An Act concerning the uniform commercial code; amending K.S.A. 40-2a20, as amended by section 1 of 1996 House Bill No. 2713, 84-1-206, 84-2-512, 84-9-104 and 84-9-106 and K.S.A. 1995 Supp. 84-1-105, 84-4-104, 84-9-103, 84-9-105, 84-9-203, 84-9-301, 84- 9-302, 84-9-304, 84-9-305, 84-9-306, 84-9-309 and 84-9-312 and repealing the existing sections; also repealing K.S.A. 84-5-101 through 84-5-113, 84-5-115 through 84-5-117, 84-8-101 and 84-8-303 and K.S.A. 1995 Supp. 84-5-114, 84-8-102 through 84-8-107, 84- 8-108, as amended by section 2 of 1996 House Bill No. 2713, 84-8-109, 84-8-201 through 84-8-208, 84-8-301, 84-8-302, 84-8-304 through 84-8-321 and 84-8-401 through 84-8- 408.

Be it enacted by the Legislature of the State of Kansas:

New Section 1. (UCC 5-101.) This article may be cited as Uniform Commercial Code-Letters of Credit.

New Sec. 2. (UCC 5-102.) (a) In this article:

(1) ``Adviser'' means a person who, at the request of the issuer, a confirmer, or another adviser, notifies or requests another adviser to no- tify the beneficiary that a letter of credit has been issued, confirmed or amended.

(2) ``Applicant'' means a person at whose request or for whose ac- count a letter of credit is issued. The term includes a person who requests an issuer to issue a letter of credit on behalf of another if the person making the request undertakes an obligation to reimburse the issuer.

(3) ``Beneficiary'' means a person who under the terms of a letter of credit is entitled to have its complying presentation honored. The term includes a person to whom drawing rights have been transferred under a transferable letter of credit.

(4) ``Confirmer'' means a nominated person who undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another.

(5) ``Dishonor'' of a letter of credit means failure timely to honor or to take an interim action, such as acceptance of a draft, that may be required by the letter of credit.

(6) ``Document'' means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion (i) which is presented in a written or other medium permitted by the letter of credit or, unless pro- hibited by the letter of credit, by the standard practice referred to in section 8(e) and (ii) which is capable of being examined for compliance with the terms and conditions of the letter of credit. A document may not be oral.

(7) ``Good faith'' means honesty in fact in the conduct or transaction concerned.

(8) ``Honor'' of a letter of credit means performance of the issuer's undertaking in the letter of credit to pay or deliver an item of value. Unless the letter of credit otherwise provides, ``honor'' occurs:

(i) Upon payment;

(ii) if the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment; or

(iii) if the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance.

(9) ``Issuer'' means a bank or other person that issues a letter of credit, but does not include an individual who makes an engagement for per- sonal, family or household purposes.

(10) ``Letter of credit'' means a definite undertaking that satisfies the requirements of section 4 by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value.

(11) ``Nominated person'' means a person whom the issuer (i) des- ignates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit and (ii) undertakes by agreement or custom and practice to reimburse.

(12) ``Presentation'' means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit.

(13) ``Presenter'' means a person making a presentation as or on be- half of a beneficiary or nominated person.

(14) ``Record'' means information that is inscribed on a tangible me- dium, or that is stored in an electronic or other medium and is retrievable in perceivable form.

(15) ``Successor of a beneficiary'' means a person who succeeds to substantially all of the rights of a beneficiary by operation of law, including a corporation with or into which the beneficiary has been merged or consolidated, an administrator, executor, personal representative, trustee in bankruptcy, debtor in possession, liquidator and receiver.

(b) Definitions in other articles applying to this article and the sec- tions in which they appear are:

``Accept'' or ``Acceptance''  K.S.A. 84-3-409

``Value''                    K.S.A. 84-3-303, 84-4-211

(c) Article 1 contains certain additional general definitions and prin- ciples of construction and interpretation applicable throughout this arti- cle.

New Sec. 3. (UCC 5-103.) (a) This article applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.

(b) The statement of a rule in this article does not by itself require, imply or negate application of the same or a different rule to a situation not provided for, or to a person not specified, in this article.

(c) With the exception of this subsection, subsections (a) and (d), sections 2(a)(9) and (10), 6(d) and 14(d), and except to the extent pro- hibited in sections 2(3) and 17(d), the effect of this article may be varied by agreement or by a provision stated or incorporated by reference in an undertaking. A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this article.

(d) Rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, perform- ance or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrange- ments between the issuer and the applicant and between the applicant and the beneficiary.

New Sec. 4. (UCC 5-104.) A letter of credit, confirmation, advice, transfer, amendment or cancellation may be issued in any form that is a record and is authenticated (i) by a signature or (ii) in accordance with the agreement of the parties or the standard practice referred to in section 8(e).

New Sec. 5. (UCC 5-105.) Consideration is not required to issue, amend, transfer or cancel a letter of credit, advice or confirmation.

New Sec. 6. (UCC 5-106.) (a) A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the ben- eficiary. A letter of credit is revocable only if it so provides.

(b) After a letter of credit is issued, rights and obligations of a ben- eficiary, applicant, confirmer, and issuer are not affected by an amend- ment or cancellation to which that person has not consented except to the extent the letter of credit provides that it is revocable or that the issuer may amend or cancel the letter of credit without that consent.

(c) If there is no stated expiration date or other provision that deter- mines its duration, a letter of credit expires one year after its stated date of issuance or, if none is stated, after the date on which it is issued.

(d) A letter of credit that states that it is perpetual expires five years after its stated date of issuance, or if none is stated, after the date on which it is issued.

New Sec. 7. (UCC 5-107.) (a) A confirmer is directly obligated on a letter of credit and has the rights and obligations of an issuer to the extent of its confirmation. The confirmer also has rights against and obligations to the issuer as if the issuer were an applicant and the confirmer had issued the letter of credit at the request and for the account of the issuer.

(b) A nominated person who is not a confirmer is not obligated to honor or otherwise give value for a presentation.

(c) A person requested to advise may decline to act as an adviser. An adviser that is not a confirmer is not obligated to honor or give value for a presentation. An adviser undertakes to the issuer and to the beneficiary accurately to advise the terms of the letter of credit, confirmation, amend- ment or advice received by that person and undertakes to the beneficiary to check the apparent authenticity of the request to advise. Even if the advice is inaccurate, the letter of credit, confirmation or amendment is enforceable as issued.

(d) A person who notifies a transferee beneficiary of the terms of a letter of credit, confirmation, amendment or advice has the rights and obligations of an adviser under subsection (c). The terms in the notice to the transferee beneficiary may differ from the terms in any notice to the transferor beneficiary to the extent permitted by the letter of credit, con- firmation, amendment or advice received by the person who so notifies.

New Sec. 8. (UCC 5-108.) (a) Except as otherwise provided in sec- tion 9, an issuer shall honor a presentation that, as determined by the standard practice referred to in subsection (e), appears on its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise provided in section 13 and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.

(b) An issuer has a reasonable time after presentation, but not beyond the end of the seventh business day of the issuer after the day of its receipt of documents:

(1) To honor;

(2) if the letter of credit provides for honor to be completed more than seven business days after presentation, to accept a draft or incur a deferred obligation; or

(3) to give notice to the presenter of discrepancies in the presenta- tion.

(c) Except as otherwise provided in subsection (d), an issuer is pre- cluded from asserting as a basis for dishonor any discrepancy if timely notice is not given, or any discrepancy not stated in the notice if timely notice is given.

(d) Failure to give the notice specified in subsection (b) or to mention fraud, forgery, or expiration in the notice does not preclude the issuer from asserting as a basis for dishonor fraud or forgery as described in section 9(a) or expiration of the letter of credit before presentation.

(e) An issuer shall observe standard practice of financial institutions that regularly issue letters of credit. Determination of the issuer's obser- vance of the standard practice is a matter of interpretation for the court. The court shall offer the parties a reasonable opportunity to present ev- idence of the standard practice.

(f) An issuer is not responsible for:

(1) The performance or nonperformance of the underlying contract, arrangement or transaction;

(2) an act or omission of others; or

(3) observance or knowledge of the usage of a particular trade other than the standard practice referred to in subsection (e).

(g) If an undertaking constituting a letter of credit under section 2(a)(10) contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.

(h) An issuer that has dishonored a presentation shall return the doc- uments or hold them at the disposal of, and send advice to that effect to, the presenter.

(i) An issuer that has honored a presentation as permitted or required by this article:

(1) Is entitled to be reimbursed by the applicant in immediately avail- able funds not later than the date of its payment of funds;

(2) takes the documents free of claims of the beneficiary or presenter;

(3) is precluded from asserting a right of recourse on a draft under K.S.A. 84-3-414 and 84-3-415, and amendments thereto;

(4) except as otherwise provided in sections 10 and 17, is precluded from restitution of money paid or other value given by mistake to the extent the mistake concerns discrepancies in the documents or tender which are apparent on the face of the presentation; and

(5) is discharged to the extent of its performance under the letter of credit unless the issuer honored a presentation in which a required sig- nature of a beneficiary was forged.

New Sec. 9. (UCC 5-109.) (a) If a presentation is made that appears on its face strictly to comply with the terms and conditions of the letter of credit, but a required document is forged or materially fraudulent, or honor of the presentation would facilitate a material fraud by the bene- ficiary on the issuer or applicant:

(1) The issuer shall honor the presentation, if honor is demanded by (i) a nominated person who has given value in good faith and without notice of forgery or material fraud, (ii) a confirmer who has honored its confirmation in good faith, (iii) a holder in due course of a draft drawn under the letter of credit which was taken after acceptance by the issuer or nominated person, or (iv) an assignee of the issuer's or nominated person's deferred obligation that was taken for value and without notice of forgery or material fraud after the obligation was incurred by the issuer or nominated person; and

(2) the issuer, acting in good faith, may honor or dishonor the pres- entation in any other case.

(b) If an applicant claims that a required document is forged or ma- terially fraudulent or that honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant, a court of competent jurisdiction may temporarily or permanently enjoin the issuer from honoring a presentation or grant similar relief against the issuer or other persons only if the court finds that:

(1) The relief is not prohibited under the law applicable to an ac- cepted draft or deferred obligation incurred by the issuer;

(2) a beneficiary, issuer or nominated person who may be adversely affected is adequately protected against loss that it may suffer because the relief is granted;

(3) all of the conditions to entitle a person to relief under the law of this state have been met; and

(4) on the basis of the information submitted to the court, the appli- cant is more likely than not to succeed under its claim of forgery or material fraud and the person demanding honor does not qualify for pro- tection under subsection (a)(1).

New Sec. 10. (UCC 5-110.) (a) If its presentation is honored, the beneficiary warrants:

(1) To the issuer, any other person to whom presentation is made, and the applicant that there is no fraud or forgery of the kind described in section 9(a); and

(2) to the applicant that the drawing does not violate any agreement between the applicant and beneficiary or any other agreement intended by them to be augmented by the letter of credit.

(b) The warranties in subsection (a) are in addition to warranties aris- ing under article 3, 4, 7 and 8 because of the presentation or transfer of documents covered by any of those articles.

New Sec. 11. (UCC 5-111.) (a) If an issuer wrongfully dishonors or repudiates its obligation to pay money under a letter of credit before presentation, the beneficiary, successor or nominated person presenting on its own behalf may recover from the issuer the amount that is the subject of the dishonor or repudiation. If the issuer's obligation under the letter of credit is not for the payment of money, the claimant may obtain specific performance or, at the claimant's election, recover an amount equal to the value of performance from the issuer. In either case, the claimant may also recover incidental but not consequential damages. The claimant is not obligated to take action to avoid damages that might be due from the issuer under this subsection. If, although not obligated to do so, the claimant avoids damages, the claimant's recovery from the issuer must be reduced by the amount of damages avoided. The issuer has the burden of proving the amount of damages avoided. In the case of repudiation the claimant need not present any document.

(b) If an issuer wrongfully dishonors a draft or demand presented under a letter of credit or honors a draft or demand in breach of its obligation to the applicant, the applicant may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach.

(c) If an adviser or nominated person other than a confirmer breaches an obligation under this article or an issuer breaches an obligation not covered in subsection (a) or (b), a person to whom the obligation is owed may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach. To the extent of the confirmation, a confirmer has the liability of an issuer specified in this subsection and subsections (a) and (b).

(d) An issuer, nominated person or adviser who is found liable under subsection (a), (b) or (c) shall pay interest on the amount owed thereunder from the date of wrongful dishonor or other appropriate date.

(e) Reasonable attorney's fees and other expenses of litigation must be awarded to the prevailing party in an action in which a remedy is sought under this article.

(f) Damages that would otherwise be payable by a party for breach of an obligation under this article may be liquidated by agreement or undertaking, but only in an amount or by a formula that is reasonable in light of the harm anticipated.

New Sec./007006/(UCC 5-112.) (a) Except as otherwise provided in sec- tion 13, unless a letter of credit provides that it is transferable, the right of a beneficiary to draw or otherwise demand performance under a letter of credit may not be transferred.

(b) Even if a letter of credit provides that it is transferable, the issuer may refuse to recognize or carry out a transfer if:

(1) The transfer would violate applicable law; or

(2) the transferor or transferee has failed to comply with any require- ment stated in the letter of credit or any other requirement relating to transfer imposed by the issuer which is within the standard practice re- ferred to in section 8(e) or is otherwise reasonable under the circum- stances.

New Sec./007006/(UCC 5-113.) (a) A successor of a beneficiary may con- sent to amendments, sign and present documents, and receive payment or other items of value in the name of the beneficiary without disclosing its status as a successor.

(b) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in its own name as the disclosed successor of the beneficiary. Except as otherwise provided in subsection (e), an issuer shall recognize a disclosed successor of a beneficiary as beneficiary in full substitution for its pre- decessor upon compliance with the requirements for recognition by the issuer of a transfer of drawing rights by operation of law under the stan- dard practice referred to in section 8(e) or, in the absence of such a practice, compliance with other reasonable procedures sufficient to pro- tect the issuer.

(c) An issuer is not obligated to determine whether a purported suc- cessor is a successor of a beneficiary or whether the signature of a pur- ported successor is genuine or authorized.

