CHAPTER 142 SENATE BILL No. 366 An Act concerning the uniform commercial code; relating to secured transactions; amend-
ing K.S.A. 84-1-105, 84-2-103, 84-2-210, 84-2-326, 84-2-502, 84-2-716, 84-2a-103, 84-
2a-303, 84-2a-307, 84-2a-309, 84-4-210, 84-7-503, 84-8-103, 84-8-106, 84-8-110, 84-8-
301, 84-8-302 and 84-8-510 and K.S.A. 1999 Supp. 84-1-201 and repealing the existing
sections; also repealing K.S.A. 84-9-101, 84-9-103, 84-9-104, 84-9-105, 84-9-106, 84-9-
107, 84-9-108, 84-9-109, 84-9-110, 84-9-112, 84-9-113, 84-9-114, 84-9-115, 84-9-116,
84-9-201, 84-9-202, 84-9-203, 84-9-204, 84-9-205, 84-9-206, 84-9-207, 84-9-208, 84-9-
301, 84-9-303, 84-9-304, 84-9-305, 84-9-306, 84-9-307, 84-9-308, 84-9-309, 84-9-310,
84-9-311, 84-9-312, 84-9-313, 84-9-314, 84-9-315, 84-9-316, 84-9-317, 84-9-318, 84-9-
319, 84-9-401, 84-9-402, 84-9-402a, 84-9-403, 84-9-404, 84-9-405, 84-9-406, 84-9-407,
84-9-408, 84-9-410, 84-9-411, 84-9-412, 84-9-413, 84-9-501, 84-9-502, 84-9-503, 84-9-
504, 84-9-505, 84-9-506, 84-9-507 and 84-9-508 and K.S.A. 1999 Supp. 58-4301 and 84-
9-102, 84-9-302 and 84-9-414.
Be it enacted by the Legislature of the State of Kansas:

New Section 1. (UCC 9-101.) This article may be cited as uniform
commercial code-secured transactions.

New Sec. 2. (UCC 9-102.) Definitions. In this article:

(1) ``Accession'' means goods that are physically united with other
goods in such a manner that the identity of the original goods is not lost.

(2) ``Account,'' except as used in ``account for,'' means a right to pay-
ment of a monetary obligation, whether or not earned by performance,
(A) for property that has been or is to be sold, leased, licensed, assigned,
or otherwise disposed of, (B) for services rendered or to be rendered, (C)
for a policy of insurance issued or to be issued, (D) for a secondary ob-
ligation incurred or to be incurred, (E) for energy provided or to be
provided, (F) for the use or hire of a vessel under a charter or other
contract, (G) arising out of the use of a credit or charge card or infor-
mation contained on or for use with the card, or (H) as winnings in a
lottery or other game of chance operated or sponsored by a state, gov-
ernmental unit of a state, or person licensed or authorized to operate the
game by a state or governmental unit of a state. The term includes health-
care-insurance receivables. The term does not include: (A) rights to pay-
ment evidenced by chattel paper or an instrument, (B) commercial tort
claims, (C) deposit accounts, (D) investment property, (E) letter-of-credit
rights or letters of credit, or (F) rights to payment for money or funds
advanced or sold, other than rights arising out of the use of a credit or
charge card or information contained on or for use with the card.

(3) ``Account debtor'' means a person obligated on an account, chattel
paper, or general intangible. The term does not include persons obligated
to pay a negotiable instrument, even if the instrument constitutes part of
chattel paper.

(4) ``Accounting,'' except as used in ``accounting for,'' means a record:

(A) Authenticated by a secured party;

(B) indicating the aggregate unpaid secured obligations as of a date
not more than 35 days earlier or 35 days later than the date of the record;
and

(C) identifying the components of the obligations in reasonable de-
tail.

(5) ``Agricultural lien'' means an interest, other than a security inter-
est, in farm products: (A) Which secures payment or performance of an
obligation for:

(i) Goods or services furnished in connection with a debtor's farming
operation; or

(ii) rent on real property leased by a debtor in connection with its
farming operation;

(B) which is created by statute in favor of a person that:

(i) In the ordinary course of its business furnished goods or services
to a debtor in connection with a debtor's farming operation; or

(ii) leased real property to a debtor in connection with the debtor's
farming operation; and

(C) whose effectiveness does not depend on the person's possession
of the personal property. Agricultural lien shall not include statutory liens.

(6) ``As-extracted collateral'' means: (A) Oil, gas, or other minerals
that are subject to a security interest that:

(i) Is created by a debtor having an interest in the minerals before
extraction; and

(ii) attaches to the minerals as extracted; or

(B) accounts arising out of the sale at the wellhead or minehead of
oil, gas, or other minerals in which the debtor had an interest before
extraction.

(7) ``Authenticate'' means:

(A) To sign; or

(B) to execute or otherwise adopt a symbol, or encrypt or similarly
process a record in whole or in part, with the present intent of the au-
thenticating person to identify the person and adopt or accept a record.

(8) ``Bank'' means an organization that is engaged in the business of
banking. The term includes savings banks, savings and loan associations,
credit unions, and trust companies.

(9) ``Cash proceeds'' means proceeds that are money, checks, deposit
accounts, or the like.

(10) ``Certificate of title'' means a certificate of title with respect to
which a statute provides for the security interest in question to be indi-
cated on the certificate as a condition or result of the security interest's
obtaining priority over the rights of a lien creditor with respect to the
collateral.

(11) ``Chattel paper'' means a record or records that evidence both a
monetary obligation and a security interest in specific goods, a security
interest in specific goods and software used in the goods, a security in-
terest in specific goods and license of software used in the goods, a lease
of specific goods, or a lease of specific goods and license of software used
in the goods. In this subsection, ``monetary obligation'' means a monetary
obligation secured by the goods or owed under a lease of the goods and
includes a monetary obligation with respect to software used in the goods.
The term does not include charters or other contracts involving the use
or hire of a vessel. If a transaction is evidenced by records that include
an instrument or series of instruments, the group of records taken to-
gether constitutes chattel paper.

(12) ``Collateral'' means the property subject to a security interest or
agricultural lien. The term includes:

(A) Proceeds to which a security interest attaches;

(B) accounts, chattel paper, payment intangibles, and promissory
notes that have been sold; and

(C) goods that are the subject of a consignment.

(13) ``Commercial tort claim'' means a claim arising in tort with re-
spect to which:

(A) The claimant is an organization; or

(B) the claimant is an individual and the claim:

(i) arose in the course of the claimant's business or profession; and

(ii) does not include damages arising out of personal injury to or the
death of an individual.

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

(15) ``Commodity contract'' means a commodity futures contract, an
option on a commodity futures contract, a commodity option, or another
contract if the contract or option is:

(A) 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
federal commodities laws; or

(B) 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.

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

(17) ``Commodity intermediary'' means a person that:

(A) Is registered as a futures commission merchant under federal
commodities law; or

(B) in the ordinary course of its business provides clearance or set-
tlement services for a board of trade that has been designated as a contract
market pursuant to federal commodities law.

(18) ``Communicate'' means:

(A) To send a written or other tangible record;

(B) to transmit a record by any means agreed upon by the persons
sending and receiving the record; or

(C) in the case of transmission of a record to or by a filing office, to
transmit a record by any means prescribed by filing-office rule.

(19) ``Consignee'' means a merchant to which goods are delivered in
a consignment.

(20) ``Consignment'' means a transaction, regardless of its form, in
which a person delivers goods to a merchant for the purpose of sale and:
(A) The merchant:

(i) Deals in goods of that kind under a name other than the name of
the person making delivery;

(ii) is not an auctioneer; and

(iii) is not generally known by its creditors to be substantially engaged
in selling the goods of others;

(B) with respect to each delivery, the aggregate value of the goods is
$1,000 or more at the time of delivery;

(C) the goods are not consumer goods immediately before delivery;
and

(D) the transaction does not create a security interest that secures an
obligation.

(21) ``Consignor'' means a person that delivers goods to a consignee
in a consignment.

(22) ``Consumer debtor'' means a debtor in a consumer transaction.

(23) ``Consumer goods'' means goods that are used or bought for use
primarily for personal, family, or household purposes.

(24) ``Consumer-goods transaction'' means a consumer transaction in
which:

(A) An individual incurs an obligation primarily for personal, family,
or household purposes; and

(B) a security interest in consumer goods secures the obligation.

(25) ``Consumer obligor'' means an obligor who is an individual and
who incurred the obligation as part of a transaction entered into primarily
for personal, family, or household purposes.

(26) ``Consumer transaction'' means a transaction in which (i) an in-
dividual incurs an obligation primarily for personal, family, or household
purposes, (ii) a security interest secures the obligation, and (iii) the col-
lateral is held or acquired primarily for personal, family, or household
purposes. The term includes consumer-goods transactions.

(27) ``Continuation statement'' means an amendment of a financing
statement which:

(A) Identifies, by its file number, the initial financing statement to
which it relates; and

(B) indicates that it is a continuation statement for, or that it is filed
to continue the effectiveness of, the identified financing statement.

(28) ``Debtor'' means:

(A) A person having an interest, other than a security interest or other
lien, in the collateral, whether or not the person is an obligor;

(B) a seller of accounts, chattel paper, payment intangibles, or prom-
issory notes; or

(C) a consignee.

(29) ``Deposit account'' means a demand, time, savings, passbook, or
similar account maintained with a bank. The term does not include in-
vestment property or accounts evidenced by an instrument.

(30) ``Document'' means a document of title or a receipt of the type
described in section (2).

(31) ``Electronic chattel paper'' means chattel paper evidenced by a
record or records consisting of information stored in an electronic me-
dium.

(32) ``Encumbrance'' means a right, other than an ownership interest,
in real property. The term includes mortgages and other liens on real
property.

(33) ``Equipment'' means goods other than inventory, farm products,
or consumer goods.

(34) ``Farm products'' means goods, other than standing timber, with
respect to which the debtor is engaged in a farming operation and which
are: (A) Crops grown, growing, or to be grown, including:

(i) Crops produced on trees, vines, and bushes; and

(ii) aquatic goods produced in aquacultural operations;

(B) livestock, born or unborn, including aquatic goods produced in
aquacultural operations;

(C) supplies used or produced in a farming operation; or

(D) products of crops or livestock in their unmanufactured states.

(35) ``Farming operation'' means raising, cultivating, propagating, fat-
tening, grazing, or any other farming, livestock, or aquacultural operation.

(36) ``File number'' means the number assigned to an initial financing
statement pursuant to section 90(a) and amendments thereto.

(37) ``Filing office'' means an office designated in section 72 and
amendments thereto as the place to file a financing statement.

(38) ``Filing-office rule'' means a rule adopted pursuant to section 97
and amendments thereto.

(39) ``Financing statement'' means a record or records composed of
an initial financing statement and any filed record relating to the initial
financing statement.

(40) ``Fixture filing'' means the filing of a financing statement cov-
ering goods that are or are to become fixtures and satisfying section 73(a)
and (b) and amendments thereto. The term includes the filing of a fi-
nancing statement covering goods of a transmitting utility which are or
are to become fixtures.

(41) ``Fixtures'' means goods that have become so related to partic-
ular real property that an interest in them arises under real property law.

(42) ``General intangible'' means any personal property, including
things in action, other than accounts, chattel paper, commercial tort
claims, deposit accounts, documents, goods, instruments, investment
property, letter-of-credit rights, letters of credit, money, and oil, gas, or
other minerals before extraction. The term includes payment intangibles
and software.

(43) ``Good faith'' means honesty in fact and the observance of rea-
sonable commercial standards of fair dealing.

(44) ``Goods'' means all things that are movable when a security in-
terest attaches. The term includes (A) fixtures, (B) standing timber that
is to be cut and removed under a conveyance or contract for sale, (C) the
unborn young of animals, (D) crops grown, growing, or to be grown, even
if the crops are produced on trees, vines, or bushes, and (E) manufactured
homes. The term also includes a computer program embedded in goods
and any supporting information provided in connection with a transaction
relating to the program if (A) the program is associated with the goods in
such a manner that it customarily is considered part of the goods, or (B)
by becoming the owner of the goods, a person acquires a right to use the
program in connection with the goods. The term does not include a com-
puter program embedded in goods that consist solely of the medium in
which the program is embedded. The term also does not include ac-
counts, chattel paper, commercial tort claims, deposit accounts, docu-
ments, general intangibles, instruments, investment property, letter-of-
credit rights, letters of credit, money, or oil, gas, or other minerals before
extraction.

(45) ``Governmental unit'' means a subdivision, agency, department,
county, parish, municipality, or other unit of the government of the
United States, a state, or a foreign country. The term includes an organ-
ization having a separate corporate existence if the organization is eligible
to issue debt on which interest is exempt from income taxation under the
laws of the United States.

(46) ``Health-care-insurance receivable'' means an interest in or claim
under a policy of insurance which is a right to payment of a monetary
obligation for health-care goods or services provided.

(47) ``Instrument'' means a negotiable instrument, a writing that
would otherwise 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 contains a limitation on transfer, or any other writing that evi-
dences a right to the payment of a monetary obligation, is not itself a
security agreement or lease, and is of a type that in ordinary course of
business is transferred by delivery with any necessary indorsement or
assignment. The term does not include (i) investment property, (ii) letters
of credit, or (iii) writings that evidence a right to payment arising out of
the use of a credit or charge card or information contained on or for use
with the card.

(48) ``Inventory'' means goods, other than farm products, which:

(A) Are leased by a person as lessor;

(B) are held by a person for sale or lease or to be furnished under a
contract of service;

(C) are furnished by a person under a contract of service; or

(D) consist of raw materials, work in process, or materials used or
consumed in a business.

(49) ``Investment property'' means a security, whether certificated or
uncertificated, security entitlement, securities account, commodity con-
tract, or commodity account.

(50) ``Jurisdiction of organization,'' with respect to a registered or-
ganization, means the jurisdiction under whose law the organization is
organized.

(51) ``Letter-of-credit right'' means a right to payment or perform-
ance under a letter of credit, whether or not the beneficiary has de-
manded or is at the time entitled to demand payment or performance.
The term does not include the right of a beneficiary to demand payment
or performance under a letter of credit.

(52) ``Lien creditor'' means:

(A) A creditor that has acquired a lien on the property involved by
attachment, levy, or the like;

(B) an assignee for benefit of creditors from the time of assignment;

(C) a trustee in bankruptcy from the date of the filing of the petition;
or

(D) a receiver in equity from the time of appointment.

(53) ``Manufactured home'' means a structure, transportable in one
or more sections, which, in the traveling mode, is eight body feet or more
in width or 40 body feet or more in length, or, when erected on site, is
320 or more square feet, and which is built on a permanent chassis and
designed to be used as a dwelling with or without a permanent foundation
when connected to the required utilities, and includes the plumbing,
heating, air conditioning, and electrical systems contained therein. The
term includes any structure that meets all of the requirements of this
paragraph except the size requirements and with respect to which the
manufacturer voluntarily files a certification required by the United States
Secretary of Housing and Urban Development and complies with the
standards established under Title 42 of the United States Code.

(54) ``Manufactured-home transaction'' means a secured transaction:

(A) That creates a purchase-money security interest in a manufac-
tured home, other than a manufactured home held as inventory; or

(B) in which a manufactured home, other than a manufactured home
held as inventory, is the primary collateral.

(55) ``Mortgage'' means a consensual interest in real property, in-
cluding fixtures, which secures payment or performance of an obligation.

(56) ``New debtor'' means a person that becomes bound as a debtor
under section 13(d) and amendments thereto by a security agreement
previously entered into by another person.

(57) ``New value'' means (A) money, (B) money's worth in property,
services, or new credit, or (C) release by a transferee of an interest in
property previously transferred to the transferee. The term does not in-
clude an obligation substituted for another obligation.

(58) ``Noncash proceeds'' means proceeds other than cash proceeds.

(59) ``Obligor'' means a person that, with respect to an obligation
secured by a security interest in or an agricultural lien on the collateral,
(A) owes payment or other performance of the obligation, (B) has pro-
vided property other than the collateral to secure payment or other per-
formance of the obligation, or (C) is otherwise accountable in whole or
in part for payment or other performance of the obligation. The term
does not include issuers or nominated persons under a letter of credit.

(60) ``Original debtor'' means a person that, as debtor, entered into
a security agreement to which a new debtor has become bound under
section 13(d) and amendments thereto.

(61) ``Payment intangible'' means a general intangible under which
the account debtor's principal obligation is a monetary obligation.

(62) ``Person related to,'' with respect to an individual, means:

(A) The spouse of the individual;

(B) a brother, brother-in-law, sister, or sister-in-law of the individual;

(C) an ancestor or lineal descendant of the individual or the individ-
ual's spouse; or

(D) any other relative, by blood or marriage, of the individual or the
individual's spouse who shares the same home with the individual.

(63) ``Person related to,'' with respect to an organization, means:

(A) A person directly or indirectly controlling, controlled by, or under
common control with the organization;

(B) an officer or director of, or a person performing similar functions
with respect to, the organization;

(C) an officer or director of, or a person performing similar functions
with respect to, a person described in subparagraph (A);

(D) the spouse of an individual described in subparagraph (A), (B),
or (C); or

(E) an individual who is related by blood or marriage to an individual
described in subparagraph (A), (B), (C), or (D) and shares the same home
with the individual.

(64) ``Proceeds'' means the following property:

(A) Whatever is acquired upon the sale, lease, license, exchange, or
other disposition of collateral;

(B) whatever is collected on, or distributed on account of, collateral;

(C) rights arising out of collateral;

(D) to the extent of the value of collateral, claims arising out of the
loss, nonconformity, or interference with the use of, defects or infringe-
ment of rights in, or damage to, the collateral; or

(E) to the extent of the value of collateral and to the extent payable
to the debtor or the secured party, insurance payable by reason of the
loss or nonconformity of, defects or infringement of rights in, or damage
to, the collateral.

(65) ``Promissory note'' means an instrument that evidences a prom-
ise to pay a monetary obligation, does not evidence an order to pay, and
does not contain an acknowledgment by a bank that the bank has received
for deposit a sum of money or funds.

(66) ``Proposal'' means a record authenticated by a secured party
which includes the terms on which the secured party is willing to accept
collateral in full or partial satisfaction of the obligation it secures pursuant
to sections 118, 119 and 120 and amendments thereto.

(67) ``Public-finance transaction'' means a secured transaction in con-
nection with which:

(A) Debt securities are issued;

(B) all or a portion of the securities issued have an initial stated ma-
turity of at least 20 years; and

(C) the debtor, obligor, secured party, account debtor or other person
obligated on collateral, assignor or assignee of a secured obligation, or
assignor or assignee of a security interest is a state or a governmental unit
of a state.

(68) ``Pursuant to commitment,'' with respect to an advance made or
other value given by a secured party, means pursuant to the secured
party's obligation, 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 its obligation.

(69) ``Record,'' except as used in ``for record,'' ``of record,'' ``record
or legal title,'' and ``record owner,'' means information that is inscribed
on a tangible medium or which is stored in an electronic or other medium
and is retrievable in perceivable form.

(70) ``Registered organization'' means an organization organized
solely under the law of a single state or the United States and as to which
the state or the United States must maintain a public record showing the
organization to have been organized.

(71) ``Secondary obligor'' means an obligor to the extent that:

(A) The obligor's obligation is secondary; or

(B) The obligor has a right of recourse with respect to an obligation
secured by collateral against the debtor, another obligor, or property of
either.

(72) ``Secured party'' means:

(A) A person in whose favor a security interest is created or provided
for under a security agreement, whether or not any obligation to be se-
cured is outstanding;

(B) a person that holds an agricultural lien;

(C) a consignor;

(D) a person to which accounts, chattel paper, payment intangibles,
or promissory notes have been sold;

(E) a trustee, indenture trustee, agent, collateral agent, or other rep-
resentative in whose favor a security interest or agricultural lien is created
or provided for; or

(F) a person that holds a security interest arising under K.S.A. 84-2-
401, 84-2-505, 84-2-711(3), 84-2a-508(5), 84-4-210 and 84-5-118 and
amendments thereto.

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

(74) ``Send,'' in connection with a record or notification, means:

(A) To deposit in the mail, deliver for transmission, or transmit by
any other usual means of communication, with postage or cost of trans-
mission provided for, addressed to any address reasonable under the cir-
cumstances; or

(B) to cause the record or notification to be received within the time
that it would have been received if properly sent under subparagraph (A).

(75) ``Software'' means a computer program and any supporting in-
formation provided in connection with a transaction relating to the pro-
gram. The term does not include a computer program that is included in
the definition of goods.

(76) ``State'' means a state of the United States, the District of Co-
lumbia, Puerto Rico, the United States Virgin Islands, or any territory or
insular possession subject to the jurisdiction of the United States.

(77) ``Statutory lien'' means liens created by K.S.A. 2-1319, 2-2608, 2-
3007, 34-239, 47-836, 58-201, 58-203, 58-204, 58-207, 58-218, 58-220,
58-221, 58-241, 58-242, 58-2524, 58-2525, 58-2526, 58-2527, 58-2528 and
84-7-209, and amendments thereto.

(78) ``Supporting obligation'' means a letter-of-credit right or second-
ary obligation that supports the payment or performance of an account,
chattel paper, a document, a general intangible, an instrument, or in-
vestment property.

(79) ``Tangible chattel paper'' means chattel paper evidenced by a
record or records consisting of information that is inscribed on a tangible
medium.

(80) ``Termination statement'' means an amendment of a financing
statement which:

(A) Identifies, by its file number, the initial financing statement to
which it relates; and

(B) indicates either that it is a termination statement or that the iden-
tified financing statement is no longer effective.

(81) ``Transmitting utility'' means a person primarily engaged in the
business of:

(A) Operating a railroad, subway, street railway, or trolley bus;

(B) transmitting communications electrically, electromagnetically, or
by light;

(C) transmitting goods by pipeline or sewer; or

(D) transmitting or producing and transmitting electricity, steam, gas,
or water.

(b) Definitions in other articles. The following definitions in other
articles apply to this article:

``Applicant''	K.S.A.84-5-102
``Beneficiary''	K.S.A.84-5-102
``Broker''	K.S.A.84-8-102
``Certificated security''	K.S.A.84-8-102
``Check''	K.S.A.84-3-104
``Clearing corporation''	K.S.A.84-8-102
``Contract for sale''	K.S.A.84-2-106
``Customer''	K.S.A.84-4-104
``Entitlement holder''	K.S.A.84-8-102
``Financial asset''	K.S.A.84-8-102
``Holder in due course''	K.S.A.84-3-302
``Issuer'' (with respect to a letter of credit or letter-of-credit right)	K.S.A.84-5-102
``Issuer'' (with respect to a security)	K.S.A.84-8-102
``Lease''	K.S.A.84-2a-103
``Lease agreement''	K.S.A.84-2a-103
``Lease contract''	K.S.A.84-2a-103
``Leasehold interest''	K.S.A.84-2a-103
``Lessee''	K.S.A.84-2a-103
``Lessee in ordinary course of business''	K.S.A.84-2a-103
``Lessor''	K.S.A.84-2a-103
``Lessor's residual interest''	K.S.A.84-2a-103
``Letter of credit''	K.S.A.84-5-102
``Merchant''	K.S.A.84-2-104
``Negotiable instrument''	K.S.A.84-3-104
``Nominated person''	K.S.A.84-5-102
``Note''	K.S.A.84-3-104
``Proceeds of a letter of credit''	K.S.A.84-5-114
``Prove''	K.S.A.84-3-103
``Sale''	K.S.A.84-2-106
``Securities account''	K.S.A.84-8-501
``Securities intermediary''	K.S.A.84-8-102
``Security''	K.S.A.84-8-102
``Security certificate''	K.S.A.84-8-102
``Security entitlement''	K.S.A.84-8-102
``Uncertificated security''	K.S.A.84-8-102

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

New Sec. 3. (UCC 9-103.) (a) Definitions. In this section:

(1) ``Purchase-money collateral'' means goods or software that se-
cures a purchase-money obligation incurred with respect to that collat-
eral; and

(2) ``purchase-money obligation'' means an obligation of an obligor
incurred as all or part of the price of the collateral or for value given to
enable the debtor to acquire rights in or the use of the collateral if the
value is in fact so used.

(b) Purchase-money security interest in goods. A security inter-
est in goods is a purchase-money security interest:

(1) To the extent that the goods are purchase-money collateral with
respect to that security interest;

(2) if the security interest is in inventory that is or was purchase-
money collateral, also to the extent that the security interest secures a
purchase-money obligation incurred with respect to other inventory in
which the secured party holds or held a purchase-money security interest;
and

(3) also to the extent that the security interest secures a purchase-
money obligation incurred with respect to software in which the secured
party holds or held a purchase-money security interest.

(c) Purchase-money security interest in software. A security in-
terest in software is a purchase-money security interest to the extent that
the security interest also secures a purchase-money obligation incurred
with respect to goods in which the secured party holds or held a purchase-
money security interest if:

(1) The debtor acquired its interest in the software in an integrated
transaction in which it acquired an interest in the goods; and

(2) the debtor acquired its interest in the software for the principal
purpose of using the software in the goods.

(d) Consignor's inventory purchase-money security interest.
The security interest of a consignor in goods that are the subject of a
consignment is a purchase-money security interest in inventory.

(e) Application of payment. If the extent to which a security inter-
est is a purchase-money security interest depends on the application of a
payment to a particular obligation, the payment must be applied:

(1) In accordance with any reasonable method of application to which
the parties agree;

(2) in the absence of the parties'agreement to a reasonable method,
in accordance with any intention of the obligor manifested at or before
the time of payment; or

(3) in the absence of an agreement to a reasonable method and a
timely manifestation of the obligor's intention, in the following order:

(A) To obligations that are not secured; and

(B) if more than one obligation is secured, to obligations secured by
purchase-money security interests in the order in which those obligations
were incurred.

(f) No loss of status of purchase-money security interest. A pur-
chase-money security interest does not lose its status as such, even if:

(1) The purchase-money collateral also secures an obligation that is
not a purchase-money obligation;

(2) collateral that is not purchase-money collateral also secures the
purchase-money obligation; or

(3) the purchase-money obligation has been renewed, refinanced,
consolidated, or restructured.

(g) Burden of proof. A secured party claiming a purchase-money
security interest has the burden of establishing the extent to which the
security interest is a purchase-money security interest.

New Sec. 4. (UCC 9-104.) Requirements for control. (a) A se-
cured party has control of a deposit account if:

(1) The secured party is the bank with which the deposit account is
maintained;

(2) the debtor, secured party, and bank have agreed in an authenti-
cated record that the bank will comply with instructions originated by the
secured party directing disposition of the funds in the account without
further consent by the debtor; or

(3) the secured party becomes the bank's customer with respect to
the deposit account.

(b) Debtor's right to direct disposition. A secured party that has
satisfied subsection (a) has control, even if the debtor retains the right to
direct the disposition of funds from the deposit account.

