 the organization is eligible to issue debt on which interest is
 
17 exempt from income taxation under the laws of the United States.
 
18      "Health-care-insurance receivable" means an interest in or
 
19 claim under a policy of insurance which is a right to payment of
 
20 a monetary obligation for health-care goods or services provided.
 
21      "Instrument" means a negotiable instrument or any other
 
22 writing that evidences a right to the payment of a monetary
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1 obligation, is not itself a security agreement or lease, and is
 
 2 of a type that in ordinary course of business is transferred by
 
 3 delivery with any necessary indorsement or assignment.  The term
 
 4 does not include (i) investment property, (ii) letters of credit,
 
 5 or (iii) writings that evidence a right to payment arising out of
 
 6 the use of a credit or charge card or information contained on or
 
 7 for use with the card.
 
 8      "Inventory" means goods, other than farm products, which:
 
 9      (1)  Are leased by a person as lessor;
 
10      (2)  Are held by a person for sale or lease or to be
 
11           furnished under a contract of service;
 
12      (3)  Are furnished by a person under a contract of service;
 
13           or
 
14      (4)  Consist of raw materials, work in process, or materials
 
15           used or consumed in a business.
 
16      "Investment property" means a security, whether certificated
 
17 or uncertificated, security entitlement, securities account,
 
18 commodity contract, or commodity account.
 
19      "Jurisdiction of organization", with respect to a registered
 
20 organization, means the jurisdiction under whose law the
 
21 organization is organized.
 
22      "Letter-of-credit right" means a right to payment or
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1 performance under a letter of credit, whether or not the
 
 2 beneficiary has demanded or is at the time entitled to demand
 
 3 payment or performance.  The term does not include the right of a
 
 4 beneficiary to demand payment or performance under a letter of
 
 5 credit.
 
 6      "Lien creditor" means:
 
 7      (1)  A creditor that has acquired a lien on the property
 
 8           involved by attachment, levy, or the like;
 
 9      (2)  An assignee for benefit of creditors from the time of
 
10           assignment;
 
11      (3)  A trustee in bankruptcy from the date of the filing of
 
12           the petition; or
 
13      (4)  A receiver in equity from the time of appointment.
 
14      "Manufactured home" means a structure, transportable in one
 
15 or more sections, which, in the traveling mode, is eight body
 
16 feet or more in width or forty body feet or more in length, or,
 
17 when erected on site, is three hundred twenty or more square
 
18 feet, and which is built on a permanent chassis and designed to
 
19 be used as a dwelling with or without a permanent foundation when
 
20 connected to the required utilities, and includes the plumbing,
 
21 heating, air-conditioning, and electrical systems contained
 
22 therein.  The term includes any structure that meets all of the
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1 requirements of this paragraph except the size requirements and
 
 2 with respect to which the manufacturer voluntarily files a
 
 3 certification required by the United States Secretary of Housing
 
 4 and Urban Development and complies with the standards established
 
 5 under Title 42 of the United States Code.
 
 6      "Manufactured-home transaction" means a secured transaction:
 
 7      (A)  That creates a purchase-money security interest in a
 
 8           manufactured home, other than a manufactured home held
 
 9           as inventory; or
 
10      (B)  In which a manufactured home, other than a manufactured
 
11           home held as inventory, is the primary collateral.
 
12      "Mortgage" means a consensual interest in real property,
 
13 including fixtures, which secures payment or performance of an
 
14 obligation.
 
15      "New debtor" means a person that becomes bound as debtor
 
16 under section 490:9-203(d) by a security agreement previously
 
17 entered into by another person.
 
18      "New value" means (i) money, (ii) money's worth in property,
 
19 services, or new credit, or (iii) release by a transferee of an
 
20 interest in property previously transferred to the transferee.
 
21 The term does not include an obligation substituted for another
 
22 obligation.
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 24                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 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.
 

 
 
 
Page 25                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      "Note".  Section 490:3-104.
 
 2      "Proceeds of a letter of credit".  Section 490:5-114.
 
 3      "Prove".  Section 490:3-103.
 
 4      "Sale".  Section 490:2-106.
 
 5      "Securities account".  Section 490:8-501.
 
 6      "Securities intermediary".  Section 490:8-102.
 
 7      "Security".  Section 490:8-102.
 
 8      "Security certificate".  Section 490:8-102.
 
 9      "Security entitlement".  Section 490:8-102.
 
10      "Uncertificated security".  Section 490:8-102.
 
11      (c)  Article 1 contains general definitions and principles
 
12 of construction and interpretation applicable throughout this
 
13 article.
 
14      §490:9-103  Purchase-money security interest; application of
 
15 payments; burden of establishing.(a)  In this section:
 
16      (1)  "Purchase-money collateral" means goods or software
 
17           that secures a purchase-money obligation incurred with
 
18           respect to that collateral; and
 
19      (2)  "Purchase-money obligation" means an obligation of an
 
20           obligor incurred as all or part of the price of the
 
21           collateral or for value given to enable the debtor to
 
22           acquire rights in or the use of the collateral if the
 

 
 
 
Page 26                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 27                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 28                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 29                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 approaches.
 
 2      §490:9-104  Control of deposit account.  (a)  A secured
 
 3 party has control of a deposit account if:
 
 4      (1)  The secured party is the bank with which the deposit
 
 5           account is maintained;
 
 6      (2)  The debtor, secured party, and bank have agreed in an
 
 7           authenticated record that the bank will comply with
 
 8           instructions originated by the secured party directing
 
 9           disposition of the funds in the deposit account without
 
10           further consent by the debtor; or
 
11      (3)  The secured party becomes the bank's customer with
 
12           respect to the deposit account.
 
13      (b)  A secured party that has satisfied subsection (a) has
 
14 control, even if the debtor retains the right to direct the
 
15 disposition of funds from the deposit account.
 
16      §490:9-105  Control of electronic chattel paper.  A secured
 
17 party has control of electronic chattel paper if the record or
 
18 records comprising the chattel paper are created, stored, and
 
19 assigned in such a manner that:
 
20      (1)  A single authoritative copy of the record or records
 
21           exists which is unique, identifiable and, except as
 
22           otherwise provided in paragraphs (4), (5), and (6),
 

 
 
 
Page 30                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           unalterable;
 
 2      (2)  The authoritative copy identifies the secured party as
 
 3           the assignee of the record or records;
 
 4      (3)  The authoritative copy is communicated to and
 
 5           maintained by the secured party or its designated
 
 6           custodian;
 
 7      (4)  Copies or revisions that add or change an identified
 
 8           assignee of the authoritative copy can be made only
 
 9           with the participation of the secured party;
 
10      (5)  Each copy of the authoritative copy and any copy of a
 
11           copy is readily identifiable as a copy that is not the
 
12           authoritative copy; and
 
13      (6)  Any revision of the authoritative copy is readily
 
14           identifiable as an authorized or unauthorized revision.
 
15      §490:9-106  Control of investment property.  (a)  A person
 
16 has control of a certificated security, uncertificated security,
 
17 or security entitlement as provided in section 490:8-106.
 
18      (b)  A secured party has control of a commodity contract if:
 
19      (1)  The secured party is the commodity intermediary with
 
20           which the commodity contract is carried; or
 
21      (2)  The commodity customer, secured party, and commodity
 
22           intermediary have agreed that the commodity
 

 
 
 
Page 31                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           intermediary will apply any value distributed on
 
 2           account of the commodity contract as directed by the
 
 3           secured party without further consent by the commodity
 
 4           customer.
 
 5      (c)  A secured party having control of all security
 
 6 entitlements or commodity contracts carried in a securities
 
 7 account or commodity account has control over the securities
 
 8 account or commodity account.
 
 9      §490:9-107  Control of letter-of-credit right.  A secured
 
10 party has control of a letter-of-credit right to the extent of
 
11 any right to payment or performance by the issuer or any
 
12 nominated person if the issuer or nominated person has consented
 
13 to an assignment of proceeds of the letter of credit under
 
14 section 490:5-114(c) or otherwise applicable law or practice.
 
15      §490:9-108  Sufficiency of description.  (a)  Except as
 
16 otherwise provided in subsections (c), (d), and (e), a
 
17 description of personal or real property is sufficient, whether
 
18 or not it is specific, if it reasonably identifies what is
 
19 described.
 
20      (b)  Except as otherwise provided in subsection (d), a
 
21 description of collateral reasonably identifies the collateral if
 
22 it identifies the collateral by:
 

 
 
 
Page 32                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (1)  Specific listing;
 
 2      (2)  Category;
 
 3      (3)  Except as otherwise provided in subsection (e), a type
 
 4           of collateral defined in this chapter;
 
 5      (4)  Quantity;
 
 6      (5)  Computational or allocational formula or procedure; or
 
 7      (6)  Except as otherwise provided in subsection (c), any
 
 8           other method, if the identity of the collateral is
 
 9           objectively determinable.
 
10      (c)  A description of collateral as "all the debtor's
 
11 assets" or "all the debtor's personal property" or using words of
 
12 similar import does not reasonably identify the collateral.
 
13      (d)  Except as otherwise provided in subsection (e), a
 
14 description of a security entitlement, securities account, or
 
15 commodity account is sufficient if it describes:
 
16      (1)  The collateral by those terms or as investment
 
17           property; or
 
18      (2)  The underlying financial asset or commodity contract.
 
19      (e)  A description only by type of collateral defined in
 
20 this chapter is an insufficient description of:
 
21      (1)  A commercial tort claim; or
 
22      (2)  In a consumer transaction, consumer goods, a security
 

 
 
 
Page 33                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           entitlement, a securities account, or a commodity
 
 2           account.
 
 3               SUBPART 2.  APPLICABILITY OF ARTICLE
 
 4      §490:9-109  Scope.  (a)  Except as otherwise provided in
 
 5 subsections (c) and (d), this article applies to:
 
 6      (1)  A transaction, regardless of its form, that creates a
 
 7           security interest in personal property or fixtures by
 
 8           contract;
 
 9      (2)  An agricultural lien;
 
10      (3)  A sale of accounts, chattel paper, payment intangibles,
 
11           or promissory notes;
 
12      (4)  A consignment;
 
13      (5)  A security interest arising under section 490:2-401,
 
14           490:2-505, 490:2-711(3), or 490:2A-508(e), as provided
 
15           in section 490:9-110; and
 
16      (6)  A security interest arising under section 490:4-210 or
 
17           490:5-118.
 
18      (b)  The application of this article to a security interest
 
19 in a secured obligation is not affected by the fact that the
 
20 obligation is itself secured by a transaction or interest to
 
21 which this article does not apply.
 
22      (c)  This article does not apply to the extent that:
 

 
 
 
Page 34                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (1)  A statute, regulation, or treaty of the United States
 
 2           preempts this article;
 
 3      (2)  Another statute of this State expressly governs the
 
 4           creation, perfection, priority, or enforcement of a
 
 5           security interest created by this State or a
 
 6           governmental unit of this State;
 
 7      (3)  A statute of another state, a foreign country, or a
 
 8           governmental unit of another state or a foreign
 
 9           country, other than a statute generally applicable to
 
10           security interests, expressly governs creation,
 
11           perfection, priority, or enforcement of a security
 
12           interest created by the state, country, or governmental
 
13           unit; or
 
14      (4)  The rights of a transferee beneficiary or nominated
 
15           person under a letter of credit are independent and
 
16           superior under section 490:5-114.
 
17      (d)  This article does not apply to:
 
18      (1)  A landlord's lien, other than an agricultural lien;
 
19      (2)  A lien, other than an agricultural lien, given by
 
20           statute or other rule of law for services or materials,
 
21           but section 490:9-333 applies with respect to priority
 
22           of the lien;
 

 
 
 
Page 35                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (3)  An assignment of a claim for wages, salary, or other
 
 2           compensation of an employee;
 
 3      (4)  A sale of accounts, chattel paper, payment intangibles,
 
 4           or promissory notes as part of a sale of the business
 
 5           out of which they arose;
 
 6      (5)  An assignment of accounts, chattel paper, payment
 
 7           intangibles, or promissory notes which is for the
 
 8           purpose of collection only;
 
 9      (6)  An assignment of a right to payment under a contract to
 
10           an assignee that is also obligated to perform under the
 
11           contract;
 
12      (7)  An assignment of a single account, payment intangible,
 
13           or promissory note to an assignee in full or partial
 
14           satisfaction of a preexisting indebtedness;
 
15      (8)  A transfer of  an interest in or an assignment of a
 
16           claim under a policy of insurance, other than an
 
17           assignment by or to a health-care provider of a health-
 
18           care-insurance receivable and any subsequent assignment
 
19           of the right to payment, but sections 490:9-315 and
 
20           490:9-322 apply with respect to proceeds and priorities
 
21           in proceeds;
 
22      (9)  An assignment of a right represented by a judgment,
 

 
 
 
Page 36                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 37                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1     (13)  An assignment of a deposit account in a consumer
 
 2           transaction, but sections 490:9-315 and 490:9-322 apply
 
 3           with respect to proceeds and priorities in proceeds.
 
 4      §490:9-110  Security interests arising under Article 2 or
 
 5 2A.  A security interest arising under section 490:2-401,
 
 6 490:2-505, 490:2-711(3), or 490:2A-508(f) is subject to this
 
 7 article.  However, until the debtor obtains possession of the
 
 8 goods:
 
 9      (1)  The security interest is enforceable, even if section
 
10           490:9-203(b)(3) has not been satisfied;
 
11      (2)  Filing is not required to perfect the security
 
12           interest;
 
13      (3)  The rights of the secured party after default by the
 
14           debtor are governed by Article 2 or 2A; and
 
15      (4)  The security interest has priority over a conflicting
 
16           security interest created by the debtor.
 
17     PART 2.  EFFECTIVENESS OF SECURITY AGREEMENT; ATTACHMENT
 
18   OF SECURITY INTEREST; RIGHTS OF PARTIES TO SECURITY AGREEMENT
 
19             SUBPART 1.  EFFECTIVENESS AND ATTACHMENT
 
20      §490:9-201  General effectiveness of security agreement.
 
21 (a)  Except as otherwise provided in this chapter, a security
 
22 agreement is effective according to its terms between the
 

 
 
 
Page 38                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 parties, against purchasers of the collateral, and against
 
 2 creditors.
 
 3      (b)  A transaction subject to this article is subject to any
 
 4 applicable rule of law which establishes a different rule for
 
 5 consumers and (i) any other statute or regulation that regulates
 
 6 the rates, charges, agreements, and practices for loans, credit
 
 7 sales, or other extensions of credit and (ii) any consumer-
 
 8 protection statute or regulation.
 
 9      (c)  In case of conflict between this article and a rule of
 
10 law, statute, or regulation described in subsection (b), the rule
 
11 of law, statute, or regulation controls.  Failure to comply with
 
12 a statute or regulation described in subsection (b) has only the
 
13 effect the statute or regulation specifies.
 
14      (d)  This article does not:
 
15      (1)  Validate any rate, charge, agreement, or practice that
 
16           violates a rule of law, statute, or regulation
 
17           described in subsection (b); or
 
18      (2)  Extend the application of the rule of law, statute, or
 
19           regulation to a transaction not otherwise subject to
 
20           it.
 
21      §490:9-202  Title to collateral immaterial.  Except as
 
22 otherwise provided with respect to consignments or sales of
 

 
 
 
Page 39                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 accounts, chattel paper, payment intangibles, or promissory
 
 2 notes, the provisions of this article with regard to rights and
 
 3 obligations apply whether title to collateral is in the secured
 
 4 party or the debtor.
 
 5      §490:9-203  Attachment and enforceability of security
 
 6 interest; proceeds; supporting obligations; formal requisites.
 
 7 (a)  A security interest attaches to collateral when it becomes
 
 8 enforceable against the debtor with respect to the collateral,
 
 9 unless an agreement expressly postpones the time of attachment.
 
10      (b)  Except as otherwise provided in subsections (c) through
 
11 (i), a security interest is enforceable against the debtor and
 
12 third parties with respect to the collateral only if:
 
13      (1)  Value has been given;
 
14      (2)  The debtor has rights in the collateral or the power to
 
15           transfer rights in the collateral to a secured party;
 
16           and
 
17      (3)  One of the following conditions is met:
 
18           (A)  The debtor has authenticated a security agreement
 
19                that provides a description of the collateral and,
 
20                if the security interest covers timber to be cut,a
 
21                description of the land concerned;
 
22           (B)  The collateral is not a certificated security and
 

 
 
 
Page 40                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1                is in the possession of the secured party under
 
 2                section 490:9-313 pursuant to the debtor's
 
 3                security agreement;
 
 4           (C)  The collateral is a certificated security in
 
 5                registered form and the security certificate has
 
 6                been delivered to the secured party under section
 
 7                490:8-301 pursuant to the debtor's security
 
 8                agreement; or
 
 9           (D)  The collateral is deposit accounts, electronic
 
10                chattel paper, investment property, or letter-of-
 
11                credit rights, and the secured party has control
 
12                under section 490:9-104, 490:9-105, 490:9-106, or
 
13                490:9-107 pursuant to the debtor's security
 
14                agreement.
 
15      (c)  Subsection (b) is subject to section 490:4-210 on the
 
16 security interest of a collecting bank, section 490:5-118 on the
 
17 security interest of a letter-of-credit issuer or nominated
 
18 person, section 490:9-110 on a security interest arising under
 
19 Article 2 or 2A, and section 490:9-206 on security interests in
 
20 investment property.
 
21      (d)  A person becomes bound as debtor by a security
 
22 agreement entered into by another person if, by operation of law
 

 
 
 
Page 41                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 other than this article or by contract:
 
 2      (1)  The security agreement becomes effective to create a
 
 3           security interest in the person's property; or
 
 4      (2)  The person becomes generally obligated for the
 
 5           obligations of the other person, including the
 
 6           obligation secured under the security agreement, and
 
 7           acquires or succeeds to all or substantially all of the
 
 8           assets of the other person.
 