(d) Honor of a purported successor's apparently complying presen- tation under subsection (a) or (b) has the consequences specified in sec- tion 8(i) even if the purported successor is not the successor of a bene- ficiary. Documents signed in the name of the beneficiary or of a disclosed successor by a person who is neither the beneficiary nor the successor of the beneficiary are forged documents for the purposes of section 9.

(e) An issuer whose rights of reimbursement are not covered by sub- section (d) or substantially similar law and any confirmer or nominated person may decline to recognize a presentation under subsection (b).

(f) A beneficiary whose name is changed after the issuance of a letter of credit has the same rights and obligations as a successor of a beneficiary under this section.

New Sec./007006/(UCC 5-114.) (a) In this section, ``proceeds of a letter of credit'' means the cash, check, accepted draft or other item of value paid or delivered upon honor or giving of value by the issuer of any nominated person under the letter of credit. The term does not include a beneficiary's drawing rights or documents presented by the beneficiary.

(b) A beneficiary may assign its right to part or all of the proceeds of a letter of credit. The beneficiary may do so before presentation as a present assignment of its right to receive proceeds contingent upon its compliance with the terms and conditions of the letter of credit.

(c) An issuer or nominated person need not recognize an assignment of proceeds of a letter of credit until it consents to the assignment.

(d) An issuer or nominated person has no obligation to give or with- hold its consent to an assignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the assignee possesses and exhibits the letter of credit and presentation of the letter of credit is a condition to honor.

(e) Rights of a transferee beneficiary or nominated person are inde- pendent of the beneficiary's assignment of the proceeds of a letter of credit and are superior to the assignee's right to the proceeds.

(f) Neither the rights recognized by this section between an assignee and an issuer, transferee beneficiary, or nominated person nor the issuer's or nominated person's payment of proceeds to an assignee or a third person affect the rights between the assignee and any person other than the issuer, transferee beneficiary or nominated person. The mode of cre- ating and perfecting a security interest in or granting an assignment of a beneficiary's rights to proceeds is governed by article 9 or other law. Against persons other than the issuer, transferee beneficiary or nominated person, the rights and obligations arising upon the creation of a security interest or other assignment of a beneficiary's right to proceeds and its perfection are governed by article 9 or other law.

New Sec./007006/(UCC 5-115.) An action to enforce a right or obligation arising under this article must be commenced within one year after the expiration date of the relevant letter of credit or one year after the cause of action accrues, whichever occurs later. A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach.

New Sec./007006/(UCC 5-116.) (a) The liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction chosen by an agreement in the form of a record signed or otherwise authenticated by the affected parties in the manner provided in section 4 or by a provision in the person's letter of credit, confirmation, or other undertaking. The jurisdiction whose law is chosen need not bear any relation to the transaction.

(b) Unless subsection (a) applies, the liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction in which the person is located. The person is considered to be located at the address indicated in the person's undertaking. If more than one address is indicated, the person is considered to be located at the address from which the person's undertaking was issued. For the purpose of jurisdiction, choice of law, and recognition of interbranch let- ters of credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical entities and a bank is considered to be located at the place where its relevant branch is considered to be located under this subsection.

(c) Except as otherwise provided in this subsection, the liability of an issuer, nominated person, or adviser is governed by any rules of custom or practice, such as the uniform customs and practice for documentary credits, to which the letter of credit, confirmation or other undertaking is expressly made subject. If (i) this article would govern the liability of an issuer, nominated person, or adviser under subsection (a) or (b), (ii) the relevant undertaking incorporates rules of custom or practice, and (iii) there is conflict between this article and those rules as applied to that undertaking, those rules govern except to the extent of any conflict with the nonvariable provisions specified in section 3(c).

(d) If there is conflict between this article and article 3, 4, 4A, or 9, this article governs.

(e) The forum for settling disputes arising out of an undertaking within this article may be chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection (a).

New Sec./007006/(UCC 5-117.) (a) An issuer that honors a beneficiary's presentation is subrogated to the rights of the beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obli- gation owed to the beneficiary and of the appliant to the same extent as if the issuer were the secondary obligor of the underlying obligation owed to the applicant.

(b) An applicant that reimburses an issuer is subrogated to the rights of the issuer against any beneficiary, presenter or nominated person to the same extent as if the applicant were the secondary obligor of the obligations owed to the issuer and has the rights of subrogation of the issuer to the rights of the beneficiary stated in subsection (a).

(c) A nominated person who pays or gives value against a draft or demand presented under a letter of credit is subrogated to the rights of:

(1) The issuer against the applicant to the same extent as if the nom- inated person were a secondary obligor of the obligation owed to the issuer by the applicant;

(2) the beneficiary to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the beneficiary; and

(3) the applicant to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the applicant.

(d) Notwithstanding any agreement or term to the contrary, the rights of subrogation stated in subsections (a) and (b) do not arise until the issuer honors the letter of credit or otherwise pays and the rights in subsection (c) do not arise until the nominated person pays or otherwise gives value. Until then, the issuer, nominated person and the applicant do not derive under this section present or prospective rights forming the basis of a claim, defense or excuse.

New Sec./007006/This act applies to a letter of credit that is issued on or after the effective date of this act. This act does not apply to a transaction, event, obligation or duty arising out of or associated with a letter of credit that was issued before the effective date of this act.

New Sec. 19. A transaction arising out of or associated with a letter of credit that was issued before the effective date of this act and the rights, obligations and interests flowing from that transaction are governed by any statute or other law amended or repealed by this act as if repeal or amendment had not occurred and may be terminated, completed, con- summated or enforced under that statute or other law.

Sec. 20. K.S.A. 1995 Supp. 84-1-105 is hereby amended to read as follows: 84-1-105. (1) Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement this act applies to transactions bearing an appropriate relation to this state.

(2) Where one of the following provisions of this act specifies the applicable law, that provision governs and a contrary agreement is effec- tive only to the extent permitted by the law (including the conflict of laws rules) so specified:

Rights of creditors against sold goods. K.S.A. 84-2-402 and amend- ments thereto.

Applicability of the article on leases. K.S.A. 1995 Supp. 84-2a-105 and 84-2a-106, and amendments thereto.

Applicability of the article on bank deposits and collections. K.S.A. 84- 4-102 and amendments thereto.

Applicability of the article on investment securities. K.S.A. 84-8-106 section 37 and amendments thereto.

Perfection provisions of the article on secured transactions. K.S.A. 84- 9-103 and amendments thereto.

Governing law in the article on funds transfers. K.S.A. 1995 Supp. 84- 4a-507 and amendments thereto.

Letters of credit. Section 16 and amendments thereto.

Sec. 21. K.S.A. 84-2-512 is hereby amended to read as follows: 84- 2-512. (1) Where the contract requires payment before inspection non- conformity of the goods does not excuse the buyer from so making pay- ment unless

(a) the nonconformity appears without inspection; or

(b) despite tender of the required documents the circumstances would justify injunction against honor under the provisions of this act (section 9(b)).

(2) Payment pursuant to subsection (1) does not constitute an accep- tance of goods or impair the buyer's right to inspect or any of his the buyer's remedies.

Sec. 22. K.S.A. 1995 Supp. 84-9-103 is hereby amended to read as follows: 84-9-103. (1) (a) This subsection applies to documents and, in- struments, rights to proceeds of written letters of credit, and to goods other than those covered by a certificate of title described in subsection (2), mobile goods described in subsection (3), and minerals described in subsection (5).

(b) Except as otherwise provided in this subsection, perfection and the effect of perfection or nonperfection of a security interest in collateral are governed by the law of the jurisdiction where the collateral is when the last event occurs on which is based the assertion that the security interest is perfected or unperfected.

(c) If the parties to a transaction creating a purchase money security interest in goods in one jurisdiction understand at the time that the se- curity interest attaches that the goods will be kept in another jurisdiction, then the law of the other jurisdiction governs the perfection and the effect of perfection or nonperfection of the security interest from the time it attaches until 30 days after the debtor receives possession of the goods and thereafter if the goods are taken to the other jurisdiction before the end of the thirty-day period.

(d) When collateral is brought into and kept in this state while subject to a security interest perfected under the law of the jurisdiction from which the collateral was removed, the security interest remains perfected, but if action is required by part 3 of this article to perfect the security interest, (i) if the action is not taken before the expiration of the period of perfection in the other jurisdiction or the end of four months after the collateral is brought into this state, whichever period first expires, the security interest becomes unperfected at the end of that period and is thereafter deemed to have been unperfected as against a person who became a purchaser after removal; (ii) if the action is taken before the expiration of the period specified in subparagraph (i), the security interest continues perfected thereafter; (iii) for the purpose of priority over a buyer of consumer goods (subsection (2) of K.S.A. 84-9-307 and amend- ments thereto), the period of the effectiveness of a filing in the jurisdic- tion from which the collateral is removed is governed by the rules with respect to perfection in subparagraphs (i) and (ii).

(2) (a) This subsection applies to goods covered by a certificate of title issued under a statute of this state or of another jurisdiction under the law of which indication of a security interest on the certificate is required as a condition of perfection.

(b) Except as otherwise provided in this subsection, perfection and the effect of perfection or nonperfection of the security interest are gov- erned by the law (including the conflict of laws rules) of the jurisdiction issuing the certificate until four months after the goods are removed from that jurisdiction and thereafter until the goods are registered in another jurisdiction, but in any event not beyond surrender of the certificate. After the expiration of that period, the goods are not covered by the certificate of title within the meaning of this section.

(c) Except with respect to the rights of a buyer described in the next paragraph, a security interest, perfected in another jurisdiction otherwise than by notation on a certificate of title, in goods brought into this state and thereafter covered by a certificate of title issued by this state is subject to the rules stated in paragraph (d) of subsection (1).

(d) If goods are brought into this state while a security interest therein is perfected in any manner under the law of the jurisdiction from which the goods are removed and a certificate of title is issued by this state and the certificate does not show that the goods are subject to the security interest or that they may be subject to security interests not shown on the certificate, the security interest is subordinate to the rights of a buyer of the goods who is not in the business of selling goods of that kind to the extent that the buyer gives value and receives delivery of the goods after issuance of the certificate and without knowledge of the security interest.

(3) (a) This subsection applies to accounts (other than an account described in subsection (5) on minerals) and general intangibles (other than uncertified securities) and to goods which are mobile and which are of a type normally used in more than one jurisdiction, such as motor vehicles, trailers, rolling stock, airplanes, shipping containers, road build- ing and construction machinery and commercial harvesting machinery and the like, if the goods are equipment or are inventory leased or held for lease by the debtor to others, and are not covered by a certificate of title described in subsection (2).

(b) The law (including the conflict of laws rules) of the jurisdiction in which the debtor is located governs the perfection and the effect of perfection or nonperfection of the security interest.

(c) If, however, the debtor is located in a jurisdiction which is not a part of the United States, and which does not provide for perfection of the security interest by filing or recording in that jurisdiction, the law of the jurisdiction in the United States in which the debtor has its major executive office in the United States governs the perfection and the effect of perfection or nonperfection of the security interest through filing. In the alternative, if the debtor is located in a jurisdiction which is not a part of the United States or Canada and the collateral is accounts or general intangibles for money due or to become due, the security interest may be perfected by notification to the account debtor. As used in this para- graph, ``United States'' includes its territories and possessions and the Commonwealth of Puerto Rico.

(d) A debtor shall be deemed located at the debtor's place of business if the debtor has one, at the debtor's chief executive office if the debtor has more than one place of business, otherwise at the debtor's residence. If, however, the debtor is a foreign air carrier under the federal aviation act of 1958, as amended, it shall be deemed located at the designated office of the agent upon whom service of process may be made on behalf of the foreign air carrier.

(e) A security interest perfected under the law of the jurisdiction of the location of the debtor is perfected until the expiration of four months after a change of the debtor's location to another jurisdiction, or until perfection would have ceased by the law of the first jurisdiction, which- ever period first expires. Unless perfected in the new jurisdiction before the end of that period, it becomes unperfected thereafter and is deemed to have been unperfected as against a person who became a purchaser after the change.

(4) The rules stated for goods in subsection (1) apply to a possessory security interest in chattel paper. The rules stated for accounts in sub- section (3) apply to a nonpossessory security interest in chattel paper, but the security interest may not be perfected by notification to the account debtor.

(5) Perfection and the effect of perfection or nonperfection of a se- curity interest which is created by a debtor who has an interest in minerals or the like (including oil and gas) before extraction and which attaches thereto as extracted, or which attaches to an account resulting from the sale thereof at the wellhead or minehead are governed by the law (in- cluding the conflict of laws rules) of the jurisdiction wherein the wellhead or minehead is located.

(6) The law (including the conflict of laws rules) of the jurisdiction of organization of the issuer governs the perfection and the effect of perfection or nonperfection of a security interest in uncertificated secu- rities. (a) This subsection applies to investment property.

(b) Except as otherwise provided in paragraph (f), during the time that a security certificate is located in a jurisdiction, perfection of a se- curity interest, the effect of perfection or nonperfection, and the priority of a security interest in the certificated security represented thereby are governed by the local law of that jurisdiction.

(c) Except as otherwise provided in paragraph (f), perfection of a security interest, the effect of perfection or nonperfection, and the priority of a security interest in an uncertificated security are governed by the local law of the issuer's jurisdiction as specified in subsection (d) of section 37.

(d) Except as otherwise provided in paragraph (f), perfection of a security interest, the effect of perfection or nonperfection, and the priority of a security interest in a security entitlement or securities account are governed by the local law of the securities intermediary's jurisdiction as specified in subsection (e) of section 37.

(e) Except as otherwise provided in paragraph (f), perfection of a security interest, the effect of perfection or nonperfection, and the priority of a security interest in a commodity contract or commodity account are governed by the local law of the commodity intermediary's jurisdiction. The following rules determine a ``commodity intermediary's jurisdiction'' for purposes of this paragraph:

(i) If an agreement between the commodity intermediary and com- modity customer specifies that it is governed by the law of a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdic- tion.

(ii) If an agreement between the commodity intermediary and com- modity customer does not specify the governing law as provided in sub- paragraph (i), but expressly specifies that the commodity account is main- tained at an office in a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.

(iii) If an agreement between the commodity intermediary and com- modity customer does not specify a jurisdiction as provided in subpara- graphs (i) or (ii), the commodity intermediary's jurisdiction is the juris- diction in which is located the office identified in an account statement as the office serving the commodity customer's account.