New Sec. 5. (UCC 9-105.) A secured party has control of electronic
chattel paper if the record or records comprising the chattel paper are
created, stored, and assigned in such a manner that:

(1) A single authoritative copy of the record or records exists which
is unique, identifiable and, except as otherwise provided in paragraphs
(4), (5), and (6), unalterable;

(2) the authoritative copy identifies the secured party as the assignee
of the record or records;

(3) the authoritative copy is communicated to and maintained by the
secured party or its designated custodian;

(4) copies or revisions that add or change an identified assignee of
the authoritative copy can be made only with the participation of the
secured party;

(5) each copy of the authoritative copy and any copy of a copy is
readily identifiable as a copy that is not the authoritative copy; and

(6) any revision of the authoritative copy is readily identifiable as an
authorized or unauthorized revision.

New Sec. 6. (UCC 9-106.)(a) Control under Section 8-106. A per-
son has control of a certificated security, uncertificated security, or se-
curity entitlement as provided in K.S.A. 84-8-106 and amendments
thereto.

(b) Control of commodity contract. A secured party has control of
a commodity contract if:

(1) The secured party is the commodity intermediary with which the
commodity contract is carried; or

(2) the commodity customer, secured party, and commodity inter-
mediary have agreed that the commodity intermediary will apply any
value distributed on account of the commodity contract as directed by
the secured party without further consent by the commodity customer.

(c) Effect of control of securities account or commodity ac-
count. A secured party having control of all security entitlements or com-
modity contracts carried in a securities account or commodity account
has control over the securities account or commodity account.

New Sec. 7. (UCC 9-107.) A secured party has control of a letter-of-
credit right to the extent of any right to payment or performance by the
issuer or any nominated person if the issuer or nominated person has
consented to an assignment of proceeds of the letter of credit under
K.S.A. 84-5-114(a) and amendments thereto or otherwise applicable law
or practice.

New Sec. 8. (UCC 9-108.) (a) Sufficiency of description. Except
as otherwise provided in subsections (c), (d), and (e), a description of
personal or real property is sufficient, whether or not it is specific, if it
reasonably identifies what is described.

(b) Examples of reasonable identification. Except as otherwise
provided in subsection (d), a description of collateral reasonably identifies
the collateral if it identifies the collateral by:

(1) Specific listing;

(2) category;

(3) except as otherwise provided in subsection (e), a type of collateral
defined in the uniform commercial code;

(4) quantity;

(5) computational or allocational formula or procedure; or

(6) except as otherwise provided in subsection (c), any other method,
if the identity of the collateral is objectively determinable.

(c) Supergeneric description not sufficient. A description of col-
lateral as ``all the debtor's assets'' or ``all the debtor's personal property''
or using words of similar import does not reasonably identify the collat-
eral.

(d) Investment property. Except as otherwise provided in subsec-
tion (e), a description of a security entitlement, securities account, or
commodity account is sufficient if it describes:

(1) The collateral by those terms or as investment property; or

(2) the underlying financial asset or commodity contract.

(e) When description by type insufficient. A description only by
type of collateral defined in the uniform commercial code is an insuffi-
cient description of:

(1) A commercial tort claim; or

(2) in a consumer transaction, consumer goods, a security entitle-
ment, a securities account, or a commodity account.

New Sec. 9. (UCC 9-109.) (a) General scope of article. Except as
otherwise provided in subsections (c) and (d), this article applies to:

(1) A transaction, regardless of its form, that creates a security interest
in personal property or fixtures by contract;

(2) an agricultural lien;

(3) a sale of accounts, chattel paper, payment intangibles, or prom-
issory notes;

(4) a consignment;

(5) a security interest arising under K.S.A. 84-2-401, 84-2-505, 84-2-
711(3) or 84-2a-508(5) and amendments thereto, as provided in section
10 and amendments thereto; and

(6) a security interest arising under K.S.A. 84-4-201 or 84-5-118 and
amendments thereto.

(b) Security interest in secured obligation. The application of this
article to a security interest in a secured obligation is not affected by the
fact that the obligation is itself secured by a transaction or interest to
which this article does not apply.

(c) Extent to which article does not apply. This article does not
apply to the extent that:

(1) A statute, regulation, or treaty of the United States preempts this
article;

(2) another statute of this state expressly governs the creation, per-
fection, priority, or enforcement of a security interest created by this state
or a governmental unit of this state;

(3) a statute of another state, a foreign country, or a governmental
unit of another state or a foreign country, other than a statute generally
applicable to security interests, expressly governs creation, perfection,
priority, or enforcement of a security interest created by the state, coun-
try, or governmental unit; or

(4) the rights of a transferee beneficiary or nominated person under
a letter of credit are independent and superior under K.S.A. 84-5-114
and amendments thereto.

(d) Inapplicability of article. This article does not apply to:

(1) A landlord's lien, other than an agricultural lien;

(2) a statutory lien, or a lien given by statute or other rule of law for
services or materials, but section 53 and amendments thereto applies with
respect to priority of the lien;

(3) an assignment of a claim for wages, salary, or other compensation
of an employee;

(4) a sale of accounts, chattel paper, payment intangibles, or prom-
issory notes as part of a sale of the business out of which they arose;

(5) an assignment of accounts, chattel paper, payment intangibles, or
promissory notes which is for the purpose of collection only;

(6) an assignment of a right to payment under a contract to an as-
signee that is also obligated to perform under the contract;

(7) an assignment of a single account, payment intangible, or prom-
issory note to an assignee in full or partial satisfaction of a preexisting
indebtedness;

(8) a transfer of an interest in or an assignment of a claim under a
policy of insurance, other than an assignment by or to a health-care pro-
vider of a health-care-insurance receivable and any subsequent assign-
ment of the right to payment, but sections 35 and 42 and amendments
thereto apply with respect to proceeds and priorities in proceeds;

(9) an assignment of a right represented by a judgment, other than a
judgment taken on a right to payment that was collateral;

(10) a right of recoupment or set-off, but:

(A) Section 60 and amendments thereto applies with respect to the
effectiveness of rights of recoupment or set-off against deposit accounts;
and

(B) section 66 and amendments thereto applies with respect to de-
fenses or claims of an account debtor;

(11) the creation or transfer of an interest in or lien on real property,
including a lease or rents thereunder, except to the extent that provision
is made for:

(A) Liens on real property in sections 13 and 28 and amendments
thereto;

(B) fixtures in section 54 and amendments thereto;

(C) fixture filings in sections 72, 73, 83, 87 and 90 and amendments
thereto; and

(D) security agreements covering personal and real property in sec-
tion 102 and amendments thereto;

(12) an assignment of a claim arising in tort, other than a commercial
tort claim, but sections 35 and 42 and amendments thereto apply with
respect to proceeds and priorities in proceeds;

(13) an assignment of a deposit account in a consumer transaction,
but sections 35 and 42 and amendments thereto apply with respect to
proceeds and priorities in proceeds; or

(14) an assignment of rights in or under:

(A) A claim or right to receive benefits under any workers compen-
sation, industrial accident or similar statute or regulation which provides
benefits for occupational injury or illness; or

(B) a deferred payment or benefit arrangement that enables a par-
ticipant to exclude or defer recognition of income for purposes of federal
or state income taxation.

New Sec. 10. (UCC 9-110.) A security interest arising under K.S.A.
84-2-401, 84-2-505, 84-2-711(3) or 84-2a-508(5) and amendments thereto
is subject to this article. However, until the debtor obtains possession of
the goods:

(1) The security interest is enforceable, even if section 13(b)(3) and
amendments thereto has not been satisfied;

(2) filing is not required to perfect the security interest;

(3) the rights of the secured party after default by the debtor are
governed by article 2 or 2A; and

(4) the security interest has priority over a conflicting security interest
created by the debtor.

New Sec. 11. (UCC 9-201.) (a) General effectiveness. Except as
otherwise provided in the uniform commercial code, a security agreement
is effective according to its terms between the parties, against purchasers
of the collateral, and against creditors.

(b) Applicable consumer laws and other law. A transaction sub-
ject to this article is subject to any applicable rule of law which establishes
a different rule for consumers, to any other statute or rule and regulation
of this state that regulates the rates, charges, agreements, and practices
for loans, credit sales, or other extensions of credit, and to any consumer
protection statute or rule and regulation of this state and, including, but
not limited to, K.S.A. 2-1319, 2-2608, 2-3007, 34-239, 47-836, 58-201,
58-203, 58-204, 58-207, 58-218, 58-220, 58-221, 58-241, 58-242, 58-2524,
58-2525, 58-2526, 58-2527, 58-2528 and 84-7-209.

(c) Other applicable law controls. In case of conflict between this
article and a rule of law, statute, or regulation described in subsection
(b), the rule of law, statute, or regulation controls. Failure to comply with
a statute or regulation described in subsection (b) has only the effect the
statute or regulation specifies.

(d) Further deference to other applicable law. This article does
not:

(1) Validate any rate, charge, agreement, or practice that violates a
rule of law, statute, or regulation described in subsection (b); or

(2) extend the application of the rule of law, statute, or regulation to
a transaction not otherwise subject to it.

New Sec. 12. (UCC 9-202.) Except as otherwise provided with re-
spect to consignments or sales of accounts, chattel paper, payment intan-
gibles, or promissory notes, the provisions of this article with regard to
rights and obligations apply whether title to collateral is in the secured
party or the debtor.

New Sec. 13. (UCC 9-203.) (a) Attachment. A security interest at-
taches to collateral when it becomes enforceable against the debtor with
respect to the collateral, unless an agreement expressly postpones the
time of attachment.

(b) Enforceability. Except as otherwise provided in subsections (c)
through (i), a security interest is enforceable against the debtor and third
parties with respect to the collateral only if:

(1) Value has been given;

(2) the debtor has rights in the collateral or the power to transfer
rights in the collateral to a secured party; and

(3) one of the following conditions is met:

(A) The debtor has authenticated a security agreement that provides
a description of the collateral and, if the security interest covers timber
to be cut, a description of the land concerned;

(B) the collateral is not a certificated security and is in the possession
of the secured party under section 33 and amendments thereto pursuant
to the debtor's security agreement;

(C) the collateral is a certificated security in registered form and the
security certificate has been delivered to the secured party under K.S.A.
84-8-301 and amendments thereto pursuant to the debtor's security
agreement; or

(D) the collateral is deposit accounts, electronic chattel paper, in-
vestment property, or letter-of-credit rights, and the secured party has
control under section 4, 5, 6 or 7 and amendments thereto pursuant to
the debtor's security agreement.

(c) Other UCC provisions. Subsection (b) is subject to K.S.A. 84-
4-210 and amendments thereto on the security interest of a collecting
bank, K.S.A. 84-5-118 and amendments thereto on the security interest
of a letter-of-credit issuer or nominated person, section 10 and amend-
ments thereto on a security interest arising under Article 2 or 2A, and
section 16 and amendments thereto on security interests in investment
property.

(d) When person becomes bound by another person's security
agreement. A person becomes bound as debtor by a security agreement
entered into by another person if, by operation of law other than this
article or by contract:

(1) The security agreement becomes effective to create a security
interest in the person's property; or

(2) the person becomes generally obligated for the obligations of the
other person, including the obligation secured under the security agree-
ment, and acquires or succeeds to all or substantially all of the assets of
the other person.

(e) Effect of new debtor becoming bound. If a new debtor be-
comes bound as debtor by a security agreement entered into by another
person:

(1) The agreement satisfies subsection (b)(3) with respect to existing
or after-acquired property of the new debtor to the extent the property
is described in the agreement; and

(2) another agreement is not necessary to make a security interest in
the property enforceable.

(f) Proceeds and supporting obligations. The attachment of a se-
curity interest in collateral gives the secured party the rights to proceeds
provided by section 35 and amendments thereto and is also attachment
of a security interest in a supporting obligation for the collateral.

(g) Lien securing right to payment. The attachment of a security
interest in a right to payment or performance secured by a security in-
terest or other lien on personal or real property is also attachment of a
security interest in the security interest, mortgage, or other lien.

(h) Security entitlement carried in securities account. The at-
tachment of a security interest in a securities account is also attachment
of a security interest in the security entitlements carried in the securities
account.

(i) Commodity contracts carried in commodity account. The at-
tachment of a security interest in a commodity account is also attachment
of a security interest in the commodity contracts carried in the commodity
account.

New Sec. 14. (UCC 9-204.) (a) After-acquired collateral. Except
as otherwise provided in subsection (b), a security agreement may create
or provide for a security interest in after-acquired collateral.

(b) When after-acquired property clause not effective. A secu-
rity interest does not attach under a term constituting an after-acquired
property clause to:

(1) Consumer goods, other than an accession when given as addi-
tional security, unless the debtor acquires rights in them within 10 days
after the secured party gives value; or

(2) a commercial tort claim.

(c) Future advances and other value. A security agreement may
provide that collateral secures, or that accounts, chattel paper, payment
intangibles, or promissory notes are sold in connection with, future ad-
vances or other value, whether or not the advances or value are given
pursuant to commitment.

New Sec. 15. (UCC 9-205.) (a) When security interest not invalid
or fraudulent. A security interest is not invalid or fraudulent against
creditors solely because: (1) The debtor has the right or ability to:

(A) Use, commingle, or dispose of all or part of the collateral, includ-
ing returned or repossessed goods;

(B) collect, compromise, enforce, or otherwise deal with collateral;

(C) accept the return of collateral or make repossessions; or

(D) use, commingle, or dispose of proceeds; or

(2) the secured party fails to require the debtor to account for pro-
ceeds or replace collateral.

(b) Requirements of possession not relaxed. This section does not
relax the requirements of possession if attachment, perfection, or enforce-
ment of a security interest depends upon possession of the collateral by
the secured party.

New Sec. 16. (UCC 9-206.) (a) Security interest when person
buys through securities intermediary. A security interest in favor of
a securities intermediary attaches to a person's security entitlement if:

(1) The person buys a financial asset through the securities inter-
mediary in a transaction in which the person is obligated to pay the pur-
chase price to the securities intermediary at the time of the purchase;
and

(2) the securities intermediary credits the financial asset to the
buyer's securities account before the buyer pays the securities interme-
diary.

(b) Security interest secures obligation to pay for financial as-
set. The security interest described in subsection (a) secures the person's
obligation to pay for the financial asset.

(c) Security interest in payment against delivery transaction. A
security interest in favor of a person that delivers a certificated security
or other financial asset represented by a writing attaches to the security
or other financial asset if: (1) The security or other financial asset:

(A) In the ordinary course of business is transferred by delivery with
any necessary indorsement or assignment; and

(B) is delivered under an agreement between persons in the business
of dealing with such securities or financial assets; and

(2) the agreement calls for delivery against payment.

(d) Security interest secures obligation to pay for delivery. The
security interest described in subsection (c) secures the obligation to
make payment for the delivery.

New Sec. 17. (UCC 9-207.) (a) Duty of care when secured party
in possession. Except as otherwise provided in subsection (d), a secured
party shall use reasonable care in the custody and preservation of collat-
eral in the secured party's possession. In the case of chattel paper or an
instrument, reasonable care includes taking necessary steps to preserve
rights against prior parties unless otherwise agreed.

(b) Expenses, risks, duties, and rights when secured party in
possession. Except as otherwise provided in subsection (d), if a secured
party has possession of collateral:

(1) Reasonable expenses, including the cost of insurance and pay-
ment of taxes or other charges, incurred in the custody, preservation, use,
or operation of the collateral are chargeable to the debtor and are secured
by the collateral;

(2) the risk of accidental loss or damage is on the debtor to the extent
of a deficiency in any effective insurance coverage;

(3) the secured party shall keep the collateral identifiable, but fun-
gible collateral may be commingled; and

(4) the secured party may use or operate the collateral:

(A) For the purpose of preserving the collateral or its value;

(B) as permitted by an order of a court having competent jurisdiction;
or

(C) except in the case of consumer goods, in the manner and to the
extent agreed by the debtor.

(c) Duties and rights when secured party in possession or con-
trol. Except as otherwise provided in subsection (d), a secured party
having possession of collateral or control of collateral under section 4, 5,
6 or 7 and amendments thereto:

(1) May hold as additional security any proceeds, except money or
funds, received from the collateral;

(2) shall apply money or funds received from the collateral to reduce
the secured obligation, unless remitted to the debtor; and

(3) may create a security interest in the collateral.

(d) Buyer of certain rights to payment. If the secured party is a
buyer of accounts, chattel paper, payment intangibles, or promissory
notes or a consignor:

(1) Subsection (a) does not apply unless the secured party is entitled
under an agreement:

(A) To charge back uncollected collateral; or

(B) otherwise to full or limited recourse against the debtor or a sec-
ondary obligor based on the nonpayment or other default of an account
debtor or other obligor on the collateral; and

(2) subsections (b) and (c) do not apply.

New Sec. 18. (UCC 9-208.) (a) Applicability of section. This sec-
tion applies to cases in which there is no outstanding secured obligation
and the secured party is not committed to make advances, incur obliga-
tions, or otherwise give value.

(b) Duties of secured party after receiving demand from
debtor. Within 10 days after receiving an authenticated demand by the
debtor:

(1) A secured party having control of a deposit account under section
4(a)(2) and amendments thereto shall send to the bank with which the
deposit account is maintained an authenticated statement that releases
the bank from any further obligation to comply with instructions origi-
nated by the secured party;

(2) a secured party having control of a deposit account under section
4(a)(3) and amendments thereto shall:

(A) Pay the debtor the balance on deposit in the deposit account; or

(B) transfer the balance on deposit into a deposit account in the
debtor's name;

(3) a secured party, other than a buyer, having control of electronic
chattel paper under section 5 and amendments thereto shall:

(A) Communicate the authoritative copy of the electronic chattel pa-
per to the debtor or its designated custodian;

(B) if the debtor designates a custodian that is the designated cus-
todian with which the authoritative copy of the electronic chattel paper
is maintained for the secured party, communicate to the custodian an
authenticated record releasing the designated custodian from any further
obligation to comply with instructions originated by the secured party and
instructing the custodian to comply with instructions originated by the
debtor; and

(C) take appropriate action to enable the debtor or its designated
custodian to make copies of or revisions to the authoritative copy which
add or change an identified assignee of the authoritative copy without the
consent of the secured party;

(4) a secured party having control of investment property under
K.S.A. 84-8-106(d)(2) or section 6(b) and amendments thereto shall send
to the securities intermediary or commodity intermediary with which the
security entitlement or commodity contract is maintained an authenti-
cated record that releases the securities intermediary or commodity in-
termediary from any further obligation to comply with entitlement orders
or directions originated by the secured party; and

(5) a secured party having control of a letter-of-credit right under
section 7 and amendments thereto shall send to each person having an
unfulfilled obligation to pay or deliver proceeds of the letter of credit to
the secured party an authenticated release from any further obligation to
pay or deliver proceeds of the letter of credit to the secured party.

New Sec. 19. (UCC 9-209.) (a) Applicability of section. Except as
otherwise provided in subsection (c), this section applies if:

(1) There is no outstanding secured obligation; and

(2) the secured party is not committed to make advances, incur ob-
ligations, or otherwise give value.

(b) Duties of secured party after receiving demand from
debtor. Within 10 days after receiving an authenticated demand by the
debtor, a secured party shall send to an account debtor that has received
notification of an assignment to the secured party as assignee under sec-
tion 68(a) and amendments thereto an authenticated record that releases
the account debtor from any further obligation to the secured party.

(c) Inapplicability to sales. This section does not apply to an as-
signment constituting the sale of an account, chattel paper, or payment
intangible.

New Sec. 20. (UCC 9-210.) (a) Definitions. In this section:

(1) ``Request'' means a record of a type described in paragraph (2),
(3), or (4).

(2) ``Request for an accounting'' means a record authenticated by a
debtor requesting that the recipient provide an accounting of the unpaid
obligations secured by collateral and reasonably identifying the transac-
tion or relationship that is the subject of the request.

(3) ``Request regarding a list of collateral'' means a record authenti-
cated by a debtor requesting that the recipient approve or correct a list
of what the debtor believes to be the collateral securing an obligation and
reasonably identifying the transaction or relationship that is the subject
of the request.

(4) ``Request regarding a statement of account'' means a record au-
thenticated by a debtor requesting that the recipient approve or correct
a statement indicating what the debtor believes to be the aggregate
amount of unpaid obligations secured by collateral as of a specified date
and reasonably identifying the transaction or relationship that is the sub-
ject of the request.

(b) Duty to respond to requests. Subject to subsections (c), (d),
(e), and (f), a secured party, other than a buyer of accounts, chattel paper,
payment intangibles, or promissory notes or a consignor, shall comply
with a request within 14 days after receipt:

(1) In the case of a request for an accounting, by authenticating and
sending to the debtor an accounting; and

(2) in the case of a request regarding a list of collateral or a request
regarding a statement of account, by authenticating and sending to the
debtor an approval or correction.

(c) Request regarding list of collateral; statement concerning
type of collateral. A secured party that claims a security interest in all
of a particular type of collateral owned by the debtor may comply with a
request regarding a list of collateral by sending to the debtor an authen-
ticated record including a statement to that effect within 14 days after
receipt.

(d) Request regarding list of collateral; no interest claimed. A
person that receives a request regarding a list of collateral, claims no
interest in the collateral when it receives the request, and claimed an
interest in the collateral at an earlier time shall comply with the request
within 14 days after receipt by sending to the debtor an authenticated
record:

(1) Disclaiming any interest in the collateral; and

(2) if known to the recipient, providing the name and mailing address
of any assignee of or successor to the recipient's interest in the collateral.

(e) Request for accounting or regarding statement of account;
no interest in obligation claimed. A person that receives a request for
an accounting or a request regarding a statement of account, claims no
interest in the obligations when it receives the request, and claimed an
interest in the obligations at an earlier time shall comply with the request
within 14 days after receipt by sending to the debtor an authenticated
record:

(1) Disclaiming any interest in the obligations; and

(2) if known to the recipient, providing the name and mailing address
of any assignee of or successor to the recipient's interest in the obligations.

(f) Charges for responses. A debtor is entitled without charge to
one response to a request under this section during any six-month period.
The secured party may require payment of a charge not exceeding $25
for each additional response.

New Sec. 21. (UCC 9-301.) Except as otherwise provided in sections
23 through 26 and amendments thereto, the following rules determine
the law governing perfection, the effect of perfection or nonperfection,
and the priority of a security interest in collateral:

(1) Except as otherwise provided in this section, while a debtor is
located in a jurisdiction, the local law of that jurisdiction governs perfec-
tion, the effect of perfection or nonperfection, and the priority of a se-
curity interest in collateral.

(2) While collateral is located in a jurisdiction, the local law of that
jurisdiction governs perfection, the effect of perfection or nonperfection,
and the priority of a possessory security interest in that collateral.

(3) Except as otherwise provided in paragraph (4), while negotiable
documents, goods, instruments, money, or tangible chattel paper is lo-
cated in a jurisdiction, the local law of that jurisdiction governs:

(A) Perfection of a security interest in the goods by filing a fixture
filing;

(B) perfection of a security interest in timber to be cut; and

(C) the effect of perfection or nonperfection and the priority of a
nonpossessory security interest in the collateral.

(4) The local law of the jurisdiction in which the wellhead or mine-
head is located governs perfection, the effect of perfection or nonperfec-
tion, and the priority of a security interest in as-extracted collateral.

New Sec. 22. (UCC 9-302.) While farm products are located in a
jurisdiction, the local law of that jurisdiction governs perfection, the effect
of perfection or nonperfection, and the priority of an agricultural lien on
the farm products.

New Sec. 23. (UCC 9-303.) (a) Applicability of section. This sec-
tion applies to goods covered by a certificate of title, even if there is no
other relationship between the jurisdiction under whose certificate of title
the goods are covered and the goods or the debtor.

(b) When goods covered by certificate of title. Goods become
covered by a certificate of title when a valid application for the certificate
of title and the applicable fee are delivered to the appropriate authority.
Goods cease to be covered by a certificate of title at the earlier of the
time the certificate of title ceases to be effective under the law of the
issuing jurisdiction or the time the goods become covered subsequently
by a certificate of title issued by another jurisdiction.

(c) Applicable law. The local law of the jurisdiction under whose
certificate of title the goods are covered governs perfection, the effect of
perfection or nonperfection, and the priority of a security interest in goods
covered by a certificate of title from the time the goods become covered
by the certificate of title until the goods cease to be covered by the cer-
tificate of title.

New Sec. 24. (UCC 9-304.) (a) Law of bank's jurisdiction gov-
erns. The local law of a bank's jurisdiction governs perfection, the effect
of perfection or nonperfection, and the priority of a security interest in a
deposit account maintained with that bank.

(b) Bank's jurisdiction. The following rules determine a bank's ju-
risdiction for purposes of this part:

(1) If an agreement between the bank and the debtor governing the
deposit account expressly provides that a particular jurisdiction is the
bank's jurisdiction for purposes of this part, this article, or the Uniform
Commercial Code, that jurisdiction is the bank's jurisdiction.

(2) If paragraph (1) does not apply and an agreement between the
bank and its customer governing the deposit account expressly provides
that the agreement is governed by the law of a particular jurisdiction, that
jurisdiction is the bank's jurisdiction.

(3) If neither paragraph (1) nor paragraph (2) applies and an agree-
ment between the bank and its customer governing the deposit account
expressly provides that the deposit account is maintained at an office in
a particular jurisdiction, that jurisdiction is the bank's jurisdiction.

(4) If none of the preceding paragraphs apply, the bank's jurisdiction
is the jurisdiction in which the office identified in an account statement
as the office serving the customer's account is located.

(5) If none of the preceding paragraphs apply, the bank's jurisdiction
is the jurisdiction in which the chief executive office of the bank is located.

New Sec. 25. (UCC 9-305.) (a) Governing law: general rules. Ex-
cept as otherwise provided in subsection (c), the following rules apply:

(1) While a security certificate is located in a jurisdiction, the local
law of that jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in the certificated
security represented thereby.

(2) The local law of the issuer's jurisdiction as specified in K.S.A. 84-
8-110(d) and amendments thereto governs perfection, the effect of per-
fection or nonperfection, and the priority of a security interest in an un-
certificated security.

(3) The local law of the securities intermediary's jurisdiction as spec-
ified in K.S.A. 84-8-110(e) and amendments thereto governs perfection,
the effect of perfection or nonperfection, and the priority of a security
interest in a security entitlement or securities account.

(4) The local law of the commodity intermediary's jurisdiction gov-
erns perfection, the effect of perfection or nonperfection, and the priority
of a security interest in a commodity contract or commodity account.

(b) Commodity intermediary's jurisdiction. The following rules
determine a commodity intermediary's jurisdiction for purposes of this
part:

(1) If an agreement between the commodity intermediary and com-
modity customer governing the commodity account expressly provides
that a particular jurisdiction is the commodity intermediary's jurisdiction
for purposes of this part, this article, or the uniform commercial code,
that jurisdiction is the commodity intermediary's jurisdiction.