 9      (e)  If a new debtor becomes bound as debtor by a security
 
10 agreement entered into by another person:
 
11      (1)  The agreement satisfies subsection (b)(3) with respect
 
12           to existing or after-acquired property of the new
 
13           debtor to the extent the property is described in the
 
14           agreement; and
 
15      (2)  Another agreement is not necessary to make a security
 
16           interest in the property enforceable.
 
17      (f)  The attachment of a security interest in collateral
 
18 gives the secured party the rights to proceeds provided by
 
19 section 490:9-315 and is also attachment of a security interest
 
20 in a supporting obligation for the collateral.
 
21      (g)  The attachment of a security interest in a right to
 
22 payment or performance secured by a security interest or other
 

 
 
 
Page 42                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 lien on personal or real property is also attachment of a
 
 2 security interest in the security interest, mortgage, or other
 
 3 lien.
 
 4      (h)  The attachment of a security interest in a securities
 
 5 account is also attachment of a security interest in the security
 
 6 entitlements carried in the securities account.
 
 7      (i)  The attachment of a security interest in a commodity
 
 8 account is also attachment of a security interest in the
 
 9 commodity contracts carried in the commodity account.
 
10      §490:9-204  After-acquired property; future advances.  (a)
 
11 Except as otherwise provided in subsection (b), a security
 
12 agreement may create or provide for a security interest in after-
 
13 acquired collateral.
 
14      (b)  A security interest does not attach under a term
 
15 constituting an after-acquired property clause to:
 
16      (1)  Consumer goods, other than an accession when given as
 
17           additional security, unless the debtor acquires rights
 
18           in them within ten days after the secured party gives
 
19           value; or
 
20      (2)  A commercial tort claim.
 
21      (c)  A security agreement may provide that collateral
 
22 secures, or that accounts, chattel paper, payment intangibles, or
 

 
 
 
Page 43                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 promissory notes are sold in connection with, future advances or
 
 2 other value, whether or not the advances or value are given
 
 3 pursuant to commitment.
 
 4      §490:9-205  Use or disposition of collateral permissible.
 
 5 (a)  A security interest is not invalid or fraudulent against
 
 6 creditors solely because:
 
 7      (1)  The debtor has the right or ability to:
 
 8           (A)  Use, commingle, or dispose of all or part of the
 
 9                collateral, including returned or repossessed
 
10                goods;
 
11           (B)  Collect, compromise, enforce, or otherwise deal
 
12                with collateral;
 
13           (C)  Accept the return of collateral or make
 
14                repossessions; or
 
15           (D)  Use, commingle, or dispose of proceeds; or
 
16      (2)  The secured party fails to require the debtor to
 
17           account for proceeds or replace collateral.
 
18      (b)  This section does not relax the requirements of
 
19 possession if attachment, perfection, or enforcement of a
 
20 security interest depends upon possession of the collateral by
 
21 the secured party.
 
22      §490:9-206  Security interest arising in purchase or
 

 


 

Page 44                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 delivery of financial asset.  (a)  A security interest in favor
 
 2 of a securities intermediary attaches to a person's security
 
 3 entitlement if:
 
 4      (1)  The person buys a financial asset through the
 
 5           securities intermediary in a transaction in which the
 
 6           person is obligated to pay the purchase price to the
 
 7           securities intermediary at the time of the purchase;
 
 8           and
 
 9      (2)  The securities intermediary credits the financial asset
 
10           to the buyer's securities account before the buyer pays
 
11           the securities intermediary.
 
12      (b)  The security interest described in subsection (a)
 
13 secures the person's obligation to pay for the financial asset.
 
14      (c)  A security interest in favor of a person that delivers
 
15 a certificated security or other financial asset represented by a
 
16 writing attaches to the security or other financial asset if:
 
17      (1)  The security or other financial asset:
 
18           (A)  In the ordinary course of business is transferred
 
19                by delivery with any necessary indorsement or
 
20                assignment; and
 
21           (B)  Is delivered under an agreement between persons in
 
22                the business of dealing with such securities or
 

 
Page 45                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1                financial assets; and
 
 2      (2)  The agreement calls for delivery against payment.
 
 3      (d)  The security interest described in subsection (c)
 
 4 secures the obligation to make payment for the delivery.
 
 5                   SUBPART 2.  RIGHTS AND DUTIES
 
 6      §490:9-207  Rights and duties of secured party having
 
 7 possession or control of collateral.  (a)  Except as otherwise
 
 8 provided in subsection (d), a secured party shall use reasonable
 
 9 care in the custody and preservation of collateral in the secured
 
10 party's possession.  In the case of chattel paper or an
 
11 instrument, reasonable care includes taking necessary steps to
 
12 preserve rights against prior parties unless otherwise agreed.
 
13      (b)  Except as otherwise provided in subsection (d), if a
 
14 secured party has possession of collateral:
 
15      (1)  Reasonable expenses, including the cost of insurance
 
16           and payment of taxes or other charges, incurred in the
 
17           custody, preservation, use, or operation of the
 
18           collateral are chargeable to the debtor and are secured
 
19           by the collateral;
 
20      (2)  The risk of accidental loss or damage is on the debtor
 
21           to the extent of a deficiency in any effective
 
22           insurance coverage;
 

 
 
 
Page 46                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 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
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1           governs perfection, the effect of perfection or
 
 2           nonperfection, and the priority of a security interest
 
 3           in a security entitlement or securities account.
 
 4      (4)  The local law of the commodity intermediary's
 
 5           jurisdiction governs perfection, the effect of
 
 6           perfection or nonperfection, and the priority of a
 
 7           security interest in a commodity contract or commodity
 
 8           account.
 
 9      (b)  The following rules determine a commodity
 
10 intermediary's jurisdiction for purposes of this part:
 
11      (1)  If an agreement between the commodity intermediary and
 
12           commodity customer governing the commodity account
 
13           expressly provides that a particular jurisdiction is
 
14           the commodity intermediary's jurisdiction for purposes
 
15           of this part, this article, or this chapter, that
 
16           jurisdiction is the commodity intermediary's
 
17           jurisdiction.
 
18      (2)  If paragraph (1) does not apply and an agreement
 
19           between the commodity intermediary and commodity
 
20           customer governing the commodity account expressly
 
21           provides that the agreement is governed by the law of a
 
22           particular jurisdiction, that jurisdiction is the
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1           commodity intermediary's jurisdiction.
 
 2      (3)  If neither paragraph (1) nor paragraph (2) applies and
 
 3           an agreement between the commodity intermediary and
 
 4           commodity customer governing the commodity account
 
 5           expressly provides that the commodity account is
 
 6           maintained at an office in a particular jurisdiction,
 
 7           that jurisdiction is the commodity intermediary's
 
 8           jurisdiction.
 
 9      (4)  If none of the preceding paragraphs applies, the
 
10           commodity intermediary's jurisdiction is the
 
11           jurisdiction in which the office identified in an
 
12           account statement as the office serving the commodity
 
13           customer's account is located.
 
14      (5)  If none of the preceding paragraphs applies, the
 
15           commodity intermediary's jurisdiction is the
 
16           jurisdiction in which the chief executive office of the
 
17           commodity intermediary is located.
 
18      (c)  The local law of the jurisdiction in which the debtor
 
19 is located governs:
 
20      (1)  Perfection of a security interest in investment
 
21           property by filing;
 
22      (2)  Automatic perfection of a security interest in
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1           investment property created by a broker or securities
 
 2           intermediary; and
 
 3      (3)  Automatic perfection of a security interest in a
 
 4           commodity contract or commodity account created by a
 
 5           commodity intermediary.
 
 6      §490:9-306  Law governing perfection and priority of
 
 7 security interests in letter-of-credit rights.  (a)  Subject to
 
 8 subsection (c), the local law of the issuer's jurisdiction or a
 
 9 nominated person's jurisdiction governs perfection, the effect of
 
10 perfection or nonperfection, and the priority of a security
 
11 interest in a letter-of-credit right if the issuer's jurisdiction
 
12 or nominated person's jurisdiction is a state.
 
13      (b)  For purposes of this part, an issuer's jurisdiction or
 
14 nominated person's jurisdiction is the jurisdiction whose law
 
15 governs the liability of the issuer or nominated person with
 
16 respect to the letter-of-credit right as provided in section
 
17 490:5-116.
 
18      (c)  This section does not apply to a security interest that
 
19 is perfected only under section 490:9-308(d).
 
20      §490:9-307  Location of debtor.  (a)  In this section,
 
21 "place of business" means a place where a debtor conducts its
 
22 affairs.
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 62                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (h)  The United States is located in the District of
 
 2 Columbia.
 
 3      (i)  A branch or agency of a bank that is not organized
 
 4 under the law of the United States or a state is located in the
 
 5 state in which the branch or agency is licensed, if all branches
 
 6 and agencies of the bank are licensed in only one state.
 
 7      (j)  A foreign air carrier under the Federal Aviation Act of
 
 8 1958, as amended, is located at the designated office of the
 
 9 agent upon which service of process may be made on behalf of the
 
10 carrier.
 
11      (k)  This section applies only for purposes of this part.
 
12                      SUBPART 2.  PERFECTION
 
13      §490:9-308  When security interest or agricultural lien is
 
14 perfected; continuity of perfection.  (a)  Except as otherwise
 
15 provided in this section and section 490:9-309, a security
 
16 interest is perfected if it has attached and all of the
 
17 applicable requirements for perfection in sections 490:9-310
 
18 through 490:9-316 have been satisfied.  A security interest is
 
19 perfected when it attaches if the applicable requirements are
 
20 satisfied before the security interest attaches.
 
21      (b)  An agricultural lien is perfected if it has become
 
22 effective and all of the applicable requirements for perfection
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1 in section 490:9-310 have been satisfied.  An agricultural lien
 
 2 is perfected when it becomes effective if the applicable
 
 3 requirements are satisfied before the agricultural lien becomes
 
 4 effective.
 
 5      (c)  A security interest or agricultural lien is perfected
 
 6 continuously if it is originally perfected by one method under
 
 7 this article and is later perfected by another method under this
 
 8 article, without an intermediate period when it was unperfected.
 
 9      (d)  Perfection of a security interest in collateral also
 
10 perfects a security interest in a supporting obligation for the
 
11 collateral.
 
12      (e)  Perfection of a security interest in a right to payment
 
13 or performance also perfects a security interest in a security
 
14 interest, mortgage, or other lien on personal or real property
 
15 securing the right.
 
16      (f)  Perfection of a security interest in a securities
 
17 account also perfects a security interest in the security
 
18 entitlements carried in the securities account.
 
19      (g)  Perfection of a security interest in a commodity
 
20 account also perfects a security interest in the commodity
 
21 contracts carried in the commodity account.
 
22      §490:9-309  Security interest perfected upon attachment.
 

 


 

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                                     S.B. NO.           2276
                                                        
                                                        

 
 1 The following security interests are perfected when they attach:
 
 2      (1)  A purchase-money security interest in consumer goods,
 
 3           except as otherwise provided in section 490:9-311(b)
 
 4           with respect to consumer goods that are subject to a
 
 5           statute or treaty described in section 490:9-311(a);
 
 6      (2)  An assignment of accounts or payment intangibles which
 
 7           does not by itself or in conjunction with other
 
 8           assignments to the same assignee transfer a significant
 
 9           part of the assignor's outstanding accounts or payment
 
10           intangibles;
 
11      (3)  A sale of a payment intangible;
 
12      (4)  A sale of a promissory note;
 
13      (5)  A security interest created by the assignment of a
 
14           health-care-insurance receivable to the provider of the
 
15           health-care goods or services;
 
16      (6)  A security interest arising under section 490:2-401,
 
17           490:2-505, 490:2-711(3), or 490:2A-508(e), until the
 
18           debtor obtains possession of the collateral;
 
19      (7)  A security interest of a collecting bank arising under
 
20           section 490:4-210;
 
21      (8)  A security interest of an issuer or nominated person
 
22           arising under section 490:5-118;
 

 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (9)  A security interest arising in the delivery of a
 
 2           financial asset under section 490:9-206(c);
 
 3     (10)  A security interest in investment property created by a
 
 4           broker or securities intermediary;
 
 5     (11)  A security interest in a commodity contract or a
 
 6           commodity account created by a commodity intermediary;
 
 7     (12)  An assignment for the benefit of all creditors of the
 
 8           transferor and subsequent transfers by the assignee
 
 9           thereunder; and
 
10     (13)  A security interest created by an assignment of a
 
11           beneficial interest in a decedent's estate.
 
12      §490:9-310  When filing required to perfect security
 
13 interest or agricultural lien; security interests and
 
14 agricultural liens to which filing provisions do not apply.  (a)
 
15 Except as otherwise provided in subsection (b) and section
 
16 490:9-312(b), a financing statement must be filed to perfect all
 
17 security interests and agricultural  liens.
 
18      (b)  The filing of a financing statement is not necessary to
 
19 perfect a security interest:
 
20      (1)  That is perfected under section 490:9-308(d), (e) (f),
 
21           or (g);
 
22      (2)  That is perfected under section 490:9-309 when it
 

 
 
 
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 1           attaches;
 
 2      (3)  In property subject to a statute, regulation, or treaty
 
 3           described in section 490:9-311(a);
 
 4      (4)  In goods in possession of a bailee which is perfected
 
 5           under section 490:9-312(d)(1) or (2);
 
 6      (5)  In certificated securities, documents, goods, or
 
 7           instruments which is perfected without filing or
 
 8           possession under section 490:9-312(e), (f), or (g);
 
 9      (6)  In collateral in the secured party's possession under
 
10           section 490:9-313;
 
11      (7)  In a certificated security which is perfected by
 
12           delivery of the security certificate to the secured
 
13           party under section 490:9-313;
 
14      (8)  In deposit accounts, electronic chattel paper
 
15           investment property, or letter-of-credit rights which
 
16           is perfected by control under section 490:9-314;
 
17      (9)  In proceeds which is perfected under section 490:9-315;
 
18           or
 
19     (10)  That is perfected under section 490:9-316.
 
20      (c)  If a secured party assigns a perfected security
 
21 interest or agricultural lien, a filing under this article is not
 
22 required to continue the perfected status of the security
 

 
 
 
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 1 interest against creditors of and transferees from the original
 
 2 debtor.
 
 3      §490:9-311  Perfection of security interests in property
 
 4 subject to certain statutes, regulations, and treaties.  (a)
 
 5 Except as otherwise provided in subsection (d), the filing of a
 
 6 financing statement is not necessary or effective to perfect a
 
 7 security interest in property subject to:
 
 8      (1)  A statute, regulation, or treaty of the United States
 
 9           whose requirements for a security interest's obtaining
 
10           priority over the rights of a lien creditor with
 
11           respect to the property preempt section 490:9-310(a);
 
12      (2)  Chapter 286; or
 
13      (3)  A certificate-of-title statute of another jurisdiction
 
14           which provides for a security interest to be indicated
 
15           on the certificate as a condition or result of the
 
16           security interest's obtaining priority over the rights
 
17           of a lien creditor with respect to the property.
 
18      (b)  Compliance with the requirements of a statute,
 
19 regulation, or treaty described in subsection (a) for obtaining
 
20 priority over the rights of a lien creditor is equivalent to the
 
21 filing of a financing statement under this article.  Except as
 
22 otherwise provided in subsection (d) and sections 490:9-313 and
 

 
 
 
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 1 490:9-316(d) and (e) for goods covered by a certificate of title,
 
 2 a security interest in property subject to a statute, regulation,
 
 3 or treaty described in subsection (a) may be perfected only by
 
 4 compliance with those requirements, and a security interest so
 
 5 perfected remains perfected notwithstanding a change in the use
 
 6 or transfer of possession of the collateral.
 
 7      (c)  Except as otherwise provided in subsection (d) and
 
 8 section 490:9-316(d) and (e), duration and renewal of perfection
 
 9 of a security interest perfected by compliance with the
 
10 requirements prescribed by a statute, regulation, or treaty
 
11 described in subsection (a) are governed by the statute,
 
12 regulation, or treaty.  In other respects, the security interest
 
13 is subject to this article.
 
14      (d)  During any period in which collateral is inventory held
 
15 for sale or lease by a person or leased by that person as lessor
 
16 and that person is in the business of selling or leasing goods of
 
17 that kind, this section does not apply to a security interest in
 
18 that collateral created by that person as debtor.
 
19      §490:9-312  Perfection of security interests in chattel
 
20 paper, deposit accounts, documents, goods covered by documents,
 
21 instruments, investment property, letter-of-credit rights, and
 
22 money; perfection by permissive filing; temporary perfection
 

 


 

Page 70                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 without filing or transfer of possession.  (a)  A security
 
 2 interest in chattel paper, negotiable documents, instruments, or
 
 3 investment property may be perfected by filing.
 
 4      (b)  Except as otherwise provided in section 490:9-315(c)
 
 5 and (d) for proceeds:
 
 6      (1)  A security interest in a deposit account may be
 
 7           perfected only by control under section 490:9-314;
 
 8      (2)  And except as otherwise provided in section
 
 9           490:9-308(d), a security interest in a letter-of-
 
10           credit right may be perfected only by control under
 
11           section 490:9-314; and
 
12      (3)  a security interest in money may be perfected only by
 
13           the secured party's taking possession under section
 
14           490:9-313.
 
15      (c)  While goods are in the possession of a bailee that has
 
16 issued a negotiable document covering the goods:
 
17      (1)  A security interest in the goods may be perfected by
 
18           perfecting a security interest in the document; and
 
19      (2)  A security interest perfected in the document has
 
20           priority over any security interest that becomes
 
21           perfected in the goods by another method during that
 
22           time.
 

 
Page 71                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (d)  While goods are in the possession of a bailee that has
 
 2 issued a nonnegotiable document covering the goods, a security
 
 3 interest in the goods may be perfected by:
 
 4      (1)  Issuance of a document in the name of the secured
 
 5           party;
 
 6      (2)  The bailee's receipt of notification of the secured
 
 7           party's interest; or
 
 8      (3)  Filing as to the goods.
 