(iv) If an agreement between the commodity intermediary and com- modity customer does not specify a jurisdiction as provided in subpara- graphs (i) or (ii) and an account statement does not identify an office serving the commodity customer's account as provided in subparagraph (iii), the commodity intermediary's jurisdiction is the jurisdiction in which is located the chief executive office of the commodity intermediary.

(f) Perfection of a security interest by filing, automatic perfection of a security interest in investment property granted by a broker or securities intermediary, and automatic perfection of a security interest in a com- modity contract or commodity account granted by a commodity inter- mediary are governed by the local law of the jurisdiction in which the debtor is located.

Sec. 23. K.S.A. 84-9-104 is hereby amended to read as follows: 84- 9-104. This article does not apply

(a) to a security interest subject to any statute of the United States such as the ship mortgage act, 1920, to the extent that such statute governs the rights of parties to and third parties affected by transactions in par- ticular types of property; or

(b) to a landlord's lien; or

(c) to a lien given by statute or other rule of law for services or ma- terials except as provided in section 84-9-310 on priority of such liens; or

(d) to a transfer of a claim for wages, salary or other compensation of an employee; or

(e) to a transfer by a government or governmental subdivision or agency; or

(f) to a sale of accounts or chattel paper as part of a sale of the busi- ness out of which they arose, or an assignment of accounts or chattel paper which is for the purpose of collection only, or a transfer of a right to payment under a contract to an assignee who is also to do the per- formance under the contract or a transfer of a single account to an as- signee in whole or partial satisfaction of a preexisting indebtedness; or

(g) to a transfer of an interest or claim in or under any policy of insurance, except as provided with respect to proceeds (section 84-9-306) and priorities in proceeds (section 84-9-312); or

(h) to a right represented by a judgment (other than a judgment taken on a right to payment which was collateral); or

(i) to any right of setoff; or

(j) except to the extent that provision is made for fixtures in section 84-9-313, to the creation or transfer of an interest in or lien on real estate, including a lease or rents thereunder; or

(k) to a transfer in whole or in part of any claim arising out of tort; or

(l) to a transfer of an interest in any deposit account (subsection (1) of section 84-9-105), except as provided with respect to proceeds (section 84-9-312).; or

(m) to a transfer of an interest in a letter of credit other than the rights to proceeds of a written letter of credit.

Sec. 24. K.S.A. 1995 Supp. 84-9-105 is hereby amended to read as follows: 84-9-105. (1) In this article unless the context otherwise requires:

(a) ``Account debtor'' means the person who is obligated on an ac- count, chattel paper or general intangible.

(b) ``Chattel paper'' means a writing or writings which evidence both a monetary obligation and a security interest in or a lease of specific goods, but a charter or other contract involving the use or hire of a vessel is not chattel paper. When a transaction is evidenced both by such a security agreement or a lease and by an instrument or a series of instruments, the group of writings taken together constitutes chattel paper.

(c) ``Collateral'' means the property subject to a security interest, and includes accounts and chattel paper which have been sold.

(d) ``Debtor'' means the person who owes payment or other perform- ance of the obligation secured, whether or not he owns or has rights in the collateral, and includes the seller of accounts or chattel paper. Where the debtor and the owner of the collateral are not the same person, the term ``debtor'' means the owner of the collateral in any provision of the article dealing with the collateral, the obligor in any provision dealing with the obligation, and may include both where the context so requires.

(e) ``Deposit account'' means a demand, time, savings, passbook or like account maintained with bank, savings and loan association, credit union or like organization, other than an account evidenced by a certifi- cate of deposit.

(f) ``Document'' means document of title as defined in the general definitions of article 1 (K.S.A. 84-1-201, and amendments thereto), and a receipt of the kind described in subsection (2) of K.S.A. 84-7-201, and amendments thereto.

(g) ``Encumbrance'' includes real estate mortgages and other liens on real estate and all other rights in real estate that are not ownership inter- ests.

(h) ``Goods'' includes all things which are movable at the time the security interest attaches or which are fixtures (K.S.A. 84-9-313, and amendments thereto), but does not include money, documents, instru- ments, investment property, commodity contracts, accounts, chattel pa- per, general intangibles, or minerals or the like (including oil and gas) before extraction. ``Goods'' also include standing timber which is to be cut and removed under a conveyance or contract for sale, the unborn young of animals and growing crops.

(i) ``Instrument'' means a negotiable instrument (defined in K.S.A. 84-3-104, and amendments thereto), or a certificated security (defined in K.S.A. 84-8-102, and amendments thereto), a writing that would other- wise qualify as a certificate of deposit (defined in subsection (j) of K.S.A. 84-3-104, and amendments thereto) but for the fact that the writing con- tains a limitation on transfer, or any other writing which evidences a right to the payment of money and is not itself a security agreement or lease and is of a type which is in ordinary course of business transferred by delivery with any necessary indorsement or assignment. The term does not include investment property.

(j) ``Mortgage'' means a consensual interest created by a real estate mortgage, a trust deed on real estate or the like.

(k) An advance is made ``pursuant to commitment'' if the secured party has bound the secured party's self to make it, whether or not a subsequent event of default or other event not within the secured party's control has relieved or may relieve the secured party from the obligation.

(l) ``Security agreement'' means an agreement which creates or pro- vides for a security interest.

(m) ``Secured party'' means a lender, seller or other person in whose favor there is a security interest, including a person to whom accounts or chattel paper have been sold. When the holders of obligations issued under an indenture of trust, equipment trust agreement or the like are represented by a trustee or other person, the representative is the secured party.

(n) ``Transmitting utility'' means any person primarily engaged in the railroad, street railway or trolley bus business, the electric or electronics communications transmission business, the transmission of goods by pipe- line, the transmission or the production and transmission of electricity, steam, gas or water or the provision of sewer service.

(2) Other definitions applying to this article and the sections in which they appear are:

``Account.'' K.S.A. 84-9-106, and amendments thereto.

``Attach.'' K.S.A. 84-9-203, and amendments thereto.

``Commodity contract.'' K.S.A. 9-115, and amendments thereto.

``Commodity customer.'' K.S.A. 9-115, and amendments thereto.

``Commodity intermediary.'' K.S.A. 9-115, and amendments thereto.

``Construction mortgage.'' Subsection (1) of K.S.A. 84-9-313, and amendments thereto.

``Consumer goods.'' Subsection (1) of K.S.A. 84-9-109, and amend- ments thereto.

``Control.'' K.S.A. 9-115, and amendments thereto.

``Equipment.'' Subsection (2) of K.S.A. 84-9-109, and amendments thereto.

``Farm products.'' Subsection (3) of K.S.A. 84-9-109, and amendments thereto.

``Fixture.'' K.S.A. 84-9-313, and amendments thereto.

``Fixture filing.'' K.S.A. 84-9-313, and amendments thereto.

``General intangibles.'' K.S.A. 84-9-106, and amendments thereto.

``Inventory.'' Subsection (4) of K.S.A. 84-9-109, and amendments thereto.

``Investment property.'' K.S.A. 9-115, and amendments thereto.

``Lien creditor.'' Subsection (3) of K.S.A. 84-9-301, and amendments thereto.

``Proceeds.'' Subsection (1) of K.S.A. 84-9-306, and amendments thereto.

``Purchase money security interest.'' K.S.A. 84-9-107, and amendments thereto.

``United States.'' K.S.A. 84-9-103, and amendments thereto.

(3) The following definitions in other articles apply to this article:

``Broker.'' section 29.

``Certificated security.'' section 29.

``Check.'' K.S.A. 84-3-104, and amendments thereto.

``Clearing corporation.'' section 29.

``Contract for sale.'' K.S.A. 84-2-106, and amendments thereto.

``Control.'' section 33.

``Delivery.'' section 54.

``Entitlement holder.'' section 29.

``Financial asset.'' section 29.

``Holder in due course.'' K.S.A. 84-3-302, and amendments thereto.

``Letter of credit.'' Section 2, and amendments thereto.

``Note.'' K.S.A. 84-3-104, and amendments thereto.

``Proceeds of a letter of credit.'' Section 14(a), and amendments thereto.

``Sale.'' K.S.A. 84-2-106, and amendments thereto.

``Securities intermediary.'' section 29.

``Security.'' section 29.

``Security certificate.'' section 29.

``Security entitlement.'' section 29.

``Uncertificated security.'' section 29.

(4) In addition article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.

Sec. 25. K.S.A. 84-9-106 is hereby amended to read as follows: 84- 9-106. ``Account'' means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance. ``General in- tangibles'' means any personal property (including things in action) other than goods, accounts, chattel paper, documents, instruments, rights to proceeds of written letters of credit, investment property and money. All rights earned or unearned under a charter or other contract involving the use or hire of a vessel and all rights incident to the charter or contract are accounts.

Sec. 26. K.S.A. 1995 Supp. 84-9-304 is hereby amended to read as follows: 84-9-304. (1) A security interest in chattel paper or negotiable documents may be perfected by filing. A security interest in the rights to proceeds of a written letter of credit can be perfected only by the secured party's taking possession of the letter of credit. A security interest in money or instruments (other than certificated securities or instruments which constitute part of chattel paper) can be perfected only by the se- cured party's taking possession, except as provided in subsections (4) and (5) and subsection (2) and (3) of K.S.A. 84-9-306 and amendments thereto on proceeds.

(2) During the period that goods are in possession of the issuer of a negotiable document therefor, a security interest in the goods is perfected by perfecting a security interest in the document, and any security interest in the goods otherwise perfected during such period is subject thereto.

(3) A security interest in goods in the possession of a bailee other than one who has issued a negotiable document therefor is perfected by issuance of a document in the name of the secured party or by the bailee's receipt of notification of the secured party's interest or by filing as to the goods.

(4) A security interest in instruments (other than certificated securi- ties) , certificated securities or negotiable documents is perfected without filing or the taking of possession for a period of 21 days from the time it attaches to the extent that it arises for new value given under a written security agreement.

(5) A security interest remains perfected for a period of 21 days with- out filing where a secured party having a perfected security interest in an instrument (other than a certificated security), a certificated security, a negotiable document or goods in possession of a bailee other than one who has issued a negotiable document therefor:

(a) Makes available to the debtor the goods or documents represent- ing the goods for the purpose of ultimate sale or exchange or for the purpose of loading, unloading, storing, shipping, transshipping, manufac- turing, processing or otherwise dealing with them in a manner prelimi- nary to their sale or exchange but priority between conflicting security interests in the goods is subject to subsection (3) of K.S.A. 84-9-312 and amendments thereto; or

(b) delivers the instrument to the debtor for the purpose of ultimate sale or exchange or of presentation, collection, renewal or registration of transfer.

(6) After the twenty-one-day 21-day period in subsections (4) and (5) perfection depends upon compliance with applicable provisions of this article.

Sec. 27. K.S.A. 1995 Supp. 84-9-305 is hereby amended to read as follows: 84-9-305. A security interest in letters of credit and advices of credit (subsection (2)(a) of K.S.A. 84-5-116 and amendments thereto), goods, instruments (other than certificated securities), money, negotiable documents or chattel paper may be perfected by the secured party's tak- ing possession of the collateral. A security interest in the rights to proceeds of a written letter of credit may be perfected by the secured party's taking possession of the letter of credit. If such collateral other than goods cov- ered by a negotiable document is held by a bailee, the secured party is deemed to have possession from the time the bailee receives notification of the secured party's interest. A security interest is perfected by posses- sion from the time possession is taken without relation back and continues only so long as possession is retained, unless otherwise specified in this article. The security interest may be otherwise perfected as provided in this article before or after the period of possession by the secured party.

New Section 28. (UCC 8-101). This article may be cited as the uni- form commercial code--investment securities.

New Sec. 29. (UCC 8-102). (a) In this article:

(1) ``Adverse claim'' means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer or deal with the financial asset.

(2) ``Bearer form,'' as applied to a certificated security, means a form in which the security is payable to the bearer of the security certificate according to its terms but not by reason of an indorsement.

(3) ``Broker'' means a person defined as a broker or dealer under the federal securities laws, but without excluding a bank acting in that capac- ity.

(4) ``Certificated security'' means a security that is represented by a certificate.

(5) ``Clearing corporation'' means:

(i) A person that is registered as a ``clearing agency'' under the federal securities laws;

(ii) a federal reserve bank; or

(iii) any other person that provides clearance or settlement services with respect to financial assets that would require it to register as a clear- ing agency under the federal securities laws but for an exclusion or ex- emption from the registration requirement, if its activities as a clearing corporation, including promulgation of rules, are subject to regulation by a federal or state governmental authority.

(6) ``Communicate'' means to:

(i) Send a signed writing; or

(ii) transmit information by any mechanism agreed upon by the per- sons transmitting and receiving the information.

(7) ``Entitlement holder'' means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary. If a person acquires a security enti- tlement by virtue of subsection (b)(2) or (3) of section 68, that person is the entitlement holder.

(8) ``Entitlement order'' means a notification communicated to a se- curities intermediary directing transfer or redemption of a financial asset to which the entitlement holder has a security entitlement.

(9) ``Financial asset,'' except as otherwise provided in section 30, means:

(i) A security;

(ii) an obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, which is, or is of a type, dealt in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment; or

(iii) any property that is held by a securities intermediary for another person in a securities account if the securities intermediary has expressly agreed with the other person that the property is to be treated as a fi- nancial asset under this article. As context requires, the term means either the interest itself or the means by which a person's claim to it is evidenced, including a certificated or uncertificated security, a security certificate or a security entitlement.

(10) ``Good faith,'' for purposes of the obligation of good faith in the performance or enforcement of contracts or duties within this article, means honesty in fact and the observance of reasonable commercial stan- dards of fair dealing.

(11) ``Indorsement'' means a signature that alone or accompanied by other words is made on a security certificate in registered form or on a separate document for the purpose of assigning, transferring or redeem- ing the security or granting a power to assign, transfer or redeem it.

(12) ``Instruction'' means a notification communicated to the issuer of an uncertificated security which directs that the transfer of the security be registered or that the security be redeemed.

(13) ``Registered form,'' as applied to a certificated security, means a form in which:

(i) The security certificate specifies a person entitled to the security; and

(ii) a transfer of the security may be registered upon books main- tained for that purpose by or on behalf of the issuer, or the security certificate so states.