(2) If paragraph (1) does not apply and an agreement between the
commodity intermediary and commodity customer governing the com-
modity account expressly provides that the agreement is governed by the
law of a particular jurisdiction, that jurisdiction is the commodity inter-
mediary's jurisdiction.

(3) If neither paragraph (1) nor paragraph (2) applies and an agree-
ment between the commodity intermediary and commodity customer
governing the commodity account expressly provides that the commodity
account is maintained at an office in a particular jurisdiction, that juris-
diction is the commodity intermediary's jurisdiction.

(4) If none of the preceding paragraphs apply, the commodity inter-
mediary's jurisdiction is the jurisdiction in which the office identified in
an account statement as the office serving the commodity customer's
account is located.

(5) If none of the preceding paragraphs apply, the commodity inter-
mediary's jurisdiction is the jurisdiction in which the chief executive office
of the commodity intermediary is located.

(c) When perfection governed by law of jurisdiction where
debtor located. The local law of the jurisdiction in which the debtor is
located governs:

(1) Perfection of a security interest in investment property by filing;

(2) automatic perfection of a security interest in investment property
created by a broker or securities intermediary; and

(3) automatic perfection of a security interest in a commodity con-
tract or commodity account created by a commodity intermediary.

New Sec. 26. (UCC 9-306.) (a) Governing law: issuers or nomi-
nated person's jurisdiction. Subject to subsection (c), the local law of
the issuer's jurisdiction or a nominated person's jurisdiction governs per-
fection, the effect of perfection or nonperfection, and the priority of a
security interest in a letter-of-credit right if the issuer's jurisdiction or
nominated person's jurisdiction is a state.

(b) Issuer's or nominated person's jurisdiction. For purposes of
this part, an issuer's jurisdiction or nominated person's jurisdiction is the
jurisdiction whose law governs the liability of the issuer or nominated
person with respect to the letter-of-credit right as provided in K.S.A. 84-
5-116 and amendments thereto.

(c) When section not applicable. This section does not apply to a
security interest that is perfected only under section 28(d) and amend-
ments thereto.

New Sec. 27. (UCC 9-307.) (a) ``Place of business.'' In this section,
``place of business'' means a place where a debtor conducts its affairs.

(b) Debtor's location: general rules. Except as otherwise provided
in this section, the following rules determine a debtor's location:

(1) A debtor who is an individual is located at the individual's prin-
cipal residence.

(2) A debtor that is an organization and has only one place of business
is located at its place of business.

(3) A debtor that is an organization and has more than one place of
business is located at its chief executive office.

(c) Limitation of applicability of subsection (b). Subsection (b)
applies only if a debtor's residence, place of business, or chief executive
office, as applicable, is located in a jurisdiction whose law generally re-
quires information concerning the existence of a nonpossessory security
interest to be made generally available in a filing, recording, or registra-
tion system as a condition or result of the security interest's obtaining
priority over the rights of a lien creditor with respect to the collateral. If
subsection (b) does not apply, the debtor is located in the District of
Columbia.

(d) Continuation of location: cessation of existence, etc. A per-
son that ceases to exist, have a residence, or have a place of business
continues to be located in the jurisdiction specified by subsections (b)
and (c).

(e) Location of registered organization organized under state
law. A registered organization that is organized under the law of a state
is located in that state.

(f) Location of registered organization organized under fed-
eral law; bank branches and agencies. Except as otherwise provided
in subsection (i), a registered organization that is organized under the law
of the United States and a branch or agency of a bank that is not organized
under the law of the United States or a state are located:

(1) In the state that the law of the United States designates, if the
law designates a state of location;

(2) in the state that the registered organization, branch, or agency
designates, if the law of the United States authorizes the registered or-
ganization, branch, or agency to designate its state of location; or

(3) in the District of Columbia, if neither paragraph (1) nor paragraph
(2) applies.

(g) Continuation of location: change in status of registered or-
ganization. A registered organization continues to be located in the ju-
risdiction specified by subsection (e) or (f) notwithstanding:

(1) The suspension, revocation, forfeiture, or lapse of the registered
organization's status as such in its jurisdiction of organization; or

(2) the dissolution, winding up, or cancellation of the existence of the
registered organization.

(h) Location of United States. The United States is located in the
District of Columbia.

(i) Location of foreign bank branch or agency if licensed in only
one state. A branch or agency of a bank that is not organized under the
law of the United States or a state is located in the state in which the
branch or agency is licensed, if all branches and agencies of the bank are
licensed in only one state.

(j) Location of foreign air carrier. A foreign air carrier under the
federal aviation act of 1958, as amended, is located at the designated office
of the agent upon which service of process may be made on behalf of the
carrier.

(k) Section applies only to this part. This section applies only for
purposes of this part.

New Sec. 28. (UCC 9-308.) (a) Perfection of security interest.
Except as otherwise provided in this section and section 29 and amend-
ments thereto, a security interest is perfected if it has attached and all of
the applicable requirements for perfection in sections 30 through 36 and
amendments thereto have been satisfied. A security interest is perfected
when it attaches if the applicable requirements are satisfied before the
security interest attaches.

(b) Perfection of agricultural lien. An agricultural lien is perfected
if it has become effective and all of the applicable requirements for per-
fection in section 30 and amendments thereto have been satisfied. An
agricultural lien is perfected when it becomes effective if the applicable
requirements are satisfied before the agricultural lien becomes effective.

(c) Continuous perfection; perfection by different methods. A
security interest or agricultural lien is perfected continuously if it is orig-
inally perfected by one method under this article and is later perfected
by another method under this article, without an intermediate period
when it was unperfected.

(d) Supporting obligation. Perfection of a security interest in col-
lateral also perfects a security interest in a supporting obligation for the
collateral.

(e) Lien securing right to payment. Perfection of a security inter-
est in a right to payment or performance also perfects a security interest
in a security interest, mortgage, or other lien on personal or real property
securing the right.

(f) Security entitlement carried in securities account. Perfection
of a security interest in a securities account also perfects a security interest
in the security entitlements carried in the securities account.

(g) Commodity contract carried in commodity account. Perfec-
tion of a security interest in a commodity account also perfects a security
interest in the commodity contracts carried in the commodity account.

New Sec. 29. (UCC 9-309.) The following security interests are per-
fected when they attach:

(1) A purchase-money security interest in consumer goods, except as
otherwise provided in section 31(b) and amendments thereto with respect
to consumer goods that are subject to a statute or treaty described in
section 31(a) and amendments thereto;

(2) an assignment of accounts or payment intangibles which does not
by itself or in conjunction with other assignments to the same assignee
transfer a significant part of the assignor's outstanding accounts or pay-
ment intangibles;

(3) a sale of a payment intangible;

(4) a sale of a promissory note;

(5) a security interest created by the assignment of a health-care-
insurance receivable to the provider of the health-care goods or services;

(6) a security interest arising under K.S.A. 84-2-401, 84-2-505, 84-2-
711(3), or 84-2a-508(5) and amendments thereto, until the debtor obtains
possession of the collateral;

(7) a security interest of a collecting bank arising under K.S.A. 84-4-
210 and amendments thereto;

(8) a security interest of an issuer or nominated person arising under
K.S.A. 84-5-118 and amendments thereto;

(9) a security interest arising in the delivery of a financial asset under
section 16 and amendments thereto;

(10) a security interest in investment property created by a broker or
securities intermediary;

(11) a security interest in a commodity contract or a commodity ac-
count created by a commodity intermediary;

(12) an assignment for the benefit of all creditors of the transferor
and subsequent transfers by the assignee thereunder; and

(13) a security interest created by an assignment of a beneficial in-
terest in a decedent's estate.

New Sec. 30. (UCC 9-310.) (a) General rule: perfection by filing.
Except as otherwise provided in subsection (b) and section 32(b) and
amendments thereto, a financing statement must be filed to perfect all
security interests and agricultural liens.

(b) Exceptions: filing not necessary. The filing of a financing state-
ment is not necessary to perfect a security interest:

(1) That is perfected under section 28(d), (e), (f), or (g) and amend-
ments thereto;

(2) that is perfected under section 29 and amendments thereto when
it attaches;

(3) in property subject to a statute, regulation, or treaty described in
section 31(a) and amendments thereto;

(4) in goods in possession of a bailee which is perfected under section
32(d)(1) or (2) and amendments thereto;

(5) in certificated securities, documents, goods, or instruments which
is perfected without filing or possession under section 32(e), (f), or (g)
and amendments thereto;

(6) in collateral in the secured party's possession under section 33
and amendments thereto;

(7) in a certificated security which is perfected by delivery of the
security certificate to the secured party under section 33 and amendments
thereto;

(8) in deposit accounts, electronic chattel paper, investment property,
or letter-of-credit rights which is perfected by control under section 34
and amendments thereto;

(9) in proceeds which is perfected under section 35 and amendments
thereto; or

(10) that is perfected under section 36 and amendments thereto.

(c) Assignment of perfected security interest. If a secured party
assigns a perfected security interest or agricultural lien, a filing under this
article is not required to continue the perfected status of the security
interest against creditors of and transferees from the original debtor.

New Sec. 31. (UCC 9-311.) (a) Security interest subject to other
law. Except as otherwise provided in subsection (d), the filing of a fi-
nancing statement is not necessary or effective to perfect a security in-
terest in property subject to:

(1) A statute, regulation, or treaty of the United States whose require-
ments for a security interest's obtaining priority over the rights of a lien
creditor with respect to the property preempt section 30(a) and amend-
ments thereto;

(2) any certificate-of-title law of this state covering automobiles, trail-
ers, mobile homes, boats, farm tractors, or the like, which provides for a
security interest to be indicated on the certificate as a condition or result
of perfection; or

(3) a certificate-of-title statute of another jurisdiction which provides
for a security interest to be indicated on the certificate as a condition or
result of the security interest's obtaining priority over the rights of a lien
creditor with respect to the property.

(b) Compliance with other law. Compliance with the requirements
of a statute, regulation, or treaty described in subsection (a) for obtaining
priority over the rights of a lien creditor is equivalent to the filing of a
financing statement under this article. Except as otherwise provided in
subsection (d) and sections 33 and 36(d) and (e) and amendments thereto
for goods covered by a certificate of title, a security interest in property
subject to a statute, regulation, or treaty described in subsection (a) may
be perfected only by compliance with those requirements, and a security
interest so perfected remains perfected notwithstanding a change in the
use or transfer of possession of the collateral.

(c) Duration and renewal of perfection. Except as otherwise pro-
vided in subsection (d) and section 36(d) and (e) and amendments
thereto, duration and renewal of perfection of a security interest per-
fected by compliance with the requirements prescribed by a statute, reg-
ulation, or treaty described in subsection (a) are governed by the statute,
regulation, or treaty. In other respects, the security interest is subject to
this article.

(d) Inapplicability to certain inventory. During any period in
which collateral is inventory held for sale or lease by a person or leased
by that person as lessor and that person is in the business of selling or
leasing goods of that kind, this section does not apply to a security interest
in that collateral created by that person as debtor.

New Sec. 32. (UCC 9-312.) (a) Perfection by filing permitted. A
security interest in chattel paper, negotiable documents, instruments, or
investment property may be perfected by filing.

(b) Control or possession of certain collateral. Except as other-
wise provided in section 35(c) and (d) and amendments thereto for pro-
ceeds:

(1) A security interest in a deposit account may be perfected only by
control under section 34 and amendments thereto;

(2) except as otherwise provided in section 28(d) and amendments
thereto, a security interest in a letter-of-credit right may be perfected
only by control under section 34 and amendments thereto; and

(3) a security interest in money may be perfected only by the secured
party's taking possession under section 33 and amendments thereto.

(c) Goods covered by negotiable document. While goods are in
the possession of a bailee that has issued a negotiable document covering
the goods:

(1) A security interest in the goods may be perfected by perfecting a
security interest in the document; and

(2) a security interest perfected in the document has priority over
any security interest that becomes perfected in the goods by another
method during that time.

(d) Goods covered by nonnegotiable document. While goods are
in the possession of a bailee that has issued a nonnegotiable document
covering the goods, a security interest in the goods may be perfected by:

(1) Issuance of a document in the name of the secured party;

(2) the bailee's receipt of notification of the secured party's interest;
or

(3) filing as to the goods.

(e) Temporary perfection: new value. A security interest in cer-
tificated securities, negotiable documents, or instruments is perfected
without filing or the taking of possession for a period of 20 days from the
time it attaches to the extent that it arises for new value given under an
authenticated security agreement.

(f) Temporary perfection: goods or documents made available
to debtor. A perfected security interest in a negotiable document or
goods in possession of a bailee, other than one that has issued a negotiable
document for the goods, remains perfected for 20 days without filing if
the secured party makes available to the debtor the goods or documents
representing the goods for the purpose of:

(1) Ultimate sale or exchange; or

(2) loading, unloading, storing, shipping, transshipping, manufactur-
ing, processing, or otherwise dealing with them in a manner preliminary
to their sale or exchange.

(g) Temporary perfection: delivery of security certificate or in-
strument to debtor. A perfected security interest in a certificated se-
curity or instrument remains perfected for 20 days without filing if the
secured party delivers the security certificate or instrument to the debtor
for the purpose of:

(1) Ultimate sale or exchange; or

(2) presentation, collection, enforcement, renewal, or registration of
transfer.

(h) Expiration of temporary perfection. After the 20-day period
specified in subsection (e), (f), or (g) expires, perfection depends upon
compliance with this article.

New Sec. 33. (UCC 9-313.) (a) Perfection by possession or deliv-
ery. Except as otherwise provided in subsection (b), a secured party may
perfect a security interest in negotiable documents, goods, instruments,
money, or tangible chattel paper by taking possession of the collateral. A
secured party may perfect a security interest in certificated securities by
taking delivery of the certificated securities under K.S.A. 84-8-301 and
amendments thereto.

(b) Goods covered by certificate of title. With respect to goods
covered by a certificate of title issued by this state, a secured party may
perfect a security interest in the goods by taking possession of the goods
only in the circumstances described in section 36(d) and amendments
thereto.

(c) Collateral in possession of person other than debtor. With
respect to collateral other than certificated securities and goods covered
by a document, a secured party takes possession of collateral in the pos-
session of a person other than the debtor, the secured party, or a lessee
of the collateral from the debtor in the ordinary course of the debtor's
business, when:

(1) The person in possession authenticates a record acknowledging
that it holds possession of the collateral for the secured party's benefit;
or

(2) the person takes possession of the collateral after having authen-
ticated a record acknowledging that it will hold possession of collateral
for the secured party's benefit.

(d) Time of perfection by possession; continuation of perfec-
tion. If perfection of a security interest depends upon possession of the
collateral by a secured party, perfection occurs no earlier than the time
the secured party takes possession and continues only while the secured
party retains possession.

(e) Time of perfection by delivery; continuation of perfection.
A security interest in a certificated security in registered form is perfected
by delivery when delivery of the certificated security occurs under K.S.A.
84-8-301 and amendments thereto and remains perfected by delivery
until the debtor obtains possession of the security certificate.

(f) Acknowledgment not required. A person in possession of col-
lateral is not required to acknowledge that it holds possession for a se-
cured party's benefit.

(g) Effectiveness of acknowledgment; no duties or confirma-
tion. If a person acknowledges that it holds possession for the secured
party's benefit:

(1) The acknowledgment is effective under subsection (c) or (a) of
K.S.A. 84-8-301 and amendments thereto, even if the acknowledgment
violates the rights of a debtor; and

(2) unless the person otherwise agrees or a law other than this article
otherwise provides, the person does not owe any duty to the secured party
and is not required to confirm the acknowledgment to another person.

(h) Secured party's delivery to person other than debtor. A se-
cured party having possession of collateral does not relinquish possession
by delivering the collateral to a person other than the debtor or a lessee
of the collateral from the debtor in the ordinary course of the debtor's
business if the person was instructed before the delivery or is instructed
contemporaneously with the delivery:

(1) To hold possession of the collateral for the secured party's benefit;
or

(2) to redeliver the collateral to the secured party.

(i) Effect of delivery under subsection (h); no duties or confir-
mation. A secured party does not relinquish possession, even if a delivery
under subsection (h) violates the rights of a debtor. A person to which
collateral is delivered under subsection (h) does not owe any duty to the
secured party and is not required to confirm the delivery to another per-
son unless the person otherwise agrees or a law other than this article
otherwise provides.

New Sec. 34. (UCC 9-314.) (a) Perfection by control. A security
interest in investment property, deposit accounts, letter-of-credit rights,
or electronic chattel paper may be perfected by control of the collateral
under section 4, 5, 6, or 7 and amendments thereto.

(b) Specified collateral: time of perfection by control; contin-
uation of perfection. A security interest in deposit accounts, electronic
chattel paper, or letter-of-credit rights is perfected by control under sec-
tion 4, 5 or 7 and amendments thereto when the secured party obtains
control and remains perfected by control only while the secured party
retains control.

(c) Investment property: time of perfection by control; contin-
uation of perfection. A security interest in investment property is per-
fected by control under section 6 and amendments thereto from the time
the secured party obtains control and remains perfected by control until:

(1) The secured party does not have control; and

(2) one of the following occurs:

(A) If the collateral is a certificated security, the debtor has or ac-
quires possession of the security certificate;

(B) if the collateral is an uncertificated security, the issuer has reg-
istered or registers the debtor as the registered owner; or

(C) if the collateral is a security entitlement, the debtor is or becomes
the entitlement holder.

New Sec. 35. (UCC 9-315.) (a) Disposition of collateral: contin-
uation of security interest or agricultural lien; proceeds. Except as
otherwise provided in this article and in K.S.A. 84-2-403(2) and amend-
ments thereto:

(1) A security interest or agricultural lien continues in collateral not-
withstanding sale, lease, license, exchange, or other disposition thereof
unless the secured party authorized the disposition free of the security
interest or agricultural lien; and

(2) a security interest attaches to any identifiable proceeds of collat-
eral.

(b) When commingled proceeds identifiable. Proceeds that are
commingled with other property are identifiable proceeds:

(1) If the proceeds are goods, to the extent provided by section 56
and amendments thereto; and

(2) if the proceeds are not goods, to the extent that the secured party
identifies the proceeds by a method of tracing, including application of
equitable principles, that is permitted under law other than this article
with respect to commingled property of the type involved.

(c) Perfection of security interest in proceeds. A security interest
in proceeds is a perfected security interest if the security interest in the
original collateral was perfected.

(d) Continuation of perfection. A perfected security interest in
proceeds becomes unperfected on the 21st day after the security interest
attaches to the proceeds unless: (1) The following conditions are satisfied:

(A) A filed financing statement covers the original collateral;

(B) the proceeds are collateral in which a security interest may be
perfected by filing in the office in which the financing statement has been
filed; and

(C) the proceeds are not acquired with cash proceeds;

(2) the proceeds are identifiable cash proceeds; or

(3) the security interest in the proceeds is perfected other than under
subsection (c) when the security interest attaches to the proceeds or
within 20 days thereafter.

(e) When perfected security interest in proceeds becomes un-
perfected. If a filed financing statement covers the original collateral, a
security interest in proceeds which remains perfected under subsection
(d)(1) becomes unperfected at the later of:

(1) When the effectiveness of the filed financing statement lapses
under section 86 and amendments thereto or is terminated under section
84 and amendments thereto; or

(2) the 21st day after the security interest attaches to the proceeds.

New Sec. 36. (UCC 9-316.) (a) General rule: effect on perfection
of change in governing law. A security interest perfected pursuant to
the law of the jurisdiction designated in section 21(1) or 25(c) and amend-
ments thereto remains perfected until the earliest of:

(1) The time perfection would have ceased under the law of that
jurisdiction;

(2) the expiration of four months after a change of the debtor's lo-
cation to another jurisdiction; or

(3) the expiration of one year after a transfer of collateral to a person
that thereby becomes a debtor and is located in another jurisdiction.

(b) Security interest perfected or unperfected under law of
new jurisdiction. If a security interest described in subsection (a) be-
comes perfected under the law of the other jurisdiction before the earliest
time or event described in that subsection, it remains perfected there-
after. If the security interest does not become perfected under the law
of the other jurisdiction before the earliest time or event, it becomes
unperfected and is deemed never to have been perfected as against a
purchaser of the collateral for value.

(c) Possessory security interest in collateral moved to new ju-
risdiction. A possessory security interest in collateral, other than goods
covered by a certificate of title and as extracted collateral consisting of
goods, remains continuously perfected if:

(1) The collateral is located in one jurisdiction and subject to a se-
curity interest perfected under the law of that jurisdiction;

(2) thereafter the collateral is brought into another jurisdiction; and

(3) upon entry into the other jurisdiction, the security interest is per-
fected under the law of the other jurisdiction.

(d) Goods covered by certificate of title from this state. Except
as otherwise provided in subsection (e), a security interest in goods cov-
ered by a certificate of title which is perfected by any method under the
law of another jurisdiction when the goods become covered by a certifi-
cate of title from this state remains perfected until the security interest
would have become unperfected under the law of the other jurisdiction
had the goods not become so covered.

(e) When subsection (d) security interests becomes unper-
fected against purchasers. A security interest described in subsection
(d) becomes unperfected as against a purchaser of the goods for value
and is deemed never to have been perfected as against a purchaser of the
goods for value if the applicable requirements for perfection under sec-
tion 31(b) or 33 and amendments thereto are not satisfied before the
earlier of:

(1) The time the security interest would have become unperfected
under the law of the other jurisdiction had the goods not become covered
by a certificate of title from this state; or

(2) the expiration of four months after the goods had become so cov-
ered.

(f) Change in jurisdiction of bank, issuer, nominated person,
securities intermediary, or commodity intermediary. A security in-
terest in deposit accounts, letter-of-credit rights, or investment property
which is perfected under the law of the bank's jurisdiction, the issuer's
jurisdiction, a nominated person's jurisdiction, the securities intermedi-
ary's jurisdiction, or the commodity intermediary's jurisdiction, as appli-
cable, remains perfected until the earlier of:

(1) The time the security interest would have become unperfected
under the law of that jurisdiction; or

(2) the expiration of four months after a change of the applicable
jurisdiction to another jurisdiction.

(g) Subsection (f) security interest perfected or unperfected
under law of new jurisdiction. If a security interest described in sub-
section (f) becomes perfected under the law of the other jurisdiction
before the earlier of the time or the end of the period described in that
subsection, it remains perfected thereafter. If the security interest does
not become perfected under the law of the other jurisdiction before the
earlier of that time or the end of that period, it becomes unperfected and
is deemed never to have been perfected as against a purchaser of the
collateral for value.

New Sec. 37. (UCC 9-317.) (a) Conflicting security interests and
rights of lien creditors. A security interest or agricultural lien is sub-
ordinate to the rights of:

(1) A person entitled to priority under section 42 and amendments
thereto; and

(2) except as otherwise provided in subsection (e), a person that be-
comes a lien creditor before the earlier of the time the security interest
or agricultural lien is perfected or a financing statement covering the
collateral is filed.

(b) Buyers that receive delivery. Except as otherwise provided in
subsection (e), a buyer, other than a secured party, of tangible chattel
paper, documents, goods, instruments, or a security certificate takes free
of a security interest or agricultural lien if the buyer gives value and
receives delivery of the collateral without knowledge of the security in-
terest or agricultural lien and before it is perfected.

(c) Lessees that receive delivery. Except as otherwise provided in
subsection (e), a lessee of goods takes free of a security interest or agri-
cultural lien if the lessee gives value and receives delivery of the collateral
without knowledge of the security interest or agricultural lien and before
it is perfected.

(d) Licensees and buyers of certain collateral. A licensee of a
general intangible or a buyer, other than a secured party, of accounts,
electronic chattel paper, general intangibles, or investment property other
than a certificated security takes free of a security interest if the licensee
or buyer gives value without knowledge of the security interest and before
it is perfected.

(e) Purchase-money security interest. Except as otherwise pro-
vided in sections 40 and 41 and amendments thereto, if a person files a
financing statement with respect to a purchase-money security interest
before or within 20 days after the debtor receives delivery of the collat-
eral, the security interest takes priority over the rights of a buyer, lessee,
or lien creditor which arise between the time the security interest attaches
and the time of filing.

New Sec. 38. (UCC 9-318.) (a) Seller retains no interest. A debtor
that has sold an account, chattel paper, payment intangible, or promissory
note does not retain a legal or equitable interest in the collateral sold.

(b) Deemed rights of debtor if buyer's security interest unper-
fected. For purposes of determining the rights of creditors of, and pur-
chasers for value of an account or chattel paper from, a debtor that has
sold an account or chattel paper, while the buyer's security interest is
unperfected, the debtor is deemed to have rights and title to the account
or chattel paper identical to those the debtor sold.

New Sec. 39. (UCC 9-319.) (a) Consignee has consignor's rights.
Except as otherwise provided in subsection (b), for purposes of deter-
mining the rights of creditors of, and purchasers for value of goods from,
a consignee, while the goods are in the possession of the consignee, the
consignee is deemed to have rights and title to the goods identical to
those the consignor had or had power to transfer.

(b) Applicability of other law. For purposes of determining the
rights of a creditor of a consignee, law other than this article determines
the rights and title of a consignee while goods are in the consignee's
possession if, under this part, a perfected security interest held by the
consignor would have priority over the rights of the creditor.

New Sec. 40. (UCC 9-320.) (a) Buyer in ordinary course of busi-
ness. Except as otherwise provided in subsection (e), a buyer in ordinary
course of business, other than a person buying farm products from a
person engaged in farming operations, takes free of a security interest
created by the buyer's seller, even if the security interest is perfected and
the buyer knows of its existence.

(b) Buyer of consumer goods. Except as otherwise provided in sub-
section (e), a buyer of goods from a person who used or bought the goods
for use primarily for personal, family, or household purposes takes free
of a security interest, even if perfected, if the buyer buys:

(1) Without knowledge of the security interest;

(2) for value;

(3) primarily for the buyer's personal, family, or household purposes;
and

(4) before the filing of a financing statement covering the goods.

(c) Effectiveness of filing for subsection (b). To the extent that it
affects the priority of a security interest over a buyer of goods under
subsection (b), the period of effectiveness of a filing made in the juris-
diction in which the seller is located is governed by section 36(a) and (b)
and amendments thereto.

(d) Buyer in ordinary course of business at wellhead or mine-
head. A buyer in ordinary course of business buying oil, gas, or other
minerals at the wellhead or minehead or after extraction takes free of an
interest arising out of an encumbrance.

(e) Possessory security interest not affected. Subsections (a) and
(b) do not affect a security interest in goods in the possession of the
secured party under section 33 and amendments thereto.