 9      (e)  A security interest in certificated securities,
 
10 negotiable documents, or instruments is perfected without filing
 
11 or the taking of possession for a period of twenty days from the
 
12 time it attaches to the extent that it arises for new value given
 
13 under an authenticated security agreement.
 
14      (f)  A perfected security interest in a negotiable document
 
15 or goods in possession of a bailee, other than one that has
 
16 issued a negotiable document for the goods, remains perfected for
 
17 twenty days without filing if the secured party makes available
 
18 to the debtor the goods or documents representing the goods for
 
19 the purpose of:
 
20      (1)  Ultimate sale or exchange; or
 
21      (2)  Loading, unloading, storing, shipping, transshipping
 
22           manufacturing, processing, or otherwise dealing with
 

 
 
 
Page 72                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 73                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 74                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 75                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 76                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 77                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 78                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 79                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 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.
 

 
 
 
Page 80                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 81                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 82                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 83                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 interest and before it is perfected.
 
 2      (e)  Except as otherwise provided in sections 490:9-320 and
 
 3 490:9-321, if a person files a financing statement with respect
 
 4 to a purchase-money security interest before or within twenty
 
 5 days after the debtor receives delivery of the collateral, the
 
 6 security interest takes priority over the rights of a buyer,
 
 7 lessee, or lien creditor which arise between the time the
 
 8 security interest attaches and the time of filing.
 
 9      §490:9-318  No interest retained in right to payment that is
 
10 sold; rights and title of seller of account or chattel paper with
 
11 respect to creditors and purchasers.  (a)  A debtor that has sold
 
12 an account, chattel paper, payment intangible, or promissory note
 
13 does not retain a legal or equitable interest in the collateral
 
14 sold.
 
15      (b)  For purposes of determining the rights of creditors of,
 
16 and purchasers for value of an account or chattel paper from, a
 
17 debtor that has sold an account or chattel paper, while the
 
18 buyer's security interest is unperfected, the debtor is deemed to
 
19 have rights and title to the account or chattel paper identical
 
20 to those the debtor sold.
 
21      §490:9-319  Rights and title of consignee with respect to
 
22 creditors and purchasers.  (a)  Except as otherwise provided in
 

 
 
 
Page 84                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 subsection (b), for purposes of determining the rights of
 
 2 creditors of, and purchasers for value of goods from, a
 
 3 consignee, while the goods are in the possession of the
 
 4 consignee, the consignee is deemed to have rights and title to
 
 5 the goods identical to those the consignor had or had power to
 
 6 transfer.
 
 7      (b)  For purposes of determining the rights of a creditor of
 
 8 a consignee, law other than this article determines the rights
 
 9 and title of a consignee while goods are in the consignee's
 
10 possession if, under this part, a perfected security interest
 
11 held by the consignor would have priority over the rights of the
 
12 creditor.
 
13      §490:9-320  Buyer of goods.  (a)  Except as otherwise
 
14 provided in subsection (e), a buyer in ordinary course of
 
15 business, other than a person buying farm products from a person
 
16 engaged in farming operations, takes free of a security interest
 
17 created by the buyer's seller, even if the security interest is
 
18 perfected and the buyer knows of its existence.
 
19      (b)  Except as otherwise provided in subsection (e), a buyer
 
20 of goods from a person who used or bought the goods for use
 
21 primarily for personal, family, or household purposes takes free
 
22 of a security interest, even if perfected, if the buyer buys:
 

 
 
 
Page 85                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (1)  Without knowledge of the security interest;
 
 2      (2)  For value;
 
 3      (3)  Primarily for the buyer's personal, family, or
 
 4           household purposes; and
 
 5      (4)  Before the filing of a financing statement covering the
 
 6           goods.
 
 7      (c)  To the extent that it affects the priority of a
 
 8 security interest over a buyer of goods under subsection (b), the
 
 9 period of effectiveness of a filing made in the jurisdiction in
 
10 which the seller is located is governed by section 490:9-316(a)
 
11 and (b).
 
12      (d)  A buyer in ordinary course of business buying oil, gas,
 
13 or other minerals at the wellhead or minehead or after extraction
 
14 takes free of an interest arising out of an encumbrance.
 
15      (e)  Subsections (a) and (b) do not affect a security
 
16 interest in goods in the possession of the secured party under
 
17 section 490:9-313.
 
18      §490:9-321  Licensee of general intangible and lessee of
 
19 goods in ordinary course of business.  (a)  In this section,
 
20 "licensee in ordinary course of business" means a person that
 
21 becomes a licensee of a general intangible in good faith, without
 
22 knowledge that the license violates the rights of another person
 

 
 
 
Page 86                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 in the general intangible, and in the ordinary course from a
 
 2 person in the business of licensing general intangibles of that
 
 3 kind.  A person becomes a licensee in the ordinary course if the
 
 4 license to the person comports with the usual or customary
 
 5 practices in the kind of business in which the licensor is
 
 6 engaged or with the licensor's own usual or customary practices.
 
 7      (b)  A licensee in ordinary course of business takes its
 
 8 rights under a nonexclusive license free of a security interest
 
 9 in the general intangible created by the licensor, even if the
 
10 security interest is perfected and the licensee knows of its
 
11 existence.
 
12      (c)  A lessee in ordinary course of business takes its
 
13 leasehold interest free of a security interest in the goods
 
14 created by the lessor, even if the security interest is perfected
 
15 and the lessee knows of its existence.
 
16      §490:9-322  Priorities among conflicting security interests
 
17 in and agricultural liens on same collateral.  (a)  Except as
 
18 otherwise provided in this section, priority among conflicting
 
19 security interests and agricultural liens in the same collateral
 
20 is determined according to the following rules:
 
21      (1)  Conflicting perfected security interests and
 
22           agricultural liens rank according to priority in time
 

 
 
 
Page 87                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           of filing or perfection.  Priority dates from the
 
 2           earlier of the time a filing covering the collateral is
 
 3           first made or the security interest or agricultural
 
 4           lien is first perfected, if there is no period
 
 5           thereafter when there is neither filing nor perfection.
 
 6      (2)  A perfected security interest or agricultural lien has
 
 7           priority over a conflicting unperfected security
 
 8           interest or agricultural lien.
 
 9      (3)  The first security interest or agricultural lien to
 
10           attach or become effective has priority if conflicting
 
11           security interests and agricultural liens are
 
12           unperfected.
 
13      (b)  For the purposes subsection (a)(1):
 
14      (1)  The time of filing or perfection as to a security
 
15           interest in collateral is also the time of filing or
 
16           perfection as to a security interest in proceeds; and
 
17      (2)  The time of filing or perfection as to a security
 
18           interest in collateral supported by a supporting
 
19           obligation is also the time of filing or perfection as
 
20           to a security interest in the supporting obligation.
 
21      (c)  Except as otherwise provided in subsection (f), a
 
22 security interest in collateral which qualifies for priority over
 

 
 
 
Page 88                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 a conflicting security interest under section 490:9-327,
 
 2 490:9-328, 490:9-329, 490:9-330, or 490:9-331 also has priority
 
 3 over a conflicting security interest in:
 
 4      (1)  Any supporting obligation for the collateral; and
 
 5      (2)  Proceeds of the collateral if:
 
 6           (A)  The security interest in proceeds is perfected;
 
 7           (B)  The proceeds are cash proceeds or of the same type
 
 8                as the collateral; and
 
 9           (C)  In the case of proceeds that are proceeds of
 
10                proceeds, all intervening proceeds are cash
 
11                proceeds, proceeds of the same type as the
 
12                collateral, or an account relating to the
 
13                collateral.
 
14      (d)  Subject to subsection (e) and except as otherwise
 
15 provided in subsection (f), if a security interest in chattel
 
16 paper, deposit accounts, negotiable documents, instruments,
 
17 investment property, or letter-of-credit rights is perfected by a
 
18 method other than filing, conflicting perfected security
 
19 interests in proceeds of the collateral rank according to
 
20 priority in time of filing.
 
21      (e)  Subsection (d) applies only if the proceeds of the
 
22 collateral are not cash proceeds, chattel paper, negotiable
 

 
 
 
Page 89                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 documents, instruments, investment property, or letter-of-credit
 
 2 rights.
 
 3      (f)  Subsections (a) through (e) are subject to:
 
 4      (1)  Subsection (g) and the other provisions of this part;
 
 5      (2)  Section 490:4-210 with respect to a security interest
 
 6           of a collecting bank;
 
 7      (3)  Section 490:5-118 with respect to a security interest
 
 8           of an issuer or nominated person; and
 
 9      (4)  Section 490:9-110 with respect to a security interest
 
10           arising under Article 2 or 2A.
 
11      (g)  A perfected agricultural lien on collateral has
 
12 priority over a conflicting security interest in or agricultural
 
13 lien on the same collateral if the statute creating the
 
14 agricultural lien so provides.
 
15      §490:9-323  Future advances.  (a)  Except as otherwise
 
16 provided in subsection (c), for purposes of determining the
 
17 priority of a perfected security interest under section
 
18 490:9-322(a)(1), perfection of the security interest dates from
 
19 the time an advance is made to the extent that the security
 
20 interest secures an advance that:
 
21      (1)  Is made while the security interest is perfected only:
 
22           (A)  Under section 490:9-309 when it attaches; or
 

 
 
 
Page 90                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           (B)  Temporarily under section 490:9-312(e), (f), or
 
 2                (g); and
 
 3      (2)  Is not made pursuant to a commitment entered into
 
 4           before or while the security interest is perfected by a
 
 5           method other than under section 490:9-309 or
 
 6           490:9-312(e), (f), or (g).
 
 7      (b)  Except as otherwise provided in subsection (c), a
 
 8 security interest is subordinate to the rights of a person that
 
 9 becomes a lien creditor to the extent that the security interest
 
10 secures an advance made more than forty-five days after the
 
11 person becomes a lien creditor unless the advance is made:
 
12      (1)  Without knowledge of the lien; or
 
13      (2)  Pursuant to a commitment entered into without knowledge
 
14           of the lien.
 
15      (c)  Subsections (a) and (b) do not apply to a security
 
16 interest held by a secured party that is a buyer of accounts,
 
17 chattel paper, payment intangibles, or promissory notes or a
 
18 consignor.
 
19      (d)  Except as otherwise provided in subsection (e), a buyer
 
20 of goods other than a buyer in ordinary course of business takes
 
21 free of a security interest to the extent that it secures
 
22 advances made after the earlier of:
 

 
 
 
Page 91                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (1)  The time the secured party acquires knowledge of the
 
 2           buyer's purchase; or
 
 3      (2)  Forty-five days after the purchase.
 
 4      (e)  Subsection (d) does not apply if the advance is made
 
 5 pursuant to a commitment entered into without knowledge of the
 
 6 buyer's purchase and before the expiration of the forty-five-day
 
 7 period.
 
 8      (f)  Except as otherwise provided in subsection (g), a
 
 9 lessee of goods, other than a lessee in ordinary course of
 
10 business, takes the leasehold interest free of a security
 
11 interest to the extent that it secures advances made after the
 
12 earlier of:
 
13      (1)  The time the secured party acquires knowledge of the
 
14           lease; or
 
15      (2)  Forty-five days after the lease contract becomes
 
16           enforceable.
 
17      (g)  Subsection (f) does not apply if the advance is made
 
18 pursuant to a commitment entered into without knowledge of the
 
19 lease and before the expiration of the forty-five-day period.
 
20      §490:9-324  Priority of purchase-money security interests.
 
21 (a)  Except as otherwise provided in subsection (g), a perfected
 
22 purchase-money security interest in goods other than inventory or
 

 
 
 
Page 92                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 livestock has priority over a conflicting security interest in
 
 2 the same goods, and, except as otherwise provided in section
 
 3 490:9-327, a perfected security interest in its identifiable
 
 4 proceeds also has priority, if the purchase-money security
 
 5 interest is perfected when the debtor receives possession of the
 
 6 collateral or within twenty days thereafter.
 
 7      (b)  Subject to subsection (c) and except as otherwise
 
 8 provided in subsection (g), a perfected purchase-money security
 
 9 interest in inventory has priority over a conflicting security
 
10 interest in the same inventory, has priority over a conflicting
 
11 security interest in chattel paper or an instrument constituting
 
12 proceeds of the inventory and in proceeds of the chattel paper,
 
13 if so provided in section 490:9-330, and, except as otherwise
 
14 provided in section 490:9-327, also has priority in identifiable
 
15 cash proceeds of the inventory to the extent the identifiable
 
16 cash proceeds are received on or before the delivery of the
 
17 inventory to a buyer, if:
 
18      (1)  The purchase-money security interest is perfected when
 
19           the debtor receives possession of the inventory;
 
20      (2)  The purchase-money secured party sends an authenticated
 
21           notification to the holder of the conflicting security
 
22           interest;
 

 
 
 
Page 93                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (3)  The holder of the conflicting security interest
 
 2           receives the notification within five years before the
 
 3           debtor receives possession of the inventory; and
 
 4      (4)  The notification states that the person sending the
 
 5           notification has or expects to acquire a purchase-
 
 6           money security interest in inventory of the debtor and
 
 7           describes the inventory.
 
 8      (c)  Subsection (b)(2) through (4) applies only if the
 
 9 holder of the conflicting security interest had filed a financing
 
10 statement covering the same types of inventory:
 
11      (1)  If the purchase-money security interest is perfected by
 
12           filing, before the date of the filing; or
 
13      (2)  If the purchase-money security interest is temporarily
 
14           perfected without filing or possession under section
 
15           490:9-312(f), before the beginning of the twenty-day
 
16           period thereunder.
 
17      (d)  Subject to subsection (e) and except as otherwise
 
18 provided in subsection (g), a perfected purchase-money security
 
19 interest in livestock that are farm products has priority over a
 
20 conflicting security interest in the same livestock, and, except
 
21 as otherwise provided in section 490:9-327, a perfected security
 
22 interest in their identifiable proceeds and identifiable products
 

 
 
 
Page 94                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 in their unmanufactured states also has priority, if:
 
 2      (1)  The purchase-money security interest is perfected when
 
 3           the debtor receives possession of the livestock;
 
 4      (2)  The purchase-money secured party sends an authenticated
 
 5           notification to the holder of the conflicting security
 
 6           interest;
 
 7      (3)  The holder of the conflicting security interest
 
 8           receives the notification within six months before the
 
 9           debtor receives possession of the livestock; and
 
10      (4)  The notification states that the person sending the
 
11           notification has or expects to acquire a purchase-
 
12           money security interest in livestock of the debtor and
 
13           describes the livestock.
 
14      (e)  Subsection (d)(2) through (4) applies only if the
 
15 holder of the conflicting security interest had filed a financing
 
16 statement covering the same types of livestock:
 
17      (1)  If the purchase-money security interest is perfected by
 
18           filing, before the date of the filing; or
 
19      (2)  If the purchase-money security interest is temporarily
 
20           perfected without filing or possession under section
 
21           490:9-312(f), before the beginning of the twenty-day
 
22           period thereunder.
 

 
 
 
Page 95                                                    
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (f)  Except as otherwise provided in subsection (g), a
 
 2 perfected purchase-money security interest in software has
 
 3 priority over a conflicting security interest in the same
 
 4 collateral, and, except as otherwise provided in section
 
 5 490:9-327, a perfected security interest in its identifiable
 
 6 proceeds also has priority, to the extent that the purchase-money
 
 7 security interest in the goods in which the software was acquired
 
 8 for use has priority in the goods and proceeds of the goods under
 
 9 this section.
 
10      (g)  If more than one security interest qualifies for
 
11 priority in the same collateral under subsection (a), (b), (d),
 
12 or (f):
 
13      (1)  A security interest securing an obligation incurred as
 
14           all or part of the price of the collateral has priority
 
15           over a security interest securing an obligation
 
16           incurred for value given to enable the debtor to
 
17           acquire rights in or the use of collateral; and
 
18      (2)  In all other cases, section 490:9-322(a) applies to the
 
19           qualifying security interests.
 
20      §490:9-325  Priority of security interests in transferred
 
21 collateral.  (a)  Except as otherwise provided in subsection (b),
 
22 a security interest created by a debtor is subordinate to a
 

 
 
 
Page 96                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 97                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 98                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 99                                                    
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 100                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           in a security entitlement or a securities account
 
 2           maintained with the securities intermediary has
 
 3           priority over a conflicting security interest held by
 
 4           another secured party.
 
 5      (4)  A security interest held by a commodity intermediary in
 
 6           a commodity contract or a commodity account maintained
 
 7           with the commodity intermediary has priority over a
 
 8           conflicting security interest held by another secured
 
 9           party.
 
10      (5)  A security interest in a certificated security in
 
11           registered form which is perfected by taking delivery
 
12           under section 490:9-313(a) and not by control under
 
13           section 490:9-314 has priority over a conflicting
 
14           security interest perfected by a method other than
 
15           control.
 
16      (6)  Conflicting security interests created by a broker
 
17           securities intermediary, or commodity intermediary
 
18           which are perfected without control under section
 
19           490:9-106 rank equally.
 
20      (7)  In all other cases, priority among conflicting security
 
21           interests in investment property is governed by
 
22           sections 490:9-322 and 490:9-323.
 

 
 
 
Page 101                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 102                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 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
 

 
 
 
Page 103                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 104                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 105                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 106                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (1)  The security interest is a purchase-money security
 
 2           interest;
 
 3      (2)  The interest of the encumbrancer or owner arises before
 
 4           the goods become fixtures; and
 
 5      (3)  The security interest is perfected by a fixture filing
 
 6           before the goods become fixtures or within twenty days
 
 7           thereafter.
 
 8      (e)  A perfected security interest in fixtures has priority
 
 9 over a conflicting interest of an encumbrancer or owner of the
 
10 real property if:
 
11      (1)  The debtor has an interest of record in the real
 
12           property or is in possession of the real property and
 
13           the security interest:
 
14           (A)  Is perfected by a fixture filing before the
 
15                interest of the encumbrancer or owner is of
 
16                record; and
 
17           (B)  Has priority over any conflicting interest of a
 
18                predecessor in title of the encumbrancer or owner;
 
19      (2)  Before the goods become fixtures, the security interest
 
20           is perfected by any method permitted by this article
 
21           and the fixtures are readily removable:
 
22           (A)  Factory or office machines;
 

 
 
 
Page 107                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 108                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 109                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 110                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 assurance for the performance of the obligation to reimburse.
 