(14) ``Securities intermediary'' means:

(i) A clearing corporation; or

(ii) a person, including a bank or broker, that in the ordinary course of business maintains securities accounts for others and is acting in that capacity.

(15) ``Security,'' except as otherwise provided in section 30, means an obligation of an issuer or a share, participation or other interest in an issuer or in property or an enterprise of an issuer:

(i) Which is represented by a security certificate in bearer or regis- tered form, or the transfer of which may be registered upon books main- tained for that purpose by or on behalf of the issuer;

(ii) which is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests or obligations; and

(iii) which:

(A) Is, or is of a type, dealt in or traded on securities exchanges or securities markets; or

(B) is a medium for investment and by its terms expressly provides that it is a security governed by this article.

(16) ``Security certificate'' means a certificate representing a security.

(17) ``Security entitlement'' means the rights and property interest of an entitlement holder with respect to a financial asset specified in sections 68 through 78.

(18) ``Uncertificated security'' means a security that is not repre- sented by a certificate.

(b) Other definitions applying to this article and the sections in which they appear are:

Appropriate person                 section 34

Control                            section 33

Delivery                           section 54

Investment company security        section 30

Issuer                             section 44

Overissue                          section 53

Protected purchaser                section 56

Securities account                 section 68

(c) In addition, article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.

(d) The characterization of a person, business or transaction for pur- poses of this article does not determine the characterization of the person, business or transaction for purposes of any other law, regulation or rule.

New Sec. 30. (UCC 8-103). (a) A share or similar equity interest issued by a corporation, business trust, joint stock company or similar entity is a security.

(b) An ``investment company security'' is a security. ``Investment company security'' means a share or similar equity interest issued by an entity that is registered as an investment company under the federal in- vestment company laws, an interest in a unit investment trust that is so registered, or a face-amount certificate issued by a face-amount certificate company that is so registered. Investment company security does not include an insurance policy or endowment policy or annuity contract is- sued by an insurance company.

(c) An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in se- curities markets, its terms expressly provide that it is a security governed by this article, or it is an investment company security. However, an in- terest in a partnership or limited liability company is a financial asset if it is held in a securities account.

(d) A writing that is a security certificate is governed by this article and not by article 3, even though it also meets the requirements of that article. However, a negotiable instrument governed by article 3 is a fi- nancial asset if it is held in a securities account.

(e) An option or similar obligation issued by a clearing corporation to its participants is not a security, but is a financial asset.

(f) A commodity contract, as defined in section 42, is not a security or a financial asset.

New Sec. 31. (UCC 8-104). (a) A person acquires a security or an interest therein, under this article, if:

(1) The person is a purchaser to whom a security is delivered pur- suant to section 54; or

(2) the person acquires a security entitlement to the security pursuant to section 68.

(b) A person acquires a financial asset, other than a security, or an interest therein, under this article, if the person acquires a security en- titlement to the financial asset.

(c) A person who acquires a security entitlement to a security or other financial asset has the rights specified in sections 68 through 78, but is a purchaser of any security, security entitlement or other financial asset held by the securities intermediary only to the extent provided in section 70.

(d) Unless the context shows that a different meaning is intended, a person who is required by other law, regulation, rule, or agreement to transfer, deliver, present, surrender, exchange or otherwise put in the possession of another person a security or financial asset satisfies that requirement by causing the other person to acquire an interest in the security or financial asset pursuant to subsection (a) or (b).

New Sec. 32. (UCC 8-105). (a) A person has notice of an adverse claim if:

(1) The person knows of the adverse claim;

(2) the person is aware of facts sufficient to indicate that there is a significant probability that the adverse claim exists and deliberately avoids information that would establish the existence of the adverse claim; or

(3) the person has a duty, imposed by statute or regulation, to inves- tigate whether an adverse claim exists, and the investigation so required would establish the existence of the adverse claim.

(b) Having knowledge that a financial asset or interest therein is or has been transferred by a representative imposes no duty of inquiry into the rightfulness of a transaction and is not notice of an adverse claim. However, a person who knows that a representative has transferred a financial asset or interest therein in a transaction that is, or whose pro- ceeds are being used, for the individual benefit of the representative or otherwise in breach of duty has notice of an adverse claim.

(c) An act or event that creates a right to immediate performance of the principal obligation represented by a security certificate or sets a date on or after which the certificate is to be presented or surrendered for redemption or exchange does not itself constitute notice of an adverse claim except in the case of a transfer more than:

(1) One year after a date set for presentment or surrender for re- demption or exchange; or

(2) six months after a date set for payment of money against pres- entation or surrender of the certificate, if money was available for pay- ment on that date.

(d) A purchaser of a certificated security has notice of an adverse claim if the security certificate:

(1) Whether in bearer or registered form, has been indorsed for col- lection or for surrender or for some other purpose not involving transfer; or

(2) is in bearer form and has on it an unambiguous statement that it is the property of a person other than the transferor, but the mere writing of a name on the certificate is not such a statement.

(e) Filing of a financing statement under article 9 is not notice of an adverse claim to a financial asset.

New Sec. 33. (UCC 8-106). (a) A purchaser has control of a cer- tificated security in bearer form if the certificated security is delivered to the purchaser.

(b) A purchaser has control of a certificated security in registered form if the certificated security is delivered to the purchaser, and:

(1) The certificate is indorsed to the purchaser or in blank by an effective indorsement; or

(2) the certificate is registered in the name of the purchaser, upon original issue or registration of transfer by the issuer.

(c) A purchaser has control of an uncertificated security if:

(1) The uncertificated security is delivered to the purchaser; or

(2) the issuer has agreed that it will comply with instructions origi- nated by the purchaser without further consent by the registered owner.

(d) A purchaser has control of a security entitlement if:

(1) The purchaser becomes the entitlement holder; or

(2) the securities intermediary has agreed that it will comply with entitlement orders originated by the purchaser without further consent by the entitlement holder.

(e) If an interest in a security entitlement is granted by the entitle- ment holder to the entitlement holder's own securities intermediary, the securities intermediary has control.

(f) A purchaser who has satisfied the requirements of subsection (c)(2) or (d)(2) has control even if the registered owner in the case of subsection (c)(2) or the entitlement holder in the case of subsection (d)(2) retains the right to make substitutions for the uncertificated security or security entitlement, to originate instructions or entitlement orders to the issuer or securities intermediary or otherwise to deal with the uncertifi- cated security or security entitlement.

(g) An issuer or a securities intermediary may not enter into an agree- ment of the kind described in subsection (c)(2) or (d)(2) without the consent of the registered owner or entitlement holder, but an issuer or a securities intermediary is not required to enter into such an agreement even though the registered owner or entitlement holder so directs. An issuer or securities intermediary that has entered into such an agreement is not required to confirm the existence of the agreement to another party unless requested to do so by the registered owner or entitlement holder.

New Sec. 34. (UCC 8-107). (a) ``Appropriate person'' means:

(1) With respect to an indorsement, the person specified by a security certificate or by an effective special indorsement to be entitled to the security;

(2) with respect to an instruction, the registered owner of an uncer- tificated security;

(3) with respect to an entitlement order, the entitlement holder;

(4) if the person designated in paragraph (1), (2) or (3) is deceased, the designated person's successor taking under other law or the desig- nated person's personal representative acting for the estate of the dece- dent; or

(5) if the person designated in paragraph (1), (2) or (3) lacks capacity, the designated person's guardian, conservator or other similar represen- tative who has power under other law to transfer the security or financial asset.

(b) An indorsement, instruction or entitlement order is effective if:

(1) It is made by the appropriate person;

(2) it is made by a person who has power under the law of agency to transfer the security or financial asset on behalf of the appropriate person, including, in the case of an instruction or entitlement order, a person who has control under section (c)(2) or (d)(2) of section 33; or

(3) the appropriate person has ratified it or is otherwise precluded from asserting its ineffectiveness.

(c) An indorsement, instruction or entitlement order made by a rep- resentative is effective even if:

(1) The representative has failed to comply with a controlling instru- ment or with the law of the state having jurisdiction of the representative relationship, including any law requiring the representative to obtain court approval of the transaction; or

(2) the representative's action in making the indorsement, instruction or entitlement order or using the proceeds of the transaction is otherwise a breach of duty.

(d) If a security is registered in the name of or specially indorsed to a person described as a representative, or if a securities account is main- tained in the name of a person described as a representative, an indorse- ment, instruction or entitlement order made by the person is effective even though the person is no longer serving in the described capacity.

(e) Effectiveness of an indorsement, instruction or entitlement order is determined as of the date the indorsement, instruction or entitlement order is made, and an indorsement, instruction or entitlement order does not become ineffective by reason of any later change of circumstances.

New Sec. 35. (UCC 8-108). (a) A person who transfers a certifi- cated security to a purchaser for value warrants to the purchaser, and an indorser, if the transfer is by indorsement, warrants to any subsequent purchaser, that:

(1) The certificate is genuine and has not been materially altered;

(2) the transferor or indorser does not know of any fact that might impair the validity of the security;

(3) there is no adverse claim to the security;

(4) the transfer does not violate any restriction on transfer;

(5) if the transfer is by indorsement, the indorsement is made by an appropriate person, or if the indorsement is by an agent, the agent has actual authority to act on behalf of the appropriate person; and

(6) the transfer is otherwise effective and rightful.

(b) A person who originates an instruction for registration of transfer of an uncertificated security to a purchaser for value warrants to the pur- chaser that:

(1) The instruction is made by an appropriate person, or if the in- struction is by an agent, the agent has actual authority to act on behalf of the appropriate person;

(2) the security is valid;

(3) there is no adverse claim to the security; and

(4) at the time the instruction is presented to the issuer:

(i) The purchaser will be entitled to the registration of transfer;

(ii) the transfer will be registered by the issuer free from all liens, security interests, restrictions and claims other than those specified in the instruction;

(iii) the transfer will not violate any restriction on transfer; and

(iv) the requested transfer will otherwise be effective and rightful.

(c) A person who transfers an uncertificated security to a purchaser for value and does not originate an instruction in connection with the transfer warrants that:

(1) The uncertificated security is valid;

(2) there is no adverse claim to the security;

(3) the transfer does not violate any restriction on transfer; and

(4) the transfer is otherwise effective and rightful.

(d) A person who indorses a security certificate warrants to the issuer that:

(1) There is no adverse claim to the security; and

(2) the indorsement is effective.

(e) A person who originates an instruction for registration of transfer of an uncertificated security warrants to the issuer that:

(1) The instruction is effective; and

(2) at the time the instruction is presented to the issuer the purchaser will be entitled to the registration of transfer.

(f) A person who presents a certificated security for registration of transfer or for payment or exchange warrants to the issuer that the person is entitled to the registration, payment or exchange, but a purchaser for value and without notice of adverse claims to whom transfer is registered warrants only that the person has no knowledge of any unauthorized sig- nature in a necessary indorsement.

(g) If a person acts as agent of another in delivering a certificated security to a purchaser, the identity of the principal was known to the person to whom the certificate was delivered, and the certificate delivered by the agent was received by the agent from the principal or received by the agent from another person at the direction of the principal, the person delivering the security certificate warrants only that the delivering person has authority to act for the principal and does not know of any adverse claim to the certificated security.

(h) A secured party who redelivers a security certificate received, or after payment and on order of the debtor delivers the security certificate to another person, makes only the warranties of an agent under subsection (g).

(i) Except as otherwise provided in subsection (g), a broker acting for a customer makes to the issuer and a purchaser the warranties provided in subsections (a) through (f). A broker that delivers a security certificate to its customer, or causes its customer to be registered as the owner of an uncertificated security, makes to the customer the warranties provided in subsection (a) or (b), and has the rights and privileges of a purchaser under this section. The warranties of and in favor of the broker acting as an agent are in addition to applicable warranties given by and in favor of the customer.

New Sec. 36. (UCC 8-109). (a) A person who originates an en- titlement order to a securities intermediary warrants to the securities intermediary that:

(1) The entitlement order is made by an appropriate person, or if the entitlement order is by an agent, the agent has actual authority to act on behalf of the appropriate person; and

(2) there is no adverse claim to the security entitlement.

(b) A person who delivers a security certificate to a securities inter- mediary for credit to a securities account or originates an instruction with respect to an uncertificated security directing that the uncertificated se- curity be credited to a securities account makes to the securities inter- mediary the warranties specified in subsection (a) or (b) of section 35.

(c) If a securities intermediary delivers a security certificate to its entitlement holder or causes its entitlement holder to be registered as the owner of an uncertificated security, the securities intermediary makes to the entitlement holder the warranties specified in subsection (a) or (b) of section 35.

New Sec. 37. (UCC 8-110). (a) The local law of the issuer's ju- risdiction, as specified in subsection (d), governs:

(1) The validity of a security;

(2) the rights and duties of the issuer with respect to registration of transfer;

(3) the effectiveness of registration of transfer by the issuer;

(4) whether the issuer owes any duties to an adverse claimant to a security; and

(5) whether an adverse claim can be asserted against a person to whom transfer of a certificated or uncertificated security is registered or a person who obtains control of an uncertificated security.

(b) The local law of the securities intermediary's jurisdiction, as spec- ified in subsection (e), governs:

(1) Acquisition of a security entitlement from the securities inter- mediary;

(2) the rights and duties of the securities intermediary and entitle- ment holder arising out of a security entitlement;

(3) whether the securities intermediary owes any duties to an adverse claimant to a security entitlement; and

(4) whether an adverse claim can be asserted against a person who acquires a security entitlement from the securities intermediary or a per- son who purchases a security entitlement or interest therein from an entitlement holder.

(c) The local law of the jurisdiction in which a security certificate is located at the time of delivery governs whether an adverse claim can be asserted against a person to whom the security certificate is delivered.

(d) ``Issuer's jurisdiction'' means the jurisdiction under which the is- suer of the security is organized or, if permitted by the law of that juris- diction, the law of another jurisdiction specified by the issuer. An issuer organized under the law of this state may specify the law of another jurisdiction as the law governing the matters specified in subsection (a)(2) through (5).

(e) The following rules determine a securities intermediary's juris- diction for purposes of this section:

(1) If an agreement between the securities intermediary and its en- titlement holder specifies that it is governed by the law of a particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction.

(2) If an agreement between the securities intermediary and its en- titlement holder does not specify the governing law as provided in para- graph (1), but expressly specifies that the securities account is maintained at an office in a particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction.