New Sec. 41. (UCC 9-321.) (a) ``Licensee in ordinary course of
business.'' In this section, ``licensee in ordinary course of business''
means a person that becomes a licensee of a general intangible in good
faith, without knowledge that the license violates the rights of another
person in the general intangible, and in the ordinary course from a person
in the business of licensing general intangibles of that kind. A person
becomes a licensee in the ordinary course of business if the license to the
person comports with the usual or customary practices in the kind of
business in which the licensor is engaged or with the licensor's own usual
or customary practices.

(b) Rights of licensee in ordinary course of business. A licensee
in ordinary course of business takes the rights of the licensee under a
nonexclusive license free of a security interest in the general intangible
created by the licensor, even if the security interest is perfected and the
licensee knows of its existence.

(c) Rights of lessee in ordinary course of business. A lessee in
ordinary course of business takes the leasehold interest free of a security
interest in the goods created by the lessor, even if the security interest is
perfected and the lessee knows of its existence.

New Sec. 42. (UCC 9-322.) (a) General priority rules. Except as
otherwise provided in this section, priority among conflicting security in-
terests and agricultural liens in the same collateral is determined accord-
ing to the following rules:

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

(2) A perfected security interest or agricultural lien has priority over
a conflicting unperfected security interest or agricultural lien.

(3) The first security interest or agricultural lien to attach or become
effective has priority if conflicting security interests and agricultural liens
are unperfected.

(b) Time of perfection: proceeds and supporting obligations.
For the purposes of subsection (a)(1):

(1) The time of filing or perfection as to a security interest in collat-
eral is also the time of filing or perfection as to a security interest in
proceeds; and

(2) the time of filing or perfection as to a security interest in collateral
supported by a supporting obligation is also the time of filing or perfection
as to a security interest in the supporting obligation.

(c) Special priority rules: proceeds and supporting obligations.
Except as otherwise provided in subsection (f), a security interest in col-
lateral which qualifies for priority over a conflicting security interest un-
der section 47, 48, 49, 59 or 51 and amendments thereto also has priority
over a conflicting security interest in:

(1) Any supporting obligation for the collateral; and

(2) proceeds of the collateral if:

(A) The security interest in proceeds is perfected;

(B) the proceeds are cash proceeds or of the same type as the col-
lateral; and

(C) in the case of proceeds that are proceeds of proceeds, all inter-
vening proceeds are cash proceeds, proceeds of the same type as the
collateral, or an account relating to the collateral.

(d) First-to-file priority rule for certain collateral. Subject to
subsection (e) and except as otherwise provided in subsection (f), if a
security interest in chattel paper, deposit accounts, negotiable documents,
instruments, investment property, or letter-of-credit rights is perfected
by a method other than filing, conflicting perfected security interests in
proceeds of the collateral rank according to priority in time of filing.

(e) Applicability of subsection (d). Subsection (d) applies only if
the proceeds of the collateral are not cash proceeds, chattel paper, ne-
gotiable documents, instruments, investment property, or letter-of-credit
rights.

(f) Limitations on subsections (a) through (e). Subsections (a)
through (e) are subject to:

(1) Subsection (g) and the other provisions of this part;

(2) K.S.A. 84-4-210 and amendments thereto with respect to a se-
curity interest of a collecting bank;

(3) K.S.A. 84-5-118 and amendments thereto with respect to a se-
curity interest of an issuer or nominated person; and

(4) section 10 and amendments thereto with respect to a security
interest arising under article 2 or 2A.

(g) Priority under agricultural lien statute. A perfected agricul-
tural lien on collateral has priority over a conflicting security interest in
or agricultural lien on the same collateral if the statute creating the ag-
ricultural lien so provides.

New Sec. 43. (UCC 9-323.) (a) When priority based on time of
advance. Except as otherwise provided in subsection (c), for purposes of
determining the priority of a perfected security interest under section
42(a)(1) and amendments thereto, perfection of the security interest dates
from the time an advance is made to the extent that the security interest
secures an advance that:

(1) Is made while the security interest is perfected only:

(A) Under section 29 and amendments thereto when it attaches; or

(B) temporarily under section 32(e), (f), or (g) and amendments
thereto; and

(2) is not made pursuant to a commitment entered into before or
while the security interest is perfected by a method other than under
section 29 or 32(e), (f), or (g) and amendments thereto.

(b) Lien creditor. Except as otherwise provided in subsection (c), a
security interest is subordinate to the rights of a person that becomes a
lien creditor to the extent that the security interest secures an advance
made more than 45 days after the person becomes a lien creditor unless
the advance is made:

(1) Without knowledge of the lien; or

(2) pursuant to a commitment entered into without knowledge of the
lien.

(c) Buyer of receivables. Subsections (a) and (b) do not apply to a
security interest held by a secured party that is a buyer of accounts, chattel
paper, payment intangibles, or promissory notes or a consignor.

(d) Buyer of goods. Except as otherwise provided in subsection (e),
a buyer of goods other than a buyer in ordinary course of business takes
free of a security interest to the extent that it secures advances made after
the earlier of:

(1) The time the secured party acquires knowledge of the buyer's
purchase; or

(2) forty-five days after the purchase.

(e) Advances made pursuant to commitment: priority of buyer
of goods. Subsection (d) does not apply if the advance is made pursuant
to a commitment entered into without knowledge of the buyer's purchase
and before the expiration of the 45-day period.

(f) Lessee of goods. Except as otherwise provided in subsection (g),
a lessee of goods, other than a lessee in ordinary course of business, takes
the leasehold interest free of a security interest to the extent that it se-
cures advances made after the earlier of:

(1) The time the secured party acquires knowledge of the lease; or

(2) forty-five days after the lease contract becomes enforceable.

(g) Advances made pursuant to commitment: priority of lessee
of goods. Subsection (f) does not apply if the advance is made pursuant
to a commitment entered into without knowledge of the lease and before
the expiration of the 45-day period.

New Sec. 44. (UCC 9-324.) (a) General rule: purchase-money
priority. Except as otherwise provided in subsection (g), a perfected
purchase-money security interest in goods other than inventory or live-
stock has priority over a conflicting security interest in the same goods,
and, except as otherwise provided in section 47 and amendments thereto,
a perfected security interest in its identifiable proceeds also has priority,
if the purchase-money security interest is perfected when the debtor re-
ceives possession of the collateral or within 20 days thereafter.

(b) Inventory purchase-money priority. Subject to subsection (c)
and except as otherwise provided in subsection (g), a perfected purchase-
money security interest in inventory has priority over a conflicting security
interest in the same inventory, has priority over a conflicting security
interest in chattel paper or an instrument constituting proceeds of the
inventory and in proceeds of the chattel paper, if so provided in section
30 and amendments thereto, and, except as otherwise provided in section
47 and amendments thereto, also has priority in identifiable cash proceeds
of the inventory to the extent the identifiable cash proceeds are received
on or before the delivery of the inventory to a buyer, if:

(1) The purchase-money security interest is perfected when the
debtor receives possession of the inventory;

(2) the purchase-money secured party sends an authenticated noti-
fication to the holder of the conflicting security interest;

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

(4) the notification states that the person sending the notification has
or expects to acquire a purchase-money security interest in inventory of
the debtor and describes the inventory.

(c) Holders of conflicting inventory security interests to be no-
tified. Subsections (b)(2) through (4) apply only if the holder of the con-
flicting security interest had filed a financing statement covering the same
types of inventory:

(1) If the purchase-money security interest is perfected by filing, be-
fore the date of the filing; or

(2) if the purchase-money security interest is temporarily perfected
without filing or possession under section 32(f) and amendments thereto,
before the beginning of the 20-day period thereunder.

(d) Livestock purchase-money priority. Subject to subsection (e)
and except as otherwise provided in subsection (g), a perfected purchase-
money security interest in livestock that are farm products has priority
over a conflicting security interest in the same livestock, and, except as
otherwise provided in section 47 and amendments thereto, a perfected
security interest in their identifiable proceeds and identifiable products
in their unmanufactured states also has priority, if:

(1) The purchase-money security interest is perfected when the
debtor receives possession of the livestock;

(2) the purchase-money secured party sends an authenticated noti-
fication to the holder of the conflicting security interest;

(3) the holder of the conflicting security interest receives the notifi-
cation within six months before the debtor receives possession of the
livestock; and

(4) the notification states that the person sending the notification has
or expects to acquire a purchase-money security interest in livestock of
the debtor and describes the livestock.

(e) Holders of conflicting livestock security interests to be no-
tified. Subsections (d)(2) through (4) apply only if the holder of the con-
flicting security interest had filed a financing statement covering the same
types of livestock:

(1) If the purchase-money security interest is perfected by filing, be-
fore the date of the filing; or

(2) if the purchase-money security interest is temporarily perfected
without filing or possession under section 32(f) and amendments thereto,
before the beginning of the 20-day period thereunder.

(f) Software purchase-money priority. Except as otherwise pro-
vided in subsection (g), a perfected purchase-money security interest in
software has priority over a conflicting security interest in the same col-
lateral, and, except as otherwise provided in section 47 and amendments
thereto, a perfected security interest in its identifiable proceeds also has
priority, to the extent that the purchase-money security interest in the
goods in which the software was acquired for use has priority in the goods
and proceeds of the goods under this section.

(g) Conflicting purchase-money security interests. If more than
one security interest qualifies for priority in the same collateral under
subsection (a), (b), (d), or (f):

(1) A security interest securing an obligation incurred as all or part
of the price of the collateral has priority over a security interest securing
an obligation incurred for value given to enable the debtor to acquire
rights in or the use of collateral; and

(2) in all other cases, section 42(a) and amendments thereto applies
to the qualifying security interests.

New Sec. 45. (UCC 9-325.) (a) Subordination of security interest
in transferred collateral. Except as otherwise provided in subsection
(b), a security interest created by a debtor is subordinate to a security
interest in the same collateral created by another person if:

(1) The debtor acquired the collateral subject to the security interest
created by the other person;

(2) the security interest created by the other person was perfected
when the debtor acquired the collateral; and

(3) there is no period thereafter when the security interest is unper-
fected.

(b) Limitation of subsection (a) subordination. Subsection (a)
subordinates a security interest only if the security interest:

(1) Otherwise would have priority solely under section 42(a) or 44
and amendments thereto; or

(2) arose solely under K.S.A. 84-2-711(3) or 84-2a-508(5) and amend-
ments thereto.

New Sec. 46. (UCC 9-326.) (a) Subordination of security interest
created by new debtor. Subject to subsection (b), a security interest
created by a new debtor which is perfected by a filed financing statement
that is effective solely under section 79 and amendments thereto in col-
lateral in which a new debtor has or acquires rights is subordinate to a
security interest in the same collateral which is perfected other than by
a filed financing statement that is effective solely under section 79 and
amendments thereto.

(b) Priority under other provisions; multiple original debtors.
The other provisions of this part determine the priority among conflicting
security interests in the same collateral perfected by filed financing state-
ments that are effective solely under section 19 and amendments thereto.
However, if the security agreements to which a new debtor became
bound as debtor were not entered into by the same original debtor, the
conflicting security interests rank according to priority in time of the new
debtor's having become bound.

New Sec. 47. (UCC 9-327.) The following rules govern priority
among conflicting security interests in the same deposit account:

(1) A security interest held by a secured party having control of the
deposit account under section 4 and amendments thereto has priority
over a conflicting security interest held by a secured party that does not
have control.

(2) Except as otherwise provided in paragraphs (3) and (4), security
interests perfected by control under section 34 and amendments thereto
rank according to priority in time of obtaining control.

(3) Except as otherwise provided in paragraph (4), a security interest
held by the bank with which the deposit account is maintained has priority
over a conflicting security interest held by another secured party.

(4) A security interest perfected by control under section 4(a)(3) and
amendments thereto has priority over a security interest held by the bank
with which the deposit account is maintained.

New Sec. 48. (UCC 9-328.) The following rules govern priority
among conflicting security interests in the same investment property:

(1) A security interest held by a secured party having control of in-
vestment property under section 6 and amendments thereto has priority
over a security interest held by a secured party that does not have control
of the investment property.

(2) Except as otherwise provided in paragraphs (3) and (4), conflicting
security interests held by secured parties each of which has control under
section 6 and amendments thereto rank according to priority in time of:

(A) If the collateral is a security, obtaining control;

(B) if the collateral is a security entitlement carried in a securities
account and: (i) if the secured party obtained control under K.S.A. 84-8-
106(d)(1) and amendments thereto, the secured party's becoming the
person for which the securities account is maintained;

(ii) if the secured party obtained control under K.S.A. 84-8-106(d)(2)
and amendments thereto, the securities intermediary's agreement to
comply with the secured party's entitlement orders with respect to se-
curity entitlements carried or to be carried in the securities account; or

(iii) if the secured party obtained control through another person un-
der K.S.A. 84-8-106(d)(3) and amendments thereto, the time on which
priority would be based under this paragraph if the other person were
the secured party; or

(C) if the collateral is a commodity contract carried with a commodity
intermediary, the satisfaction of the requirement for control specified in
section 6(b)(2) and amendments thereto with respect to commodity con-
tracts carried or to be carried with the commodity intermediary.

(3) A security interest held by a securities intermediary in a security
entitlement or a securities account maintained with the securities inter-
mediary has priority over a conflicting security interest held by another
secured party.

(4) A security interest held by a commodity intermediary in a com-
modity contract or a commodity account maintained with the commodity
intermediary has priority over a conflicting security interest held by an-
other secured party.

(5) A security interest in a certificated security in registered form
which is perfected by taking delivery under section 33(a) and amend-
ments thereto and not by control under section 34 and amendments
thereto has priority over a conflicting security interest perfected by a
method other than control.

(6) Conflicting security interests created by a broker, securities in-
termediary, or commodity intermediary which are perfected without con-
trol under section 6 and amendments thereto rank equally.

(7) In all other cases, priority among conflicting security interests in
investment property is governed by sections 42 and 43 and amendments
thereto.

New Sec. 49. (UCC 9-329.) The following rules govern priority
among conflicting security interests in the same letter-of-credit right:

(1) A security interest held by a secured party having control of the
letter-of-credit right under section 7 and amendments thereto has priority
to the extent of its control over a conflicting security interest held by a
secured party that does not have control.

(2) Security interests perfected by control under section 34 and
amendments thereto rank according to priority in time of obtaining con-
trol.

New Sec. 50. (UCC 9-330.) (a) Purchaser's priority: security in-
terest claimed merely as proceeds. A purchaser of chattel paper has
priority over a security interest in the chattel paper which is claimed
merely as proceeds of inventory subject to a security interest if:

(1) In good faith and in the ordinary course of the purchaser's busi-
ness, the purchaser gives new value and takes possession of the chattel
paper or obtains control of the chattel paper under section 5 and amend-
ments thereto; and

(2) the chattel paper does not indicate that it has been assigned to an
identified assignee other than the purchaser.

(b) Purchaser's priority: other security interests. A purchaser of
chattel paper has priority over a security interest in the chattel paper
which is claimed other than merely as proceeds of inventory subject to a
security interest if the purchaser gives new value and takes possession of
the chattel paper or obtains control of the chattel paper under section 5
and amendments thereto in good faith, in the ordinary course of the
purchaser's business, and without knowledge that the purchase violates
the rights of the secured party.

(c) Chattel paper purchaser's priority in proceeds. Except as
otherwise provided in section 47 and amendments thereto, a purchaser
having priority in chattel paper under subsection (a) or (b) also has priority
in proceeds of the chattel paper to the extent that:

(1) Section 42 and amendments thereto provides for priority in the
proceeds; or

(2) the proceeds consist of the specific goods covered by the chattel
paper or cash proceeds of the specific goods, even if the purchaser's
security interest in the proceeds is unperfected.

(d) Instrument purchaser's priority. Except as otherwise provided
in section 51(a) and amendments thereto, a purchaser of an instrument
has priority over a security interest in the instrument perfected by a
method other than possession if the purchaser gives value and takes pos-
session of the instrument in good faith and without knowledge that the
purchase violates the rights of the secured party.

(e) Holder of purchase-money security interest gives new
value. For purposes of subsections (a) and (b), the holder of a purchase-
money security interest in inventory gives new value for chattel paper
constituting proceeds of the inventory.

(f) Indication of assignment gives knowledge. For purposes of
subsections (b) and (d), if chattel paper or an instrument indicates that it
has been assigned to an identified secured party other than the purchaser,
a purchaser of the chattel paper or instrument has knowledge that the
purchase violates the rights of the secured party.

New Sec. 51. (UCC 9-331.) (a) Rights under Articles 3, 7, and 8
not limited. This article does not limit the rights of a holder in due course
of a negotiable instrument, a holder to which a negotiable document of
title has been duly negotiated, or a protected purchaser of a security.
These holders or purchasers take priority over an earlier security interest,
even if perfected, to the extent provided in articles 3, 7, and 8.

(b) Protection under Article 8. This article does not limit the rights
of or impose liability on a person to the extent that the person is protected
against the assertion of an adverse claim under article 8.

(c) Filing not notice. Filing under this article does not constitute
notice of a claim or defense to the holders, or purchasers, or persons
described in subsections (a) and (b).

New Sec. 52. (UCC 9-332.) (a) Transferee of money. A transferee
of money takes the money free of a security interest unless the transferee
acts in collusion with the debtor in violating the rights of the secured
party.

(b) Transferee of funds from deposit account. A transferee of
funds from a deposit account takes the funds free of a security interest
in the deposit account unless the transferee acts in collusion with the
debtor in violating the rights of the secured party.

New Sec. 53. (UCC 9-333.) (a) ``Possessory lien.'' In this section,
``possessory lien'' means an interest, other than a security interest or an
agricultural lien:

(1) Which secures payment or performance of an obligation for serv-
ices or materials furnished with respect to goods by a person in the or-
dinary course of the person's business;

(2) which is created by statute or rule of law in favor of the person;
and

(3) whose effectiveness depends on the person's possession of the
goods.

(b) Priority of possessory lien. A possessory lien on goods has pri-
ority over a security interest in the goods unless the lien is created by a
statute that expressly provides otherwise.

New Sec. 54. (UCC 9-334.) (a) Security interest in fixtures under
this article. A security interest under this article may be created in goods
that are fixtures or may continue in goods that become fixtures. A security
interest does not exist under this article in ordinary building materials
incorporated into an improvement on land.

(b) Security interest in fixtures under real-property law. This
article does not prevent creation of an encumbrance upon fixtures under
real property law.

(c) General rule: subordination of security interest in fixtures.
In cases not governed by subsections (d) through (h), a security interest
in fixtures is subordinate to a conflicting interest of an encumbrancer or
owner of the related real property other than the debtor.

(d) Fixtures purchase-money priority. Except as otherwise pro-
vided in subsection (h), a perfected security interest in fixtures has priority
over a conflicting interest of an encumbrancer or owner of the real prop-
erty if the debtor has an interest of record in or is in possession of the
real property and:

(1) The security interest is a purchase-money security interest;

(2) the interest of the encumbrancer or owner arises before the goods
become fixtures; and

(3) the security interest is perfected by a fixture filing before the
goods become fixtures or within 20 days thereafter.

(e) Priority of security interest in fixtures over interests in real
property. A perfected security interest in fixtures has priority over a
conflicting interest of an encumbrancer or owner of the real property if:
(1) The debtor has an interest of record in the real property or is in
possession of the real property and the security interest:

(A) Is perfected by a fixture filing before the interest of the encum-
brancer or owner is of record; and

(B) has priority over any conflicting interest of a predecessor in title
of the encumbrancer or owner;

(2) before the goods become fixtures, the security interest is per-
fected by any method permitted by this article and the fixtures are readily
removable:

(A) Factory or office machines;

(B) equipment that is not primarily used or leased for use in the
operation of the real property; or

(C) replacements of domestic appliances that are consumer goods;

(3) the conflicting interest is a lien on the real property obtained by
legal or equitable proceedings after the security interest was perfected
by any method permitted by this article; or

(4) the security interest is:

(A) Created in a manufactured home in a manufactured-home trans-
action; and

(B) perfected pursuant to a statute described in section 31(a)(2) and
amendments thereto.

(f) Priority based on consent, disclaimer, or right to remove. A
security interest in fixtures, whether or not perfected, has priority over a
conflicting interest of an encumbrancer or owner of the real property if:

(1) The encumbrancer or owner has, in an authenticated record, con-
sented to the security interest or disclaimed an interest in the goods as
fixtures; or

(2) the debtor has a right to remove the goods as against the encum-
brancer or owner.

(g) Continuation of subsection (f) priority. The priority of the
security interest under subsection (f) continues for a reasonable time if
the debtor's right to remove the goods as against the encumbrancer or
owner terminates.

(h) Priority of construction mortgage. A mortgage is a construc-
tion mortgage to the extent that it secures an obligation incurred for the
construction of an improvement on land, including the acquisition cost
of the land, if a recorded record of the mortgage so indicates. Except as
otherwise provided in subsections (e) and (f), a security interest in fixtures
is subordinate to a construction mortgage if a record of the mortgage is
recorded before the goods become fixtures and the goods become fixtures
before the completion of the construction. A mortgage has this priority
to the same extent as a construction mortgage to the extent that it is given
to refinance a construction mortgage.

(i) Priority of security interest in crops. A perfected security in-
terest in crops growing on real property has priority over a conflicting
interest of an encumbrancer or owner of the real property if the debtor
has an interest of record in or is in possession of the real property.

(j) Subsection (i) prevails. Subsection (i) prevails over any incon-
sistent provisions of law of this state.

New Sec. 55. (UCC 9-335.) (a) Creation of security interest in
accession. A security interest may be created in an accession and con-
tinues in collateral that becomes an accession.

(b) Perfection of security interest. If a security interest is per-
fected when the collateral becomes an accession, the security interest
remains perfected in the collateral.

(c) Priority of security interest. Except as otherwise provided in
subsection (d), the other provisions of this part determine the priority of
a security interest in an accession.

(d) Compliance with certificate-of-title statute. A security inter-
est in an accession is subordinate to a security interest in the whole which
is perfected by compliance with the requirements of a certificate-of-title
statute under section 31(b) and amendments thereto.

(e) Removal of accession after default. After default, subject to
part 6, a secured party may remove an accession from other goods if the
security interest in the accession has priority over the claims of every
person having an interest in the whole.

(f) Reimbursement following removal. A secured party that re-
moves an accession from other goods under subsection (e) shall promptly
reimburse any holder of a security interest or other lien on, or owner of,
the whole or of the other goods, other than the debtor, for the cost of
repair of any physical injury to the whole or the other goods. The secured
party need not reimburse the holder or owner for any diminution in value
of the whole or the other goods caused by the absence of the accession
removed or by any necessity for replacing it. A person entitled to reim-
bursement may refuse permission to remove until the secured party gives
adequate assurance for the performance of the obligation to reimburse.

New Sec. 56. (UCC 9-336.) (a) ``Commingled goods.'' In this sec-
tion, ``commingled goods'' means goods that are physically united with
other goods in such a manner that their identity is lost in a product or
mass.

(b) No security interest in commingled goods as such. A security
interest does not exist in commingled goods as such. However, a security
interest may attach to a product or mass that results when goods become
commingled goods.

(c) Attachment of security interest to product or mass. If collat-
eral becomes commingled goods, a security interest attaches to the prod-
uct or mass.

(d) Perfection of security interest. If a security interest in collat-
eral is perfected before the collateral becomes commingled goods, the
security interest that attaches to the product or mass under subsection
(c) is perfected.

(e) Priority of security interest. Except as otherwise provided in
subsection (f), the other provisions of this part determine the priority of
a security interest that attaches to the product or mass under subsection
(c).

(f) Conflicting security interests in product or mass. If more
than one security interest attaches to the product or mass under subsec-
tion (c), the following rules determine priority:

(1) A security interest that is perfected under subsection (d) has pri-
ority over a security interest that is unperfected at the time the collateral
becomes commingled goods.

(2) If more than one security interest is perfected under subsection
(d), the security interests rank equally in proportion to the value of the
collateral at the time it became commingled goods.

New Sec. 57. (UCC 9-337.) If, while a security interest in goods is
perfected by any method under the law of another jurisdiction, this state
issues a certificate of title that does not show that the goods are subject
to the security interest or contain a statement that they may be subject
to security interests not shown on the certificate:

(1) A buyer of the goods, other than a person in the business of selling
goods of that kind, takes free of the security interest if the buyer gives
value and receives delivery of the goods after issuance of the certificate
and without knowledge of the security interest; and

(2) the security interest is subordinate to a conflicting security inter-
est in the goods that attaches, and is perfected under section 31(b) and
amendments thereto, after issuance of the certificate and without the
conflicting secured party's knowledge of the security interest.

New Sec. 58. (UCC 9-338.) If a security interest or agricultural lien
is perfected by a filed financing statement providing information de-
scribed in section 87(b)(5) and amendments thereto which is incorrect at
the time the financing statement is filed:

(1) The security interest or agricultural lien is subordinate to a con-
flicting perfected security interest in the collateral to the extent that the
holder of the conflicting security interest gives value in reasonable reli-
ance upon the incorrect information; and

(2) a purchaser, other than a secured party, of the collateral takes free
of the security interest or agricultural lien to the extent that, in reasonable
reliance upon the incorrect information, the purchaser gives value and,
in the case of chattel paper, documents, goods, instruments, or a security
certificate, receives delivery of the collateral.

New Sec. 59. (UCC 9-339.) This article does not preclude subordi-
nation by agreement by a person entitled to priority.

New Sec. 60. (UCC 9-340.) (a) Exercise of recoupment or set-
off. Except as otherwise provided in subsection (c), a bank with which a
deposit account is maintained may exercise any right of recoupment or
set-off against a secured party that holds a security interest in the deposit
account.

(b) Recoupment or set-off not affected by security interest. Ex-
cept as otherwise provided in subsection (c), the application of this article
to a security interest in a deposit account does not affect a right of re-
coupment or set-off of the secured party as to a deposit account main-
tained with the secured party.

(c) When set-off ineffective. The exercise by a bank of a set-off
against a deposit account is ineffective against a secured party that holds
a security interest in the deposit account which is perfected by control
under section 4(a)(3) and amendments thereto, if the set-off is based on
a claim against the debtor.

New Sec. 61. (UCC 9-341.) Except as otherwise provided in section
60(c) and amendments thereto, and unless the bank otherwise agrees in
an authenticated record, a bank's rights and duties with respect to a de-
posit account maintained with the bank are not terminated, suspended,
or modified by:

(1) The creation, attachment, or perfection of a security interest in
the deposit account;

(2) the bank's knowledge of the security interest; or

(3) the bank's receipt of instructions from the secured party.

New Sec. 62. (UCC 9-342.) This article does not require a bank to
enter into an agreement of the kind described in section 4(a)(2) and
amendments thereto, even if the bank's customer so requests or directs.
A bank that has entered into such an agreement is not required to confirm
the existence of the agreement to another person unless requested to do
so by the bank's customer.

New Sec. 63. (UCC 9-401.) (a) Other law governs alienability;
exceptions. Except as otherwise provided in subsection (b) and sections
68, 69, 70, and 71 and amendments thereto, whether a debtor's rights in
collateral may be voluntarily or involuntarily transferred is governed by
law other than this article.