 2      §490:9-336  Commingled goods.  (a)  In this section,
 
 3 "commingled goods" means goods that are physically united with
 
 4 other goods in such a manner that their identity is lost in a
 
 5 product or mass.
 
 6      (b)  A security interest does not exist in commingled goods
 
 7 as such.  However, a security interest may attach to a product or
 
 8 mass that results when goods become commingled goods.
 
 9      (c)  If collateral becomes commingled goods, a security
 
10 interest attaches to the product or mass.
 
11      (d)  If a security interest in collateral is perfected
 
12 before the collateral becomes commingled goods, the security
 
13 interest that attaches to the product or mass under subsection
 
14 (c) is perfected.
 
15      (e)  Except as otherwise provided in subsection (f), the
 
16 other provisions of this part determine the priority of a
 
17 security interest that attaches to the product or mass under
 
18 subsection (c).
 
19      (f)  If more than one security interest attaches to the
 
20 product or mass under subsection (c), the following rules
 
21 determine priority:
 
22      (1)  A security interest that is perfected under subsection
 

 
 
 
Page 111                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           (d) has priority over a security interest that is
 
 2           unperfected at the time the collateral becomes
 
 3           commingled goods.
 
 4      (2)  If more than one security interest is perfected under
 
 5           subsection (d), the security interests rank equally in
 
 6           proportion to value of the collateral at the time it
 
 7           became commingled goods.
 
 8      §490:9-337  Priority of security interests in goods covered
 
 9 by certificate of title.  If, while a security interest in goods
 
10 is perfected by any method under the law of another jurisdiction,
 
11 this State issues a certificate of title that does not show that
 
12 the goods are subject to the security interest or contain a
 
13 statement that they may be subject to security interests not
 
14 shown on the certificate:
 
15      (1)  A buyer of the goods, other than a person in the
 
16           business of selling goods of that kind, takes free of
 
17           the security interest if the buyer gives value and
 
18           receives delivery of the goods after issuance of the
 
19           certificate and without knowledge of the security
 
20           interest; and
 
21      (2)  The security interest is subordinate to a conflicting
 
22           security interest in the goods that attaches, and is
 

 
 
 
Page 112                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           perfected under section 490:9-311(b), after issuance of
 
 2           the certificate and without the conflicting secured
 
 3           party's knowledge of the security interest.
 
 4      §490:9-338  Priority of security interest or agricultural
 
 5 lien perfected by filed financing statement providing certain
 
 6 incorrect information.  If a security interest or agricultural
 
 7 lien is perfected by a filed financing statement providing
 
 8 information described in section 490:9-516(b)(5) which is
 
 9 incorrect at the time the financing statement is filed:
 
10      (1)  The security interest or agricultural lien is
 
11           subordinate to a conflicting perfected security
 
12           interest in the collateral to the extent that the
 
13           holder of the conflicting security interest gives value
 
14           in reasonable reliance upon the incorrect information;
 
15           and
 
16      (2)  A purchaser, other than a secured party, of the
 
17           collateral takes free of the security interest or
 
18           agricultural lien to the extent that, in reasonable
 
19           reliance upon the incorrect information, the purchaser
 
20           gives value and, in the case of chattel paper
 
21           documents, goods, instruments, or a security
 
22           certificate, receives delivery of the collateral.
 

 
 
 
Page 113                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      §490:9-339  Priority subject to subordination.  This article
 
 2 does not preclude subordination by agreement by a person entitled
 
 3 to priority.
 
 4                    SUBPART 4.  RIGHTS OF BANK
 
 5      §490:9-340  Effectiveness of right of recoupment or set-off
 
 6 against deposit account.  (a)  Except as otherwise provided in
 
 7 subsection (c), a bank with which a deposit account is maintained
 
 8 may exercise any right of recoupment or set-off against a secured
 
 9 party that holds a security interest in the deposit account.
 
10      (b)  Except as otherwise provided in subsection (c), the
 
11 application of this article to a security interest in a deposit
 
12 account does not affect a right of recoupment or set-off of the
 
13 secured party as to a deposit account maintained with the secured
 
14 party.
 
15      (c)  The exercise by a bank of a set-off against a deposit
 
16 account is ineffective against a secured party that holds a
 
17 security interest in the deposit account which is perfected by
 
18 control under section 490:9-104(a)(3), if the set-off is based on
 
19 a claim against the debtor.
 
20      §490:9-341  Bank's rights and duties with respect to deposit
 
21 account.  Except as otherwise provided in section 490:9-340(c),
 
22 and unless the bank otherwise agrees in an authenticated record,
 

 
 
 
Page 114                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 a bank's rights and duties with respect to a deposit account
 
 2 maintained with the bank are not terminated, suspended, or
 
 3 modified by:
 
 4      (1)  The creation, attachment, or perfection of a security
 
 5           interest in the deposit account;
 
 6      (2)  The bank's knowledge of the security interest; or
 
 7      (3)  The bank's receipt of instructions from the secured
 
 8           party.
 
 9      §490:9-342  Bank's right to refuse to enter into or disclose
 
10 existence of control agreement.  This article does not require a
 
11 bank to enter into an agreement of the kind described in section
 
12 490:9-104(a)(2), even if its customer so requests or directs.  A
 
13 bank that has entered into such an agreement is not required to
 
14 confirm the existence of the agreement to another person unless
 
15 requested to do so by its customer.
 
16                 PART 4.  RIGHTS OF THIRD PARTIES
 
17      §490:9-401  Alienability of debtor's rights.  (a)  Except as
 
18 otherwise provided in subsection (b) and sections 490:9-406,
 
19 490:9-407, 490:9-408, and 490:9-409, whether a debtor's rights in
 
20 collateral may be voluntarily or involuntarily transferred is
 
21 governed by law other than this article.
 
22      (b)  An agreement between the debtor and secured party which
 

 
 
 
Page 115                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 prohibits a transfer of the debtor's rights in collateral or
 
 2 makes the transfer a default does not prevent the transfer from
 
 3 taking effect.
 
 4      §490:9-402  Secured party not obligated on contract of
 
 5 debtor or in tort.  The existence of a security interest,
 
 6 agricultural lien, or authority given to a debtor to dispose of
 
 7 or use collateral, without more, does not subject a secured party
 
 8 to liability in contract or tort for the debtor's acts or
 
 9 omissions.
 
10      §490:9-403  Agreement not to assert defenses against
 
11 assignee.  (a)  In this section, "value" has the meaning provided
 
12 in section 490:3-303(a).
 
13      (b)  Except as otherwise provided in this section, an
 
14 agreement between an account debtor and an assignor not to assert
 
15 against an assignee any claim or defense that the account debtor
 
16 may have against the assignor is enforceable by an assignee that
 
17 takes an assignment:
 
18      (1)  For value;
 
19      (2)  In good faith;
 
20      (3)  Without notice of a claim of a property or possessory
 
21           right to the property assigned; and
 
22      (4)  Without notice of a defense or claim in recoupment of
 

 
 
 
Page 116                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           the type that may be asserted against a person entitled
 
 2           to enforce a negotiable instrument under section
 
 3           490:3-305(a).
 
 4      (c)  Subsection (b) does not apply to defenses of a type
 
 5 that may be asserted against a holder in due course of a
 
 6 negotiable instrument under section 490:3-305(b).
 
 7      (d)  In a consumer transaction, if a record evidences the
 
 8 account debtor's obligation, law other than this article requires
 
 9 that the record include a statement to the effect that the rights
 
10 of an assignee are subject to claims or defenses that the account
 
11 debtor could assert against the original obligee, and the record
 
12 does not include such a statement:
 
13      (1)  The record has the same effect as if the record
 
14           included such a statement; and
 
15      (2)  The account debtor may assert against an assignee those
 
16           claims and defenses that would have been available if
 
17           the record included such a statement.
 
18      (e)  This section is subject to law other than this article
 
19 which establishes a different rule for an account debtor who is
 
20 an individual and who incurred the obligation primarily for
 
21 personal, family, or household purposes.
 
22      (f)  Except as otherwise provided in subsection (d), this
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1 section does not displace law other than this article which gives
 
 2 effect to an agreement by an account debtor not to assert a claim
 
 3 or defense against an assignee.
 
 4      §490:9-404  Rights acquired by assignee; claims and defenses
 
 5 against assignee.  (a)  Unless an account debtor has made an
 
 6 enforceable agreement not to assert defenses or claims, and
 
 7 subject to subsections (b) through (e), the rights of an assignee
 
 8 are subject to:
 
 9      (1)  All terms of the agreement between the account debtor
 
10           and assignor and any defense or claim in recoupment
 
11           arising from the transaction that gave rise to the
 
12           contract; and
 
13      (2)  Any other defense or claim of the account debtor
 
14           against the assignor which accrues before the account
 
15           debtor receives a notification of the assignment
 
16           authenticated by the assignor or the assignee.
 
17      (b)  Subject to subsection (c) and except as otherwise
 
18 provided in subsection (d), the claim of an account debtor
 
19 against an assignor may be asserted against an assignee under
 
20 subsection (a) only to reduce the amount the account debtor owes.
 
21      (c)  This section is subject to law other than this article
 
22 which establishes a different rule for an account debtor who is
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1 an individual and who incurred the obligation primarily for
 
 2 personal, family, or household purposes.
 
 3      (d)  In a consumer transaction, if a record evidences the
 
 4 account debtor's obligation, law other than this article requires
 
 5 that the record include a statement to the effect that the
 
 6 account debtor's recovery against an assignee with respect to
 
 7 claims and defenses against the assignor may not exceed amounts
 
 8 paid by the account debtor under the record, and the record does
 
 9 not include such a statement, the extent to which a claim of an
 
10 account debtor against the assignor may be asserted against an
 
11 assignee is determined as if the record included such a
 
12 statement.
 
13      (e)  This section does not apply to an assignment of a
 
14 health-care-insurance receivable.
 
15      §409:9-405  Modification of assigned contract.  (a)  A
 
16 modification of or substitution for an assigned contract is
 
17 effective against an assignee if made in good faith.  The
 
18 assignee acquires corresponding rights under the modified or
 
19 substituted contract.  The assignment may provide that the
 
20 modification or substitution is a breach of contract by the
 
21 assignor.  This subsection is subject to subsections (b) through
 
22 (d).
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (b)  Subsection (a) applies to the extent that:
 
 2      (1)  The right to payment or a part thereof under an
 
 3           assigned contract has not been fully earned by
 
 4           performance; or
 
 5      (2)  The right to payment or a part thereof has been fully
 
 6           earned by performance and the account debtor has not
 
 7           received notification of the assignment under section
 
 8           490:9-406(a).
 
 9      (c)  This section is subject to law other than this article
 
10 which establishes a different rule for an account debtor who is
 
11 an individual and who incurred the obligation primarily for
 
12 personal, family, or household purposes.
 
13      (d)  This section does not apply to an assignment of a
 
14 health-care-insurance receivable.
 
15      §490:9-406  Discharge of account debtor; notification of
 
16 assignment; identification and proof of assignment; restrictions
 
17 on assignment of accounts, chattel paper, payment intangibles,
 
18 and promissory notes ineffective.  (a)  Subject to subsections
 
19 (b) through (i), an account debtor on an account, chattel paper,
 
20 or a payment intangible may discharge its obligation by paying
 
21 the assignor until, but not after, the account debtor receives a
 
22 notification, authenticated by the assignor or the assignee, that
 

 
 
 
Page 120                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 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.
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (c)  A rule of law, statute, or regulation, that prohibits,
 
 2 restricts, or requires the consent of a government, governmental
 
 3 body or official, person obligated on a promissory note, or
 
 4 account debtor to the assignment or transfer of, or creation of a
 
 5 security interest in, a promissory note, health-care-insurance
 
 6 receivable, or general intangible, including a contract, permit,
 
 7 license, or franchise between an account debtor and a debtor, is
 
 8 ineffective to the extent that the rule of law, statute, or
 
 9 regulation:
 
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      (d)  To the extent that a term in a promissory note or in an
 
20 agreement between an account debtor and a debtor which relates to
 
21 a health-care-insurance receivable or general intangible or a
 
22 rule of law, statute, or regulation described in subsection (c)
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 


 

Page 131                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
Page 132                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 133                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (b)  A financing statement that provides the name of the
 
 2 debtor in accordance with subsection (a) is not rendered
 
 3 ineffective by the absence of:
 
 4      (1)  A trade name or other name of the debtor; or
 
 5      (2)  Unless required under subsection (a)(4)(B), names of
 
 6           partners, members, associates, or other persons
 
 7           comprising the debtor.
 
 8      (c)  A financing statement that provides only the debtor's
 
 9 trade name does not sufficiently provide the name of the debtor.
 
10      (d)  Failure to indicate the representative capacity of a
 
11 secured party or representative of a secured party does not
 
12 affect the sufficiency of a financing statement.
 
13      (e)  A financing statement may provide the name of more than
 
14 one debtor and the name of more than one secured party.
 
15      §490:9-504  Indication of collateral.  A financing statement
 
16 sufficiently indicates the collateral that it covers only if the
 
17 financing statement provides:
 
18      (1)  A description of the collateral pursuant to section
 
19           490:9-108; or
 
20      (2)  An indication that the financing statement covers all
 
21           assets or all personal property.
 
22      §490:9-505  Filing and compliance with other statutes and
 

 


 

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                                     S.B. NO.           2276
                                                        
                                                        

 
 1 treaties for consignments, leases, other bailments, and other
 
 2 transactions.  (a)  A consignor, lessor, or other bailor of
 
 3 goods, a licensor, or a buyer of a payment intangible or
 
 4 promissory note may file a financing statement, or may comply
 
 5 with a statute or treaty described in section 490:9-311(a), using
 
 6 the terms "consignor", "consignee", "lessor", "lessee", "bailor",
 
 7 "bailee", "licensor", "licensee", "owner", "registered owner",
 
 8 "buyer", "seller", or words of similar import, instead of the
 
 9 terms "secured party" and "debtor".
 
10      (b)  This part applies to the filing of a financing
 
11 statement under subsection (a) and, as appropriate, to compliance
 
12 that is equivalent to filing a financing statement under section
 
13 490:9-311(b), but the filing or compliance is not of itself a
 
14 factor in determining whether the collateral secures an
 
15 obligation.  If it is determined for another reason that the
 
16 collateral secures an obligation, a security interest held by the
 
17 consignor, lessor, bailor, licensor, owner, or buyer which
 
18 attaches to the collateral is perfected by the filing or
 
19 compliance.
 
20      §490:9-506  Effect of errors or omissions.  (a)  A financing
 
21 statement substantially satisfying the requirements of this part
 
22 is effective, even if it has minor errors or omissions, unless
 

 
Page 136                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 the errors or omissions make the financing statement seriously
 
 2 misleading.
 
 3      (b)  Except as otherwise provided in subsection (c), a
 
 4 financing statement that fails sufficiently to provide the name
 
 5 of the debtor in accordance with section 490:9-503(a) is
 
 6 seriously misleading.
 
 7      (c)  If a search of the records of the filing office under
 
 8 the debtor's correct name, using the filing office's standard
 
 9 search logic, if any, would disclose a financing statement that
 
10 fails sufficiently to provide the name of the debtor in
 
11 accordance with section 490:9-503(a), the name provided does not
 
12 make the financing statement seriously misleading.
 
13      (d)  For purposes of section 490:9-508(b), the "debtor's
 
14 correct name" in subsection (c) means the correct name of the new
 
15 debtor.
 
16      §490:9-507  Effect of certain events on effectiveness of
 
17 financing statement.  (a)  A filed financing statement remains
 
18 effective with respect to collateral that is sold, exchanged,
 
19 leased, licensed, or otherwise disposed of and in which a
 
20 security interest or agricultural lien continues, even if the
 
21 secured party knows of or consents to the disposition.
 
22      (b)  Except as otherwise provided in subsection (c) and
 

 
 
 
Page 137                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 138                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 collateral.
 
 2      (b)  If the difference between the name of the original
 
 3 debtor and that of the new debtor causes a filed financing
 
 4 statement that is effective under subsection (a) to be seriously
 
 5 misleading under section 490:9-506:
 
 6      (1)  The financing statement is effective to perfect a
 
 7           security interest in collateral acquired by the new
 
 8           debtor before, and within four months after, the new
 
 9           debtor becomes bound under section 490:9-203(d); and
 
10      (2)  The financing statement is not effective to perfect a
 
11           security interest in collateral acquired by the new
 
12           debtor more than four months after the new debtor
 
13           becomes bound under section 490:9-203(d) unless an
 
14           initial financing statement providing the name of the
 
15           new debtor is filed before the expiration of that time.
 
16      (c)  This section does not apply to collateral as to which a
 
17 filed financing statement remains effective against the new
 
18 debtor under section 490:9-507(a).
 
19      §490:9-509  Persons entitled to file a record.  (a)  A
 
20 person may file an initial financing statement, amendment that
 
21 adds collateral covered by a financing statement, or amendment
 
22 that adds a debtor to a financing statement only if:
 

 
 
 
Page 139                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (1)  The debtor authorizes the filing in an authenticated
 
 2           record; or
 
 3      (2)  The person holds an agricultural lien that has become
 
 4           effective at the time of filing and the financing
 
 5           statement covers only collateral in which the person
 
 6           holds an agricultural lien.
 
 7      (b)  By authenticating or becoming bound as debtor by a
 
 8 security agreement, a debtor or new debtor authorizes the filing
 
 9 of an initial financing statement, and an amendment, covering:
 
10      (1)  The collateral described in the security agreement; and
 
11      (2)  Property that becomes collateral under section
 
12           490:9-315(a)(2), whether or not the security agreement
 
13           expressly covers proceeds.
 