(3) If an agreement between the securities intermediary and its en- titlement holder does not specify a jurisdiction as provided in paragraph (1) or (2), the securities intermediary's jurisdiction is the jurisdiction in which is located the office identified in an account statement as the office serving the entitlement holder's account.

(4) If an agreement between the securities intermediary and its en- titlement holder does not specify a jurisdiction as provided in paragraph (1) or (2) and an account statement does not identify an office serving the entitlement holder's account as provided in paragraph (3), the secu- rities intermediary's jurisdiction is the jurisdiction in which is located the chief executive office of the securities intermediary.

(f) A securities intermediary's jurisdiction is not determined by the physical location of certificates representing financial assets, or by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement or by the location of facilities for data processing or other recordkeeping con- cerning the account.

New Sec. 38. (UCC 8-111). A rule adopted by a clearing corpora- tion governing rights and obligations among the clearing corporation and its participants in the clearing corporation is effective even if the rule conflicts with this act and affects another party who does not consent to the rule.

New Sec. 39. (UCC 8-112). (a) The interest of a debtor in a cer- tificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, ex- cept as otherwise provided in subsection (d). However, a certificated se- curity for which the certificate has been surrendered to the issuer may be reached by a creditor by legal process upon the issuer.

(b) The interest of a debtor in an uncertificated security may be reached by a creditor only by legal process upon the issuer at its chief executive office in the United States, except as otherwise provided in subsection (d).

(c) The interest of a debtor in a security entitlement may be reached by a creditor only by legal process upon the securities intermediary with whom the debtor's securities account is maintained, except as otherwise provided in subsection (d).

(d) The interest of a debtor in a certificated security for which the certificate is in the possession of a secured party or in an uncertificated security registered in the name of a secured party or a security entitlement maintained in the name of a secured party, may be reached by a creditor by legal process upon the secured party.

(e) A creditor whose debtor is the owner of a certificated security, uncertificated security or security entitlement is entitled to aid from a court of competent jurisdiction, by injunction or otherwise, in reaching the certificated security, uncertificated security or security entitlement, or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by other legal process.

New Sec. 40. (UCC 8-113). A contract or modification of a con- tract for the sale or purchase of a security is enforceable whether or not there is a writing signed or record authenticated by a party against whom enforcement is sought, even if the contract or modification is not capable of performance within one year of its making.

New Sec. 41. (UCC 8-114). The following rules apply in an action on a certificated security against the issuer:

(a) Unless specifically denied in the pleadings, each signature on a security certificate or in a necessary indorsement is admitted.

(b) If the effectiveness of a signature is put in issue, the burden of establishing effectiveness is on the party claiming under the signature, but the signature is presumed to be genuine or authorized.

(c) If signatures on a security certificate are admitted or established, production of the certificate entitles a holder to recover on it unless the defendant establishes a defense or a defect going to the validity of the security.

(d) If it is shown that a defense or defect exists, the plaintiff has the burden of establishing that the plaintiff or some person under whom the plaintiff claims is a person against whom the defense or defect cannot be asserted.

New Sec. 42. (UCC 8-115). A securities intermediary that has transferred a financial asset pursuant to an effective entitlement order, or a broker or other agent or bailee that has dealt with a financial asset at the direction of its customer or principal, is not liable to a person having an adverse claim to the financial asset, unless the securities intermediary, or broker or other agent or bailee:

(a) Took the action after it had been served with an injunction, re- straining order or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order or other legal process; or

(b) acted in collusion with the wrongdoer in violating the rights of the adverse claimant; or

(c) in the case of a security certificate that has been stolen, acted with notice of the adverse claim.

New Sec. 43. (UCC 8-116). A securities intermediary that receives a financial asset and establishes a security entitlement to the financial asset in favor of an entitlement holder is a purchaser for value of the financial asset. A securities intermediary that acquires a security entitle- ment to a financial asset from another securities intermediary acquires the security entitlement for value if the securities intermediary acquiring the security entitlement establishes a security entitlement to the financial asset in favor of an entitlement holder.

New Sec. 44. (UCC 8-201). (a) With respect to an obligation on or a defense to a security, an issuer includes a person that:

(1) Places or authorizes the placing of its name on a security certifi- cate, other than as authenticating trustee, registrar, transfer agent, or the like, to evidence a share, participation or other interest in its property or in an enterprise, or to evidence its duty to perform an obligation repre- sented by the certificate;

(2) creates a share, participation or other interest in its property or in an enterprise, or undertakes an obligation, that is an uncertificated security;

(3) directly or indirectly creates a fractional interest in its rights or property, if the fractional interest is represented by a security certificate; or

(4) becomes responsible for, or in place of, another person described as an issuer in this section.

(b) With respect to an obligation on or defense to a security, a guar- antor is an issuer to the extent of its guaranty, whether or not its obligation is noted on a security certificate.

(c) With respect to a registration of a transfer, issuer means a person on whose behalf transfer books are maintained.

New Sec. 45. (UCC 8-202). (a) Even against a purchaser for value and without notice, the terms of a certificated security include terms stated on the certificate and terms made part of the security by reference on the certificate to another instrument, indenture or document or to a constitution, statute, ordinance, rule, regulation, order, or the like, to the extent the terms referred to do not conflict with terms stated on the certificate. A reference under this subsection does not of itself charge a purchaser for value with notice of a defect going to the validity of the security, even if the certificate expressly states that a person accepting it admits notice. The terms of an uncertificated security include those stated in any instrument, indenture or document, or in a constitution, statute, ordinance, rule, regulation, order, or the like, pursuant to which the se- curity is issued.

(b) The following rules apply if an issuer asserts that a security is not valid:

(1) A security other than one issued by a government or governmental subdivision, agency or instrumentality, even though issued with a defect going to its validity, is valid in the hands of a purchaser for value and without notice of the particular defect unless the defect involves a vio- lation of a constitutional provision. In that case, the security is valid in the hands of a purchaser for value and without notice of the defect, other than one who takes by original issue.

(2) Paragraph (1) applies to an issuer that is a government or govern- mental subdivision, agency or instrumentality only if there has been sub- stantial compliance with the legal requirements governing the issue or the issuer has received a substantial consideration for the issue as a whole or for the particular security and a stated purpose of the issue is one for which the issuer has power to borrow money or issue the security.

(c) Except as otherwise provided in section 49, lack of genuineness of a certificated security is a complete defense, even against a purchaser for value and without notice.

(d) All other defenses of the issuer of a security, including nondelivery and conditional delivery of a certificated security, are ineffective against a purchaser for value who has taken the certificated security without no- tice of the particular defense.

(e) This section does not affect the right of a party to cancel a contract for a security when, as and if issued, or when distributed in the event of a material change in the character of the security that is the subject of the contract or in the plan or arrangement pursuant to which the security is to be issued or distributed.

(f) If a security is held by a securities intermediary against whom an entitlement holder has a security entitlement with respect to the security, the issuer may not assert any defense that the issuer could not assert if the entitlement holder held the security directly.

New Sec. 46. (UCC 8-203). After an act or event, other than a call that has been revoked, creating a right to immediate performance of the principal obligation represented by a certificated security or setting a date on or after which the security is to be presented or surrendered for re- demption or exchange, a purchaser is charged with notice of any defect in its issue or defense of the issuer, if the act or event:

(a) Requires the payment of money, the delivery of a certificated security, the registration of transfer of an uncertificated security, or any of them on presentation or surrender of the security certificate, the money or security is available on the date set for payment or exchange, and the purchaser takes the security more than one year after that date; or

(b) is not covered by this section and the purchaser takes the security more than two years after the date set for surrender or presentation or the date on which performance became due.

New Sec. 47. (UCC 8-204). A restriction on transfer of a security imposed by the issuer, even if otherwise lawful, is ineffective against a person without knowledge of the restriction unless:

(a) The security is certificated and the restriction is noted conspicu- ously on the security certificate; or

(b) the security is uncertificated and the registered owner has been notified of the restriction.

New Sec. 48. (UCC 8-205). An unauthorized signature placed on a security certificate before or in the course of issue is ineffective, but the signature is effective in favor of a purchaser for value of the certifi- cated security if the purchaser is without notice of the lack of authority and the signing has been done by:

(a) An authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security certificate or of similar security certificates, or the immediate preparation for signing of any of them; or

(b) an employee of the issuer, or of any of the persons listed in sub- section (a), entrusted with responsible handling of the security certificate.

New Sec. 49. (UCC 8-206). (a) If a security certificate contains the signatures necessary to its issue or transfer but is incomplete in any other respect:

(1) Any person may complete it by filling in the blanks as authorized; and

(2) even if the blanks are incorrectly filled in, the security certificate as completed is enforceable by a purchaser who took it for value and without notice of the incorrectness.

(b) A complete security certificate that has been improperly altered, even if fraudulently, remains enforceable, but only according to its orig- inal terms.

New Sec. 50. (UCC 8-207). (a) Before due presentment for reg- istration of transfer of a certificated security in registered form or of an instruction requesting registration of transfer of an uncertificated secu- rity, the issuer or indenture trustee may treat the registered owner as the person exclusively entitled to vote, receive notifications, and otherwise exercise all the rights and powers of an owner.

(b) This article does not affect the liability of the registered owner of a security for a call, assessment, or the like.

New Sec. 51. (UCC 8-208). (a) A person signing a security cer- tificate as authenticating trustee, registrar, transfer agent, or the like, war- rants to a purchaser for value of the certificated security, if the purchaser is without notice of a particular defect, that:

(1) The certificate is genuine;

(2) the person's own participation in the issue of the security is within the person's capacity and within the scope of the authority received by the person from the issuer; and

(3) the person has reasonable grounds to believe that the certificated security is in the form and within the amount the issuer is authorized to issue.

(b) Unless otherwise agreed, a person signing under subsection (a) does not assume responsibility for the validity of the security in other respects.

New Sec. 52. (UCC 8-209). A lien in favor of an issuer upon a certificated security is valid against a purchaser only if the right of the issuer to the lien is noted conspicuously on the security certificate.

New Sec. 53. (UCC 8-210). (a) In this section, ``overissue'' means the issue of securities in excess of the amount the issuer has corporate power to issue, but an overissue does not occur if appropriate action has cured the overissue.

(b) Except as otherwise provided in subsections (c) and (d), the pro- visions of this article which validate a security or compel its issue or reissue do not apply to the extent that validation, issue or reissue would result in overissue.

(c) If an identical security not constituting an overissue is reasonably available for purchase, a person entitled to issue or validation may compel the issuer to purchase the security and deliver it if certificated or register its transfer if uncertificated, against surrender of any security certificate the person holds.

(d) If a security is not reasonably available for purchase, a person entitled to issue or validation may recover from the issuer the price the person or the last purchaser for value paid for it with interest from the date of the person's demand.

New Sec. 54. (UCC 8-301). (a) Delivery of a certificated security to a purchaser occurs when:

(1) The purchaser acquires possession of the security certificate;

(2) another person, other than a securities intermediary, either ac- quires possession of the security certificate on behalf of the purchaser or, having previously acquired possession of the certificate, acknowledges that it holds for the purchaser; or

(3) a securities intermediary acting on behalf of the purchaser ac- quires possession of the security certificate, only if the certificate is in registered form and has been specially indorsed to the purchaser by an effective indorsement.

(b) Delivery of an uncertificated security to a purchaser occurs when:

(1) The issuer registers the purchaser as the registered owner, upon original issue or registration of transfer; or

(2) another person, other than a securities intermediary, either be- comes the registered owner of the uncertificated security on behalf of the purchaser or, having previously become the registered owner, ac- knowledges that it holds for the purchaser.

New Sec. 55. (UCC 8-302). (a) Except as otherwise provided in subsections (b) and (c), upon delivery of a certificated or uncertificated security to a purchaser, the purchaser acquires all rights in the security that the transferor had or had power to transfer.

(b) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.

(c) A purchaser of a certificated security who as a previous holder had notice of an adverse claim does not improve its position by taking from a protected purchaser.

New Sec. 56. (UCC 8-303). (a) ``Protected purchaser'' means a purchaser of a certificated or uncertificated security, or of an interest therein, who:

(1) Gives value;

(2) does not have notice of any adverse claim to the security; and

(3) obtains control of the certificated or uncertificated security.

(b) In addition to acquiring the rights of a purchaser, a protected purchaser also acquires its interest in the security free of any adverse claim.

New Sec. 57. (UCC 8-304). (a) An indorsement may be in blank or special. An indorsement in blank includes an indorsement to bearer. A special indorsement specifies to whom a security is to be transferred or who has power to transfer it. A holder may convert a blank indorsement to a special indorsement.

(b) An indorsement purporting to be only of part of a security certif- icate representing units intended by the issuer to be separately transfer- able is effective to the extent of the indorsement.

(c) An indorsement, whether special or in blank, does not constitute a transfer until delivery of the certificate on which it appears or, if the indorsement is on a separate document, until delivery of both the docu- ment and the certificate.

(d) If a security certificate in registered form has been delivered to a purchaser without a necessary indorsement, the purchaser may become a protected purchaser only when the indorsement is supplied. However, against a transferor, a transfer is complete upon delivery and the pur- chaser has a specifically enforceable right to have any necessary indorse- ment supplied.

(e) An indorsement of a security certificate in bearer form may give notice of an adverse claim to the certificate, but it does not otherwise affect a right to registration that the holder possesses.

(f) Unless otherwise agreed, a person making an indorsement as- sumes only the obligations provided in section 35 and not an obligation that the security will be honored by the issuer.

New Sec. 58. (UCC 8-305). (a) If an instruction has been origi- nated by an appropriate person but is incomplete in any other respect, any person may complete it as authorized and the issuer may rely on it as completed, even though it has been completed incorrectly.

(b) Unless otherwise agreed, a person initiating an instruction as- sumes only the obligations imposed by section 35 and not an obligation that the security will be honored by the issuer.

New Sec. 59. (UCC 8-306). (a) A person who guarantees a sig- nature of an indorser of a security certificate warrants that at the time of signing:

(1) The signature was genuine;

(2) the signer was an appropriate person to indorse, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person; and

(3) the signer had legal capacity to sign.

(b) A person who guarantees a signature of the originator of an in- struction warrants that at the time of signing:

(1) The signature was genuine;

(2) the signer was an appropriate person to originate the instruction, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person, if the person specified in the instruction as the registered owner was, in fact, the registered owner, as to which fact the signature guarantor does not make a warranty; and

(3) the signer had legal capacity to sign.