(b) Agreement does not prevent transfer. An agreement between
the debtor and the secured party which prohibits a transfer of the debtor's
rights in collateral or makes the transfer a default does not prevent the
transfer from taking effect.

New Sec. 64. (UCC 9-402.) The existence of a security interest, ag-
ricultural lien, or authority given to a debtor to dispose of or use collateral,
without more, does not subject a secured party to liability in contract or
tort for the debtor's acts or omissions.

New Sec. 65. (UCC 9-403.) (a) ``Value.'' In this section, ``value'' has
the meaning provided in K.S.A. 84-3-303(a) and amendments thereto.

(b) Agreement not to assert claim or defense. Except as other-
wise provided in this section, an agreement between an account debtor
and an assignor not to assert against an assignee any claim or defense that
the account debtor may have against the assignor is enforceable by an
assignee that takes an assignment:

(1) For value;

(2) in good faith;

(3) without notice of a claim of a property or possessory right to the
property assigned; and

(4) without notice of a defense or claim in recoupment of the type
that may be asserted against a person entitled to enforce a negotiable
instrument under K.S.A. 84-3-305(a) and amendments thereto.

(c) When subsection (b) not applicable. Subsection (b) does not
apply to defenses of a type that may be asserted against a holder in due
course of a negotiable instrument under K.S.A. 84-3-305(b) and amend-
ments thereto.

(d) Omission of required statement in consumer transaction. In
a consumer transaction, if a record evidences the account debtor's obli-
gation, law other than this article requires that the record include a state-
ment to the effect that the rights of an assignee are subject to claims or
defenses that the account debtor could assert against the original obligee,
and the record does not include such a statement:

(1) The record has the same effect as if the record included such a
statement; and

(2) the account debtor may assert against an assignee those claims
and defenses that would have been available if the record included such
a statement.

(e) Rule for individual under other law. This section is subject to
law other than this article which establishes a different rule for an account
debtor who is an individual and who incurred the obligation primarily for
personal, family, or household purposes.

(f) Other law not displaced. Except as otherwise provided in sub-
section (d), this section does not displace law other than this article which
gives effect to an agreement by an account debtor not to assert a claim
or defense against an assignee.

New Sec. 66. (UCC 9-404.) (a) Assignee's rights subject to terms,
claims, and defenses; exceptions. Unless an account debtor has made
an enforceable agreement not to assert defenses or claims, and subject
to subsections (b) through (e), the rights of an assignee are subject to:

(1) All terms of the agreement between the account debtor and as-
signor and any defense or claim in recoupment arising from the trans-
action that gave rise to the contract; and

(2) any other defense or claim of the account debtor against the as-
signor which accrues before the account debtor receives a notification of
the assignment authenticated by the assignor or the assignee.

(b) Account debtor's claim reduces amount owed to assignee.
Subject to subsection (c) and except as otherwise provided in subsection
(d), the claim of an account debtor against an assignor may be asserted
against an assignee under subsection (a) only to reduce the amount the
account debtor owes.

(c) Rule for individual under other law. This section is subject to
law other than this article which establishes a different rule for an account
debtor who is an individual and who incurred the obligation primarily for
personal, family, or household purposes.

(d) Omission of required statement in consumer transaction. In
a consumer transaction, if a record evidences the account debtor's obli-
gation, law other than this article requires that the record include a state-
ment to the effect that the account debtor's recovery against an assignee
with respect to claims and defenses against the assignor may not exceed
amounts paid by the account debtor under the record, and the record
does not include such a statement, the extent to which a claim of an
account debtor against the assignor may be asserted against an assignee
is determined as if the record included such a statement.

(e) Inapplicability to health-care-insurance receivable. This
section does not apply to an assignment of a health-care-insurance re-
ceivable.

New Sec. 67. (UCC 9-405.) (a) Effect of modification on as-
signee. A modification of or substitution for an assigned contract is ef-
fective against an assignee if made in good faith. The assignee acquires
corresponding rights under the modified or substituted contract. The as-
signment may provide that the modification or substitution is a breach of
contract by the assignor. This subsection is subject to subsections (b)
through (d).

(b) Applicability of subsection (a). Subsection (a) applies to the
extent that:

(1) The right to payment or a part thereof under an assigned contract
has not been fully earned by performance; or

(2) the right to payment or a part thereof has been fully earned by
performance and the account debtor has not received notification of the
assignment under section 68(a) and amendments thereto.

(c) Rule for individual under other law. This section is subject to
law other than this article which establishes a different rule for an account
debtor who is an individual and who incurred the obligation primarily for
personal, family, or household purposes.

(d) Inapplicability to health-care-insurance receivable. This
section does not apply to an assignment of a health-care-insurance re-
ceivable.

New Sec. 68. (UCC 9-406.) (a) Discharge of account debtor; ef-
fect of notification. Subject to subsections (b) through (i), an account
debtor on an account, chattel paper, or a payment intangible may dis-
charge the account debtor's obligation by paying the assignor until, but
not after, the account debtor receives a notification, authenticated by the
assignor or the assignee, that the amount due or to become due has been
assigned and that payment is to be made to the assignee. After receipt of
the notification, the account debtor may discharge the account debtor's
obligation by paying the assignee and may not discharge the obligation
by paying the assignor.

(b) When notification ineffective. Subject to subsection (h), noti-
fication is ineffective under subsection (a):

(1) If it does not reasonably identify the rights assigned;

(2) to the extent that an agreement between an account debtor and
a seller of a payment intangible limits the account debtor's duty to pay a
person other than the seller and the limitation is effective under law other
than this article; or

(3) at the option of an account debtor, if the notification notifies the
account debtor to make less than the full amount of any installment or
other periodic payment to the assignee, even if:

(A) Only a portion of the account, chattel paper, or general intangible
has been assigned to that assignee;

(B) a portion has been assigned to another assignee; or

(C) the account debtor knows that the assignment to that assignee is
limited.

(c) Proof of assignment. Subject to subsection (h), if requested by
the account debtor, an assignee shall seasonably furnish reasonable proof
that the assignment has been made. Unless the assignee complies, the
account debtor may discharge its obligation by paying the assignor, even
if the account debtor has received a notification under subsection (a).

(d) Term restricting assignment generally ineffective. Except as
otherwise provided in subsection (e), K.S.A. 84-2a-303 and section 69,
and amendments thereto, and subject to subsection (h), a term in an
agreement between an account debtor and an assignor or in a promissory
note is ineffective to the extent that it:

(1) Prohibits, restricts, or requires the consent of the account debtor
or person obligated on the promissory note to the assignment or transfer
of, or the creation, attachment, perfection, or enforcement of a security
interest in, the account, chattel paper, payment intangible, or promissory
note; or

(2) provides that the assignment or transfer or the creation, attach-
ment, perfection, or enforcement of the security interest may give rise to
a default, breach, right of recoupment, claim, defense, termination, right
of termination, or remedy under the account, chattel paper, payment
intangible, or promissory note.

(e) Inapplicability of subsection (d) to certain sales. Subsection
(d) does not apply to the sale of a payment intangible or promissory note.

(f) Legal restrictions on assignment generally ineffective. Ex-
cept as otherwise provided in K.S.A. 84-2a-303 and section 69 and amend-
ments thereto, and subject to subsections (h) and (i), a rule of law, statute,
or regulation that prohibits, restricts, or requires the consent of a gov-
ernment, governmental body or official, or account debtor to the assign-
ment or transfer of, or creation of a security interest in, an account or
chattel paper is ineffective to the extent that the rule of law, statute, or
regulation:

(1) Prohibits, restricts, or requires the consent of the government,
governmental body or official, or account debtor to the assignment or
transfer of, or the creation, attachment, perfection, or enforcement of a
security interest in the account or chattel paper; or

(2) provides that the assignment or transfer or the creation, attach-
ment, perfection, or enforcement of the security interest may give rise to
a default, breach, right of recoupment, claim, defense, termination, right
of termination, or remedy under the account or chattel paper.

(g) Subsection (b)(3) not waivable. Subject to subsection (h), an
account debtor may not waive or vary its option under subsection (b)(3).

(h) Rule for individual under other law. This section is subject to
law other than this article which establishes a different rule for an account
debtor who is an individual and who incurred the obligation primarily for
personal, family, or household purposes.

(i) Inapplicability to health-care-insurance receivable. This sec-
tion does not apply to an assignment of a health-care-insurance receiva-
ble.

(j) Section prevails over specified inconsistent law. This section
prevails over any inconsistent provisions of any laws, rules, and regula-
tions.

New Sec. 69. (UCC 9-407.) (a) Term restricting assignment gen-
erally ineffective. Except as otherwise provided in subsection (b), a term
in a lease agreement is ineffective to the extent that it:

(1) Prohibits, restricts, or requires the consent of a party to the lease
to the assignment or transfer or the creation, attachment, perfection, or
enforcement of a security interest in an interest of a party under the lease
contract or in the lessor's residual interest in the goods; or

(2) provides that the assignment or transfer or the creation, attach-
ment, perfection, or enforcement of the security interest may give rise to
a default, breach, right of recoupment, claim, defense, termination, right
of termination, or remedy under the lease.

(b) Effectiveness of certain terms. Except as otherwise provided
in K.S.A. 84-2a-303(7) and amendments thereto, a term described in
subsection (a)(2) is effective to the extent that there is:

(1) A transfer by the lessee of the lessee's right of possession or use
of the goods in violation of the term; or

(2) a delegation of a material performance of either party to the lease
contract in violation of the term.

(c) Security interest not material impairment. The creation, at-
tachment, perfection, or enforcement of a security interest in the lessor's
interest under the lease contract or the lessor's residual interest in the
goods is not a transfer that materially impairs the lessee's prospect of
obtaining return performance or materially changes the duty of or ma-
terially increases the burden or risk imposed on the lessee within the
purview of K.S.A. 84-2a-303(4) and amendments thereto unless, and then
only to the extent that, enforcement actually results in a delegation of
material performance of the lessor.

New Sec. 70. (UCC 9-408.) (a) Term restricting assignment gen-
erally ineffective. Except as otherwise provided in subsection (b), a term
in a promissory note or in an agreement between an account debtor and
a debtor which relates to a health-care-insurance receivable or a general
intangible, including a contract, permit, license, or franchise, and which
term prohibits, restricts, or requires the consent of the person obligated
on the promissory note or the account debtor to, the assignment or trans-
fer of, or creation, attachment, or perfection of a security interest in, the
promissory note, health-care-insurance receivable, or general intangible,
is ineffective to the extent that the term:

(1) Would impair the creation, attachment, or perfection of a security
interest; or

(2) provides that the assignment or transfer or the creation, attach-
ment, or perfection of the security interest may give rise to a default,
breach, right of recoupment, claim, defense, termination, right of ter-
mination, or remedy under the promissory note, health-care-insurance
receivable, or general intangible.

(b) Applicability of subsection (a) to sales of certain rights to
payment. Subsection (a) applies to a security interest in a payment in-
tangible or promissory note only if the security interest arises out of a sale
of the payment intangible or promissory note.

(c) Legal restrictions on assignment generally ineffective. A
rule of law, statute, or regulation that prohibits, restricts, or requires the
consent of a government, governmental body or official, person obligated
on a promissory note, or account debtor to the assignment or transfer of,
or creation of a security interest in, a promissory note, health-care-insur-
ance receivable, or general intangible, including a contract, permit, li-
cense, or franchise between an account debtor and a debtor, is ineffective
to the extent that the rule of law, statute, or regulation:

(1) Would impair the creation, attachment, or perfection of a security
interest; or

(2) provides that the assignment or transfer or the creation, attach-
ment, or perfection of the security interest may give rise to a default,
breach, right of recoupment, claim, defense, termination, right of ter-
mination, or remedy under the promissory note, health-care-insurance
receivable, or general intangible.

(d) Limitation on ineffectiveness under subsections (a) and (c).
To the extent that a term in a promissory note or in an agreement between
an account debtor and a debtor which relates to a health-care-insurance
receivable or general intangible or a rule of law, statute, or regulation
described in subsection (c) would be effective under law other than this
article but is ineffective under subsection (a) or (c), the creation, attach-
ment, or perfection of a security interest in the promissory note, health-
care-insurance receivable, or general intangible:

(1) Is not enforceable against the person obligated on the promissory
note or the account debtor;

(2) does not impose a duty or obligation on the person obligated on
the promissory note or the account debtor;

(3) does not require the person obligated on the promissory note or
the account debtor to recognize the security interest, pay or render per-
formance to the secured party, or accept payment or performance from
the secured party;

(4) does not entitle the secured party to use or assign the debtor's
rights under the promissory note, health-care-insurance receivable, or
general intangible, including any related information or materials fur-
nished to the debtor in the transaction giving rise to the promissory note,
health-care-insurance receivable, or general intangible;

(5) does not entitle the secured party to use, assign, possess, or have
access to any trade secrets or confidential information of the person ob-
ligated on the promissory note or the account debtor; and

(6) does not entitle the secured party to enforce the security interest
in the promissory note, health-care-insurance receivable, or general in-
tangible.

(e) Section prevails over specified inconsistent law. This section
prevails over any inconsistent provisions of any laws, rules, and regulations
of this state.

New Sec. 71. (UCC 9-409.) (a) Term or law restricting assign-
ment generally ineffective. A term in a letter of credit or a rule of law,
statute, regulation, custom, or practice applicable to the letter of credit
which prohibits, restricts, or requires the consent of an applicant, issuer,
or nominated person to a beneficiary's assignment of or creation of a
security interest in a letter-of-credit right is ineffective to the extent that
the term or rule of law, statute, regulation, custom, or practice:

(1) Would impair the creation, attachment, or perfection of a security
interest in the letter-of-credit right; or

(2) provides that the assignment or the creation, attachment, or per-
fection of the security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination, or remedy
under the letter-of-credit right.

(b) Limitation on ineffectiveness under subsection (a). To the
extent that a term in a letter of credit is ineffective under subsection (a)
but would be effective under law other than this article or a custom or
practice applicable to the letter of credit, to the transfer of a right to draw
or otherwise demand performance under the letter of credit, or to the
assignment of a right to proceeds of the letter of credit, the creation,
attachment, or perfection of a security interest in the letter-of-credit right:

(1) Is not enforceable against the applicant, issuer, nominated person,
or transferee beneficiary;

(2) imposes no duties or obligations on the applicant, issuer, nomi-
nated person, or transferee beneficiary; and

(3) does not require the applicant, issuer, nominated person, or trans-
feree beneficiary to recognize the security interest, pay or render per-
formance to the secured party, or accept payment or other performance
from the secured party.

New Sec. 72. (UCC 9-501.) (a) Filing offices. Except as otherwise
provided in subsection (b), if the law of this state governs perfection of a
security interest or agricultural lien, the office in which to file a financing
statement to perfect the security interest or agricultural lien is:(1) The
office designated for the filing or recording of a record of a mortgage on
the related real property, if:

(A) The collateral is as-extracted collateral or timber to be cut; or

(B) the financing statement is filed as a fixture filing and the collateral
is goods that are or are to become fixtures; or

(2) the office of the secretary of state, in all other cases, including a
case in which the collateral is goods that are or are to become fixtures
and the financing statement is not filed as a fixture filing.

(b) Filing office for transmitting utilities. The office in which to
file a financing statement to perfect a security interest in collateral, in-
cluding fixtures, of a transmitting utility is the office of the secretary of
state. The financing statement also constitutes a fixture filing as to the
collateral indicated in the financing statement which is or is to become
fixtures.

New Sec. 73. (UCC 9-502.) (a) Sufficiency of financing state-
ment. Subject to subsection (b), a financing statement is sufficient only
if it:

(1) Provides the name of the debtor;

(2) provides the name of the secured party or a representative of the
secured party; and

(3) indicates the collateral covered by the financing statement.

(b) Real-property-related financing statements. Except as oth-
erwise provided in section 72(b) and amendments thereto, to be suffi-
cient, a financing statement that covers as-extracted collateral or timber
to be cut, or which is filed as a fixture filing and covers goods that are or
are to become fixtures, must satisfy subsection (a) and also:

(1) Indicate that it covers this type of collateral;

(2) indicate that it is to be filed in the real property records;

(3) provide a description of the real property to which the collateral
is related; and

(4) if the debtor does not have an interest of record in the real prop-
erty, provide the name of a record owner.

(c) Record of mortgage as financing statement. A record of a
mortgage is effective, from the date of recording, as a financing statement
filed as a fixture filing or as a financing statement covering as-extracted
collateral or timber to be cut only if:

(1) The record indicates the goods or accounts that it covers;

(2) the goods are or are to become fixtures related to the real property
described in the record or the collateral is related to the real property
described in the record and is as-extracted collateral or timber to be cut;

(3) the record satisfies the requirements for a financing statement in
this section other than an indication that it is to be filed in the real prop-
erty records; and

(4) the record is recorded.

(d) Filing before security agreement or attachment. A financing
statement may be filed before a security agreement is made or a security
interest otherwise attaches.

New Sec. 74. (UCC 9-503.) (a) Sufficiency of debtor's name. A
financing statement sufficiently provides the name of the debtor:

(1) If the debtor is a registered organization, only if the financing
statement provides the name of the debtor indicated on the public record
of the debtor's jurisdiction of organization which shows the debtor to have
been organized;

(2) if the debtor is a decedent's estate, only if the financing statement
provides the name of the decedent and indicates that the debtor is an
estate;

(3) if the debtor is a trust or a trustee acting with respect to property
held in trust, only if the financing statement:

(A) Provides the name specified for the trust in its organic documents
or, if no name is specified, provides the name of the settlor and additional
information sufficient to distinguish the debtor from other trusts having
one or more of the same settlors; and

(B) indicates, in the debtor's name or otherwise, that the debtor is a
trust or is a trustee acting with respect to property held in trust; and

(4) if the debtors are married debtors jointly engaged in business and
it is unclear whether a partnership exists, the financing statement may be
filed in the names of the individual debtors;

(5) in other cases:

(A) If the debtor has a name, only if it provides the individual or
organizational name of the debtor; and

(B) if the debtor does not have a name, only if it provides the names
of the partners, members, associates, or other persons comprising the
debtor.

(b) Additional debtor-related information. A financing statement
that provides the name of the debtor in accordance with subsection (a)
is not rendered ineffective by the absence of:

(1) A trade name or other name of the debtor; or

(2) unless required under subsection (a)(4)(B), names of partners,
members, associates, or other persons comprising the debtor.

(c) Debtor's trade name insufficient. A financing statement that
provides only the debtor's trade name does not sufficiently provide the
name of the debtor.

(d) Representative capacity. Failure to indicate the representative
capacity of a secured party or representative of a secured party does not
affect the sufficiency of a financing statement.

(e) Multiple debtors and secured parties. A financing statement
may provide the name of more than one debtor and the name of more
than one secured party.

New Sec. 75. (UCC 9-504.) A financing statement sufficiently indi-
cates the collateral that it covers if the financing statement provides:

(1) A description of the collateral pursuant to section 8 and amend-
ments thereto; or

(2) an indication that the financing statement covers all assets or all
personal property.

New Sec. 76. (UCC 9-505.) (a) Use of terms other than ``debtor''
and ``secured party.'' A consignor, lessor, or other bailor of goods, a
licensor, or a buyer of a payment intangible or promissory note may file
a financing statement, or may comply with a statute or treaty described
in section 31(a) and amendments thereto, using the terms ``consignor,''
``consignee,'' ``lessor,'' ``lessee,'' ``bailor,'' ``bailee,'' ``licensor,'' ``licensee,''
``owner,'' ``registered owner,'' ``buyer,'' ``seller,'' or words of similar im-
port, instead of the terms ``secured party'' and ``debtor.''

(b) Effect of financing statement under subsection (a). This part
applies to the filing of a financing statement under subsection (a) and, as
appropriate, to compliance that is equivalent to filing a financing state-
ment under section 31(b) and amendments thereto, but the filing or com-
pliance is not of itself a factor in determining whether the collateral se-
cures an obligation. If it is determined for another reason that the
collateral secures an obligation, a security interest held by the consignor,
lessor, bailor, licensor, owner, or buyer which attaches to the collateral is
perfected by the filing or compliance.

New Sec. 77. (UCC 9-506.) (a) Minor errors and omissions. A
financing statement substantially satisfying the requirements of this part
is effective, even if it has minor errors or omissions, unless the errors or
omissions make the financing statement seriously misleading.

(b) Financing statement seriously misleading. Except as other-
wise provided in subsection (c), a financing statement that fails sufficiently
to provide the name of the debtor in accordance with section 74(a) and
amendments thereto, is seriously misleading.

(c) Financing statement not seriously misleading. If a search of
the records of the filing office under the debtor's correct name, using the
filing office's standard search logic, if any, would disclose a financing
statement that fails sufficiently to provide the name of the debtor in ac-
cordance with section 74(a) and amendments thereto, the name provided
does not make the financing statement seriously misleading.

(d) ``Debtor's correct name.'' For purposes of section 79(b) and
amendments thereto, the ``debtor's correct name'' in subsection (c) means
the correct name of the new debtor.

New Sec. 78. (UCC 9-507.) (a) Disposition. A filed financing state-
ment remains effective with respect to collateral that is sold, exchanged,
leased, licensed, or otherwise disposed of and in which a security interest
or agricultural lien continues, even if the secured party knows of or con-
sents to the disposition.

(b) Information becoming seriously misleading. Except as oth-
erwise provided in subsection (c) and section 79 and amendments thereto,
a financing statement is not rendered ineffective if, after the financing
statement is filed, the information provided in the financing statement
becomes seriously misleading under section 77 and amendments thereto.

(c) Change in debtor's name. If a debtor so changes its name that
a filed financing statement becomes seriously misleading under section
77 and amendments thereto:

(1) The financing statement is effective to perfect a security interest
in collateral acquired by the debtor before, or within four months after,
the change; and

(2) the financing statement is not effective to perfect a security in-
terest in collateral acquired by the debtor more than four months after
the change, unless an amendment to the financing statement which ren-
ders the financing statement not seriously misleading is filed within four
months after the change.

New Sec. 79. (UCC 9-508.) (a) Financing statement naming orig-
inal debtor. Except as otherwise provided in this section, a filed financ-
ing statement naming an original debtor is effective to perfect a security
interest in collateral in which a new debtor has or acquires rights to the
extent that the financing statement would have been effective had the
original debtor acquired rights in the collateral.

(b) Financing statement becoming seriously misleading. If the
difference between the name of the original debtor and that of the new
debtor causes a filed financing statement that is effective under subsec-
tion (a) to be seriously misleading under section 77 and amendments
thereto:

(1) The financing statement is effective to perfect a security interest
in collateral acquired by the new debtor before, and within four months
after, the new debtor becomes bound under section 13(d) and amend-
ments thereto; and

(2) the financing statement is not effective to perfect a security in-
terest in collateral acquired by the new debtor more than four months
after the new debtor becomes bound under section 13(d) and amend-
ments thereto, unless an initial financing statement providing the name
of the new debtor is filed before the expiration of that time.

(c) When section not applicable. This section does not apply to
collateral as to which a filed financing statement remains effective against
the new debtor under section 78(a) and amendments thereto.

New Sec. 80. (UCC 9-509.) (a) Person entitled to file record. A
person may file an initial financing statement, amendment that adds col-
lateral covered by a financing statement, or amendment that adds a debtor
to a financing statement only if:

(1) The debtor authorizes the filing in an authenticated record; or

(2) the person holds an agricultural lien that has become effective at
the time of filing and the financing statement covers only collateral in
which the person holds an agricultural lien.

(b) Security agreement as authorization. By authenticating or be-
coming bound as debtor by a security agreement, a debtor or new debtor
authorizes the filing of an initial financing statement, and an amendment,
covering:

(1) The collateral described in the security agreement; and

(2) property that becomes collateral under section 35(a)(2) and
amendments thereto, whether or not the security agreement expressly
covers proceeds.

(c) Acquisition of collateral as authorization. By acquiring collat-
eral in which a security interest or agricultural lien continues under sec-
tion 35(a)(1) and amendments thereto, a debtor authorizes the filing of
an initial financing statement, and an amendment, covering the collateral
and property that becomes collateral under section 35(a)(2) and amend-
ments thereto.

(d) Person entitled to file certain amendments. A person may
file an amendment other than an amendment that adds collateral covered
by a financing statement or an amendment that adds a debtor to a fi-
nancing statement only if:

(1) The secured party of record authorizes the filing; or

(2) the amendment is a termination statement for a financing state-
ment as to which the secured party of record has failed to file or send a
termination statement as required by section 84(a) or (c) and amend-
ments thereto, the debtor authorizes the filing, and the termination state-
ment indicates that the debtor authorized it to be filed.

(e) Multiple secured parties of record. If there is more than one
secured party of record for a financing statement, each secured party of
record may authorize the filing of an amendment under subsection (d).

New Sec. 81. (UCC 9-510.) (a) Filed record effective if author-
ized. A filed record is effective only to the extent that it was filed by a
person that may file it under section 80 and amendments thereto.

(b) Authorization by one secured party of record. A record au-
thorized by one secured party of record does not affect the financing
statement with respect to another secured party of record.

(c) Continuation statement not timely filed. A continuation state-
ment that is not filed within the six-month period prescribed by section
86(d) and amendments thereto, is ineffective.

New Sec. 82. (UCC 9-511.) (a) Secured party of record. A secured
party of record with respect to a financing statement is a person whose
name is provided as the name of the secured party or a representative of
the secured party in an initial financing statement that has been filed. If
an initial financing statement is filed under section 85(a) and amendments
thereto, the assignee named in the initial financing statement is the se-
cured party of record with respect to the financing statement.

(b) Amendment naming secured party of record. If an amend-
ment of a financing statement which provides the name of a person as a
secured party or a representative of a secured party is filed, the person
named in the amendment is a secured party of record. If an amendment
is filed under section 85(b) and amendments thereto, the assignee named
in the amendment is a secured party of record.

(c) Amendment deleting secured party of record. A person re-
mains a secured party of record until the filing of an amendment of the
financing statement which deletes the person.

New Sec. 83. (UCC 9-512.) (a) Amendment of information in fi-
nancing statement. Subject to section 80 and amendments thereto, a
person may add or delete collateral covered by, continue or terminate the
effectiveness of, or, subject to subsection (e), otherwise amend the infor-
mation provided in, a financing statement by filing an amendment that:

(1) Identifies, by its file number, the initial financing statement to
which the amendment relates; and

(2) if the amendment relates to an initial financing statement filed in
a filing office described in section 72(a)(1) and amendments thereto, pro-
vides the information specified in section 73(b) and amendments thereto.

(b) Period of effectiveness not affected. Except as otherwise pro-
vided in section 86 and amendments thereto, the filing of an amendment
does not extend the period of effectiveness of the financing statement.