14      (c)  By acquiring collateral in which a security interest or
 
15 agricultural lien continues under section 490:9-315(a)(1), a
 
16 debtor authorizes the filing of an initial financing statement,
 
17 and an amendment, covering the collateral and property that
 
18 becomes collateral under section 490:9-315(a)(2).
 
19      (d)  A person may file an amendment other than an amendment
 
20 that adds collateral covered by a financing statement or an
 
21 amendment that adds a debtor to a financing statement only if:
 
22      (1)  The secured party of record authorizes the filing; or
 

 
 
 
Page 140                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (2)  The amendment is a termination statement for a
 
 2           financing statement as to which the secured party of
 
 3           record has failed to file or send a termination
 
 4           statement as required by section 490:9-513(a) or (c)
 
 5           the debtor authorizes the filing, and the termination
 
 6           statement indicates that the debtor authorized it to be
 
 7           filed.
 
 8      (e)  If there is more than one secured party of record for a
 
 9 financing statement, each secured party of record may authorize
 
10 the filing of an amendment under subsection (c).
 
11      §490:9-510  Effectiveness of filed record.  (a)  A filed
 
12 record is effective only to the extent that it was filed by a
 
13 person that may file it under section 490:9-509.
 
14      (b)  A record authorized by one secured party of record does
 
15 not affect the financing statement with respect to another
 
16 secured party of record.
 
17      (c)  A continuation statement that is not filed within the
 
18 six-month period prescribed by section 490:9-515(d) is
 
19 ineffective.
 
20      §490:9-511  Secured party of record.  (a)  A secured party
 
21 of record with respect to a financing statement is a person whose
 
22 name is provided as the name of the secured party or a
 

 
 
 
Page 141                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 representative of the secured party in an initial financing
 
 2 statement that has been filed.  If an initial financing statement
 
 3 is filed under section 490:9-514(a), the assignee named in the
 
 4 initial financing statement is the secured party of record with
 
 5 respect to the financing statement.
 
 6      (b)  If an amendment of a financing statement which provides
 
 7 the name of a person as a secured party or a representative of a
 
 8 secured party is filed, the person named in the amendment is a
 
 9 secured party of record.  If an amendment is filed under section
 
10 490:9-514(b), the assignee named in the amendment is a secured
 
11 party of record.
 
12      (c)  A person remains a secured party of record until the
 
13 filing of an amendment of the financing statement which deletes
 
14 the person.
 
15      §490:9-512  Amendment of financing statement.  (a)  Subject
 
16 to section 490:9-509, a person may add or delete collateral
 
17 covered by, continue or terminate the effectiveness of, or,
 
18 subject to subsection (e), otherwise amend the information
 
19 provided in, a financing statement by filing an amendment that:
 
20      (1)  Identifies, by its file number, the initial financing
 
21           statement to which the amendment relates; and
 
22      (2)  If the amendment relates to an initial financing
 

 
 
 
Page 142                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           statement filed or recorded in a filing office
 
 2           described in section 490:9-501(a)(1), provides the
 
 3           information specified in section 490:9-502(b).
 
 4      (b)  Except as otherwise provided in section 490:9-515, the
 
 5 filing of an amendment does not extend the period of
 
 6 effectiveness of the financing statement.
 
 7      (c)  A financing statement that is amended by an amendment
 
 8 that adds collateral is effective as to the added collateral only
 
 9 from the date of the filing of the amendment.
 
10      (d)  A financing statement that is amended by an amendment
 
11 that adds a debtor is effective as to the added debtor only from
 
12 the date of the filing of the amendment.
 
13      (e)  An amendment is ineffective to the extent it:
 
14      (1)  Purports to delete all debtors and fails to provide the
 
15           name of a debtor to be covered by the financing
 
16           statement; or
 
17      (2)  Purports to delete all secured parties of record and
 
18           fails to provide the name of a new secured party of
 
19           record.
 
20      §490:9-513  Termination statement.  (a)  A secured party
 
21 shall cause the secured party of record for a financing statement
 
22 to file a termination statement for the financing statement if
 

 
 
 
Page 143                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 144                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (1)  Except in the case of a financing statement covering
 
 2           accounts or chattel paper that has been sold or goods
 
 3           that are the subject of a consignment, there is no
 
 4           obligation secured by the collateral covered by the
 
 5           financing statement and no commitment to make an
 
 6           advance, incur an obligation, or otherwise give value;
 
 7      (2)  The financing statement covers accounts or chattel
 
 8           paper that has been sold but as to which the account
 
 9           debtor or other person obligated has discharged its
 
10           obligation;
 
11      (3)  The financing statement covers goods that were the
 
12           subject of a consignment to the debtor but are not in
 
13           the debtor's possession; or
 
14      (4)  The debtor did not authorize the filing of the initial
 
15           financing statement.
 
16      (d)  Except as otherwise provided in section 490:9-510, upon
 
17 the filing of a termination statement with the filing office, the
 
18 financing statement to which the termination statement relates
 
19 ceases to be effective.
 
20      §490:9-514  Assignment of powers of secured party of record.
 
21 (a)  Except as otherwise provided in subsection (c), an initial
 
22 financing statement may reflect an assignment of all of the
 

 
 
 
Page 145                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 146                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 the date of filing.
 
 2      (b)  Except as otherwise provided in subsections (e), (f),
 
 3 and (g), an initial financing statement filed in connection with
 
 4 a public-finance transaction or manufactured-home transaction is
 
 5 effective for a period of thirty years after the date of filing
 
 6 if it indicates that it is filed in connection with a public-
 
 7 finance transaction or manufactured-home transaction.
 
 8      (c)  The effectiveness of a filed financing statement lapses
 
 9 on the expiration of the period of its effectiveness unless
 
10 before the lapse a continuation statement is filed pursuant to
 
11 subsection (d).  Upon lapse, a financing statement ceases to be
 
12 effective and any security interest or agricultural lien that was
 
13 perfected by the financing statement becomes unperfected, unless
 
14 the security interest is perfected otherwise.  If the security
 
15 interest or agricultural lien becomes unperfected upon lapse, it
 
16 is deemed never to have been perfected as against a purchaser of
 
17 the collateral for value.
 
18      (d)  A continuation statement may be filed only within six
 
19 months before the expiration of the five-year period specified in
 
20 subsection (a) or the thirty-year period specified in subsection
 
21 (b), whichever is applicable.
 
22      (e)  Except as otherwise provided in section 490:9-510, upon
 

 
 
 
Page 147                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 148                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 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
 

 
 
 
Page 149                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 150                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 151                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 152                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 153                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 154                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 155                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (h)  The filing office shall perform the acts required by
 
 2 subsections (a) through (e) at the time and in the manner
 
 3 prescribed by filing-office rule, but not later than two business
 
 4 days after the filing office receives the record in question.
 
 5      §490:9-520  Acceptance and refusal to accept record.  (a)  A
 
 6 filing office shall refuse to accept a record for filing for a
 
 7 reason set forth in section 490:9-516(b) and may refuse to accept
 
 8 a record for filing only for a reason set forth in section
 
 9 490:9-516(b).
 
10      (b)  If a filing office refuses to accept a record for
 
11 filing, it shall communicate to the person that presented the
 
12 record the fact of and reason for the refusal and the date and
 
13 time the record would have been filed had the filing office
 
14 accepted it.  The communication must be made at the time and in
 
15 the manner prescribed by filing-office rule but in no event more
 
16 than two business days after the filing office receives the
 
17 record.
 
18      (c)  A filed financing statement satisfying section
 
19 490:9-502(a) and (b) is effective, even if the filing office is
 
20 required to refuse to accept it for filing under subsection (a).
 
21 However, section 490:9-338 applies to a filed financing statement
 
22 providing information described in section 490:9-516(b)(5) which
 

 
 
 
Page 156                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 is incorrect at the time the financing statement is filed.
 
 2      (d)  If a record communicated to a filing office provides
 
 3 information that relates to more than one debtor, this part
 
 4 applies as to each debtor separately.
 
 5      §490:9-521  Uniform form of written financing statement and
 
 6 amendment.  (a)  A filing office that accepts written records for
 
 7 filing may not refuse to accept a written initial financing
 
 8 statement in the following form, except for a reason set forth in
 
 9 section 490:9-516(b):
 
10 UCC FINANCING STATEMENT
 
11 FOLLOW INSTRUCTIONS (front and back) CAREFULLY
 
12 A.   NAME AND PHONE OF CONTACT AT FILER [optional]
 
13      ___________________________________
 
14 B.   SEND ACKNOWLEDGMENT TO:  (Name and Address)
 
15      ___________________________________ THE ABOVE SPACE IS
 
16 FOR  ___________________________________ FILING OFFICE USE ONLY
 
17 1.   DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name
 
18      (1a or 1b) - Do not abbreviate or combine names
 
19      1a.  ORGANIZATION'S NAME
 
20 
 
21 _________________________________________________________________
 
22 or   1b.  INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
 

 
 
 
Page 157                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 158                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 
 
 2 _________________________________________________________________
 
 3      2d. TAX ID. NO. ADD'L INFO. RE    2e. TYPE OF ORGANIZATION
 
 4          SSN OR EIN  ORGANIZATION DEBTOR
 
 5 
 
 6 _________________________________________________________________
 
 7      2f. JURISDICTION OF ORGANIZATION  2g. ORGANIZATION ID NO.,
 
 8                                            if any
 
 9 
 
10      ____________________________________________________[ ] NONE
 
11 3.   SECURED PARTY'S NAME (or name of total assignee of assignor
 
12 S/P) - insert only one secured party name (3a or 3b)
 
13      3a.  ORGANIZATION'S NAME
 
14 
 
15 _________________________________________________________________
 
16 OR   3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
 
17   
 
18 _________________________________________________________________
 
19      3c. MAILING ADDRESS      CITY     STATE POSTAL CODE  COUNTRY
 
20 
 
21 _________________________________________________________________
 

 
 
 
 
 
Page 159                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 4.   This FINANCING STATEMENT covers the following collateral:
 
 2 
 
 3 _________________________________________________________________
 
 4 5.   ALTERNATIVE DESIGNATION [if applicable]: [ ] LESSEE/LESOR
 
 5      [ ] CONSIGNEE/CONSIGNOR [ ] BAILEE/BAILOR [ ] SELLER/BUYER
 
 6      [ ] AG. LIEN [ ] NON-UCC FILING
 
 7 6.   [ ] This FINANCING STATEMENT is to be filed (for record)
 
 8      (or recorded) in the REAL ESTATE RECORDS.
 
 9      Attach Addendum [if applicable]
 
10 7.   Check to REQUEST SEARCH REPORT(S) on Debtor(s)
 
11      [ ] All Debtors   [ ] Debtor 1   [ ] Debtor 2
 
12      [ADDITIONAL FEE]                   [optional]
 
13 
 
14      -----------------------------------------------------------
 
15 8.   OPTIONAL FILER REFERENCE DATA
 
16   _______________________________________________________________
 
17 FILING OFFICE COPY - NATIONAL UCC FILING STATEMENT (FORM UCC 1)
 
18 (REV.  071/29/98)
 
19                          [BACK OF FORM]
 
20 UCC FINANCING STATEMENT ADDENDUM
 
21 Follow instructions (front and back) CAREFULLY.
 

 
 
 
 
 
Page 160                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 9.   NAME OF FIRST DEBTOR (1a or 1b) ON RELATED FINANCING
 
 2 STATEMENT
 
 3 
 
 4 _________________________________________________________________
 
 5      9a. ORGANIZATION'S NAME
 
 6 
 
 7 _________________________________________________________________
 
 8 OR   9b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
 9 
 
10 _________________________________________________________________
 
11 10.  MISCELLANEOUS:
 
12 
 
13      ______________________________________THE ABOVE SPACE IS FOR
 
14 
 
15      ______________________________________FILING OFFICE USE ONLY
 
16 11.  ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one
 
17 name
 
18      (11a or 11b) - do not abbreviate or combine names
 
19      11a. ORGANIZATION'S NAME
 
20 
 
21 _________________________________________________________________
 
22 OR   11b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 

 
 
 
Page 161                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 
 
 2 _________________________________________________________________
 
 3      11c. MAILING ADDRESS    CITY      STATE POSTAL CODE  COUNTRY
 
 4 
 
 5 _________________________________________________________________
 
 6      11d. TAX ID. NO.  ADD'L INFO. RE  11e. TYPE OF ORGANIZATION
 
 7           SSN OR EIN  ORGANIZATION DEBTOR
 
 8 
 
 9 _________________________________________________________________
 
10      11f. JURISDICTION OF ORGANIZATION 11g ORGANIZATIONAL ID.
 
11                                            No., if any
 
12 
 
13      _____________________________________________________[ ] NONE
 
14 12.  [ ] ADDITIONAL SECURED PARTY'S or  [ ] ASSIGNOR S/P'S NAME -
 
15 insert only one name (12a or 12b).
 
16      12a.ORGANIZATION'S NAME
 
17 
 
18 __________________________________________________________________
 
19 OR   12b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
20 
 
21 __________________________________________________________________
 
22      12c. MAILING ADDRESS    CITY      STATE POSTAL CODE  COUNTRY
 

 
 
 
Page 162                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 
 
 2 __________________________________________________________________
 
 3 13.  This FINANCING STATEMENT covers [ ] timber to be cut or
 
 4      [ ] as-extracted collateral, or is filed as a [ ] fixture
 
 5      filing.
 
 6 14.  Description of real estate:
 
 7 
 
 8 __________________________________________________________________
 
 9 15.  Name and address of a RECORD OWNER of the above-described
 
10      real estate (if Debtor does not have record interest):
 
11 16.  Additional collateral description:
 
12 
 
13 __________________________________________________________________
 
14 17.  Check only if applicable and check only one box:
 
15      Debtor is a [ ] Trust or [ ] Trustee acting with respect to
 
16      property held in trust or [ ] Decedent's Estate
 
17 18.  Check only if applicable and check only one box:
 
18      [ ] Debtor is a TRANSMITTING UTILITY
 
19      [ ] Filed in connection with a Manufactured-Home Transaction
 
20          - effective 30 years
 
21      [ ] Filed in connection with a Public-Finance Transaction -
 
22          effective 30 years
 

 
 
 
Page 163                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      FILING OFFICE COPY - NATIONAL UCC FILING STATEMENT
 
 2      (FORM UCC 1Ad)(REV. 07/29/98)
 
 3      (b)  A filing office that accepts written records for filing
 
 4 may not refuse to accept a written financing statement amendment
 
 5 in the following form, except for a reason set forth in section
 
 6 490:9-516(b):
 
 7 UCC FINANCING STATEMENT AMENDMENT
 
 8 FOLLOW INSTRUCTIONS (front and back) CAREFULLY
 
 9 A.   NAME AND PHONE OF CONTACT AT FILER [optional]
 
10      _______________________________________
 
11 B.   SEND ACKNOWLEDGMENT TO:  (Name and Address)
 
12      ___________________________________THE ABOVE SPACE IS FOR
 
13      ___________________________________FILING OFFICE USE ONLY
 
14 1a.  INITIAL FINANCING STATEMENT FILE NO.  1b. [ ] This FINANCING
 
15      STATEMENT AMENDMENT is to be filed (for record) (or
 
16      recorded) in the REAL ESTATE RECORDS.
 
17 2.   [ ] TERMINATION:  Effectiveness of the Financing Statement
 
18      identified above is terminated with respect to security
 
19      interest(s) of the Secured Party authorizing this
 
20      Termination Statement.
 
21 3.   [ ] CONTINUATION:  Effectiveness of the Financing Statement
 
22      identified above with respect to security interest(s) of the
 

 
 
 
Page 164                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      Secured Party authorizing this Continuation Statement is
 
 2      continued for the additional period provided by applicable
 
 3      law.
 
 4 4.   [ ] ASSIGNMENT (full or partial):  Give name of assignee in
 
 5      item 7a or 7b and address of assignee in item 7c; and also
 
 6      give name of assignor in item 9.
 
 7 
 
 8 _________________________________________________________________
 
 9 5.   AMENDMENT (PARTY INFORMATION): This Amendment affects
 
10      [ ] Debtor or [ ] Secured Party of record.  Check only one
 
11      of these two boxes.  Also check one of the following three
 
12      boxes and provide appropriate information in items 6 and/or
 
13      7.
 
14      [ ] CHANGE name and/or address:  Give current record name in
 
15      item 6a or 6b; also give new name (if name change) in item
 
16      7a or 7b and/or new address (if address change in item 7c.
 
17      [ ] DELETE name:  Give record name to be deleted in item 6a
 
18      or 6b.
 
19      [ ] ADD name: Complete item 7a or 7b, and also item 7c; also
 
20      complete items 7d-7g (if applicable).
 
21 6.   CURRENT RECORD INFORMATION:
 
22      6a.  ORGANIZATION'S NAME
 

 
 
 
Page 165                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 
 
 2 _________________________________________________________________
 
 3 OR   6b.  INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
 4 
 
 5 _________________________________________________________________
 
 6 7.   CHANGED (NEW) OR ADDED INFORMATION:
 
 7      7a.  ORGANIZATION'S NAME
 
 8 
 
 9 _________________________________________________________________
 
10 OR   7b.  INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
11 
 
12 _________________________________________________________________
 
13      7c.  MAILING ADDRESS    CITY      STATE POSTAL CODE  COUNTRY
 
14 
 
15 _________________________________________________________________
 
16      7d.  TAX ID. NO.  ADD'L INFO. RE  7e.  TYPE OF ORGANIZATION
 
17           SSN OR EIN  ORGANIZATION DEBTOR
 
18 
 
19 _________________________________________________________________
 
20      7f.  JURISDICTION OF ORGANIZATION 7g. ORGANIZATIONAL ID.
 
21                                            No., if any
 
22       __________________________________________________ [ ] NONE
 

 
 
 
Page 166                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 8.   AMENDMENT (COLLATERAL CHANGE): check only one box
 
 2      Describe collateral [ ] deleted or [ ] added, or give entire
 
 3      [ ] restated collateral description, or describe collateral
 
 4      [ ] assigned.
 