(c) A person who specially guarantees the signature of an originator of an instruction makes the warranties of a signature guarantor under subsection (b) and also warrants that at the time the instruction is pre- sented to the issuer:

(1) The person specified in the instruction as the registered owner of the uncertificated security will be the registered owner; and

(2) the transfer of the uncertificated security requested in the instruc- tion will be registered by the issuer free from all liens, security interests, restrictions and claims other than those specified in the instruction.

(d) A guarantor under subsections (a) and (b) or a special guarantor under subsection (c) does not otherwise warrant the rightfulness of the transfer.

(e) A person who guarantees an indorsement of a security certificate makes the warranties of a signature guarantor under subsection (a) and also warrants the rightfulness of the transfer in all respects.

(f) A person who guarantees an instruction requesting the transfer of an uncertificated security makes the warranties of a special signature guarantor under subsection (c) and also warrants the rightfulness of the transfer in all respects.

(g) An issuer may not require a special guaranty of signature, a guar- anty of indorsement or a guaranty of instruction as a condition to regis- tration of transfer.

(h) The warranties under this section are made to a person taking or dealing with the security in reliance on the guaranty, and the guarantor is liable to the person for loss resulting from their breach. An indorser or originator of an instruction whose signature, indorsement or instruction has been guaranteed is liable to a guarantor for any loss suffered by the guarantor as a result of breach of the warranties of the guarantor.

New Sec. 60. (UCC 8-307). Unless otherwise agreed, the trans- feror of a security on due demand shall supply the purchaser with proof of authority to transfer or with any other requisite necessary to obtain registration of the transfer of the security, but if the transfer is not for value, a transferor need not comply unless the purchaser pays the nec- essary expenses. If the transferor fails within a reasonable time to comply with the demand, the purchaser may reject or rescind the transfer.

New Sec. 61. (UCC 8-401). (a) If a certificated security in reg- istered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register trans- fer of an uncertificated security, the issuer shall register the transfer as requested if:

(1) Under the terms of the security the person seeking registration of transfer is eligible to have the security registered in its name;

(2) the indorsement or instruction is made by the appropriate person or by an agent who has actual authority to act on behalf of the appropriate person;

(3) reasonable assurance is given that the indorsement or instruction is genuine and authorized (section 62);

(4) any applicable law relating to the collection of taxes has been complied with;

(5) the transfer does not violate any restriction on transfer imposed by the issuer in accordance with section 47;

(6) a demand that the issuer not register transfer has not become effective under section 63, or the issuer has complied with subsection (b) of section 63 but no legal process or indemnity bond is obtained as pro- vided in subsection (d) of section 63; and

(7) the transfer is in fact rightful or is to a protected purchaser.

(b) If an issuer is under a duty to register a transfer of a security, the issuer is liable to a person presenting a certificated security or an instruc- tion for registration or to the person's principal for loss resulting from unreasonable delay in registration or failure or refusal to register the transfer.

New Sec. 62. (UCC 8-402). (a) An issuer may require the follow- ing assurance that each necessary indorsement or each instruction is gen- uine and authorized:

(1) In all cases, a guaranty of the signature of the person making an indorsement or originating an instruction including, in the case of an instruction, reasonable assurance of identity;

(2) if the indorsement is made or the instruction is originated by an agent, appropriate assurance of actual authority to sign;

(3) if the indorsement is made or the instruction is originated by a fiduciary pursuant to subsection (a)(4) or (5) of section 35, appropriate evidence of appointment or incumbency;

(4) if there is more than one fiduciary, reasonable assurance that all who are required to sign have done so; and

(5) if the indorsement is made or the instruction is originated by a person not covered by another provision of this subsection, assurance appropriate to the case corresponding as nearly as may be to the provi- sions of this subsection.

(b) An issuer may elect to require reasonable assurance beyond that specified in this section.

(c) In this section:

(1) ``Guaranty of the signature'' means a guaranty signed by or on behalf of a person reasonably believed by the issuer to be responsible. An issuer may adopt standards with respect to responsibility if they are not manifestly unreasonable.

(2) Appropriate evidence of appointment or incumbency means:

(i) In the case of a fiduciary appointed or qualified by a court, a certificate issued by or under the direction or supervision of the court or an officer thereof and dated within 60 days before the date of presentation for transfer; or

(ii) in any other case, a copy of a document showing the appointment or a certificate issued by or on behalf of a person reasonably believed by an issuer to be responsible or, in the absence of that document or certif- icate, other evidence the issuer reasonably considered appropriate.

New Sec. 63. (UCC 8-403). (a) A person who is an appropriate person to make an indorsement or originate an instruction may demand that the issuer not register transfer of a security by communicating to the issuer a notification that identifies the registered owner and the issue of which the security is a part and provides an address for communications directed to the person making the demand. The demand is effective only if it is received by the issuer at a time and in a manner affording the issuer reasonable opportunity to act on it.

(b) If a certificated security in registered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register transfer of an uncertificated security after a demand that the issuer not register transfer has become effective, the issuer shall promptly communicate to (i) the person who initiated the demand at the address provided in the demand and (ii) the person who presented the security for registration of transfer or initiated the instruc- tion requesting registration of transfer a notification stating that:

(1) The certificated security has been presented for registration of transfer or instruction for registration of transfer of uncertificated security has been received;

(2) a demand that the issuer not register transfer had previously been received; and

(3) the issuer will withhold registration of transfer for a period of time stated in the notification in order to provide the person who initiated the demand an opportunity to obtain legal process or an indemnity bond.

(c) The period described in subsection (b)(3) may not exceed 30 days after the date of communication of the notification. A shorter period may be specified by the issuer if it is not manifestly unreasonable.

(d) An issuer is not liable to a person who initiated a demand that the issuer not register transfer for any loss the person suffers as a result of registration of a transfer pursuant to an effective indorsement or instruc- tion if the person who initiated the demand does not, within the time stated in the issuer's communication, either:

(1) Obtain an appropriate restraining order, injunction or other proc- ess from a court of competent jurisdiction enjoining the issuer from reg- istering the transfer; or

(2) file with the issuer an indemnity bond, sufficient in the issuer's judgment to protect the issuer and any transfer agent, registrar or other agent of the issuer involved from any loss it or they may suffer by refusing to register the transfer.

(e) This section does not relieve an issuer from liability for registering transfer pursuant to an indorsement or instruction that was not effective.

New Sec. 64. (UCC 8-404). (a) Except as otherwise provided in section 66, an issuer is liable for wrongful registration of transfer if the issuer has registered a transfer of a security to a person not entitled to it, and the transfer was registered:

(1) Pursuant to an ineffective indorsement or instruction;

(2) after a demand that the issuer not register transfer became effec- tive under subsection (a) of section 63 and the issuer did not comply with subsection (b) of section 63;

(3) after the issuer had been served with an injunction, restraining order or other legal process enjoining it from registering the transfer, issued by a court of competent jurisdiction, and the issuer had a reason- able opportunity to act on the injunction, restraining order or other legal process; or

(4) by an issuer acting in collusion with the wrongdoer.

(b) An issuer that is liable for wrongful registration of transfer under subsection (a) on demand shall provide the person entitled to the security with a like certificated or uncertificated security, and any payments or distributions that the person did not receive as a result of the wrongful registration. If an overissue would result, the issuer's liability to provide the person with a like security is governed by section 53.

(c) Except as otherwise provided in subsection (a) or in a law relating to the collection of taxes, an issuer is not liable to an owner or other person suffering loss as a result of the registration of a transfer of a se- curity if registration was made pursuant to an effective indorsement or instruction.

New Sec. 65. (UCC 8-405). (a) If an owner of a certificated se- curity, whether in registered or bearer form, claims that the certificate has been lost, destroyed or wrongfully taken, the issuer shall issue a new certificate if the owner:

(1) So requests before the issuer has notice that the certificate has been acquired by a protected purchaser;

(2) files with the issuer a sufficient indemnity bond; and

(3) satisfies other reasonable requirements imposed by the issuer.

(b) If, after the issue of a new security certificate, a protected pur- chaser of the original certificate presents it for registration of transfer, the issuer shall register the transfer unless an overissue would result. In that case, the issuer's liability is governed by section 53. In addition to any rights on the indemnity bond, an issuer may recover the new certif- icate from a person to whom it was issued or any person taking under that person, except a protected purchaser.

New Sec. 66. (UCC 8-406). If a security certificate has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the issuer of that fact within a reasonable time after the owner has notice of it and the issuer registers a transfer of the security before receiving notification, the owner may not assert against the issuer a claim for reg- istering the transfer under section 64 or a claim to a new security certif- icate under section 65.

New Sec. 67. (UCC 8-407). A person acting as authenticating trus- tee, transfer agent, registrar or other agent for an issuer in the registration of a transfer of its securities, in the issue of new security certificates or uncertificated securities, or in the cancellation of surrendered security certificates has the same obligation to the holder or owner of a certificated or uncertificated security with regard to the particular functions per- formed as the issuer has in regard to those functions.

New Sec. 68. (UCC 8-501). (a) ``Securities account'' means an account to which a financial asset is or may be credited in accordance with an agreement under which the person maintaining the account un- dertakes to treat the person for whom the account is maintained as en- titled to exercise the rights that comprise the financial asset.

(b) Except as otherwise provided in subsections (d) and (e), a person acquires a security entitlement if a securities intermediary:

(1) Indicates by book entry that a financial asset has been credited to the person's securities account;

(2) receives a financial asset from the person or acquires a financial asset for the person and, in either case, accepts it for credit to the person's securities account; or

(3) becomes obligated under other law, regulation or rule to credit a financial asset to the person's securities account.

(c) If a condition of subsection (b) has been met, a person has a security entitlement even though the securities intermediary does not itself hold the financial asset.

(d) If a securities intermediary holds a financial asset for another per- son, and the financial asset is registered in the name of, payable to the order of, or specially indorsed to the other person, and has not been indorsed to the securities intermediary or in blank, the other person is treated as holding the financial asset directly rather than as having a se- curity entitlement with respect to the financial asset.

(e) Issuance of a security is not establishment of a security entitle- ment.

New Sec. 69. (UCC 8-502). An action based on an adverse claim to a financial asset, whether framed in conversion, replevin, constructive trust, equitable lien or other theory may not be asserted against a person who acquires a security entitlement under section 68 for value and with- out notice of the adverse claim.

New Sec. 70. (UCC 8-503). (a) To the extent necessary for a se- curities intermediary to satisfy all security entitlements with respect to a particular financial asset, all interests in that financial asset held by the securities intermediary are held by the securities intermediary for the entitlement holders, are not property of the securities intermediary, and are not subject to claims of creditors of the securities intermediary, except as otherwise provided in section 78.

(b) An entitlement holder's property interest with respect to a par- ticular financial asset under subsection (a) is a pro rata property interest in all interests in that financial asset held by the securities intermediary, without regard to the time the entitlement holder acquired the security entitlement or the time the securities intermediary acquired the interest in that financial asset.

(c) An entitlement holder's property interest with respect to a partic- ular financial asset under subsection (a) may be enforced against the se- curities intermediary only by exercise of the entitlement holder's rights under sections 72 through 75.

(d) An entitlement holder's property interest with respect to a par- ticular financial asset under subsection (a) may be enforced against a purchaser of the financial asset or interest therein only if:

(1) Insolvency proceedings have been initiated by or against the se- curities intermediary;

(2) the securities intermediary does not have sufficient interests in the financial asset to satisfy the security entitlements of all of its entitle- ment holders to that financial asset;

(3) the securities intermediary violated its obligations under section 71 by transferring the financial asset or interest therein to the purchaser; and

(4) the purchaser is not protected under subsection (e). The trustee or other liquidator, acting on behalf of all entitlement holders having security entitlements with respect to a particular financial asset, may recover the financial asset or interest therein from the purchaser. If the trustee or other liquidator elects not to pursue that right, an entitle- ment holder whose security entitlement remains unsatisfied has the right to recover its interest in the financial asset from the purchaser.

(e) An action based on the entitlement holder's property interest with respect to a particular financial asset under subsection (a), whether framed in conversion, replevin, constructive trust, equitable lien or other theory may not be asserted against any purchaser of a financial asset or interest therein who gives value, obtains control, and does not act in collusion with the securities intermediary in violating the securities in- termediary's obligations under section 71.

New Sec. 71. (UCC 8-504). (a) A securities intermediary shall promptly obtain and thereafter maintain a financial asset in a quantity corresponding to the aggregate of all security entitlements it has estab- lished in favor of its entitlement holders with respect to that financial asset. The securities intermediary may maintain those financial assets di- rectly or through one or more other securities intermediaries.

(b) Except to the extent otherwise agreed by its entitlement holder, a securities intermediary may not grant any security interests in a financial asset it is obligated to maintain pursuant to subsection (a).

(c) A securities intermediary satisfies the duty in subsection (a) if:

(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

(2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to obtain and maintain the financial asset.

(d) This section does not apply to a clearing corporation that is itself the obligor of an option or similar obligation to which its entitlement holders have security entitlements.

New Sec. 72. (UCC 8-505). (a) A securities intermediary shall take action to obtain a payment or distribution made by the issuer of a financial asset. A securities intermediary satisfies the duty if:

(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

(2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to attempt to obtain the payment or distribution.

(b) A securities intermediary is obligated to its entitlement holder for a payment or distribution made by the issuer of a financial asset if the payment or distribution is received by the securities intermediary.

New Sec. 73. (UCC 8-506). A securities intermediary shall exercise rights with respect to a financial asset if directed to do so by an entitle- ment holder. A securities intermediary satisfies the duty if:

(a) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

(b) in the absence of agreement, the securities intermediary either places the entitlement holder in a position to exercise the rights directly or exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.

New Sec. 74. (UCC 8-507). (a) A securities intermediary shall comply with an entitlement order if the entitlement order is originated by the appropriate person, the securities intermediary has had reasonable opportunity to assure itself that the entitlement order is genuine and authorized, and the securities intermediary has had reasonable opportu- nity to comply with the entitlement order. A securities intermediary sat- isfies the duty if:

(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

(2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to comply with the entitlement order.