(c) Effectiveness of amendment adding collateral. A financing
statement that is amended by an amendment that adds collateral is ef-
fective as to the added collateral only from the date of the filing of the
amendment.

(d) Effectiveness of amendment adding debtor. A financing
statement that is amended by an amendment that adds a debtor is effec-
tive as to the added debtor only from the date of the filing of the amend-
ment.

(e) Certain amendments ineffective. An amendment is ineffective
to the extent it:

(1) Purports to delete all debtors and fails to provide the name of a
debtor to be covered by the financing statement; or

(2) purports to delete all secured parties of record and fails to provide
the name of a new secured party of record.

New Sec. 84. (UCC 9-513.) (a) Consumer goods. A secured party
shall cause the secured party of record for a financing statement to file a
termination statement for the financing statement if the financing state-
ment covers consumer goods and:

(1) There is no obligation secured by the collateral covered by the
financing statement and no commitment to make an advance, incur an
obligation, or otherwise give value; or

(2) the debtor did not authorize the filing of the initial financing state-
ment.

(b) Time for compliance with subsection (a). To comply with sub-
section (a), a secured party shall cause the secured party of record to file
the termination statement:

(1) Within one month after there is no obligation secured by the
collateral covered by the financing statement and no commitment to
make an advance, incur an obligation, or otherwise give value; or

(2) if earlier, within 20 days after the secured party receives an au-
thenticated demand from a debtor.

(c) Other collateral. In cases not governed by subsection (a), within
20 days after a secured party receives an authenticated demand from a
debtor, the secured party shall cause the secured party of record for a
financing statement to send to the debtor a termination statement for the
financing statement or file the termination statement in the filing office
if:

(1) Except in the case of a financing statement covering accounts or
chattel paper that has been sold or goods that are the subject of a con-
signment, there is no obligation secured by the collateral covered by the
financing statement and no commitment to make an advance, incur an
obligation, or otherwise give value;

(2) the financing statement covers accounts or chattel paper that has
been sold but as to which the account debtor or other person obligated
has discharged its obligation;

(3) the financing statement covers goods that were the subject of a
consignment to the debtor but are not in the debtor's possession; or

(4) the debtor did not authorize the filing of the initial financing state-
ment.

(d) Effect of filing termination statement. Except as otherwise
provided in section 81 and amendments thereto, upon the filing of a
termination statement with the filing office, the financing statement to
which the termination statement relates ceases to be effective.

New Sec. 85. (UCC 9-514.) (a) Assignment reflected on initial
financing statement. Except as otherwise provided in subsection (c), an
initial financing statement may reflect an assignment of all of the secured
party's power to authorize an amendment to the financing statement by
providing the name and mailing address of the assignee as the name and
address of the secured party.

(b) Assignment of filed financing statement. Except as otherwise
provided in subsection (c), a secured party of record may assign of record
all or part of its power to authorize an amendment to a financing state-
ment by filing in the filing office an amendment of the financing state-
ment which:

(1) Identifies, by its file number, the initial financing statement to
which it relates;

(2) provides the name of the assignor; and

(3) provides the name and mailing address of the assignee.

(c) Assignment of record of mortgage. An assignment of record
of a security interest in a fixture covered by a record of a mortgage which
is effective as a financing statement filed as a fixture filing under section
73(c) and amendments thereto, may be made only by an assignment of
record of the mortgage in the manner provided by law of this state other
than the uniform commercial code.

New Sec. 86. (UCC 9-515.) (a) Five-year effectiveness. Except as
otherwise provided in subsections (b), (e), (f), and (g), a filed financing
statement is effective for a period of five years after the date of filing.

(b) Public-finance or manufactured-home transaction. Except
as otherwise provided in subsections (e), (f), and (g), an initial financing
statement filed in connection with a public-finance transaction or man-
ufactured-home transaction is effective for a period of 30 years after the
date of filing if it indicates that it is filed in connection with a public-
finance transaction or manufactured-home transaction.

(c) Lapse and continuation of financing statement. The effect-
iveness of a filed financing statement lapses on the expiration of the pe-
riod of its effectiveness unless before the lapse a continuation statement
is filed pursuant to subsection (d). Upon lapse, a financing statement
ceases to be effective and any security interest or agricultural lien that
was perfected by the financing statement becomes unperfected, unless
the security interest is perfected otherwise. If the security interest or
agricultural lien becomes unperfected upon lapse, it is deemed never to
have been perfected as against a purchaser of the collateral for value.

(d) When continuation statement may be filed. A continuation
statement may be filed only within six months before the expiration of
the five-year period specified in subsection (a) or the thirty-year period
specified in subsection (b), whichever is applicable.

(e) Effect of filing continuation statement. Except as otherwise
provided in section 81 and amendments thereto, upon timely filing of a
continuation statement, the effectiveness of the initial financing statement
continues for a period of five years commencing on the day on which the
financing statement would have become ineffective in the absence of the
filing. Upon the expiration of the five-year period, the financing statement
lapses in the same manner as provided in subsection (c), unless, before
the lapse, another continuation statement is filed pursuant to subsection
(d). Succeeding continuation statements may be filed in the same manner
to continue the effectiveness of the initial financing statement.

(f) Transmitting utility financing statement. If a debtor is a trans-
mitting utility and a filed financing statement so indicates, the financing
statement is effective until a termination statement is filed.

(g) Record of mortgage as financing statement. A record of a
mortgage that is effective as a financing statement filed as a fixture filing
under section 73(c) and amendments thereto, remains effective as a fi-
nancing statement filed as a fixture filing until the mortgage is released
or satisfied of record or its effectiveness otherwise terminates as to the
real property.

New Sec. 87. (UCC 9-516.) (a) What constitutes filing. Except as
otherwise provided in subsection (b), communication of a record to a
filing office and tender of the filing fee or acceptance of the record by
the filing office constitutes filing.

(b) Refusal to accept record; filing does not occur. Filing does
not occur with respect to a record that a filing office refuses to accept
because:

(1) The record is not communicated by a method or medium of com-
munication authorized by the filing office;

(2) an amount equal to or greater than the applicable filing fee is not
tendered;

(3) the filing office is unable to index the record because:

(A) In the case of an initial financing statement, the record does not
provide a name for the debtor;

(B) in the case of an amendment or correction statement, the record:

(i) does not identify the initial financing statement as required by
section 83 or 89 and amendments thereto, as applicable; or

(ii) identifies an initial financing statement whose effectiveness has
lapsed under section 86 and amendments thereto;

(C) in the case of an initial financing statement that provides the
name of a debtor identified as an individual or an amendment that pro-
vides a name of a debtor identified as an individual which was not pre-
viously provided in the financing statement to which the record relates,
the record does not identify the debtor's last name; or

(D) in the case of a record filed in the filing office described in section
72(a)(1) and amendments thereto, the record does not provide a sufficient
description of the real property to which it relates;

(4) in the case of an initial financing statement or an amendment that
adds a secured party of record, the record does not provide a name and
mailing address for the secured party of record;

(5) in the case of an initial financing statement or an amendment that
provides a name of a debtor which was not previously provided in the
financing statement to which the amendment relates, the record does
not:

(A) provide a mailing address for the debtor;

(B) indicate whether the debtor is an individual or an organization;
or

(C) if the financing statement indicates that the debtor is an organi-
zation, provide:

(i) a type of organization for the debtor;

(ii) a jurisdiction of organization for the debtor; or

(iii) an organizational identification number for the debtor or indicate
that the debtor has none;

(6) in the case of an assignment reflected in an initial financing state-
ment under section 85(a) and amendments thereto, or an amendment
filed under section 85(b) and amendments thereto, the record does not
provide a name and mailing address for the assignee; or

(7) in the case of a continuation statement, the record is not filed
within the six-month period prescribed by section 86(d) and amendments
thereto.

(c) Rules applicable to subsection (b). For purposes of subsection
(b):

(1) A record does not provide information if the filing office is unable
to read or decipher the information; and

(2) a record that does not indicate that it is an amendment or identify
an initial financing statement to which it relates, as required by section
83, 85 or 89 and amendments thereto, is an initial financing statement.

(d) Refusal to accept record; record effective as filed record. A
record that is communicated to the filing office with tender of the filing
fee, but which the filing office refuses to accept for a reason other than
one set forth in subsection (b), is effective as a filed record except as
against a purchaser of the collateral which gives value in reasonable re-
liance upon the absence of the record from the files.

New Sec. 88. (UCC 9-517.) The failure of the filing office to index
a record correctly does not affect the effectiveness of the filed record.

New Sec. 89. (UCC 9-518.) (a) Correction statement. A person
may file in the filing office a correction statement with respect to a record
indexed there under the person's name if the person believes that the
record is inaccurate or was wrongfully filed.

(b) Sufficiency of correction statement. A correction statement
must:

(1) Identify the record to which it relates by the file number assigned
to the initial financing statement to which the record relates;

(2) indicate that it is a correction statement; and

(3) provide the basis for the person's belief that the record is inac-
curate and indicate the manner in which the person believes the record
should be amended to cure any inaccuracy or provide the basis for the
person's belief that the record was wrongfully filed.

(c) Record not affected by correction statement. The filing of a
correction statement does not affect the effectiveness of an initial financ-
ing statement or other filed record.

New Sec. 90. (UCC 9-519.) (a) Filing office duties. For each rec-
ord filed in a filing office, the filing office shall:

(1) Assign a unique number to the filed record;

(2) create a record that bears the number assigned to the filed record
and the date and time of filing;

(3) maintain the filed record for public inspection; and

(4) index the filed record in accordance with subsections (c), (d), and
(e).

(b) File number. A file number must include a digit that:

(1) Is mathematically derived from or related to the other digits of
the file number; and

(2) aids the filing office in determining whether a number commu-
nicated as the file number includes a single-digit or transpositional error.

(c) Indexing: general. Except as otherwise provided in subsections
(d) and (e), the filing office shall:

(1) Index an initial financing statement according to the name of the
debtor and index all filed records relating to the initial financing statement
in a manner that associates with one another an initial financing statement
and all filed records relating to the initial financing statement; and

(2) index a record that provides a name of a debtor which was not
previously provided in the financing statement to which the record relates
also according to the name that was not previously provided.

(d) Indexing: real-property-related financing statement. If a fi-
nancing statement is filed as a fixture filing or covers as-extracted collat-
eral or timber to be cut, it must be filed for record and the filing office
shall index it:

(1) Under the names of the debtor and of each owner of record
shown on the financing statement as if they were the mortgagors under
a mortgage of the real property described; and

(2) to the extent that the law of this state provides for indexing of
records of mortgages under the name of the mortgagee, under the name
of the secured party as if the secured party were the mortgagee there-
under, or, if indexing is by description, as if the financing statement were
a record of a mortgage of the real property described.

(e) Indexing: real-property-related assignment. If a financing
statement is filed as a fixture filing or covers as-extracted collateral or
timber to be cut, the filing office shall index an assignment filed under
section 85(a) and amendments thereto, or an amendment filed under
section 85(b) and amendments thereto:

(1) Under the name of the assignor as grantor; and

(2) to the extent that the law of this state provides for indexing a
record of the assignment of a mortgage under the name of the assignee,
under the name of the assignee.

(f) Retrieval and association capability. The filing office shall
maintain a capability:

(1) To retrieve a record by the name of the debtor and by the file
number assigned to the initial financing statement to which the record
relates; and

(2) to associate and retrieve with one another an initial financing
statement and each filed record relating to the initial financing statement.

(g) Removal of debtor's name. The filing office may not remove a
debtor's name from the index until one year after the effectiveness of a
financing statement naming the debtor lapses under section 86 and
amendments thereto, with respect to all secured parties of record.

(h) Timeliness of filing office performance. The filing office shall
perform the acts required by subsections (a) through (e) at the time and
in the manner prescribed by filing-office rule, but not later than two
business days after the filing office receives the record in question.

(i) Inapplicability to real-property-related filing office. Subsec-
tions (b) and (h) do not apply to a filing office described in section 72(a)(1)
and amendments thereto.

New Sec. 91. (UCC 9-520.) (a) Mandatory refusal to accept rec-
ord. A filing office shall refuse to accept a record for filing for a reason
set forth in section 87(b) and amendments thereto, and may refuse to
accept a record for filing only for a reason set forth in section 87(b) and
amendments thereto.

(b) Communication concerning refusal. If a filing office refuses
to accept a record for filing, it shall communicate to the person that
presented the record the fact of and reason for the refusal and the date
and time the record would have been filed had the filing office accepted
it. The communication must be made at the time and in the manner
prescribed by filing-office rule but, in the case of a filing office described
in section 72(a)(2) and amendments thereto, in no event more than two
business days after the filing office receives the record.

(c) When filed financing statement effective. A filed financing
statement satisfying section 73(a) and (b) and amendments thereto, is
effective, even if the filing office is required to refuse to accept it for filing
under subsection (a). However, section 58 and amendments thereto ap-
plies to a filed financing statement providing information described in
section 87(b)(5) and amendments thereto which is incorrect at the time
the financing statement is filed.

(d) Separate application to multiple debtors. If a record com-
municated to a filing office provides information that relates to more than
one debtor, this part applies as to each debtor separately.

New Sec. 92. (UCC 9-521.) (a) Initial financing statement form.
A filing office that accepts written records may not refuse to accept a
written initial financing statement in the following form and format except
for a reason set forth in section 87(b) and amendments thereto:

(b) Amendment form. A filing office that accepts written records
may not refuse to accept a written record in the following form and format
except for a reason set forth in section 87(b) and amendments thereto:

New Sec. 93. (UCC 9-522.) (a) Post-lapse maintenance and re-
trieval of information. The filing office shall maintain a record of the
information provided in a filed financing statement for at least one year
after the effectiveness of the financing statement has lapsed under section
86 and amendments thereto, with respect to all secured parties of record.
The record must be retrievable by using the name of the debtor and by
using the file number assigned to the initial financing statement to which
the record relates.

(b) Destruction of written records. Except to the extent that a
statute governing disposition of public records provides otherwise, the
filing office immediately may destroy any written record evidencing a
financing statement. However, if the filing office destroys a written rec-
ord, it shall maintain another record of the financing statement which
complies with subsection (a).

New Sec. 94. (UCC 9-523.) (a) Acknowledgment of filing written
record. If a person that files a written record requests an acknowledg-
ment of the filing, the filing office shall send to the person an image of
the record showing the number assigned to the record pursuant to section
90(a)(1) and amendments thereto and the date and time of the filing of
the record. However, if the person furnishes a copy of the record to the
filing office, the filing office may instead:

(1) Note upon the copy the number assigned to the record pursuant
to section 90(a)(1) and amendments thereto and the date and time of the
filing of the record; and

(2) send the copy to the person.

(b) Acknowledgment of filing other record. If a person files a
record other than a written record, the filing office shall communicate to
the person an acknowledgment that provides:

(1) The information in the record;

(2) the number assigned to the record pursuant to section 90 and
amendments thereto; and

(3) the date and time of the filing of the record.

(c) Communication of requested information. The filing office
shall communicate or otherwise make available in a record the following
information to any person that requests it:

(1) Whether there is on file on a date and time specified by the filing
office, but not a date earlier than three business days before the filing
office receives the request, any financing statement that:

(A) Designates a particular debtor;

(B) has not lapsed under section 86 and amendments thereto, with
respect to all secured parties of record; and

(C) if the request so states, has lapsed under section 86 and amend-
ments thereto, and a record of which is maintained by the filing office
under section 93(a) and amendments thereto;

(2) the date and time of filing of each financing statement; and

(3) the information provided in each financing statement.

(d) Medium for communicating information. In complying with
its duty under subsection (c), the filing office may communicate infor-
mation in any medium. However, if requested, the filing office shall com-
municate information by issuing its written certificate.

(e) Timeliness of filing office performance. The filing office shall
perform the acts required by subsections (a) through (d) at the time and
in the manner prescribed by filing-office rule, but not later than two
business days after the filing office receives the request.

(f) Immunity for filing officers. Except with respect to willful mis-
conduct, the state, counties and filing officers are immune from liability
for damages resulting from errors or omissions in information supplied
pursuant to this act.

(g) Public availability of records. At least weekly, the filing office
shall offer to sell or license to the public on a nonexclusive basis, in bulk,
copies of all records filed in it under this part, in every medium from
time to time available to the filing office.

New Sec. 95. (UCC 9-524.) Delay by the filing office beyond a time
limit prescribed by this part is excused if:

(1) The delay is caused by interruption of communication or com-
puter facilities, war, emergency conditions, failure of equipment, or other
circumstances beyond control of the filing office; and

(2) the filing office exercises reasonable diligence under the circum-
stances.

New Sec. 96. (UCC 9-525.) (a) Initial financing statement: gen-
eral. The fee for filing and indexing a record under this part shall be
provided by the secretary of state.

New Sec. 97. (UCC 9-526.)(a) Adoption of filing-office rules. The
secretary of state shall adopt and publish rules to implement this article.
The filing-office rules must be:

(1) Consistent with this article; and

(2) adopted and published in accordance with the administrative pro-
cedure act.

(b) Harmonization of rules. To keep the filing-office rules and
practices of the filing office in harmony with the rules and practices of
filing offices in other jurisdictions that enact substantially this part, and
to keep the technology used by the filing office compatible with the tech-
nology used by filing offices in other jurisdictions that enact substantially
this part, the secretary of the state, so far as is consistent with the pur-
poses, policies, and provisions of this article, in adopting, amending, and
repealing filing-office rules, shall:

(1) Consult with filing offices in other jurisdictions that enact sub-
stantially this part; and

(2) consult the most recent version of the model rules promulgated
by the international association of corporate administrators or any suc-
cessor organization; and

(3) take into consideration the rules and practices of, and the tech-
nology used by, filing offices in other jurisdictions that enact substantially
this part.

New Sec. 98. (UCC 9-527.) The secretary of state shall report an-
nually to the governor and legislature on the operation of the filing office.
The report must contain a statement of the extent to which:

(1) The filing-office rules are not in harmony with the rules of filing
offices in other jurisdictions that enact substantially this part and the
reasons for these variations; and

(2) the filing-office rules are not in harmony with the most recent
version of the model rules promulgated by the international association
of corporate administrators, or any successor organization, and the rea-
sons for these variations.

New Sec. 99. (UCC 9-601.) (a) Rights of secured party after de-
fault. After default, a secured party has the rights provided in this part
and, except as otherwise provided in section 100 and amendments
thereto, those provided by agreement of the parties. A secured party:

(1) May reduce a claim to judgment, foreclose, or otherwise enforce
the claim, security interest, or agricultural lien by any available judicial
procedure; and

(2) if the collateral is documents, may proceed either as to the doc-
uments or as to the goods they cover.

(b) Rights and duties of secured party in possession or control.
A secured party in possession of collateral or control of collateral under
section 4, 5, 6 or 7 and amendments thereto has the rights and duties
provided in section 17 and amendments thereto.

(c) Rights cumulative; simultaneous exercise. The rights under
subsections (a) and (b) are cumulative and may be exercised simultane-
ously.

(d) Rights of debtor and obligor. Except as otherwise provided in
subsection (g) and section 103 and amendments thereto, after default, a
debtor and an obligor have the rights provided in this part and by agree-
ment of the parties.

(e) Lien of levy after judgment. If a secured party has reduced its
claim to judgment, the lien of any levy that may be made upon the col-
lateral by virtue of an execution based upon the judgment relates back to
the earliest of:

(1) The date of perfection of the security interest or agricultural lien
in the collateral;

(2) the date of filing a financing statement covering the collateral; or

(3) any date specified in a statute under which the agricultural lien
was created.

(f) Execution sale. A sale pursuant to an execution is a foreclosure
of the security interest or agricultural lien by judicial procedure within
the meaning of this section. A secured party may purchase at the sale and
thereafter hold the collateral free of any other requirements of this article.

(g) Consignor or buyer of certain rights to payment. Except as
otherwise provided in section 105(c) and amendments thereto, this part
imposes no duties upon a secured party that is a consignor or is a buyer
of accounts, chattel paper, payment intangibles, or promissory notes.

New Sec. 100. (UCC 9-602.) Except as otherwise provided in section
122 and amendments thereto, to the extent that they give rights to a
debtor or obligor and impose duties on a secured party, the debtor or
obligor may not waive or vary the rules stated in the following listed
sections:

(1) Section 17(b)(4)(C) and amendments thereto, which deals with
use and operation of the collateral by the secured party;

(2) section 20 and amendments thereto, which deals with requests
for an accounting and requests concerning a list of collateral and state-
ment of account;

(3) section 105(c) and amendments thereto, which deals with collec-
tion and enforcement of collateral;

(4) sections 106(a) and 113(c) and amendments thereto to the extent
that they deal with application or payment of noncash proceeds of col-
lection, enforcement, or disposition;

(5) sections 106(a) and 113(d) and amendments thereto to the extent
that they require accounting for or payment of surplus proceeds of col-
lateral;

(6) section 107 and amendments thereto to the extent that it imposes
upon a secured party that takes possession of collateral without judicial
process the duty to do so without breach of the peace;

(7) sections 108(b), 109, 111 and 112 and amendments thereto which
deal with disposition of collateral;

(8) section 113(f) and amendments thereto which deals with calcu-
lation of a deficiency or surplus when a disposition is made to the secured
party, a person related to the secured party, or a secondary obligor;

(9) section 114 and amendments thereto which deals with explanation
of the calculation of a surplus or deficiency;

(10) sections 118, 119 and 120 and amendments thereto which deal
with acceptance of collateral in satisfaction of obligation;

(11) section 121 and amendments thereto which deals with redemp-
tion of collateral;

(12) section 122 and amendments thereto which deals with permis-
sible waivers; and

(13) sections 123 and 124 and amendments thereto which deal with
the secured liability for failure to comply with this article.

New Sec. 101. (UCC 9-603.) (a) Agreed standards. The parties
may determine by agreement the standards measuring the fulfillment of
the rights of a debtor or obligor and the duties of a secured party under
a rule stated in section 100 and amendments thereto if the standards are
not manifestly unreasonable.

(b) Agreed standards inapplicable to breach of peace. Subsec-
tion (a) does not apply to the duty under section 107 and amendments
thereto, to refrain from breaching the peace.

New Sec. 102. (UCC 9-604.) (a) Enforcement: personal and real
property. If a security agreement covers both personal and real property,
a secured party may proceed:

(1) Under this part as to the personal property without prejudicing
any rights with respect to the real property; or

(2) as to both the personal property and the real property in accord-
ance with the rights with respect to the real property, in which case the
other provisions of this part do not apply.

(b) Enforcement: fixtures. Subject to subsection (c), if a security
agreement covers goods that are or become fixtures, a secured party may
proceed:

(1) Under this part; or

(2) in accordance with the rights with respect to real property, in
which case the other provisions of this part do not apply.

(c) Removal of fixtures. Subject to the other provisions of this part,
if a secured party holding a security interest in fixtures has priority over
all owners and encumbrancers of the real property, the secured party,
after default, may remove the collateral from the real property.

(d) Injury caused by removal. A secured party that removes col-
lateral shall promptly reimburse any encumbrancer or owner of the real
property, other than the debtor, for the cost of repair of any physical
injury caused by the removal. The secured party need not reimburse the
encumbrancer or owner for any diminution in value of the real property
caused by the absence of the goods removed or by any necessity of re-
placing them. A person entitled to reimbursement may refuse permission
to remove until the secured party gives adequate assurance for the per-
formance of the obligation to reimburse.

New Sec. 103. (UCC 9-605.) A secured party does not owe a duty
based on its status as secured party: (1) To a person that is a debtor or
obligor, unless the secured party knows:

(A) That the person is a debtor or obligor;

(B) the identity of the person; and

(C) how to communicate with the person; or

(2) to a secured party or lienholder that has filed a financing state-
ment against a person, unless the secured party knows:

(A) That the person is a debtor; and

(B) the identity of the person.

New Sec. 104. (UCC 9-606.) For purposes of this part, a default
occurs in connection with an agricultural lien at the time the secured
party becomes entitled to enforce the lien in accordance with the statute
under which it was created.

New Sec. 105. (UCC 9-607.) (a)Collection and enforcement gen-
erally. If so agreed, and in any event after default, a secured party:

(1) May notify an account debtor or other person obligated on col-
lateral to make payment or otherwise render performance to or for the
benefit of the secured party;

(2) may take any proceeds to which the secured party is entitled un-
der section 35 and amendments thereto;

(3) may enforce the obligations of an account debtor or other person
obligated on collateral and exercise the rights of the debtor with respect
to the obligation of the account debtor or other person obligated on col-
lateral to make payment or otherwise render performance to the debtor,
and with respect to any property that secures the obligations of the ac-
count debtor or other person obligated on the collateral;

(4) if it holds a security interest in a deposit account perfected by
control under section 4(a)(1) and amendments thereto, may apply the
balance of the deposit account to the obligation secured by the deposit
account; and

(5) if it holds a security interest in a deposit account perfected by
control under section 4(a)(2) or (3) and amendments thereto, may instruct
the bank to pay the balance of the deposit account to or for the benefit
of the secured party.

(b) Nonjudicial enforcement of mortgage. If necessary to enable
a secured party to exercise under subsection (a)(3) the right of a debtor
to enforce a mortgage nonjudicially, the secured party may record in the
office in which a record of the mortgage is recorded:

(1) A copy of the security agreement that creates or provides for a
security interest in the obligation secured by the mortgage; and

(2) the secured party's sworn affidavit in recordable form stating that:

(A) A default has occurred; and

(B) the secured party is entitled to enforce the mortgage nonjudi-
cially.

(c) Commercially reasonable collection and enforcement. A se-
cured party shall proceed in a commercially reasonable manner if the
secured party:

(1) Undertakes to collect from or enforce an obligation of an account
debtor or other person obligated on collateral; and

(2) is entitled to charge back uncollected collateral or otherwise to
full or limited recourse against the debtor or a secondary obligor.

(d) Expenses of collection and enforcement. A secured party may
deduct from the collections made pursuant to subsection (c) reasonable
expenses of collection and enforcement, including reasonable attorney
fees and legal expenses incurred by the secured party.

(e) Duties to secured party not affected. This section does not
determine whether an account debtor, bank, or other person obligated
on collateral owes a duty to a secured party.

New Sec. 106. (UCC 9-608.) (a) Application of proceeds, surplus,
and deficiency if obligation secured. If a security interest or agricul-
tural lien secures payment or performance of an obligation, the following
rules apply:

(1) A secured party shall apply or pay over for application the cash
proceeds of collection or enforcement under this section in the following
order to:

(A) The reasonable expenses of collection and enforcement and, to
the extent provided for by agreement and not prohibited by law, reason-
able attorney fees and legal expenses incurred by the secured party;

(B) the satisfaction of obligations secured by the security interest or
agricultural lien under which the collection or enforcement is made; and

(C) the satisfaction of obligations secured by any subordinate security
interest in or other lien on the collateral subject to the security interest
or agricultural lien under which the collection or enforcement is made if
the secured party receives an authenticated demand for proceeds before
distribution of the proceeds is completed.