 5 
 
 6 _________________________________________________________________
 
 7 9.   NAME OF SECURED PARTY OF RECORD AUTHORIZING THIS AMENDMENT
 
 8      (name of assignor, if this is an Assignment).  If this is an
 
 9      Amendment authorized by a Debtor which adds collateral or
 
10      adds the authorizing Debtor, or if this is a Termination
 
11      authorized by a Debtor, check here [ ] and enter name of
 
12      DEBTOR authorizing this Amendment.
 
13      9a.  ORGANIZATION'S NAME
 
14 
 
15 _________________________________________________________________
 
16 OR   9b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
17 
 
18 _________________________________________________________________
 
19 10.  OPTIONAL FILE REFERENCE DATA
 
20 
 
21 _________________________________________________________________
 

 
 
 
 
 
Page 167                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 FILING OFFICE COPY - NATIONAL UCC FINANCING STATEMENT AMENDMENT
 
 2 (FORM UCC3) (REV. 07/29/98)
 
 3                          [BACK OF FORM]
 
 4 UCC FINANCING STATEMENT AMENDMENT ADDENDUM
 
 5 FOLLOW INSTRUCTIONS (front and back) CAREFULLY
 
 6 11.  INITIAL FINANCING STATEMENT FILE NO. (same as item 1a on
 
 7      Amendment form)
 
 8 
 
 9 _________________________________________________________________
 
10 12.  NAME OF PARTY AUTHORIZING THIS AMENDMENT (same as item 9 on
 
11      Amendment form)
 
12      12a. ORGANIZATION'S NAME
 
13 
 
14 _________________________________________________________________
 
15 OR   12b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME  SUFFIX
 
16 
 
17 _________________________________________________________________
 
18 13.  USE THIS SPACE FOR ADDITIONAL INFORMATION
 
19      ___________________________________THIS SPACE IS FOR
 
20      ___________________________________FILING OFFICE USE ONLY
 
21 FILING OFFICE COPY - NATIONAL UCC FINANCING STATEMENT AMENDMENT
 
22 ADDENDUM (FORM UCC3Ad) (REV. 07/29/98)
 

 
 
 
Page 168                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 169                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 170                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 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
 

 
 
 
Page 171                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 172                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 173                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 174                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 175                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 176                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 consignor or is a buyer of accounts, chattel paper, payment
 
 2 intangibles, or promissory notes.
 
 3      §490:9-602  Waiver and variance of rights and duties.
 
 4 Except as otherwise provided in section 490:9-624, to the extent
 
 5 that they give rights to a debtor or obligor and impose duties on
 
 6 a secured party, the debtor or obligor may not waive or vary the
 
 7 rules stated in the following listed sections:
 
 8      (1)  Section 490:9-207(b)(4)(C), which deals with use and
 
 9           operation of the collateral by the secured party;
 
10      (2)  Section 490:9-210, which deals with requests for an
 
11           accounting and requests concerning a list of collateral
 
12           and statement of account;
 
13      (3)  Section 490:9-607(c), which deals with collection and
 
14           enforcement of collateral;
 
15      (4)  Sections 490:9-608(a) and 490:9-615(c) to the extent
 
16           that they deal with application or payment of noncash
 
17           proceeds of collection, enforcement, or disposition;
 
18      (5)  Sections 490:9-608(a) and 490:9-615(d) to the extent
 
19           that they require accounting for or payment of surplus
 
20           proceeds of collateral;
 
21      (6)  Section 490:9-609 to the extent that it imposes upon a
 
22           secured party that takes possession of collateral
 

 
 
 
Page 177                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           without judicial process the duty to do so without
 
 2           breach of the peace;
 
 3      (7)  Sections 490:9-610(b), 490:9-611, 490:9-613, and
 
 4           490:9-614, which deal with disposition of collateral;
 
 5      (8)  Section 490:9-615(f), which deals with calculation of a
 
 6           deficiency or surplus when a disposition is made to the
 
 7           secured party, a person related to the secured party,
 
 8           or a secondary obligor;
 
 9      (9)  Section 490:9-616, which deals with explanation of the
 
10           calculation of a surplus or deficiency;
 
11     (10)   Section 490:9-620, 490:9-621, and 490:9-622, which
 
12           deal with acceptance of collateral in satisfaction of
 
13           obligation;
 
14     (11)   Section 490:9-623, which deals with redemption of
 
15           collateral;
 
16     (12)   Section 490:9-624, which deals with permissible
 
17           waivers; and
 
18     (13)   Sections 490:9-625 and 490:9-626, which deal with the
 
19           secured party's liability for failure to comply with
 
20           this article.
 
21      §490:9-603  Agreement on standards concerning rights and
 
22 duties.  (a)  The parties may determine by agreement the
 

 
 
 
Page 178                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 standards measuring the fulfillment of the rights of a debtor or
 
 2 obligor and the duties of a secured party under a rule stated in
 
 3 section 490:9-602 if the standards are not manifestly
 
 4 unreasonable.
 
 5      (b)  Subsection (a) does not apply to the duty under section
 
 6 490:9-609 to refrain from breaching the peace.
 
 7      §490:9-604  Procedure if security agreement covers real
 
 8 property or fixtures.  (a)  If a security agreement covers both
 
 9 personal and real property, a secured party may proceed:
 
10      (1)  Under this part as to the personal property without
 
11           prejudicing any rights with respect to the real
 
12           property; or
 
13      (2)  As to both the personal property and the real property
 
14           in accordance with the rights with respect to the real
 
15           property, in which case the other provisions of this
 
16           part do not apply.
 
17      (b)  Subject to subsection (c), if a security agreement
 
18 covers goods that are or become fixtures, a secured party may
 
19 proceed:
 
20      (1)  Under this part; or
 
21      (2)  In accordance with the rights with respect to real
 
22           property, in which case the other provisions of this
 

 
 
 
Page 179                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           part do not apply.
 
 2      (c)  Subject to the other provisions of this part, if a
 
 3 secured party holding a security interest in fixtures has
 
 4 priority over all owners and encumbrancers of the real property,
 
 5 the secured party, after default, may remove the collateral from
 
 6 the real property.
 
 7      (d)  A secured party that removes collateral shall promptly
 
 8 reimburse any encumbrancer or owner of the real property, other
 
 9 than the debtor, for the cost of repair of any physical injury
 
10 caused by the removal.  The secured party need not reimburse the
 
11 encumbrancer or owner for any diminution in value of the real
 
12 property caused by the absence of the goods removed or by any
 
13 necessity of replacing them.  A person entitled to reimbursement
 
14 may refuse permission to remove until the secured party gives
 
15 adequate assurance for the performance of the obligation to
 
16 reimburse.
 
17      §490:9-605  Unknown debtor or secondary obligor.  A secured
 
18 party does not owe a duty based on its status as secured party:
 
19      (1)  To a person that is a debtor or obligor, unless the
 
20           secured party knows:
 
21           (A)  That the person is a debtor or obligor;
 
22           (B)  The identity of the person; and
 

 
 
 
Page 180                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 181                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           the account debtor or other person obligated on
 
 2           collateral to make payment or otherwise render
 
 3           performance to the debtor, and with respect to any
 
 4           property that secures the obligations of the account
 
 5           debtor or other person obligated on the collateral;
 
 6      (4)  If it holds a security interest in a deposit account
 
 7           perfected by control under section 490:9-104(a)(1) may
 
 8           apply the balance of the deposit account to the
 
 9           obligation secured by the deposit account; and
 
10      (5)  If it holds a security interest in a deposit account
 
11           perfected by control under section 490:9-104(a)(2) or
 
12           (3), may instruct the bank to pay the balance of the
 
13           deposit account to or for the benefit of the secured
 
14           party.
 
15      (b)  If necessary to enable a secured party to exercise
 
16 under subsection (a)(3) the right of a debtor to enforce a
 
17 mortgage nonjudicially, the secured party may record in the
 
18 office in which a record of the mortgage is recorded:
 
19      (1)  A copy of the security agreement that creates or
 
20           provides for a security interest in the obligation
 
21           secured by the mortgage; and
 
22      (2)  The secured party's sworn affidavit in recordable form
 

 
 
 
Page 182                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           stating that:
 
 2           (A)  A default has occurred; and
 
 3           (B)  The secured party is entitled to enforce the
 
 4                mortgage nonjudicially.
 
 5      (c)  A secured party shall proceed in a commercially
 
 6 reasonable manner if the secured party:
 
 7      (1)  Undertakes to collect from or enforce an obligation of
 
 8           an account debtor or other person obligated on
 
 9           collateral; and
 
10      (2)  Is entitled to charge back uncollected collateral or
 
11           otherwise to full or limited recourse against the
 
12           debtor or a secondary obligor.
 
13      (d)  A secured party may deduct from the collections made
 
14 pursuant to subsection (c) reasonable expenses of collection and
 
15 enforcement, including reasonable attorney's fees and legal
 
16 expenses incurred by the secured party.
 
17      (e)  This section does not determine whether an account
 
18 debtor, bank, or other person obligated on collateral owes a duty
 
19 to a secured party.
 
20      §490:9-608  Application of proceeds of collection or
 
21 enforcement; liability for deficiency and right to surplus.  (a)
 
22 If a security interest or agricultural lien secures payment or
 

 
 
 
Page 183                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 performance of an obligation, the following rules apply:
 
 2      (1)  A secured party shall apply or pay over for application
 
 3           the cash proceeds of collection or enforcement under
 
 4           this section in the following order to:
 
 5           (A)  The reasonable expenses of collection and
 
 6                enforcement and, to the extent provided for by
 
 7                agreement and not prohibited by law, reasonable
 
 8                attorney's fees and legal expenses incurred by the
 
 9                secured party;
 
10           (B)  The satisfaction of obligations secured by the
 
11                security interest or agricultural lien under which
 
12                the collection or enforcement is made; and
 
13           (C)  The satisfaction of obligations secured by any
 
14                subordinate security interest in or other lien on
 
15                the collateral subject to the security interest or
 
16                agricultural lien under which the collection or
 
17                enforcement is made if the secured party receives
 
18                an authenticated demand for proceeds before
 
19                distribution of the proceeds is completed.
 
20      (2)  If requested by a secured party, a holder of a
 
21           subordinate security interest or other lien shall
 
22           furnish reasonable proof of the interest or lien within
 

 
 
 
Page 184                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           a reasonable time.  Unless the holder complies the
 
 2           secured party need not comply with the holder's demand
 
 3           under paragraph (1)(C).
 
 4      (3)  A secured party need not apply or pay over for
 
 5           application noncash proceeds of collection and
 
 6           enforcement under this section unless the failure to do
 
 7           so would be commercially unreasonable.  A secured party
 
 8           that applies or pays over for application noncash
 
 9           proceeds shall do so in a commercially reasonable
 
10           manner.
 
11      (4)  A secured party shall account to and pay a debtor for
 
12           any surplus, and the obligor is liable for any
 
13           deficiency.
 
14      (b)  If the underlying transaction is a sale of accounts,
 
15 chattel paper, payment intangibles, or promissory notes, the
 
16 debtor is not entitled to any surplus, and the obligor is not
 
17 liable for any deficiency.
 
18      §490:9-609  Secured party's right to take possession after
 
19 default.  (a)  After default, a secured party:
 
20      (1)  May take possession of the collateral; and
 
21      (2)  Without removal, may render equipment unusable and
 
22           dispose of collateral on a debtor's premises under
 

 
 
 
Page 185                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           section 490:9-610.
 
 2      (b)  A secured party may proceed under subsection (a):
 
 3      (1)  Pursuant to judicial process; or
 
 4      (2)  Without judicial process, if it proceeds without breach
 
 5           of the peace.
 
 6      (c)  If so agreed, and in any event after default, a secured
 
 7 party may require the debtor to assemble the collateral and make
 
 8 it available to the secured party at a place to be designated by
 
 9 the secured party which is reasonably convenient to both parties.
 
10      §490:9-610  Disposition of collateral after default.  (a)
 
11 After default, a secured party may sell, lease, license, or
 
12 otherwise dispose of any or all of the collateral in its present
 
13 condition or following any commercially reasonable preparation or
 
14 processing.
 
15      (b)  Every aspect of a disposition of collateral, including
 
16 the method, manner, time, place, and other terms, must be
 
17 commercially reasonable.  If commercially reasonable, a secured
 
18 party may dispose of collateral by public or private proceedings,
 
19 by one or more contracts, as a unit or in parcels, and at any
 
20 time and place and on any terms.
 
21      (c)  A secured party may purchase collateral:
 
22      (1)  At a public disposition; or
 

 
 
 
Page 186                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (2)  At a private disposition only if the collateral is of a
 
 2           kind that is customarily sold on a recognized market or
 
 3           the subject of widely distributed standard price
 
 4           quotations.
 
 5      (d)  A contract for sale, lease, license, or other
 
 6 disposition includes the warranties relating to title,
 
 7 possession, quiet enjoyment, and the like which by operation of
 
 8 law accompany a voluntary disposition of property of the kind
 
 9 subject to the contract.
 
10      (e)  A secured party may disclaim or modify warranties under
 
11 subsection (d):
 
12      (1)  In a manner that would be effective to disclaim or
 
13           modify the warranties in a voluntary disposition of
 
14           property of the kind subject to the contract of
 
15           disposition; or
 
16      (2)  By communicating to the purchaser a record evidencing
 
17           the contract for disposition and including an express
 
18           disclaimer or modification of the warranties.
 
19      (f)  A record is sufficient to disclaim warranties under
 
20 subsection (e) if it indicates "There is no warranty relating to
 
21 title, possession, quiet enjoyment, or the like in this
 
22 disposition" or uses words of similar import.
 

 
 
 
Page 187                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      §490:9-611  Notification before disposition of collateral.
 
 2 (a)  In this section, "notification date" means the earlier of
 
 3 the date on which:
 
 4      (1)  A secured party sends to the debtor and any secondary
 
 5           obligor an authenticated notification of disposition;
 
 6           or
 
 7      (2)  The debtor and any secondary obligor waive the right to
 
 8           notification.
 
 9      (b)  Except as otherwise provided in subsection (d), a
 
10 secured party that disposes of collateral under section 490:9-610
 
11 shall send to the persons specified in subsection (c)  a
 
12 reasonable authenticated notification of disposition.
 
13      (c)  To comply with subsection (b), the secured party shall
 
14 send an authenticated notification of disposition to:
 
15      (1)  The debtor;
 
16      (2)  Any secondary obligor; and
 
17      (3)  If the collateral is other than consumer goods:
 
18           (A)  Any other person from which the secured party has
 
19                received, before the notification date, an
 
20                authenticated notification of a claim of an
 
21                interest in the collateral;
 
22           (B)  Any other secured party or lienholder that, ten
 

 
 
 
Page 188                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 189                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           requests, in a commercially reasonable manner
 
 2           information concerning financing statements indexed
 
 3           under the debtor's name in the office indicated in
 
 4           subsection (c)(3)(B); and
 
 5      (2)  Before the notification date, the secured party:
 
 6           (A)  Did not receive a response to the request for
 
 7                information; or
 
 8           (B)  Received a response to the request for information
 
 9                and sent an authenticated notification of
 
10                disposition to each secured party named in that
 
11                response whose financing statement covered the
 
12                collateral.
 
13      §490:9-612  Timeliness of notification before disposition of
 
14 collateral.  (a)  Except as otherwise provided in subsection (b),
 
15 whether a notification is sent within a reasonable time is a
 
16 question of fact.
 
17      (b)  In a transaction other than a consumer transaction, a
 
18 notification of disposition sent after default and ten days or
 
19 more before the earliest time of disposition set forth in the
 
20 notification is sent within a reasonable time before the
 
21 disposition.
 
22      §490:9-613  Contents and form of notification before
 

 


 

Page 190                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 disposition of collateral: general.  Except in a consumer-goods
 
 2 transaction, the following rules apply:
 
 3      (1)  The contents of a notification of disposition are
 
 4           sufficient if the notification:
 
 5           (A)  Describes the debtor and the secured party;
 
 6           (B)  Describes the collateral that is the subject of
 
 7                the intended disposition;
 
 8           (C)  States the method of intended disposition;
 
 9           (D)  States that the debtor is entitled to an
 
10                accounting of the unpaid indebtedness and states
 
11                the charge, if any, for an accounting; and
 
12           (E)  States the time and place of a public sale or the
 
13                time after which any other disposition is to be
 
14                made.
 
15      (2)  Whether the contents of a notification that lacks any
 
16           of the information specified in paragraph (1) are
 
17           nevertheless sufficient is a question of fact.
 
18      (3)  The contents of a notification providing substantially
 
19           the information specified in paragraph (1) are
 
20           sufficient, even if the notification includes:
 
21           (A)  Information not specified by that paragraph; or
 
22           (B)  Minor errors that are not seriously misleading.
 

 
Page 191                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 192                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 193                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 194                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 195                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 196                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      §490:9-615  Application of proceeds of disposition;
 
 2 liability for deficiency and right to surplus.  (a)  A secured
 
 3 party shall apply or pay over for application the cash proceeds
 
 4 of disposition in the following order to:
 
 5      (1)  The reasonable expenses of retaking, holding preparing
 
 6           for disposition, processing, and disposing and, to the
 
 7           extent provided for by agreement and not prohibited by
 
 8           law, reasonable attorney's fees and legal expenses
 
 9           incurred by the secured party;
 
10      (2)  The satisfaction of obligations secured by the security
 
11           interest or agricultural lien under which the
 
12           disposition is made;
 
13      (3)  The satisfaction of obligations secured by any
 
14           subordinate security interest in or other subordinate
 
15           lien on the collateral if:
 
16           (A)  The secured party receives from the holder of the
 
17                subordinate security interest or other lien an
 
18                authenticated demand for proceeds before
 
19                distribution of the proceeds is completed; and
 
20           (B)  In a case in which a consignor has an interest in
 
21                the collateral, the subordinate security interest
 
22                or other lien is senior to the interest of the
 

 
 
 
Page 197                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 198                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 199                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 200                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1                from which additional information concerning the
 
 2                transaction is available.
 