(b) If a securities intermediary transfers a financial asset pursuant to an ineffective entitlement order, the securities intermediary shall rees- tablish a security entitlement in favor of the person entitled to it, and pay or credit any payments or distributions that the person did not receive as a result of the wrongful transfer. If the securities intermediary does not reestablish a security entitlement, the securities intermediary is liable to the entitlement holder for damages.

New Sec. 75. (UCC 8-508). A securities intermediary shall act at the direction of an entitlement holder to change a security entitlement into another available form of holding for which the entitlement holder is eligible, or to cause the financial asset to be transferred to a securities account of the entitlement holder with another securities intermediary. A securities intermediary satisfies the duty if:

(a) The securities intermediary acts as agreed upon by the entitle- ment holder and the securities intermediary; or

(b) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.

New Sec. 76. (UCC 8-509). (a) If the substance of a duty im- posed upon a securities intermediary by sections 71 through 75 is the subject of other statute, regulation or rule, compliance with that statute, regulation or rule satisfies the duty.

(b) To the extent that specific standards for the performance of the duties of a securities intermediary or the exercise of the rights of an entitlement holder are not specified by other statute, regulation, or rule or by agreement between the securities intermediary and entitlement holder, the securities intermediary shall perform its duties and the enti- tlement holder shall exercise its rights in a commercially reasonable man- ner.

(c) The obligation of a securities intermediary to perform the duties imposed by sections 71 through 75 is subject to:

(1) Rights of the securities intermediary arising out of a security in- terest under a security agreement with the entitlement holder or other- wise; and

(2) rights of the securities intermediary under other law, regulation, rule or agreement to withhold performance of its duties as a result of unfulfilled obligations of the entitlement holder to the securities inter- mediary.

(d) Sections 71 through 75 do not require a securities intermediary to take any action that is prohibited by other statute, regulation or rule.

New Sec. 77. (UCC 8-510). (a) An action based on an adverse claim to a financial asset or security entitlement, whether framed in con- version, replevin, constructive trust, equitable lien or other theory, may not be asserted against a person who purchases a security entitlement, or an interest therein, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim and obtains control.

(b) If an adverse claim could not have been asserted against an en- titlement holder under section 69, the adverse claim cannot be asserted against a person who purchases a security entitlement, or an interest therein, from the entitlement holder.

(c) In a case not covered by the priority rules in article 9, a purchaser for value of a security entitlement, or an interest therein, who obtains control has priority over a purchaser of a security entitlement, or an in- terest therein, who does not obtain control. Purchasers who have control rank equally, except that a securities intermediary as purchaser has pri- ority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary.

New Sec. 78. (UCC 8-511). (a) Except as otherwise provided in subsections (b) and (c), if a securities intermediary does not have suffi- cient interests in a particular financial asset to satisfy both its obligations to entitlement holders who have security entitlements to that financial asset and its obligation to a creditor of the securities intermediary who has a security interest in that financial asset, the claims of entitlement holders, other than the creditor, have priority over the claim of the cred- itor.

(b) A claim of a creditor of a securities intermediary who has a se- curity interest in a financial asset held by a securities intermediary has priority over claims of the securities intermediary's entitlement holders who have security entitlements with respect to that financial asset if the creditor has control over the financial asset.

(c) If a clearing corporation does not have sufficient financial assets to satisfy both its obligations to entitlement holders who have security entitlements with respect to a financial asset and its obligation to a cred- itor of the clearing corporation who has a security interest in that financial asset, the claim of the creditor has priority over the claims of entitlement holders.

New Sec. 79. (UCC 8-603). (a) This act does not affect an action or proceeding commenced before this act takes effect.

(b) If a security interest in a security is perfected at the date this act takes effect, and the action by which the security interest was perfected would suffice to perfect a security interest under this act, no further action is required to continue perfection. If a security interest in a security is perfected at the date this act takes effect but the action by which the security interest was perfected would not suffice to perfect a security interest under this act, the security interest remains perfected for a period of four months after the effective date and continues perfected thereafter if appropriate action to perfect under this act is taken within that period. If a security interest is perfected at the date this act takes effect and the security interest can be perfected by filing under this act, a financing statement signed by the secured party instead of the debtor may be filed within that period to continue perfection or thereafter to perfect.

Sec. 80. K.S.A. 84-1-206 is hereby amended to read as follows: 84- 1-206. (1) Except in the cases described in subsection (2) of this section a contract for the sale of personal property is not enforceable by way of action or defense beyond five thousand dollars $5,000 in amount or value of remedy unless there is some writing which indicates that a contract for sale has been made between the parties at a defined or stated price, reasonably identifies the subject matter, and is signed by the party against whom enforcement is sought or by his the authorized agent.

(2) Subsection (1) of this section does not apply to contracts for the sale of goods (section K.S.A. 84-2-201) nor of securities (section 84-8-319 40) nor to security agreements (section K.S.A. 84-9-203).

Sec. 81. K.S.A. 1995 Supp. 84-4-104 is hereby amended to read as follows: 84-4-104. (a) In this article, unless the context otherwise re- quires:

(1) ``Account'' means any deposit or credit account with a bank, in- cluding a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit;

(2) ``Afternoon'' means the period of a day between noon and mid- night;

(3) ``Banking day'' means the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions;

(4) ``Clearing house'' means an association of banks or other payors regularly clearing items;

(5) ``Customer'' means a person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank;

(6) ``Documentary draft'' means a draft to be presented for accep- tance or payment if specified documents, certificated securities (K.S.A. 84-8-102) section 29 or instructions for uncertificated securities (K.S.A. 84-8-308 and amendments thereto), or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft;

(7) ``Draft'' means a draft as defined in K.S.A. 1995 Supp. 84-3-104 and amendments thereto, or an item, other than an instrument, that is an order.

(8) ``Drawee'' means a person ordered in a draft to make payment;

(9) ``Item'' means an instrument or a promise in order to pay money handled by a bank for collection or payment. The term does not include a payment order governed by article 4a or a credit or debit card slip;

(10) ``Midnight deadline'' with respect to a bank is midnight on its next banking day following the banking day on which it receives the rel- evant item or notice or from which the time for taking action commences to run, whichever is later;

(11) ``Settle'' means to pay in cash, by clearing-house settlement, in a charge or credit or by remittance, or otherwise as agreed. A settlement may be either provisional or final;

(12) ``Suspends payments'' with respect to a bank means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over or that it ceases or refuses to make payments in the ordinary course of business.

(b) Other definitions applying to this article and the sections in which they appear are:

``Agreement for electronic presentment.''   K.S.A. 84-4-110.

``Bank.''                                   K.S.A. 84-4-105.

``Collecting bank.''                        K.S.A. 84-4-105.

``Depository bank.''                        K.S.A. 84-4-105.

``Intermediary bank.''                      K.S.A. 84-4-105.

``Payor bank.''                             K.S.A. 84-4-105.

``Presenting bank.''                        K.S.A. 84-4-105.

``Presentment notice.''                     K.S.A. 84-4-110.

(c) The following definitions in other articles apply to this article:

``Acceptance.''                             K.S.A. 84-3-410.

``Alteration.''                             K.S.A. 84-3-407.

``Cashier's check.''                        K.S.A. 84-3-104.

``Certificate of deposit.''                 K.S.A. 84-3-104.

``Certified check.''                        K.S.A. 84-3-409.

``Check.''                                  K.S.A. 84-3-104.

``Good Faith.''                             K.S.A. 84-3-103.

``Draft.''                                  K.S.A. 84-3-104.

``Holder in due course.''                   K.S.A. 84-3-302.

``Instrument.''                             K.S.A. 84-3-104.

``Notice of dishonor.''                     K.S.A. 84-3-503.

``Order.''                                  K.S.A. 84-3-103.

``Ordinary care.''                          K.S.A. 84-3-103.

``Person entitled to enforce.''             K.S.A. 84-3-301.

``Presentment.''                            K.S.A. 84-3-504.

``Promise.''                                K.S.A. 84-3-103.

``Prove.''                                  K.S.A. 84-3-103.

``Teller's check.''                         K.S.A. 84-3-104.

``Unauthorized signature.''                 K.S.A. 84-3-403.

New Sec. 82. (UCC 9-115). (1) In this article:

(a) ``Commodity account'' means an account maintained by a com- modity intermediary in which a commodity contract is carried for a com- modity customer.

(b) ``Commodity contract'' means a commodity futures contract, an option on a commodity futures contract, a commodity option, or other contract that, in each case, is:

(i) Traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to the federal commodities laws; or

(ii) traded on a foreign commodity board of trade, exchange, or mar- ket, and is carried on the books of a commodity intermediary for a com- modity customer.

(c) ``Commodity customer'' means a person for whom a commodity intermediary carries a commodity contract on its books.

(d) ``Commodity intermediary'' means:

(i) A person who is registered as a futures commission merchant un- der the federal commodities laws; or

(ii) a person who in the ordinary course of its business provides clear- ance or settlement services for a board of trade that has been designated as a contract market pursuant to the federal commodities laws.

(e) ``Control'' with respect to a certificated security, uncertificated security, or security entitlement has the meaning specified in section 33. A secured party has control over a commodity contract if by agreement among the commodity customer, the commodity intermediary, and the secured party, the commodity intermediary has agreed that it will apply any value distributed on account of the commodity contract as directed by the secured party without further consent by the commodity customer. If a commodity customer grants a security interest in a commodity con- tract to its own commodity intermediary, the commodity intermediary as secured party has control. A secured party has control over a securities account or commodity account if the secured party has control over all security entitlements or commodity contracts carried in the securities account or commodity account.

(f) ``Investment property'' means:

(i) A security, whether certificated or uncertificated;

(ii) a security entitlement;

(iii) a securities account;

(iv) a commodity contract; or

(v) a commodity account.

(2) Attachment or perfection of a security interest in a securities ac- count is also attachment or perfection of a security interest in all security entitlements carried in the securities account. Attachment or perfection of a security interest in a commodity account is also attachment or per- fection of a security interest in all commodity contracts carried in the commodity account.

(3) A description of collateral in a security agreement or financing statement is sufficient to create or perfect a security interest in a certif- icated security, uncertificated security, security entitlement, securities ac- count, commodity contract, or commodity account whether it describes the collateral by those terms, or as investment property, or by description of the underlying security, financial asset, or commodity contract. A de- scription of investment property collateral in a security agreement or fi- nancing statement is sufficient if it identifies the collateral by specific listing, by category, by quantity, by a computational or allocational for- mula or procedure, or by any other method, if the identity of the collateral is objectively determinable.

(4) Perfection of a security interest in investment property is gov- erned by the following rules:

(a) A security interest in investment property may be perfected by control.

(b) Except as otherwise provided in paragraphs (c) and (d), a security interest in investment property may be perfected by filing.

(c) If the debtor is a broker or securities intermediary a security in- terest in investment property is perfected when it attaches. The filing of a financing statement with respect to a security interest in investment property granted by a broker or securities intermediary has no effect for purposes of perfection or priority with respect to that security interest.

(d) If a debtor is a commodity intermediary, a security interest in a commodity contract or a commodity account is perfected when it atta- ches. The filing of a financing statement with respect to a security interest in a commodity contract or a commodity account granted by a commodity intermediary has no effect for purposes of perfection or priority with respect to that security interest.

(5) Priority between conflicting security interests in the same invest- ment property is governed by the following rules:

(a) A security interest of a secured party who has control over in- vestment property has priority over a security interest of a secured party who does not have control over the investment property.

(b) Except as otherwise provided in paragraphs (c) and (d), conflict- ing security interests of secured parties each of whom has control rank equally.

(c) Except as otherwise agreed by the securities intermediary, a se- curity interest in a security entitlement or a securities account granted to the debtor's own securities intermediary has priority over any security interest granted by the debtor to another secured party.

(d) Except as otherwise agreed by the commodity intermediary, a security interest in a commodity contract or a commodity account granted to the debtor's own commodity intermediary has priority over any security interest granted by the debtor to another secured party.

(e) Conflicting security interests granted by a broker, a securities in- termediary, or a commodity intermediary which are perfected without control rank equally.

(f) In all other cases, priority between conflicting security interests in investment property is governed by subsections (5), (6) and (7) of K.S.A. 84-9-312, and amendments thereto. Subsection (4) of K.S.A. 84-9-312, and amendments thereto, does not apply to investment property.

(6) If a security certificate in registered form is delivered to a secured party pursuant to agreement, a written security agreement is not required for attachment or enforceability of the security interest, delivery suffices for perfection of the security interest, and the security interest has priority over a conflicting security interest perfected by means other than control, even if a necessary indorsement is lacking.

New Sec. 83. (UCC 9-116). (1) If a person buys a financial asset through a securities intermediary in a transaction in which the buyer is obligated to pay the purchase price to the securities intermediary at the time of the purchase, and the securities intermediary credits the financial asset to the buyer's securities account before the buyer pays the securities intermediary, the securities intermediary has a security interest in the buyer's security entitlement securing the buyer's obligation to pay. A se- curity agreement is not required for attachment or enforceability of the security interest, and the security interest is automatically perfected.

(2) If a certificated security, or other financial asset represented by a writing which in the ordinary course of business is transferred by delivery with any necessary indorsement or assignment is delivered pursuant to an agreement between persons in the business of dealing with such se- curities or financial assets and the agreement calls for delivery versus payment, the person delivering the certificate or other financial asset has a security interest in the certificated security or other financial asset se- curing the seller's right to receive payment. A security agreement is not required for attachment or enforceability of the security interest, and the security interest is automatically perfected.

Sec. 84. K.S.A. 1995 Supp. 84-9-203 is hereby amended to read as follows: 84-9-203. (1) Subject to the provisions of K.S.A. 84-4-208 and amendments thereto on the security interest of a collecting bank, K.S.A. 1994 Supp. 84-8-321 on security interests in securities sections 82 and 83 on security interests in investment property, and K.S.A. 84-9-113 and amendments thereto on a security interest arising under the article on sales, a security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless:

(a) The collateral is in the possession of the secured party pursuant to agreement, the collateral is investment property and the secured party has control pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers crops growing or to be grown or timber to be cut, a description of the land concerned;

(b) value has been given; and

(c) the debtor has rights in the collateral.

(2) A security interest attaches when it becomes enforceable against the debtor with respect to the collateral. Attachment occurs as soon as all of the events specified in subsection (1) have taken place unless explicit agreement postpones the time of attaching.