(2) If requested by a secured party, a holder of a subordinate security
interest or other lien shall furnish reasonable proof of the interest or lien
within a reasonable time. Unless the holder complies, the secured party
need not comply with the holder's demand under paragraph (1)(C).

(3) A secured party need not apply or pay over for application non-
cash proceeds of collection and enforcement under this section unless
the failure to do so would be commercially unreasonable. A secured party
that applies or pays over for application noncash proceeds shall do so in
a commercially reasonable manner.

(4) A secured party shall account to and pay a debtor for any surplus,
and the obligor is liable for any deficiency.

(b) No surplus or deficiency in sales of certain rights to pay-
ment. If the underlying transaction is a sale of accounts, chattel paper,
payment intangibles, or promissory notes, the debtor is not entitled to
any surplus, and the obligor is not liable for any deficiency.

New Sec. 107. (UCC 9-609.) (a) Possession; rendering equip-
ment unusable; disposition on debtor's premises. After default, a
secured party:

(1) May take possession of the collateral; and

(2) without removal, may render equipment unusable and dispose of
collateral on a debtor's premises under section 108 and amendments
thereto.

(b) Judicial and nonjudicial process. A secured party may proceed
under subsection (a):

(1) Pursuant to judicial process; or

(2) without judicial process, if it proceeds without breach of the
peace.

(c) Assembly of collateral. If so agreed, and in any event after de-
fault, a secured party may require the debtor to assemble the collateral
and make it available to the secured party at a place to be designated by
the secured party which is reasonably convenient to both parties.

New Sec. 108. (UCC 9-610.) (a) Disposition after default. After
default, a secured party may sell, lease, license, or otherwise dispose of
any or all of the collateral in its present condition or following any com-
mercially reasonable preparation or processing.

(b) Commercially reasonable disposition. Every aspect of a dis-
position of collateral, including the method, manner, time, place, and
other terms, must be commercially reasonable. If commercially reason-
able, a secured party may dispose of collateral by public or private pro-
ceedings, by one or more contracts, as a unit or in parcels, and at any
time and place and on any terms.

(c) Purchase by secured party. A secured party may purchase col-
lateral:

(1) At a public disposition; or

(2) at a private disposition only if the collateral is of a kind that is
customarily sold on a recognized market or the subject of widely distrib-
uted standard price quotations.

(d) Warranties on disposition. A contract for sale, lease, license, or
other disposition includes the warranties relating to title, possession, quiet
enjoyment, and the like which by operation of law accompany a voluntary
disposition of property of the kind subject to the contract.

(e) Disclaimer of warranties. A secured party may disclaim or mod-
ify warranties under subsection (d):

(1) In a manner that would be effective to disclaim or modify the
warranties in a voluntary disposition of property of the kind subject to
the contract of disposition; or

(2) by communicating to the purchaser a record evidencing the con-
tract for disposition and including an express disclaimer or modification
of the warranties.

(f) Record sufficient to disclaim warranties. A record is sufficient
to disclaim warranties under subsection (e) if it indicates ``There is no
warranty relating to title, possession, quiet enjoyment, or the like in this
disposition'' or uses words of similar import.

New Sec. 109. (UCC 9-611.) (a) Notification date. In this section,
notification date means the earlier of the date on which:

(1) A secured party sends to the debtor and any secondary obligor an
authenticated notification of disposition; or

(2) the debtor and any secondary obligor waive the right to notifica-
tion.

(b) Notification of disposition required. Except as otherwise pro-
vided in subsection (d), a secured party that disposes of collateral under
section 108 and amendments thereto shall send to the persons specified
in subsection (c) a reasonable authenticated notification of disposition.

(c) Persons to be notified. To comply with subsection (b), the se-
cured party shall send an authenticated notification of disposition to:

(1) The debtor;

(2) any secondary obligor; and

(3) if the collateral is other than consumer goods:

(A) Any other person from which the secured party has received,
before the notification date, an authenticated notification of a claim of an
interest in the collateral;

(B) any other secured party or lienholder that, 10 days before the
notification date, held a security interest in or other lien on the collateral
perfected by the filing of a financing statement that:

(i) Identified the collateral;

(ii) was indexed under the debtor's name as of that date; and

(iii) was filed in the office in which to file a financing statement
against the debtor covering the collateral as of that date; and

(C) any other secured party that, 10 days before the notification date,
held a security interest in the collateral perfected by compliance with a
statute, regulation, or treaty described in section 31(a) and amendments
thereto.

(d) Subsection (b) inapplicable: perishable collateral; recog-
nized market. Subsection (b) does not apply if the collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold
on a recognized market.

(e) Compliance with subsection (c)(3)(B). A secured party com-
plies with the requirement for notification prescribed by subsection
(c)(3)(B) if:

(1) Not later than 20 days or earlier than 30 days before the notifi-
cation date, the secured party requests, in a commercially reasonable
manner, information concerning financing statements indexed under the
debtor's name in the office indicated in subsection (c)(3)(B); and

(2) before the notification date, the secured party:

(A) Did not receive a response to the request for information; or

(B) received a response to the request for information and sent an
authenticated notification of disposition to each secured party or other
lienholder named in that response whose financing statement covered
the collateral.

New Sec. 110. (UCC 9-612.) (a) Reasonable time is question of
fact. Except as otherwise provided in subsection (b), whether a notifi-
cation is sent within a reasonable time is a question of fact.

(b) Ten-day period sufficient. A notification of disposition sent af-
ter default and 10 days or more before the earliest time of disposition set
forth in the notification is sent within a reasonable time before the dis-
position.

New Sec. 111. (UCC 9-613.) Except in a consumer-goods transac-
tion, the following rules apply:

(1) The contents of a notification of disposition are sufficient if the
notification:

(A) Describes the debtor and the secured party;

(B) describes the collateral that is the subject of the intended dis-
position;

(C) states the method of intended disposition;

(D) states that the debtor is entitled to an accounting of the unpaid
indebtedness and states the charge, if any, for an accounting; and

(E) states the time and place of a public sale or the time after which
any other disposition is to be made.

(2) Whether the contents of a notification that lacks any of the infor-
mation specified in paragraph (1) are nevertheless sufficient is a question
of fact.

(3) The contents of a notification providing substantially the infor-
mation specified in paragraph (1) are sufficient, even if the notification
includes:

(A) Information not specified by that paragraph; or

(B) minor errors that are not seriously misleading.

(4) A particular phrasing of the notification is not required.

(5) The following form of notification and the form appearing in sec-
tion 112(3) and amendments thereto, when completed, each provides
sufficient information:

NOTIFICATION OF DISPOSITION OF COLLATERAL To:

Name of debtor, obligor, or other person to which the notification is
sent

From:

Name, address, and telephone number of secured party

Name of Debtor(s):

Include only if debtor(s) are not an addressee

For a public disposition:

We will sell [or lease or license, as applicable] the describe collateral
[to the highest qualified bidder] in public as follows:

Day and Date:

Time:

Place:

For a private disposition:

We will sell [or lease or license, as applicable] the describe collateral
privately sometime after; [day and date].

You are entitled to an accounting of the unpaid indebtedness secured
by the property that we intend to sell [or lease or license, as applicable]
[for a charge of $______]. You may request an accounting by calling us
at [telephone number].

New Sec. 112. (UCC 9-614.) In a consumer-goods transaction, the
following rules apply:

(1) A notification of disposition must provide the following informa-
tion:

(A) The information specified in section 111(1) and amendments
thereto;

(B) a description of any liability for a deficiency of the person to which
the notification is sent;

(C) a telephone number from which the amount that must be paid
to the secured party to redeem the collateral under section 121 and
amendments thereto is available; and

(D) a telephone number or mailing address from which additional
information concerning the disposition and the obligation secured is avail-
able.

(2) A particular phrasing of the notification is not required.

(3) The following form of notification, when completed, provides suf-
ficient information:

[Name and address of secured party]

[Date];

NOTICE OF OUR PLAN TO SELL PROPERTY [Name and address of any obligor who is also a debtor]

Subject: [Identification of Transaction] We have your [describe collat-
eral], because you broke promises in our agreement.

[For a public disposition:]

We will sell [describe collateral] at public sale. A sale could include a lease
or license.

The sale will be held as follows:

Date:

Time:

Place:

You may attend the sale and bring bidders if you want.

[For a private disposition:]

We will sell [describe collateral] at private sale sometime after [date]. A
sale could include a lease or license.

The money that we get from the sale (after paying our costs) will reduce
the amount you owe. If we get less money than you owe, you [will or will
not, as applicable] still owe us the difference. If we get more money than
you owe, you will get the extra money, unless we must pay it to someone
else.

You can get the property back at any time before we sell it by paying
us the full amount you owe (not just the past due payments), including
our expenses. To learn the exact amount you must pay, call us at [tele-
phone number].

If you want us to explain to you in writing how we have figured the
amount that you owe us, you may call us at [telephone number] [or write
us at (secured party's address)] and request a written explanation. (We
will charge you $______ for the explanation if we sent you another
written explanation of the amount you owe us within the last six months.)

If you need more information about the sale call us at (telephone number)
[or write us at (secured party's address)].

We are sending this notice to the following other people who have an
interest in [describe collateral] or who owe money under your agreement:

[Names of all other debtors and obligors, if any]

(4) A notification in the form of paragraph (3) is sufficient, even if
additional information appears at the end of the form.

(5) A notification in the form of paragraph (3) is sufficient, even if it
includes errors in information not required by paragraph (1), unless the
error is misleading with respect to rights arising under this article.

(6) If a notification under this section is not in the form of paragraph
(3), law other than this article determines the effect of including infor-
mation not required by paragraph (1).

New Sec. 113. (UCC 9-615.) (a) Application of proceeds. A se-
cured party shall apply or pay over for application the cash proceeds of
disposition in the following order to:

(1) The reasonable expenses of retaking, holding, preparing for dis-
position, processing, and disposing, and, to the extent provided for by
agreement and not prohibited by law, reasonable attorney fees and legal
expenses incurred by the secured party;

(2) the satisfaction of obligations secured by the security interest or
agricultural lien under which the disposition is made;

(3) the satisfaction of obligations secured by any subordinate security
interest in or other subordinate lien on the collateral if:

(A) The secured party receives from the holder of the subordinate
security interest or other lien an authenticated demand for proceeds be-
fore distribution of the proceeds is completed; and

(B) in a case in which a consignor has an interest in the collateral,
the subordinate security interest or other lien is senior to the interest of
the consignor; and

(4) a secured party that is a consignor of the collateral if the secured
party receives from the consignor an authenticated demand for proceeds
before distribution of the proceeds is completed.

(b) Proof of subordinate interest. If requested by a secured party,
a holder of a subordinate security interest or other lien shall furnish rea-
sonable proof of the interest or lien within a reasonable time. Unless the
holder does so, the secured party need not comply with the holder's
demand under subsection (a)(3).

(c) Application of noncash proceeds. A secured party need not
apply or pay over for application noncash proceeds of disposition under
this section unless the failure to do so would be commercially unreason-
able. A secured party that applies or pays over for application noncash
proceeds shall do so in a commercially reasonable manner.

(d) Surplus or deficiency if obligation secured. If the security
interest under which a disposition is made secures payment or perform-
ance of an obligation, after making the payments and applications re-
quired by subsection (a) and permitted by subsection (c):

(1) Unless subsection (a)(4) requires the secured party to apply or
pay over cash proceeds to a consignor, the secured party shall account to
and pay a debtor for any surplus; and

(2) the obligor is liable for any deficiency.

(e) No surplus or deficiency in sales of certain rights to pay-
ment. If the underlying transaction is a sale of accounts, chattel paper,
payment intangibles, or promissory notes:

(1) The debtor is not entitled to any surplus; and

(2) the obligor is not liable for any deficiency.

(f) Calculation of surplus or deficiency in disposition to person
related to secured party. The surplus or deficiency following a dispo-
sition is calculated based on the amount of proceeds that would have
been realized in a disposition complying with this part to a transferee
other than the secured party, a person related to the secured party, or a
secondary obligor if:

(1) The transferee in the disposition is the secured party, a person
related to the secured party, or a secondary obligor; and

(2) the amount of proceeds of the disposition is significantly below
the range of proceeds that a complying disposition to a person other than
the secured party, a person related to the secured party, or a secondary
obligor would have brought.

(g) Cash proceeds received by junior secured party. A secured
party that receives cash proceeds of a disposition in good faith and without
knowledge that the receipt violates the rights of the holder of a security
interest or other lien that is not subordinate to the security interest or
agricultural lien under which the disposition is made:

(1) Takes the cash proceeds free of the security interest or other lien;

(2) is not obligated to apply the proceeds of the disposition to the
satisfaction of obligations secured by the security interest or other lien;
and

(3) is not obligated to account to or pay the holder of the security
interest or other lien for any surplus.

New Sec. 114. (UCC 9-616.)(a) Definitions. In this section: (1) ``Ex-
planation'' means a writing that:

(A) States the amount of the surplus or deficiency;

(B) provides an explanation in accordance with subsection (c) of how
the secured party calculated the surplus or deficiency;

(C) states, if applicable, that future debits, credits, charges, including
additional credit service charges or interest, rebates, and expenses may
affect the amount of the surplus or deficiency; and

(D) provides a telephone number or mailing address from which ad-
ditional information concerning the transaction is available.

(2) ``Request'' means a record:

(A) Authenticated by a debtor or consumer obligor;

(B) requesting that the recipient provide an explanation; and

(C) sent after disposition of the collateral under section 108 and
amendments thereto.

(b) Explanation of calculation. In a consumer-goods transaction in
which the debtor is entitled to a surplus or a consumer obligor is liable
for a deficiency under section 113 and amendments thereto, the secured
party shall:

(1) Send an explanation to the debtor or consumer obligor, as appli-
cable, after the disposition and:

(A) Before or when the secured party accounts to the debtor and
pays any surplus or first makes written demand on the consumer obligor
after the disposition for payment of the deficiency; and

(B) within 14 days after receipt of a request; or

(2) in the case of a consumer obligor who is liable for a deficiency,
within 14 days after receipt of a request, send to the consumer obligor a
record waiving the secured party's right to a deficiency.

(c) Required information. To comply with subsection (a)(1)(B), a
writing must provide the following information in the following order:

(1) The aggregate amount of obligations secured by the security in-
terest under which the disposition was made, and, if the amount reflects
a rebate of unearned interest or credit service charge, an indication of
that fact, calculated as of a specified date:

(A) If the secured party takes or receives possession of the collateral
after default, not more than 35 days before the secured party takes or
receives possession; or

(B) If the secured party takes or receives possession of the collateral
before default or does not take possession of the collateral, not more than
35 days before the disposition;

(2) the amount of proceeds of the disposition;

(3) the aggregate amount of the obligations after deducting the
amount of proceeds;

(4) the amount, in the aggregate or by type, and types of expenses,
including expenses of retaking, holding, preparing for disposition, proc-
essing, and disposing of the collateral, and attorney fees secured by the
collateral which are known to the secured party and relate to the current
disposition;

(5) the amount, in the aggregate or by type, and types of credits,
including rebates of interest or credit service charges, to which the obligor
is known to be entitled and which are not reflected in the amount in
paragraph (1); and

(6) the amount of the surplus or deficiency.

(d) Substantial compliance. A particular phrasing of the explana-
tion is not required. An explanation complying substantially with the
requirements of subsection (a) is sufficient, even if it includes minor er-
rors that are not seriously misleading.

(e) Charges for responses. A debtor or consumer obligor is entitled
without charge to one response to a request under this section during any
six-month period in which the secured party did not send to the debtor
or consumer obligor an explanation pursuant to subsection (b)(1). The
secured party may require payment of a charge not exceeding $25 for
each additional response.

New Sec. 115. (UCC 9-617.) (a) Effects of disposition. A secured
party's disposition of collateral after default:

(1) Transfers to a transferee for value all of the debtor's rights in the
collateral;

(2) discharges the security interest under which the disposition is
made; and

(3) discharges any subordinate security interest or other subordinate
lien.

(b) Rights of good-faith transferee. A transferee that acts in good
faith takes free of the rights and interests described in subsection (a),
even if the secured party fails to comply with this article or the require-
ments of any judicial proceeding.

(c) Rights of other transferee. If a transferee does not take free of
the rights and interests described in subsection (a), the transferee takes
the collateral subject to:

(1) The debtor's rights in the collateral;

(2) the security interest or agricultural lien under which the disposi-
tion is made; and

(3) any other security interest or other lien.

New Sec. 116. (UCC 9-618.) (a) Rights and duties of secondary
obligor. A secondary obligor acquires the rights and becomes obligated
to perform the duties of the secured party after the secondary obligor:

(1) Receives an assignment of a secured obligation from the secured
party;

(2) receives a transfer of collateral from the secured party and agrees
to accept the rights and assume the duties of the secured party; or

(3) is subrogated to the rights of a secured party with respect to col-
lateral.

(b) Effect of assignment, transfer, or subrogation. An assign-
ment, transfer, or subrogation described in subsection (a):

(1) Is not a disposition of collateral under section 108 and amend-
ments thereto; and

(2) relieves the secured party of further duties under this article.

New Sec. 117. (UCC 9-619.) (a) ``Transfer statement.'' In this sec-
tion, ``transfer statement'' means a record authenticated by a secured
party stating:

(1) That the debtor has defaulted in connection with an obligation
secured by specified collateral;

(2) that the secured party has exercised the secured party's post-de-
fault remedies with respect to the collateral;

(3) that, by reason of the exercise, a transferee has acquired the rights
of the debtor in the collateral; and

(4) the name and mailing address of the secured party, debtor, and
transferee.

(b) Effect of transfer statement. A transfer statement entitles the
transferee to the transfer of record of all rights of the debtor in the col-
lateral specified in the statement in any official filing, recording, registra-
tion, or certificate-of-title system covering the collateral. If a transfer
statement is presented with the applicable fee and request form to the
official or office responsible for maintaining the system, the official or
office shall:

(1) Accept the transfer statement;

(2) promptly amend its records to reflect the transfer; and

(3) if applicable, issue a new appropriate certificate of title in the
name of the transferee.

(c) Transfer not a disposition; no relief of secured party's du-
ties. A transfer of the record or legal title to collateral to a secured party
under subsection (b) or otherwise is not of itself a disposition of collateral
under this article and does not of itself relieve the secured party of the
secured party's duties under this article.

New Sec. 118. (UCC 9-620.) (a) Conditions to acceptance in sat-
isfaction. Except as otherwise provided in subsection (g), a secured party
may accept collateral in full or partial satisfaction of the obligation it
secures only if:

(1) The debtor consents to the acceptance under subsection (c);

(2) the secured party does not receive, within the time set forth in
subsection (d), a notification of objection to the proposal authenticated
by:

(A) A person to which the secured party was required to send a pro-
posal under section 119 and amendments thereto; or

(B) any other person, other than the debtor, holding an interest in
the collateral subordinate to the security interest that is the subject of the
proposal;

(3) if the collateral is consumer goods, the collateral is not in the
possession of the debtor when the debtor consents to the acceptance; and

(4) subsection (e) does not require the secured party to dispose of
the collateral or the debtor waives the requirement pursuant to section
122 and amendments thereto.

(b) Purported acceptance ineffective. A purported or apparent
acceptance of collateral under this section is ineffective unless:

(1) The secured party consents to the acceptance in an authenticated
record or sends a proposal to the debtor; and

(2) the conditions of subsection (a) are met.

(c) Debtor's consent. For purposes of this section:

(1) A debtor consents to an acceptance of collateral in partial satis-
faction of the obligation the collateral secures only if the debtor agrees
to the terms of the acceptance in a record authenticated after default;
and

(2) a debtor consents to an acceptance of collateral in full satisfaction
of the obligation the collateral secures only if the debtor agrees to the
terms of the acceptance in a record authenticated after default or the
secured party:

(A) Sends to the debtor after default a proposal that is unconditional
or subject only to a condition that collateral not in the possession of the
secured party be preserved or maintained;

(B) in the proposal, proposes to accept collateral in full satisfaction
of the obligation it secures; and

(C) does not receive a notification of objection authenticated by the
debtor within 20 days after the proposal is sent.

(d) Effectiveness of notification. To be effective under subsection
(a)(2), a notification of objection must be received by the secured party:

(1) In the case of a person to which the proposal was sent pursuant
to section 119 and amendments thereto, within 20 days after notification
was sent to that person; and

(2) in other cases:

(A) Within 20 days after the last notification was sent pursuant to
section 119 and amendments thereto; or

(B) if a notification was not sent, before the debtor consents to the
acceptance under subsection (c).

(e) Mandatory disposition of consumer goods. A secured party
that has taken possession of collateral shall dispose of the collateral pur-
suant to section 108 and amendments thereto, within the time specified
in subsection (f) if:

(1) Sixty percent of the cash price has been paid in the case of a
purchase-money security interest in consumer goods; or

(2) sixty percent of the principal amount of the obligation secured
has been paid in the case of a non-purchase-money security interest in
consumer goods.

(f) Compliance with mandatory disposition requirement. To
comply with subsection (e), the secured party shall dispose of the collat-
eral:

(1) Within 90 days after taking possession; or

(2) within any longer period to which the debtor and all secondary
obligors have agreed in an agreement to that effect entered into and
authenticated after default.

(g) No partial satisfaction in consumer transaction. In a con-
sumer transaction, a secured party may not accept collateral in partial
satisfaction of the obligation it secures.

New Sec. 119. (UCC 9-621.) (a) Persons to which proposal to be
sent. A secured party that desires to accept collateral in full or partial
satisfaction of the obligation it secures shall send the secured party's pro-
posal to:

(1) Any person from which the secured party has received, before
the debtor consented to the acceptance, an authenticated notification of
a claim of an interest in the collateral;

(2) any other secured party or lienholder that, 10 days before the
debtor consented to the acceptance, held a security interest in or other
lien on the collateral perfected by the filing of a financing statement that:

(A) Identified the collateral;

(B) was indexed under the debtor's name as of that date; and

(C) was filed in the office or offices in which to file a financing state-
ment against the debtor covering the collateral as of that date; and

(3) any other secured party that, 10 days before the debtor consented
to the acceptance, held a security interest in the collateral perfected by
compliance with a statute, regulation, or treaty described in section 31(a)
and amendments thereto.

(b) Proposal to be sent to secondary obligor in partial satisfac-
tion. A secured party that desires to accept collateral in partial satisfaction
of the obligation it secures shall send its proposal to any secondary obligor
in addition to the persons described in subsection (a).

New Sec. 120. (UCC 9-622.) (a) Effect of acceptance. A secured
party's acceptance of collateral in full or partial satisfaction of the obli-
gation it secures:

(1) Discharges the obligation to the extent consented to by the
debtor;

(2) transfers to the secured party all of a debtor's rights in the collat-
eral;

(3) discharges the security interest or agricultural lien that is the sub-
ject of the debtor's consent and any subordinate security interest or other
subordinate lien; and

(4) terminates any other subordinate interest.

(b) Discharge of subordinate interest notwithstanding non-
compliance. A subordinate interest is discharged or terminated under
subsection (a), even if the secured party fails to comply with this article.

New Sec. 121. (UCC 9-623.) (a) Persons that may redeem. A
debtor, any secondary obligor, or any other secured party or lienholder
may redeem collateral.

(b) Requirements for redemption. To redeem collateral, a person
shall tender:

(1) Fulfillment of all obligations secured by the collateral; and

(2) the reasonable expenses and attorney fees described in section
113(a)(1) and amendments thereto.

(c) When redemption may occur. A redemption may occur at any
time before a secured party:

(1) Has collected collateral under section 105 and amendments
thereto;

(2) has disposed of collateral or entered into a contract for its dis-
position under section 108 and amendments thereto; or

(3) has accepted collateral in full or partial satisfaction of the obli-
gation it secures under section 120 and amendments thereto.

New Sec. 122. (UCC 9-624.) (a) Waiver of disposition notifica-
tion. A debtor or secondary obligor may waive the right to notification
of disposition of collateral under section 109 and amendments thereto
only by an agreement to that effect entered into and authenticated after
default.

(b) Waiver of mandatory disposition. A debtor may waive the right
to require disposition of collateral under section 118(e) and amendments
thereto only by an agreement to that effect entered into and authenticated
after default.

(c) Waiver of redemption right. Except in a consumer-goods trans-
action, a debtor or secondary obligor may waive the right to redeem col-
lateral under section 121 and amendments thereto only by an agreement
to that effect entered into and authenticated after default.

New Sec. 123. (UCC 9-625.) (a) Judicial orders concerning non-
compliance. If it is established that a secured party is not proceeding in
accordance with this article, a court may order or restrain collection, en-
forcement, or disposition of collateral on appropriate terms and condi-
tions.

(b) Damages for noncompliance. Subject to subsections (c), (d),
and (f), a person is liable for damages in the amount of any loss caused
by a failure to comply with this article. Loss caused by a failure to comply
with a request under section 20 and amendments thereto may include
loss resulting from the debtor's inability to obtain, or increased costs of,
alternative financing.

(c) Persons entitled to recover damages; statutory damages in
consumer-goods transaction. Except as otherwise provided in section
126 and amendments thereto:

(1) A person that, at the time of the failure, was a debtor, was an
obligor, or held a security interest in or other lien on the collateral may
recover damages under subsection (b) for its loss; and

(2) if the collateral is consumer goods, a person that was a debtor or
a secondary obligor at the time a secured party failed to comply with this
part may recover for that failure in any event an amount not less than the
credit service charge plus 10 percent of the principal amount of the ob-
ligation or the time-price differential plus 10 percent of the cash price.

(d) Recovery when deficiency eliminated or reduced. A debtor
whose deficiency is eliminated under section 124 and amendments
thereto may recover damages for the loss of any surplus. However, a
debtor or secondary obligor whose deficiency is eliminated or reduced
under section 124 and amendments thereto may not otherwise recover
under subsection (b) for noncompliance with the provisions of this part
relating to collection, enforcement, disposition, or acceptance.

(e) Statutory damages: noncompliance with specified provi-
sions. In addition to any damages recoverable under subsection (b), the
debtor, consumer obligor, or person named as a debtor in a filed record,
as applicable, may recover $500 in each case from a person that:

(1) Fails to comply with section 18 and amendments thereto;

(2) fails to comply with section 19 and amendments thereto;

(3) files a record that the person is not entitled to file under section
80(a) and amendments thereto;

(4) fails to cause the secured party of record to file or send a termi-
nation statement as required by section 84(a) or (c) and amendments
thereto;

(5) fails to comply with section 114(b)(1) and amendments thereto,
and whose failure is part of a pattern, or consistent with a practice, of
noncompliance; or

(6) fails to comply with section 114(b)(2) and amendments thereto.