 3      (2)  "Request" means a record:
 
 4           (A)  Authenticated by a debtor or consumer obligor;
 
 5           (B)  Requesting that the recipient provide an
 
 6                explanation; and
 
 7           (C)  Sent after disposition of the collateral under
 
 8                section 490:9-610.
 
 9      (b)  In a consumer-goods transaction in which the debtor is
 
10 entitled to a surplus or a consumer obligor is liable for a
 
11 deficiency under section 490:9-615, the secured party shall:
 
12      (1)  Send an explanation to the debtor or consumer obligor
 
13           as applicable, after the disposition and:
 
14           (A)  Before or when the secured party accounts to the
 
15                debtor and pays any surplus or first makes written
 
16                demand on the consumer obligor after the
 
17                disposition for payment of the deficiency; and
 
18           (B)  Within fourteen days after receipt of a request;
 
19                or
 
20      (2)  In the case of a consumer obligor who is liable for a
 
21           deficiency, within fourteen days after receipt of a
 
22           request, send to the consumer obligor a record waiving
 

 
 
 
Page 201                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           the secured party's right to a deficiency.
 
 2      (c)  To comply with subsection (a)(1)(B), a writing must
 
 3 provide the following information in the following order:
 
 4      (1)  The aggregate amount of obligations secured by the
 
 5           security interest under which the disposition was made,
 
 6           and, if the amount reflects a rebate of unearned
 
 7           interest or credit service charge, an indication of
 
 8           that fact, calculated as of a specified date:
 
 9           (A)  If the secured party takes or receives possession
 
10                of the collateral after default, not more than
 
11                thirty-five days before the secured party takes or
 
12                receives possession; or
 
13           (B)  If the secured party takes or receives possession
 
14                of the collateral before default or does not take
 
15                possession of the collateral, not more than
 
16                thirty-five days before the disposition;
 
17      (2)  The amount of proceeds of the disposition;
 
18      (3)  The aggregate amount of the obligations after deducting
 
19           the amount of proceeds;
 
20      (4)  The amount, in the aggregate or by type, and types of
 
21           expenses, including expenses of retaking, holding
 
22           preparing for disposition, processing, and disposing of
 

 
 
 
Page 202                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           the collateral, and attorney's fees secured by the
 
 2           collateral which are known to the secured party and
 
 3           relate to the current disposition;
 
 4      (5)  The amount, in the aggregate or by type, and types of
 
 5           credits, including rebates of interest or credit
 
 6           service charges, to which the obligor is known to be
 
 7           entitled and which are not reflected in the amount in
 
 8           paragraph (1); and
 
 9      (6)  The amount of the surplus or deficiency.
 
10      (d)  A particular phrasing of the explanation is not
 
11 required.  An explanation complying substantially with the
 
12 requirements of subsection (a) is sufficient, even if it includes
 
13 minor errors that are not seriously misleading.
 
14      (e)  A debtor or consumer obligor is entitled without charge
 
15 to one response to a request under this section during any six-
 
16 month period in which the secured party did not send to the
 
17 debtor or consumer obligor an explanation pursuant to subsection
 
18 (b)(1).  The secured party may require payment of a charge not
 
19 exceeding $25 for each additional response.
 
20      §490:9-617  Rights of transferee of collateral.  (a)  A
 
21 secured party's disposition of collateral after default:
 
22      (1)  Transfers to a transferee for value all of the debtor's
 

 
 
 
Page 203                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 204                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (2)  Receives a transfer of collateral from the secured
 
 2           party and agrees to accept the rights and assume the
 
 3           duties of the secured party; or
 
 4      (3)  Is subrogated to the rights of a secured party with
 
 5           respect to collateral.
 
 6      (b)  An assignment, transfer, or subrogation described in
 
 7 subsection (a):
 
 8      (1)  Is not a disposition of collateral under section
 
 9           490:9-610; and
 
10      (2)  Relieves the secured party of further duties under this
 
11           article.
 
12      §490:9-619  Transfer of record or legal title.  (a)  In this
 
13 section, "transfer statement" means a record authenticated by a
 
14 secured party stating:
 
15      (1)  That the debtor has defaulted in connection with an
 
16           obligation secured by specified collateral;
 
17      (2)  That the secured party has exercised its post-default
 
18           remedies with respect to the collateral;
 
19      (3)  That, by reason of the exercise, a transferee has
 
20           acquired the rights of the debtor in the collateral;
 
21           and
 
22      (4)  The name and mailing address of the secured party
 

 
 
 
Page 205                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           debtor, and transferee.
 
 2      (b)  A transfer statement entitles the transferee to the
 
 3 transfer of record of all rights of the debtor in the collateral
 
 4 specified in the statement in any official filing, recording,
 
 5 registration, or certificate-of-title system covering the
 
 6 collateral.  If a transfer statement is presented with the
 
 7 applicable fee and request form to the official or office
 
 8 responsible for maintaining the system, the official or office
 
 9 shall:
 
10      (1)  Accept the transfer statement;
 
11      (2)  Promptly amend its records to reflect the transfer; and
 
12      (3)  If applicable, issue a new appropriate certificate of
 
13           title in the name of the transferee.
 
14      (c)  A transfer of the record or legal title to collateral
 
15 to a secured party under subsection (b) or otherwise is not of
 
16 itself a disposition of collateral under this article and does
 
17 not of itself relieve the secured party of its duties under this
 
18 article.
 
19      §490:9-620  Acceptance of collateral in full or partial
 
20 satisfaction of obligation; compulsory disposition of collateral.
 
21 (a)  Except as otherwise provided in subsection (g), a secured
 
22 party may accept collateral in full or partial satisfaction of
 

 
 
 
Page 206                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 the obligation it secures only if:
 
 2      (1)  The debtor consents to the acceptance under subsection
 
 3           (c);
 
 4      (2)  The secured party does not receive, within the time set
 
 5           forth in subsection (d), a notification of objection to
 
 6           the proposal authenticated by:
 
 7           (A)  A person to which the secured party was required
 
 8                to send a proposal under section 490:9-621; or
 
 9           (B)  Any other person, other than the debtor, holding
 
10                an interest in the collateral subordinate to the
 
11                security interest that is the subject of the
 
12                proposal;
 
13      (3)  If the collateral is consumer goods, the collateral is
 
14           not in the possession of the debtor when the debtor
 
15           consents to the acceptance; and
 
16      (4)  Subsection (e) does not require the secured party to
 
17           dispose of the collateral or the debtor waives the
 
18           requirement pursuant to section 490:9-624.
 
19      (b)  A purported or apparent acceptance of collateral under
 
20 this section is ineffective unless:
 
21      (1)  The secured party consents to the acceptance in an
 
22           authenticated record or sends a proposal to the debtor;
 

 
 
 
Page 207                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           and
 
 2      (2)  The conditions of subsection (a) are met.
 
 3      (c)  For purposes of this section:
 
 4      (1)  A debtor consents to an acceptance of collateral in
 
 5           partial satisfaction of the obligation it secures only
 
 6           if the debtor agrees to the terms of the acceptance in
 
 7           a record authenticated after default; and
 
 8      (2)  A debtor consents to an acceptance of collateral in
 
 9           full satisfaction of the obligation it secures only if
 
10           the debtor agrees to the terms of the acceptance in a
 
11           record authenticated after default or the secured
 
12           party:
 
13           (A)  Sends to the debtor after default a proposal that
 
14                is unconditional or subject only to a condition
 
15                that collateral not in the possession of the
 
16                secured party be preserved or maintained;
 
17           (B)  In the proposal, proposes to accept collateral in
 
18                full satisfaction of the obligation it secures;
 
19                and
 
20           (C)  Does not receive a notification of objection
 
21                authenticated by the debtor within twenty days
 
22                after the proposal is sent.
 

 
 
 
Page 208                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 209                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (2)  Within any longer period to which the debtor and all
 
 2           secondary obligors have agreed in an agreement to that
 
 3           effect entered into and authenticated after default.
 
 4      (g)  In a consumer transaction, a secured party may not
 
 5 accept collateral in partial satisfaction of the obligation it
 
 6 secures.
 
 7      §490:9-621  Notification of proposal to accept collateral.
 
 8 (a)  A secured party that desires to accept collateral in full or
 
 9 partial satisfaction of the obligation it secures shall send its
 
10 proposal to:
 
11      (1)  Any person from which the secured party has received
 
12           before the debtor consented to the acceptance, an
 
13           authenticated notification of a claim of an interest in
 
14           the collateral;
 
15      (2)  Any other secured party or lienholder that, ten days
 
16           before the debtor consented to the acceptance, held a
 
17           security interest in or other lien on the collateral
 
18           perfected by the filing of a financing statement that:
 
19           (A)  Identified the collateral;
 
20           (B)  Was indexed under the debtor's name as of that
 
21                date; and
 
22           (C)  Was filed in the office or offices in which to
 

 
 
 
Page 210                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 211                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      (4)  Terminates any other subordinate interest.
 
 2      (b)  A subordinate interest is discharged or terminated
 
 3 under subsection (a), even if the secured party fails to comply
 
 4 with this article.
 
 5      §490:9-623  Right to redeem collateral.  (a)  A debtor, any
 
 6 secondary obligor, or any other secured party or lienholder may
 
 7 redeem collateral.
 
 8      (b)  To redeem collateral, a person shall tender:
 
 9      (1)  Fulfillment of all obligations secured by the
 
10           collateral; and
 
11      (2)  The reasonable expenses and attorney's fees described
 
12           in section 490:9-615(a)(1).
 
13      (c)  A redemption may occur at any time before a secured
 
14 party:
 
15      (1)  Has collected collateral under section 490:9-607;
 
16      (2)  Has disposed of collateral or entered into a contract
 
17           for its disposition under section 490:9-610; or
 
18      (3)  Has accepted collateral in full or partial satisfaction
 
19           of the obligation it secures under section 490:9-622.
 
20      §490:9-624  Waiver.  (a)  A debtor or secondary obligor may
 
21 waive the right to notification of disposition of collateral
 
22 under section 490:9-611 only by an agreement to that effect
 

 
 
 
Page 212                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 entered into and authenticated after default.
 
 2      (b)  A debtor may waive the right to require disposition of
 
 3 collateral under section 490:9-620(e) only by an agreement to
 
 4 that effect entered into and authenticated after default.
 
 5      (c)  Except in a consumer-goods transaction, a debtor or
 
 6 secondary obligor may waive the right to redeem collateral under
 
 7 section 490:9-623 only by an agreement to that effect entered
 
 8 into and authenticated after default.
 
 9              SUBPART 2.  NONCOMPLIANCE WITH ARTICLE
 
10      §490:9-625  Remedies for secured party's failure to comply
 
11 with article.  (a)  If it is established that a secured party is
 
12 not proceeding in accordance with this article, a court may order
 
13 or restrain collection, enforcement, or disposition of collateral
 
14 on appropriate terms and conditions.
 
15      (b)  Subject to subsections (c), (d), and (f), a person is
 
16 liable for damages in the amount of any loss caused by a failure
 
17 to comply with this article.  Loss caused by a failure to comply
 
18 with a request under section 490:9-210 may include loss resulting
 
19 from the debtor's inability to obtain, or increased costs of,
 
20 alternative financing.
 
21      (c)  Except as otherwise provided in section 490:9-628:
 
22      (1)  A person that, at the time of the failure, was a
 

 
 
 
Page 213                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           debtor, was an obligor, or held a security interest in
 
 2           or other lien on the collateral may recover damages
 
 3           under subsection (b) for its loss; and
 
 4      (2)  If the collateral is consumer goods, a person that was
 
 5           a debtor or a secondary obligor at the time a secured
 
 6           party failed to comply with this part may recover for
 
 7           that failure in any event an amount not less than the
 
 8           credit service charge plus ten per cent of the
 
 9           principal amount of the obligation or the time-price
 
10           differential plus ten per cent of the cash price.
 
11      (d)  A debtor whose deficiency is eliminated under section
 
12 490:9-626 may recover damages for the loss of any surplus.
 
13 However, a debtor or secondary obligor whose deficiency is
 
14 eliminated or reduced under section 490:9-626 may not otherwise
 
15 recover under subsection (b) for noncompliance with the
 
16 provisions of this part relating to collection, enforcement,
 
17 disposition, or acceptance.
 
18      (e)  In addition to any damages recoverable under subsection
 
19 (b), the debtor, consumer obligor, or person named as a debtor in
 
20 a filed record, as applicable, may recover $500 in each case from
 
21 a person that:
 
22      (1)  Fails to comply with section 490:9-208;
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 215                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 216                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 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
 

 
 
 
Page 217                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 218                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 219                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 220                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 221                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 222                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 223                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 224                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 706, the financing statement ceases to be effective at the
 
 2 earlier of:
 
 3      (1)  The time the financing statement would have ceased to
 
 4           be effective under the law of the jurisdiction in which
 
 5           it is filed; or
 
 6      (2)  June 30, 2006.
 
 7      (d)  The filing of a continuation statement after this
 
 8 article takes effect does not continue the effectiveness of the
 
 9 financing statement filed before this article takes effect.
 
10 However, upon the timely filing of a continuation statement after
 
11 this article takes effect and in accordance with the law of the
 
12 jurisdiction governing perfection as provided in part 3, the
 
13 effectiveness of a financing statement filed in the same office
 
14 in that jurisdiction before this article takes effect continues
 
15 for the period provided by the law of that jurisdiction.
 
16      (e)  Subsection (c)(2) applies to a financing statement
 
17 that, before this article takes effect, is filed against a
 
18 transmitting utility and satisfies the applicable requirements
 
19 for perfection under the law of the jurisdiction governing
 
20 perfection as provided in the former section 490:9-103 only to
 
21 the extent that part 3 provides that the law of a jurisdiction
 
22 other than a jurisdiction in which the financing statement is
 

 
 
 
Page 225                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 226                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 


 

Page 227                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 statement or continuation statement.  A person may file an
 
 2 initial financing statement or a continuation statement under
 
 3 this part if:
 
 4      (1)  The secured party of record authorizes the filing; and
 
 5      (2)  The filing is necessary under this part:
 
 6           (A)  To continue the effectiveness of a financing
 
 7                statement filed before this article takes effect;
 
 8                or
 
 9           (B)  To perfect or continue the perfection of a
 
10                security interest.
 
11      §490:9-708  Priority.  (a)  This article determines the
 
12 priority of conflicting claims to collateral.  However, if the
 
13 relative priorities of the claims were established before this
 
14 article takes effect, the former Article 9 determines priority.
 
15      (b)  For purposes of section 490:9-322(a), the priority of a
 
16 security interest that becomes enforceable under section
 
17 490:9-203 of this article dates from the time this article takes
 
18 effect if the security interest is perfected under this article
 
19 by the filing of a financing statement before this article takes
 
20 effect which would not have been effective to perfect the
 
21 security interest under the former Article 9.  This subsection
 
22 does not apply to conflicting security interests each of which is
 

 
Page 228                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 perfected by the filing of such a financing statement."
 
 2      SECTION 2.  Chapter 490, Hawaii Revised Statutes, is amended
 
 3 by adding to article 5 a new section to be designated and to read
 
 4 as follows:
 
 5      "§490:5-118  Security interest of issuer or nominated
 
 6 person.  (a)  An issuer or nominated person has a security
 
 7 interest in a document presented under a letter of credit to the
 
 8 extent that the issuer or nominated person honors or gives value
 
 9 for the presentation.
 
10      (b)  So long as and to the extent that an issuer or
 
11 nominated person has not been reimbursed or has not otherwise
 
12 recovered the value given with respect to a security interest in
 
13 a document under subsection (a), the security interest continues
 
14 and is subject to Article 9, but:
 
15      (1)  A security agreement is not necessary to make the
 
16           security interest enforceable under section
 
17           490:9-203(b)(3);
 
18      (2)  If the document is presented in a medium other than a
 
19           written or other tangible medium, the security interest
 
20           is perfected; and
 
21      (3)  If the document is presented in a written or other
 
22           tangible medium and is not a certificated security
 

 
 
 
Page 229                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           chattel paper, a document of title, an instrument, or a
 
 2           letter of credit, the security interest is perfected
 
 3           and has priority over a conflicting security interest
 
 4           in the document so long as the debtor does not have
 
 5           possession of the document."
 
 6      SECTION 3.  Section 286-52, Hawaii Revised Statutes, is
 
 7 amended by amending subsection (e) to read as follows:
 
 8      "(e)  Until the director of finance has issued the new
 
 9 certificate of registration and certificate of ownership as in
 
10 subsection (d) provided, delivery of such vehicle shall be deemed
 
11 not to have been made and title thereto shall be deemed not to
 
12 have passed, and the intended transfer shall be deemed to be
 
13 incomplete and not to be valid or effective for any purpose,
 
14 notwithstanding any provision of the Uniform Commercial Code;
 
15 provided that a security interest in a motor vehicle shall be
 
16 perfected as provided in the Uniform Commercial Code, [sections
 
17 490:9-302(3)(b) and 490:9-302(4),] section 490:9-311 and that the
 
18 validity, attachment, priority, and enforcement of such security
 
19 interest shall be governed by Article 9 of the Code."
 
20      SECTION 4.  Section 476-1, Hawaii Revised Statutes, is
 
21 amended by amending the definition of "goods" to read as follows:
 
22      ""Goods" include all things which are movable at the time
 

 
 
 
Page 230                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 the credit sale is entered into or which will be movable when
 
 2 they thereafter come into existence or which are or will be
 
 3 fixtures [(section 490:9-313),] (sections 490:9-334 and
 
 4 490:9-604), but except as provided in this paragraph does not
 
 5 include money, documents, instruments, accounts, chattel paper,
 
 6 general intangibles, or minerals or the like (including oil and
 
 7 gas) before extraction.  "Goods" include standing timber which is
 
 8 to be cut and removed under a conveyance or contract for sale,
 
 9 the unborn young animals, growing crops, and merchandise
 
10 certificates or coupons, issued by a credit seller, to be used in
 
11 the face amount in lieu of cash in exchange for goods sold by
 
12 such a seller."
 