(3) Unless otherwise agreed a security agreement gives the secured party the rights to proceeds provided by K.S.A. 84-9-306 and amend- ments thereto.

(4) A transaction, although subject to this article, may be subject to the Kansas uniform consumer credit code (K.S.A. 16a-1-101 et seq. and amendments thereto) and in the case of conflict between the provisions of this article and that statute, the provisions of that statute shall control.

Sec. 85. K.S.A. 1995 Supp. 84-9-301 is hereby amended to read as follows: 84-9-301. (1) Except as otherwise provided in subsection (2), an unperfected security interest is subordinate to the rights of:

(a) Persons entitled to priority under K.S.A. 84-9-312, and amend- ments thereto;

(b) a person who becomes a lien creditor before the security interest is perfected;

(c) in the case of goods, instruments, documents and chattel paper, a person who is not a secured party and who is a transferee in bulk or other buyer not in ordinary course of business, or is a buyer of farm products in ordinary course of business, to the extent that such buyer gives value and receives delivery of the collateral without knowledge of the security interest and before it is perfected;

(d) in the case of accounts and , general intangibles, and investment property, a person who is not a secured party and who is a transferee to the extent that such person gives value without knowledge of the security interest and before it is perfected.

(2) If the secured party files with respect to a purchase money se- curity interest before or within 20 days after the debtor receives posses- sion of the collateral, the secured party takes priority over the rights of a transferee in bulk or of a lien creditor which arise between the time the security interest attaches and the time of filing.

(3) A ``lien creditor'' means a creditor who has acquired a lien on the property involved by attachment, levy or the like and includes an assignee for benefit of creditors from the time of assignment and a trustee in bankruptcy from the date of the filing of the petition or a receiver in equity from the time of appointment.

(4) A person who becomes a lien creditor while a security interest is perfected takes subject to the security interest only to the extent that it secures advances made before such person becomes a lien creditor or within 45 days thereafter or made without knowledge of the lien or pur- suant to a commitment entered into without knowledge of the lien.

Sec. 86. K.S.A. 1995 Supp. 84-9-302 is hereby amended to read as follows: 84-9-302. (1) A financing statement must be filed to perfect all security interests except the following:

(a) A security interest in collateral in possession of the secured party under K.S.A. 84-9-305 and amendments thereto;

(b) a security interest temporarily perfected in instruments , certifi- cated securities or documents without delivery under K.S.A. 84-9-304 and amendments thereto or in proceeds for a ten-day period under K.S.A. 84-9-306 and amendments thereto;

(c) a security interest created by an assignment of a beneficial interest in a trust or a decedent's estate;

(d) a purchase money security interest in a consumer good with a purchase price of $1,000 or less, other than a vehicle in which a security interest is subject to perfection under subsection (3), but filing is required to perfect a security interest in a vessel as defined in K.S.A. 82a-802, and amendments thereto, and a fixture filing is required for priority over con- flicting security interests in a fixture as provided in K.S.A. 84-9-313, and amendments thereto;

(e) an assignment of accounts which does not alone or in conjunction with other assignments to the same assignee transfer a significant part of the outstanding accounts of the assignor;

(f) a security interest of a collecting bank (K.S.A. 84-4-208 and amendments thereto) or in securities (K.S.A. 84-8-321 and amendments thereto) or arising under the article on sales (see K.S.A. 84-9-113 and amendments thereto) or covered in subsection (3);

(g) an assignment for the benefits of all creditors of the transferor and subsequent transfers by the assignee thereunder. ;

(h) a security interest in investment property which is perfected with- out filing under section 82 or 83.

(2) If a secured party assigns a perfected security interest, no filing under this article is required in order to continue the perfected status of the security interest against creditors of and transferees from the original debtor.

(3) A security interest in:

(a) Property subject to a statute of the United States which provides for national registration or filing of such security interests in such prop- erty; or

(b) property subject to a statute of this state which provides for cen- tral filing of such property; or

(c) a vehicle (except a vehicle held as inventory for sale) subject to a statute of this state which requires indication on a certificate of title or a duplicate thereof of such security interests in such vehicle:

Can be perfected only by presentation, for the purpose of such regis- tration or such filing or such indication, of the documents appropriate under any such statute to the public official appropriate under any such statute and tender of the required fee to or acceptance of the documents by such public official, or by the mailing or delivery by a dealer or secured party to the appropriate state agency of a notice of security interest as prescribed by K.S.A. 8-135 and amendments thereto. Such presentation and tender or acceptance, or mailing or delivery, shall have the same effect under this article as filing under this article, and such perfection shall have the same effect under this article as perfection by filing under this article.

Sec. 87. K.S.A. 1995 Supp. 84-9-306 is hereby amended to read as follows: 84-9-306. (1) ``Proceeds'' includes whatever is received upon the sale, exchange, collection or other disposition of collateral or proceeds. Insurance payable by reason of loss or damage to the collateral is pro- ceeds, except to the extent that it is payable to a person other than a party to the security agreement. Any payments or distribution made with re- spect to investment property collateral are proceeds. Money, checks, de- posit accounts, and the like are ``cash proceeds.'' All other proceeds are ``non-cash proceeds.''

(2) Except where this article otherwise provides, a security interest continues in collateral notwithstanding sale, exchange or other disposition thereof unless the disposition was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor.

(3) The security interest in proceeds is a continuously perfected se- curity interest if the interest in the original collateral was perfected but it ceases to be a perfected security interest and becomes unperfected 10 days after receipt of the proceeds by the debtor unless:

(a) A filed financing statement covers the original collateral and the proceeds are collateral in which a security interest may be perfected by filing in the office or offices where the financing statement has been filed and, if the proceeds are acquired with cash proceeds, the description of collateral in the financing statement indicates the types of property con- stituting the proceeds; or

(b) a filed financing statement covers the original collateral and the proceeds are identifiable cash proceeds; or

(c) the original collateral was investment property and the proceeds are identifiable cash proceeds; or

(c) (d) the security interest in the proceeds is perfected before the expiration of the ten-day 10-day period.

Except as provided in this section, a security interest in proceeds can be perfected only by the methods or under the circumstances permitted in this article for original collateral of the same type.

(4) In the event of insolvency proceedings instituted by or against a debtor, a secured party with a perfected security interest in proceeds has a perfected security interest only in the following proceeds:

(a) In identifiable noncash proceeds and in separate deposit accounts containing only proceeds;

(b) in identifiable cash proceeds in the form of money which is nei- ther commingled with other money nor deposited in a deposit account prior to the insolvency proceedings;

(c) in identifiable cash proceeds in the form of checks and the like which are not deposited in a deposit account prior to the insolvency pro- ceedings; and

(d) in all cash and deposit accounts of the debtor, in which proceeds have been commingled with other funds, but, except for security interests provided for by K.S.A. 1995 Supp. 84-9-319, and amendments thereto, the perfected security interest under this paragraph (d) is (i) subject to any right of setoff; and (ii) limited to an amount not greater than the amount of any cash proceeds received by the debtor within ten (10) 10 days before the institution of the insolvency proceedings less the sum of (I) the payments to the secured party on account of cash proceeds re- ceived by the debtor during such period and (II) the cash proceeds re- ceived by the debtor during such period to which the secured party is entitled under paragraphs (a) through (c) of this subsection (4).

(5) If a sale of goods results in an account or chattel paper which is transferred by the seller to a secured party, and if the goods are returned to or are repossessed by the seller or the secured party, the following rules determine priorities:

(a) If the goods were collateral at the time of sale for an indebtedness of the seller which is still unpaid, the original security interest attaches again to the goods and continues as a perfected security interest if it was perfected at the time when the goods were sold. If the security interest was originally perfected by a filing which is still effective, nothing further is required to continue the perfected status; in any other case, the secured party must take possession of the returned or repossessed goods or must file.

(b) An unpaid transferee of the chattel paper has a security interest in the goods against the transferor. Such security interest is prior to a security interest asserted under paragraph (a) to the extent that the trans- feree of the chattel paper was entitled to priority under section 84-9-308, and amendments thereto.

(c) An unpaid transferee of the account has a security interest in the goods against the transferor. Such security interest is subordinate to a security interest asserted under paragraph (a).

(d) A security interest of an unpaid transferee asserted under para- graph (b) or (c) must be perfected for protection against creditors of the transferor and purchasers of the returned or repossessed goods.

Sec. 88. K.S.A. 1995 Supp. 84-9-309 is hereby amended to read as follows: 84-9-309. Nothing in this article limits the rights of a holder in due course of a negotiable instrument (K.S.A. 84-3-302 and amendments thereto) or a holder to whom a negotiable document of title has been duly negotiated (K.S.A. 84-7-501 and amendments thereto) or a bona fide protected purchaser of a security (K.S.A. 84-8-302 and amendments thereto) and such holders or purchasers take priority over an earlier se- curity interest even though perfected. Filing under this article does not constitute notice of the security interest to such holders or purchasers.

Sec. 89. K.S.A. 1995 Supp. 84-9-312 is hereby amended to read as follows: 84-9-312. (1) The rules of priority stated in other sections of this part and in the following sections shall govern when applicable: K.S.A. 84-4-208 84-4-210 and amendments thereto with respect to the security interests of collecting banks in items being collected, accompanying doc- uments and proceeds; K.S.A. 84-9-103 and amendments thereto on se- curity interests related to other jurisdictions; and K.S.A. 84-9-114 and amendments thereto on consignments.

(2) A perfected security interest in crops for new value given to en- able the debtor to produce the crops during the production season and given not more than three months before the crops become growing crops by planting or otherwise takes priority over an earlier perfected security interest to the extent that such earlier interest secures obligations due more than six months before the crops become growing crops by planting or otherwise, even though the person giving new value had knowledge of the earlier security interest.

(3) A perfected purchase money security interest in inventory has priority over a conflicting security interest in the same inventory and also has priority in identifiable cash proceeds received on or before the deliv- ery of the inventory to a buyer if:

(a) The purchase money security interest is perfected at the time the debtor receives possession of the inventory; and

(b) except where excused by K.S.A. 1995 Supp. 84-9-319, and amend- ments thereto, the purchase money secured party gives notification in writing to the holder of the conflicting security interest if the holder had filed a financing statement covering the same types of inventory (i) before the date of the filing made by the purchase money secured party or (ii) before the beginning of the twenty-one-day 21-day period where the purchase money security interest is temporarily perfected without filing or possession (subsection (5) of K.S.A. 84-9-304 and amendments thereto); and

(c) the holder of the conflicting security interest receives the notifi- cation within five years before the debtor receives possession of the in- ventory; and

(d) the notification states that the person giving the notice has or expects to acquire a purchase money security interest in inventory of the debtor, describing such inventory by item or type.

(4) A purchase money security interest in collateral other than inven- tory has priority over a conflicting security interest in the same collateral or its proceeds if the purchase money security interest is perfected at the time the debtor receives possession of the collateral or within 20 days thereafter.

(5) In all cases not governed by other rules stated in this section (including cases of purchase money security interests which do not qualify for the special priorities set forth in subsections (3) and (4)), priority between conflicting security interests in the same collateral shall be de- termined according to the following rules:

(a) Conflicting security interests rank according to priority in time of filing or perfection. Priority dates from the time a filing is first made covering the collateral or the time the security interest is first perfected, whichever is earlier, provided that there is no period thereafter when there is neither filing nor perfection.

(b) So long as conflicting security interests are unperfected, the first to attach has priority.

(6) For the purposes of subsection (5) a date of filing or perfection as to collateral is also a date of filing or perfection as to proceeds.

(7) If future advances are made while a security interest is perfected by filing, the taking of possession or under K.S.A. 1994 Supp. 84-8-321 section 82 or section 83 on investment property, and amendments thereto on securities the security interest has the same priority for the purposes of subsection (5) with respect to the future advances as it does with re- spect to the first advance. If a commitment is made before or while the security interest is so perfected, the security interest has the same priority with respect to advances made pursuant thereto. In other cases a per- fected security interest has priority from the date the advance is made.

Sec. 90. K.S.A. 40-2a20, as amended by section 1 of 1996 House Bill No. 2713, is hereby amended to read as follows: 40-2a20. (a) Any in- surance company other than life organized under any law of this state, with the direction or approval of a majority of its board of directors or authorized committee thereof, may:

(1) Adopt a nominee name unique to such insurance company in which such insurance company's securities may be registered;

(2) designate a state or national bank having trust powers to obtain a nominee name for such insurance company in which such insurance com- pany's securities may be registered; or

(3) designate a state or national bank having trust powers as trustee to make any investment authorized by this act in the name of such trustee or such trustee's nominee.

(b) Under the provisions of paragraphs (2) and (3) of subsection (a), the designated state or national bank may arrange for such securities to be held in a clearing corporation. Such arrangement must be in accor- dance with a written agreement, approved by the commissioner of insur- ance, between the insurance company and its designated bank and must impose the same degree of responsibility on the bank as if such securities were held in definitive form by such bank.

(c) As used in this section ``clearing corporation'' means: (1) A cor- poration defined in subsection (3) (5) of K.S.A. 84-8-102, section 29 and amendments thereto;

(2) any organization or system for clearance and settlement of secu- rities transactions which is operated or owned by a bank, trust company or other entity that is subject to regulation by the United States federal reserve board or the United States comptroller of the currency; or

(3) any clearing agency registered with the securities and exchange commission pursuant to the securities exchange act of 1934, section 17A, and amendments thereto.

Sec. 91. K.S.A. 40-2a20, as amended by section 1 of 1996 House Bill No. 2713, 84-1-206, 84-2-512, 84-5-101 through 84-5-113, 84-5-115 through 84-5-117, 84-8-101, 84-8-303, 84-9-104 and 84-9-106 and K.S.A. 1995 Supp. 84-1-105, 84-4-104, 84-5-114, 84-8-102 through 84-8-107, 84- 8-108, as amended by section 2 of 1996 House Bill No. 2713, 84-8-109, 84-8-201 through 84-8-208, 84-8-301, 84-8-302, 84-8-304 through 84-8- 321, 84-8-401 through 84-8-408, 84-9-103, 84-9-105, 84-9-203, 84-9-301, 84-9-302, 84-9-304, 84-9-305, 84-9-306, 84-9-309 and 84-9-312 are hereby repealed.

Sec. 92. This act shall take effect and be in force from and after its publication in the statute book.

Approved May 11, 1996.