13      SECTION 5.  Section 506-1, Hawaii Revised Statutes, is
 
14 amended by amending subsection (b) to read as follows:
 
15      "(b)  A mortgage may secure the repayment of past debt, a
 
16 debt incurred at the time the mortgage is executed, or a debt
 
17 incurred for advances which may be made by the mortgagee
 
18 subsequent to the execution of the mortgage even though the
 
19 mortgagee is under no contractual duty to make these advances.
 
20 Except as otherwise provided in [section 490:9-313] sections
 
21 490:9-334 and 490:9-604 of the Uniform Commercial Code with
 
22 respect to security interests in fixtures, a mortgage which
 

 
 
 
Page 231                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 secures future advances, up to but not exceeding the maximum
 
 2 amount of future advances stated in the mortgage, shall be
 
 3 superior to any subsequently recorded mortgage, lien or other
 
 4 encumbrances or conveyance, other than liens for real property
 
 5 taxes and assessments for public improvements, even though the
 
 6 subsequently recorded mortgage, lien or other encumbrance or
 
 7 conveyance is recorded prior to the date upon which any advance
 
 8 or advances have been made."
 
 9      SECTION 6.  Section 506-2, Hawaii Revised Statutes, is
 
10 amended by amending subsection (a) to read as follows:
 
11      "(a)  Subject to the limitations contained in this chapter
 
12 and to [section 490:9-313] sections 490:9-334 and 490:9-604 of
 
13 the Uniform Commercial Code respecting security interests in
 
14 fixtures, if the mortgage so provides, the lien of the mortgage
 
15 may attach to additions, improvements, and purchases or
 
16 substitutions made to supply the place of any real property or
 
17 fixtures disposed of and to all other after-acquired real
 
18 property or fixtures referred to in the mortgage when the
 
19 mortgagor acquires an interest therein to the extent of the
 
20 interest, but subject to existing liens and the lien of a
 
21 purchase money mortgage given by the mortgagor of any such after-
 
22 acquired real property or fixtures."
 

 
 
 
Page 232                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      SECTION 7.  Section 712A-1, Hawaii Revised Statutes, is
 
 2 amended by amending the definition of "owner" to read as follows:
 
 3      ""Owner" means a person who is not a secured party within
 
 4 the meaning of section [[490:9-105(1)]] 490:9-102 and who has an
 
 5 interest in property, whether legal or equitable.  A purported
 
 6 interest which is not in compliance with any statute requiring
 
 7 its recordation or reflection in public records in order to
 
 8 perfect the interest against a bona fide purchaser for value
 
 9 shall not be recognized as an interest against this State in an
 
10 action pursuant to this chapter.  An owner with power to convey
 
11 property binds other owners, and a spouse binds the person's
 
12 spouse, by any act or omission."
 
13      SECTION 8.  Section 490:1-105, Hawaii Revised Statutes, is
 
14 amended by amending subsection (2) to read as follows:
 
15      "(2)  Where one of the following provisions of this chapter
 
16 specifies the applicable law, that provision governs and a
 
17 contrary agreement is effective only to the extent permitted by
 
18 the law (including the conflict of laws rules) so specified:
 
19      Rights of creditors against sold goods.  Section 490:2-402.
 
20      Applicability of the Article on Leases.  Sections 490:2A-105
 
21 and 490:2A-106.
 
22      Applicability of the Article on Bank Deposits and
 

 
 
 
Page 233                                                   
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 1 Collections.  Section 490:4-102.
 
 2      Governing law in the Article on Funds Transfers.  Section
 
 3 490:4A-507.
 
 4      Letters of Credit.  Section 490:5-116.
 
 5      Applicability of the Article on Investment Securities.
 
 6 Section 490:8-110.
 
 7      [Perfection provisions of the Article on Secured
 
 8 Transactions.  Section 490:9-103.]
 
 9      Law governing perfection, the effect of perfection or
 
10 nonperfection, and the priority of security interests and
 
11 agricultural liens.  Sections 490:9-301 through 490:9-307."
 
12      SECTION 9.  Section 490:1-201, Hawaii Revised Statutes, is
 
13 amended as follows:
 
14      1.  By amending the definition of "buyer in ordinary course
 
15 of business" to read:
 
16      "(9)  "Buyer in ordinary course of business" means a person
 
17 [who] that buys goods in good faith [and], without knowledge that
 
18 the sale [to him is in violation of] violates the [ownership]
 
19 rights [or security interest] of [a third party] another person
 
20 in the goods [buys], and in the ordinary course from a person,
 
21 other than a pawnbroker, in the business of selling goods of that
 
22 kind [but does not include a pawnbroker.  All persons who sell
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 235                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 reissue, gift, or any other voluntary transaction creating an
 
 2 interest in property."
 
 3      3.  By amending the definition of "security interest" to
 
 4 read:
 
 5      (37)  "Security interest" means an interest in personal
 
 6 property or fixtures which secures payment or performance of an
 
 7 obligation.  [The retention or reservation of title by a seller
 
 8 of goods notwithstanding shipment or delivery to the buyer
 
 9 (section 490:2-401) is limited in effect to a reservation of a
 
10 "security interest".] The term also includes any interest of a
 
11 consignor and a buyer of accounts [or], chattel paper [which], a
 
12 payment intangible, or a promissory note in a transaction that is
 
13 subject to Article 9.  The special property interest of a buyer
 
14 of goods on identification of those goods to a contract for sale
 
15 under section 490:2-401 is not a "security interest", but a buyer
 
16 may also acquire a "security interest" by complying with Article
 
17 9.  [Unless a consignment is intended as security, reservation of
 
18 title thereunder is not a "security interest", but a consignment
 
19 in any event is subject to the provisions on consignment sales
 
20 (section 490:2-326).] Except as otherwise provided in section
 
21 490;2-505, the right of a seller or lessor of goods under Article
 
22 2 or 2A to retain or acquire possession of the goods is not a
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 237                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1           additional consideration upon compliance with the lease
 
 2           agreement.
 
 3      A transaction does not create a security interest merely
 
 4 because it provides that:
 
 5      (a)  The present value of the consideration the lessee is
 
 6           obligated to pay the lessor for the right to possession
 
 7           and use of the goods is substantially equal to or is
 
 8           greater than the fair market value of the goods at the
 
 9           time the lease is entered into;
 
10      (b)  The lessee assumes risk of loss of the goods, or agrees
 
11           to pay taxes, insurance, filing, recording, or
 
12           registration fees, or service or maintenance costs with
 
13           respect to the goods;
 
14      (c)  The lessee has an option to renew the lease or to
 
15           become the owner of the goods;
 
16      (d)  The lessee has an option to renew the lease for a fixed
 
17           rent that is equal to or greater than the reasonably
 
18           predictable fair market rent for the use of the goods
 
19           for the term of the renewal at the time the option is
 
20           to be performed; or
 
21      (e)  The lessee has an option to become the owner of the
 
22           goods for a fixed price that is equal to or greater
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 239                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 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).] 490:90-201 or section 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."
 

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 243                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 244                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 provisions of this Article on parol or extrinsic evidence
 
 2 (section 490:2-202)."
 
 3      SECTION 14.  Section 490:2-502, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "§490:2-502  Buyer's right to goods on seller's repudiation,
 
 6 failure to deliver, or insolvency.(1)  Subject to [subsection]
 
 7 subsections (2) and (3) and even though the goods have not been
 
 8 shipped a buyer who has paid a part or all of the price of goods
 
 9 in which [he] the buyer has a special property under the
 
10 provisions of the immediately preceding section may on making and
 
11 keeping good a tender of any unpaid portion of their price
 
12 recover them from the seller if:
 
13      (a)  In the case of goods bought for personal, family, or
 
14           household purposes, the seller repudiates or fails to
 
15           deliver as required by the contract; or
 
16      (b)  In all cases, the seller becomes insolvent within ten
 
17           days after receipt of the first installment on their
 
18           price.
 
19      (2)  The buyer's right to recover the goods under subsection
 
20 (1)(a) vests upon acquisition of a special property, even if the
 
21 seller had not then repudiated or failed to deliver.
 
22      [(2)] (3)  If the identification creating [his] the buyer's
 

 
 
 
Page 245                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 special property has been made by the buyer [he], the buyer
 
 2 acquires the right to recover the goods only if
 
 3 they conform to the contract for sale."
 
 4      SECTION 15.  Section 490:2-716, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (3) to read as follows:
 
 6      "(3)  The buyer has a right of replevin for goods identified
 
 7 to the contract if after reasonable effort [he] the buyer is
 
 8 unable to effect cover for such goods or the circumstances
 
 9 reasonably indicate that such effort will be unavailing or if the
 
10 goods have been shipped under reservation and satisfaction of the
 
11 security interest in them has been made or tendered. In the case
 
12 of goods bought for personal, family, or household purposes, the
 
13 buyer's right of replevin vests upon acquisition of a special
 
14 property, even if the seller had not then repudiated or failed to
 
15 deliver."
 
16      SECTION 16.  Section 490:2A-103, Hawaii Revised Statutes, is
 
17 amended by amending subsection (c) to read as follows:
 
18      "(c)  The following definitions in other Articles apply to
 
19 this Article:
 
20      "Account".  Section [490:9-106.] 490:2-102(a).
 
21      "Between merchants".  Section 490:2-104(3).
 
22      "Buyer".  Section 490:2-103(1)(a).
 

 
 
 
Page 246                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1      "Chattel paper".  Section [490:9-105(1)(b).] 490:9-102(a).
 
 2      "Consumer goods".  Section [490:9-109(1).] 490:9-102(a).
 
 3      "Document".  Section [490:9-105(1)(f).] 490:9-102(a).
 
 4      "Entrusting".  Section 490:2-403(3).
 
 5      ["General intangibles".  Section 490:9-106.
 
 6      "General intangible".  Section 490:9-1-2(a).
 
 7      "Good faith".  Section 490:2-103(1)(b).
 
 8      "Instrument".  Section [490:9-105(1)(j).] 490:9-102(a).
 
 9      "Merchant".  Section 490:2-104(1).
 
10      "Mortgage".  Section [490:9-105(1)(k).] 490:9-102(a).
 
11      "Pursuant to commitment".  Section [490:9-105(1)(l).]
 
12 490:9-102(a).
 
13      "Receipt".  Section 490:2-103(1)(c).
 
14      "Sale".  Section 490:2-106(1).
 
15      "Sale on approval".  Section 490:2-326.
 
16      "Sale or return".  Section 490:2-326.
 
17      "Seller".  Section 490:2-103(1)(d).
 
18      SECTION 17.  Section 490:2A-303, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "§490:2A-303  Alienability of party's interest under lease
 
21 contract or of lessor's residual interest in goods; delegation of
 
22 performance; transfer of rights.(a)  As used in this section,
 

 
 
 
Page 247                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 248                                                   
                                     S.B. NO.           2276
                                                        
                                                        

 
 1 either party to the lease contract in violation of the provision.
 
 2 Neither the granting nor the enforcement of a security interest
 
 3 in (i) the lessor's interest under the lease contract or (ii) the
 
 4 lessor's residual interest in the goods is a transfer that
 
 5 materially impairs the prospect of obtaining return performance
 
 6 by, materially changes the duty of, or materially increases the
 
 7 burden or risk imposed on, the lessee within the purview of
 
 8 subsection (e) unless, and then only to the extent that, there is
 
 9 an actual delegation of a material performance of the lessor.
 
10      (d)] (c)  A provision in a lease agreement which (i)
 
11 prohibits a transfer of a right to damages for default with
 
12 respect to the whole lease contract or of a right to payment
 
13 arising out of the transferor's due performance of the
 
14 transferor's entire obligation, or (ii) makes such a transfer an
 
15 event of default, is not enforceable, and such a transfer is not
 
16 a transfer that materially impairs the prospect of obtaining
 
17 return performance by, materially changes the duty of, or
 
18 materially increases the burden or risk imposed on, the other
 
19 party to the lease contract within the purview of subsection
 
20 [(e).] (d).
 
21      [(e)] (d)  Subject to [subsections] subsection (c) and
 
22 [(d):] section 490:9-407:
 

 
 
 
Page 249                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 250                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 251                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 252                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
Page 253                                                   
                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1           and
 
 2      (3)  The security interest has priority over conflicting
 
 3           perfected security interests in the item, accompanying
 
 4           documents, or proceeds."
 
 5      SECTION 21.  Section 490:7-503, Hawaii Revised Statutes, is
 
 6 amended by amending subsection (1) to read as follows:
 
 7      "(1)  A document of title confers no right in goods against
 
 8 a person who before issuance of the document had a legal interest
 
 9 or a perfected security interest in them and who neither
 
10      (a)  Delivered or entrusted them or any document of title
 
11           covering them to the bailor or [his] the bailor's
 
12           nominee with actual or apparent authority to ship,
 
13           store or sell or with power to obtain delivery under
 
14           this Article (section 490:7-403) or with power of
 
15           disposition under this chapter (sections 490:2-403 and
 
16           [490:9-307)] 490:9-320) or other statute or rule of
 
17           law; nor
 
18      (b)  Acquiesced in the procurement by the bailor or [his]
 
19           the bailor's nominee of any document of title."
 
20      SECTION 22.  Section 490:8-103, Hawaii Revised Statutes, is
 
21 amended by amending subsection (f) to read as follows:
 
22      "(f)  A commodity contract, as defined in section
 

 
 
 
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 1 [490:9-115,] 490:9-102(a), is not a security or a financial
 
 2 asset."
 
 3      SECTION 23.  Section 490:8-106, Hawaii Revised Statutes, is
 
 4 amended as follows:
 
 5      1.  By amending subsection (d) to read:
 
 6      "(d)  A purchaser has "control" of a security entitlement
 
 7 if:
 
 8      (1)  The purchaser becomes the entitlement holder; or
 
 9      (2)  The securities intermediary has agreed that it will
 
10           comply with entitlement orders originated by the
 
11           purchaser without further consent by the entitlement
 
12           holder[.]; or
 
13      (3)  Another person has control of the security entitlement
 
14           on behalf of the purchaser or, having previously
 
15           acquired control of the security entitlement,
 
16           acknowledges that it has control on behalf of the
 
17           purchaser."
 
18      2.  By amending subsection (f) to read:
 
19      "(f)  A purchaser who has satisfied the requirements of
 
20 subsection [(c)(2)] (c) or [(d)(2)] (d) has control, even if the
 
21 registered owner in the case of subsection [(c)(2)] (c) or the
 
22 entitlement holder in the case of subsection [(d)(2)] (d) retains
 

 
 
 
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 1 the right to make substitutions for the uncertificated security
 
 2 or security entitlement, to originate instructions or entitlement
 
 3 orders to the issuer or securities intermediary, or otherwise to
 
 4 deal with the uncertificated security or security entitlement."
 
 5      SECTION 24.  Section 490:8-110, Hawaii Revised Statutes, is
 
 6 amended by amending subsection (e) to read as follows:
 
 7      "(e)  The following rules determine a "securities
 
 8 intermediary's jurisdiction" for purposes of this section:
 
 9      (1)  If an agreement between the securities intermediary and
 
10           its entitlement holder [specifies that it is governed
 
11           by the law of a particular jurisdiction,] governing the
 
12           securities account expressly provides that a particular
 
13           jurisdiction is the securities intermediary's
 
14           jurisdiction for purposes of this part, this article,
 
15           or this chapter, that jurisdiction is the securities
 
16           intermediary's jurisdiction.
 
17      (2)  If paragraph (1) does not apply and an agreement
 
18           between the securities intermediary and its entitlement
 
19           holder governing the securities account expressly
 
20           provides that the agreement is governed by the law of a
 
21           particular jurisdiction, that jurisdiction is the
 
22           securities intermediary's jurisdiction.
 

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 1           provided in paragraph (3),] none of the preceding
 
 2           paragraphs applies, the securities intermediary's
 
 3           jurisdiction is the jurisdiction in which [is located]
 
 4           the chief executive office of the securities
 
 5           intermediary[.] is located."
 
 6      SECTION 25.  Section 490:8-301, Hawaii Revised Statutes, is
 
 7 amended by amending subsection (a) to read as follows:
 
 8      "(a)  Delivery of a certificated security to a purchaser
 
 9 occurs when:
 
10      (1)  The purchaser acquires possession of the security
 
11           certificate;
 
12      (2)  Another person, other than a securities intermediary,
 
13           either acquires possession of the security certificate
 
14           on behalf of the purchaser or, having previously
 
15           acquired possession of the certificate, acknowledges
 
16           that it holds for the purchaser; or
 
17      (3)  A securities intermediary acting on behalf of the
 
18           purchaser acquires possession of the security
 
19           certificate, only if the certificate is in registered
 
20           form and [has been] is (i) registered in the name of
 
21           the purchaser, (ii) payable to the order of the
 
22           purchaser, or (iii) specially indorsed to the purchaser
 

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

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

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

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

 
 
 
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                                     S.B. NO.           2276
                                                        
                                                        

 
 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 financing statement.  Except as specified in this subsection, the
 
14 provisions of section [490:9-403(3)] 490:9-515 for continuation
 
15 statements apply to such a financing statement."
 
16      SECTION 30.  Article 9 of chapter 490, Hawaii Revised
 
17 Statutes, in effect on June 30, 2001, is repealed.
 
18      SECTION 31.  Statutory material to be repealed is bracketed,
 
19 except that bracketed instructions in the forms and the "end of
 
20 form" notations in sections 490:9-613 and 490:9-614 in section 1
 
21 of this Act shall not be repealed.  New statutory material is
 
22 underscored, except that the underscoring in the forms in section
 
23 1 of this Act shall be set forth as part of the forms.
 

 
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 1      SECTION 32.  This Act shall take effect on July 1, 2001. 
 
 2 
 
 3                           INTRODUCED BY: ________________________