(f) Statutory damages: noncompliance with section 20 and
amendments thereto. A debtor or consumer obligor may recover dam-
ages under subsection (b) and, in addition, $500 in each case from a
person that, without reasonable cause, fails to comply with a request un-
der section 20 and amendments thereto. A recipient of a request under
section 20 and amendments thereto which never claimed an interest in
the collateral or obligations that are the subject of a request under that
section has a reasonable excuse for failure to comply with the request
within the meaning of this subsection.

(g) Limitation of security interest: noncompliance with section
20 and amendments thereto. If a secured party fails to comply with a
request regarding a list of collateral or a statement of account under
section 20 and amendments thereto, the secured party may claim a se-
curity interest only as shown in the statement included in the request as
against a person that is reasonably misled by the failure.

New Sec. 124. (UCC 9-626.) Applicable rules if amount of defi-
ciency or surplus in issue. In an action arising from a transaction in
which the amount of a deficiency or surplus is in issue, the following rules
apply:

(1) A secured party need not prove compliance with the provisions
of this part relating to collection, enforcement, disposition, or acceptance
unless the debtor or a secondary obligor places the secured party's com-
pliance in issue.

(2) If the secured party's compliance is placed in issue, the secured
party has the burden of establishing that the collection, enforcement,
disposition, or acceptance was conducted in accordance with this part.

(3) Except as otherwise provided in section 126 and amendments
thereto, if a secured party fails to prove that the collection, enforcement,
disposition, or acceptance was conducted in accordance with the provi-
sions of this part relating to collection, enforcement, disposition, or ac-
ceptance, the liability of a debtor or a secondary obligor for a deficiency
is limited to an amount by which the sum of the secured obligation,
expenses, and attorney fees exceeds the greater of:

(A) The proceeds of the collection, enforcement, disposition, or ac-
ceptance; or

(B) the amount of proceeds that would have been realized had the
noncomplying secured party proceeded in accordance with the provisions
of this part relating to collection, enforcement, disposition, or acceptance.

(4) For purposes of paragraph (3)(B), the amount of proceeds that
would have been realized is equal to the sum of the secured obligation,
expenses, and attorney fees unless the secured party proves that the
amount is less than that sum.

(5) If a deficiency or surplus is calculated under section 113(f) and
amendments thereto, the debtor or obligor has the burden of establishing
that the amount of proceeds of the disposition is significantly below the
range of prices that a complying disposition to a person other than the
secured party, a person related to the secured party, or a secondary ob-
ligor would have brought.

New Sec. 125. (UCC 9-627.) (a) Greater amount obtainable un-
der other circumstances; no preclusion of commercial reasonable-
ness. The fact that a greater amount could have been obtained by a
collection, enforcement, disposition, or acceptance at a different time or
in a different method from that selected by the secured party is not of
itself sufficient to preclude the secured party from establishing that the
collection, enforcement, disposition, or acceptance was made in a com-
mercially reasonable manner.

(b) Dispositions that are commercially reasonable. A disposition
of collateral is made in a commercially reasonable manner if the dispo-
sition is made:

(1) In the usual manner on any recognized market;

(2) at the price current in any recognized market at the time of the
disposition; or

(3) otherwise in conformity with reasonable commercial practices
among dealers in the type of property that was the subject of the dispo-
sition.

(c) Approval by court or on behalf of creditors. A collection, en-
forcement, disposition, or acceptance is commercially reasonable if it has
been approved:

(1) In a judicial proceeding;

(2) by a bona fide creditors' committee;

(3) by a representative of creditors; or

(4) by an assignee for the benefit of creditors.

(d) Approval under subsection (c) not necessary; absence of ap-
proval has no effect. Approval under subsection (c) need not be ob-
tained, and lack of approval does not mean that the collection, enforce-
ment, disposition, or acceptance is not commercially reasonable.

New Sec. 126. (UCC 9-628.) (a) Limitation of liability to debtor
or obligor. Unless a secured party knows that a person is a debtor or
obligor, knows the identity of the person, and knows how to communicate
with the person:

(1) The secured party is not liable to the person, or to a secured party
or lienholder that has filed a financing statement against the person, for
failure to comply with this article; and

(2) the secured party's failure to comply with this article does not
affect the liability of the person for a deficiency.

(b) Limitation of liability to debtor, obligor, another secured
party, or lienholder. A secured party is not liable because of its status
as secured party:

(1) To a person that is a debtor or obligor, unless the secured party
knows:

(A) That the person is a debtor or obligor;

(B) the identity of the person; and

(C) how to communicate with the person; or

(2) to a secured party or lienholder that has filed a financing state-
ment against a person, unless the secured party knows:

(A) That the person is a debtor; and

(B) the identity of the person.

(c) Limitation of liability if reasonable belief that transaction
not a consumer-goods transaction or consumer transaction. A se-
cured party is not liable to any person, and a person's liability for a de-
ficiency is not affected, because of any act or omission arising out of the
secured party's reasonable belief that a transaction is not a consumer-
goods transaction or a consumer transaction or that goods are not con-
sumer goods, if the secured party's belief is based on its reasonable reli-
ance on:

(1) A debtor's representation concerning the purpose for which col-
lateral was to be used, acquired, or held; or

(2) an obligor's representation concerning the purpose for which a
secured obligation was incurred.

(d) Limitation of liability for statutory damages. A secured party
is not liable to any person under section 123(c)(2) and amendments
thereto, for its failure to comply with section 114 and amendments
thereto.

(e) Limitation of multiple liability for statutory damages. A se-
cured party is not liable under section 123(c)(2) and amendments thereto,
more than once with respect to any one secured obligation.

New Sec. 127. (UCC 9-702.) (a) Pre-effective date transactions
or liens. Except as otherwise provided in this part, this act applies to a
transaction or lien within its scope, even if the transaction or lien was
entered into or created before this act takes effect.

(b) Continuing validity. Except as otherwise provided in subsection
(c) and sections 128 through 133 and amendments thereto:

(1) Transactions and liens that were not governed by former article
9, were validly entered into or created before this act takes effect, and
would be subject to this act if they had been entered into or created after
this act takes effect, and the rights, duties, and interests flowing from
those transactions and liens remain valid after this act takes effect; and

(2) the transactions and liens may be terminated, completed, con-
summated, and enforced as required or permitted by this act or by the
law that otherwise would apply if this act had not taken effect.

(c) Pre-effective date proceedings. This act does not affect an ac-
tion, case, or proceeding commenced before this act takes effect.

New Sec. 128. (UCC 9-703.) (a)Continuing priority over lien
creditor: perfection requirements satisfied. A security interest that
is enforceable immediately before this act takes effect and would have
priority over the rights of a person that becomes a lien creditor at that
time is a perfected security interest under this act if, when this act takes
effect, the applicable requirements for enforceability and perfection un-
der this act are satisfied without further action.

(b) Continuing priority over lien creditor: perfection require-
ments not satisfied. Except as otherwise provided in section 130 and
amendments thereto, if, immediately before this act takes effect, a se-
curity interest is enforceable and would have priority over the rights of a
person that becomes a lien creditor at that time, but the applicable
requirements for enforceability or perfection under this act are not sat-
isfied when this act takes effect, the security interest:

(1) Is a perfected security interest for one year after this act takes
effect;

(2) remains enforceable thereafter only if the security interest be-
comes enforceable under section 13 and amendments thereto, before the
year expires; and

(3) remains perfected thereafter only if the applicable requirements
for perfection under this act are satisfied before the year expires.

New Sec. 129. (UCC 9-704.) A security interest that is enforceable
immediately before this act takes effect but which would be subordinate
to the rights of a person that becomes a lien creditor at that time:

(1) Remains an enforceable security interest for one year after this
act takes effect;

(2) remains enforceable thereafter if the security interest becomes
enforceable under section 13 and amendments thereto, when this act
takes effect or within one year thereafter; and

(3) becomes perfected:

(A) Without further action, when this act takes effect if the applicable
requirements for perfection under this act are satisfied before or at that
time; or

(B) when the applicable requirements for perfection are satisfied if
the requirements are satisfied after that time.

New Sec. 130. (UCC 9-705.) (a) Pre-effective date action; one-
year perfection period unless reperfected. If action, other than the
filing of a financing statement, is taken before this act takes effect and
the action would have resulted in priority of a security interest over the
rights of a person that becomes a lien creditor had the security interest
become enforceable before this act takes effect, the action is effective to
perfect a security interest that attaches under this act within one year
after this act takes effect. An attached security interest becomes unper-
fected one year after this act takes effect unless the security interest be-
comes a perfected security interest under this act before the expiration
of that period.

(b) Pre-effective date filing. The filing of a financing statement
before this act takes effect is effective to perfect a security interest to the
extent the filing would satisfy the applicable requirements for perfection
under this act.

(c) Pre-effective date filing in jurisdiction formerly governing
perfection. This act does not render ineffective an effective financing
statement that, before this act takes effect, is filed and satisfies the ap-
plicable requirements for perfection under the law of the jurisdiction
governing perfection as provided in K.S.A. 84-9-103 prior to the effective
date of this act. However, except as otherwise provided in subsections (d)
and (e) and section 131 and amendments thereto, the financing statement
ceases to be effective at the earlier of:

(1) The time the financing statement would have ceased to be effec-
tive under the law of the jurisdiction in which it is filed; or

(2) June 30, 2006.

(d) Continuation statement. The filing of a continuation statement
after this act takes effect does not continue the effectiveness of the fi-
nancing statement filed before this act takes effect. However, upon the
timely filing of a continuation statement after this act takes effect and in
accordance with the law of the jurisdiction governing perfection as pro-
vided in part 3, the effectiveness of a financing statement filed in the
same office in that jurisdiction before this act takes effect continues for
the period provided by the law of that jurisdiction.

(e) Application of subsection (c)(2) to transmitting utility fi-
nancing statement. Subsection (c)(2) applies to a financing statement
that, before this act takes effect, is filed against a transmitting utility and
satisfies the applicable requirements for perfection under the law of the
jurisdiction governing perfection as provided in K.S.A. 84-9-103 prior to
the effective date of this act only to the extent that part 3 provides that
the law of a jurisdiction other than jurisdiction in which the financing
statement is filed governs perfection of a security interest in collateral
covered by the financing statement.

(f) Application of Part 5. A financing statement that includes a fi-
nancing statement filed before this act takes effect and a continuation
statement filed after this act takes effect is effective only to the extent
that it satisfies the requirements of part 5 for an initial financing state-
ment.

New Sec. 131. (UCC 9-706.) (a) Initial financing statement in
lieu of continuation statement. The filing of an initial financing state-
ment in the office specified in section 72 and amendments thereto, con-
tinues the effectiveness of a financing statement filed before this act takes
effect if:

(1) The filing of an initial financing statement in that office would be
effective to perfect a security interest under this act;

(2) the pre-effective-date financing statement was filed in an office
in another state or another office in this state; and

(3) the initial financing statement satisfies subsection (c).

(b) Period of continued effectiveness. The filing of an initial fi-
nancing statement under subsection (a) continues the effectiveness of the
pre-effective date financing statement:

(1) If the initial financing statement is filed before this act takes ef-
fect, for the period provided in K.S.A. 84-9-103 prior to the effective date
of this act with respect to a financing statement; and

(2) if the initial financing statement is filed after this act takes effect,
for the period provided in section 86 and amendments thereto with re-
spect to an initial financing statement.

(c) Requirements for initial financing statement under subsec-
tion (a). To be effective for purposes of subsection (a), an initial financing
statement must:

(1) Satisfy the requirements of part 5 for an initial financing state-
ment;

(2) identify the pre-effective-date financing statement by indicating
the office in which the financing statement was filed and providing the
dates of filing and file numbers, if any, of the financing statement and of
the most recent continuation statement filed with respect to the financing
statement; and

(3) indicate that the pre-effective date financing statement remains
effective.

New Sec. 132. (UCC 9-707.) A person may file an initial financing
statement or a continuation statement under this part if:

(1) The secured party of record authorizes the filing; and

(2) the filing is necessary under this part:

(A) To continue the effectiveness of a financing statement filed be-
fore this act takes effect; or

(B) to perfect or continue the perfection of a security interest.

New Sec. 133. (UCC 9-708.) (a) Law governing priority. This act
determines the priority of conflicting claims to collateral. However, if the
relative priorities of the claims were established before this act takes ef-
fect, former article 9 determines priority.

(b) Priority if security interest becomes enforceable under sec-
tion 13 and amendments thereto. For purposes of section 42(a) and
amendments thereto, the priority of a security interest that becomes en-
forceable under section 13 and amendments thereto, dates from the time
this act takes effect if the security interest is perfected under this act by
the filing of a financing statement before this act takes effect which would
not have been effective to perfect the security interest under former
article 9. This subsection does not apply to conflicting security interests
each of which is perfected by the filing of such a financing statement.

New Sec. 134. Uniform commercial code fee fund. (a) There is
hereby created in the state treasury the uniform commercial code fee
fund.

(b) The secretary of state shall remit to the state treasurer at least
monthly all fees received by the secretary of state for providing infor-
mation concerning filings under article 9 of chapter 84 of the Kansas
Statutes Annotated. Upon receipt of any such remittance, the state trea-
surer shall deposit the entire amount in the state treasury and credit 20%
of the amount to the state general fund and the balance to the uniform
commercial code fee fund.

(c) All expenditures from the uniform commercial code fee fund shall
be made in accordance with appropriation acts upon warrants of the di-
rector of accounts and reports issued pursuant to vouchers approved by
the secretary of state or a person or persons designated by the secretary
of state.

(d) If information regarding filings in the office of the secretary of
state is provided by a register of deeds, the fee to be collected from the
customer shall be an amount fixed by rules and regulations adopted by
the secretary of state. The rules and regulations adopted by the secretary
of state shall specify the amount the register of deeds shall remit to the
county treasurer for deposit into the county general fund. The register of
deeds shall remit at least monthly the remainder of all such fees collected
to the state treasurer. The state treasurer shall deposit the entire amount
in the state treasury and shall credit 20% of the amount to the state
general fund and the remainder to the uniform commercial code fee fund.

Sec. 135. K.S.A. 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. 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. 84-8-110
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. 84-4a-507 and
amendments thereto.

Letters of credit. K.S.A. 84-5-116 and amendments thereto.

Law governing perfection, the effect of perfection or nonperfection, and
the priority of security interests. Sections 21 through 27 and amendments
thereto.

Sec. 136. K.S.A. 1999 Supp. 84-1-201 is hereby amended to read as
follows: 84-1-201. Subject to additional definitions contained in the sub-
sequent articles of this act which are applicable to specific articles or parts
thereof, and unless the context otherwise requires, in this act:

(1) ``Action'' in the sense of a judicial proceeding includes recoup-
ment, counterclaim, set-off, suit in equity and any other proceedings in
which rights are determined.

(2) ``Aggrieved party'' means a party entitled to resort to a remedy.

(3) ``Agreement'' means the bargain of the parties in fact as found in
their language or by implication from other circumstances including
course of dealing or usage of trade or course of performance as provided
in this act (K.S.A. 84-1-205 and 84-2-208, and amendments thereto).
Whether an agreement has legal consequences is determined by the pro-
visions of this act, if applicable; otherwise by the law of contracts (K.S.A.
84-1-103 and amendments thereto). (Compare ``Contract.'')

(4) ``Bank'' means any person engaged in the business of banking.

(5) ``Bearer'' means the person in possession of an instrument, doc-
ument of title or certificated security payable to bearer or indorsed in
blank.

(6) ``Bill of lading'' means a document evidencing the receipt of goods
for shipment issued by a person engaged in the business of transporting
or forwarding goods, and includes an airbill. ``Airbill'' means a document
serving for air transportation as a bill of lading does for marine or rail
transportation, and includes an air consignment note or air waybill.

(7) ``Branch'' includes a separately incorporated foreign branch of a
bank.

(8) ``Burden of establishing'' a fact means the burden of persuading
the triers of fact that the existence of the fact is more probable than its
nonexistence.

(9) ``Buyer in ordinary course of business'' means a person ~~who~~ that
buys goods in good faith ~~and~~, without knowledge that the sale ~~to the~~
~~person is in violation of~~ violates the ~~ownership~~ rights ~~or security interest~~
of ~~a third party~~ another person in the goods ~~buys~~, and in the ordinary
course from a person, other than a pawnbroker in the business of selling
goods of that kind ~~but does not include a pawnbroker~~. ~~All persons who~~
~~sell minerals or the like (including oil and gas) at wellhead or minehead~~
~~shall be deemed to be persons~~ A person buys goods in the ordinary course
if the sale to the person comports with the usual or customary practices
in the kind of business in which the seller is engaged or with the seller's
own usual or customary practices. A person that sells oil, gas, or other
minerals at the wellhead or minehead is a person in the business of selling
goods of that kind. ~~``Buying''~~ A buyer in the ordinary course of business
may be buy for cash or, by exchange of other property, or on secured or
unsecured credit and ~~includes receiving~~ may acquire goods or documents
of title under a preexisting contract for sale ~~but does not include a transfer~~
~~in bulk or as security for or in total or partial satisfaction of a money debt~~.
Only a buyer that takes possession of the goods or has a right to recover
the goods from the seller under article 2 may be a buyer in ordinary course
of business. A person that acquires goods in a transfer in bulk or as se-
curity for or in total or partial satisfaction of a money debt is not a buyer
in ordinary course of business.

(10) ``Conspicuous'': A term or clause is conspicuous when it is so
written that a reasonable person against whom it is to operate ought to
have noticed it. A printed heading in capitals (as: NONNEGOTIABLE
BILL OF LADING) is conspicuous. Language in the body of a form is
``conspicuous'' if it is in larger or other contrasting type or color. But in
a telegram any stated term is ``conspicuous.'' Whether a term or clause is
``conspicuous'' or not is for decision by the court.

(11) ``Contract'' means the total legal obligation which results from
the parties' agreement as affected by this act and any other applicable
rules of law. (Compare ``Agreement.'')

(12) ``Creditor'' includes a general creditor, a secured creditor, a lien
creditor and any representative of creditors, including an assignee for the
benefit of creditors, a trustee in bankruptcy, a receiver in equity and an
executor or administrator of an insolvent debtor's or assignor's estate.

(13) ``Defendant'' includes a person in the position of defendant in a
cross-action or counterclaim.

(14) ``Delivery'' with respect to instruments, documents of title, chat-
tel paper or certificated securities means voluntary transfer of possession.

(15) ``Document of title'' includes bill of lading, dock warrant, dock
receipt, warehouse receipt or order for the delivery of goods, and also
any other document which in the regular course of business or financing
is treated as adequately evidencing that the person in possession of it is
entitled to receive, hold and dispose of the document and the goods it
covers. To be a document of title a document must purport to be issued
by or addressed to a bailee and purport to cover goods in the bailee's
possession which are either identified or are fungible portions of an iden-
tified mass.

(16) ``Fault'' means wrongful act, omission or breach.

(17) ``Fungible'' with respect to goods or securities means goods or
securities of which any unit is, by nature or usage of trade, the equivalent
of any other like unit. Goods which are not fungible shall be deemed
fungible for the purposes of this act to the extent that under a particular
agreement or document unlike units are treated as equivalents.

(18) ``Genuine'' means free of forgery or counterfeiting.

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

(20) ``Holder'' with respect to a negotiable instrument, means the
person in possession if the instrument is payable to bearer or, in the case
of an instrument payable to an identified person, if the identified person
is in possession. ``Holder'' with respect to a document of title means the
person in possession if the goods are deliverable to bearer or to the order
of the person in possession.

(21) To ``honor'' is to pay or to accept and pay, or where a credit so
engages to purchase or discount a draft complying with the terms of the
credit.

(22) ``Insolvency proceedings'' includes any assignment for the ben-
efit of creditors or other proceedings intended to liquidate or rehabilitate
the estate of the person involved.

(23) A person is ``insolvent'' who either has ceased to pay the person's
debts in the ordinary course of business or cannot pay the person's debts
as they become due or is insolvent within the meaning of the federal
bankruptcy law.

(24) ``Money'' means a medium of exchange authorized or adopted
by a domestic or foreign government and includes a monetary unit of
account established by an intergovernmental organization or by agree-
ment between two or more nations.

(25) A person has ``notice'' of a fact when:

(a) The person has actual knowledge of it; or

(b) the person has received a notice or notification of it; or

(c) from all the facts and circumstances known to the person at the
time in question the person has reason to know that it exists. A person
``knows'' or has ``knowledge'' of a fact when the person has actual knowl-
edge of it. ``Discover'' or ``learn'' or a word or phrase of similar import
refers to knowledge rather than to reason to know. The time and circum-
stances under which a notice or notification may cease to be effective are
not determined by this act.

(26) A person ``notifies'' or ``gives'' a notice or notification to another
by taking such steps as may be reasonably required to inform the other
in ordinary course whether or not such other actually comes to know of
it. A person ``receives'' a notice or notification when:

(a) It comes to the person's attention; or

(b) it is duly delivered at the place of business through which the
contract was made or at any other place held out by the person as the
place for receipt of such communications.

(27) Notice, knowledge or a notice or notification received by an or-
ganization is effective for a particular transaction from the time when it
is brought to the attention of the individual conducting that transaction,
and in any event from the time when it would have been brought to the
individual's attention if the organization had exercised due diligence. An
organization exercises due diligence if it maintains reasonable routines
for communicating significant information to the person conducting the
transaction and there is reasonable compliance with the routines. Due
diligence does not require an individual acting for the organization to
communicate information unless such communication is part of the in-
dividual's regular duties or unless the individual has reason to know of
the transaction and that the transaction would be materially affected by
the information.

(28) ``Organization'' includes a corporation, government or govern-
mental subdivision or agency, business trust, estate, trust, partnership or
association, two or more persons having a joint or common interest or
any other legal or commercial entity.

(29) ``Party,'' as distinct from ``third party,'' means a person who has
engaged in a transaction or made an agreement within this act.

(30) ``Person'' includes an individual or an organization. (See K.S.A.
84-1-102 and amendments thereto.)

(31) ``Presumption'' or ``presumed'' means that the trier of fact must
find the existence of the fact presumed unless and until evidence is in-
troduced which would support a finding of its nonexistence. The intro-
duction of such evidence shall have the effect specified in K.S.A. 60-414
and amendments thereto on the burden of establishing the existence or
nonexistence of such fact.

(32) ``Purchase'' includes taking by sale, discount, negotiation, mort-
gage, pledge, lien, security interest, issue or reissue, gift or any other
voluntary transaction creating an interest in property.

(33) ``Purchaser'' means a person who takes by purchase.

(34) ``Remedy'' means any remedial right to which an aggrieved party
is entitled with or without resort to a tribunal.

(35) ``Representative'' includes an agent, an officer of a corporation
or association, and a trustee, executor or administrator of an estate or any
other person empowered to act for another.

(36) ``Rights'' includes remedies.

(37) ``Security interest'' means an interest in personal property or
fixtures which secures payment or performance of an obligation. ~~The~~
~~retention or reservation of title by a seller of goods notwithstanding ship-~~
~~ment or delivery to the buyer (K.S.A. 84-2-401 and amendments thereto)~~
~~is limited in effect to a reservation of a ``security interest.''~~ The term also
includes any interest of a consignor and a buyer of accounts or, chattel
paper ~~which~~, a payment intangible or a promissory note in a transaction
that is subject to article 9. The special property interest of a buyer of
goods on identification of such goods to a contract for sale under K.S.A.
84-2-401 and amendments thereto is not a ``security interest,'' but a buyer
may also acquire a ``security interest'' by complying with article 9. ~~Unless~~
~~a consignment is intended as security, reservation of title thereunder is~~
~~not a ``security interest,'' but a consignment in any event is subject to the~~
~~provisions on consignment sales (K.S.A. 84-2-326 and amendments~~
~~thereto).~~ Except as otherwise provided in K.S.A. 84-2-505 and amend-
ments thereto, the right of a seller or lessor of goods under article 2 or 2A
to retain or acquire possession of the goods is not a ``security interest,''
but a seller or lessor may also acquire a ``security interest'' by complying
with article 9. The retention or reservation of title by a seller of goods
notwithstanding shipment or delivery to the buyer (K.S.A. 84-2-401 and
amendments thereto) is limited in effect to a reservation of a ``security
interest.''

Whether a transaction creates a lease or security interest is determined
by the facts of each case; however, a transaction creates a security interest
if the consideration the lessee is to pay the lessor for the right to posses-
sion and use of the goods is an obligation for the term of the lease not
subject to termination by the lessee, and

(a) the original term of the lease is equal to or greater than the re-
maining economic life of the goods,

(b) the lessee is bound to renew the lease for the remaining economic
life of the goods or is bound to become the owner of the goods,

(c) the lessee has an option to renew the lease for the remaining
economic life of the goods for no additional consideration or nominal
additional consideration upon compliance with the lease agreement, or

(d) the lessee has an option to become the owner of the goods for no
additional consideration or nominal additional consideration upon com-
pliance with the lease agreement.

A transaction does not create a security interest merely because it pro-
vides that:

(a) The present value of the consideration the lessee is obligated to
pay the lessor for the right to possession and use of the goods is substan-
tially equal to or is greater than the fair market value of the goods at the
time the lease is entered into,

(b) the lessee assumes risk of loss of the goods, or agrees to pay taxes,
insurance, filing, recording, or registration fees, or service or maintenance
costs with respect to the goods,

(c) the lessee has an option to renew the lease or to become the owner
of the goods,

(d) the lessee has an option to renew the lease for a fixed rent that is
equal to or greater than the reasonably predictable fair market rent for
the use of the goods for the term of the renewal at the time the option
is to be performed, or

(e) the lessee has an option to become the owner of the goods for a
fixed price that is equal to or greater than the reasonably predictable fair
market value of the goods at the time the option is to be performed.

For purposes of this subsection (37):

(a) Additional consideration is not nominal if (i) when the option to
renew the lease is ~~grant~~ granted to the lessee the rent is stated to be the
fair market rent for the use of the goods for the term of the renewal
determined at the time the option is to be performed, or (ii) when the
option to become the owner of the goods is granted to the lessee the
price is stated to be the fair market value of the goods determined at the
time the option is to be performed. Additional consideration is nominal
if it is less than the lessee's reasonably predictable cost of performing
under the lease agreement if the option is not exercised;

(b) ``Reasonably predictable'' and ``remaining economic life of the
goods'' are to be determined with reference to the facts and circum-
stances at the time the transaction is entered into; and

(c) ``Present value'' means the amount as of a date certain of one or
more sums payable in the future, discounted to the date certain. The
discount is determined by the interest rate specified by the parties if the
rate is not manifestly unreasonable at the time the transaction is entered
into; otherwise, the discount is determined by a commercially reasonable
rate that takes into account the facts and circumstances of each case at
the time the transaction was entered into.

(38) ``Send'' in connection with any writing or notice means to deposit
in the mail or deliver for transmission by any other usual means of com-
munication with postage or cost of transmission provided for and properly
addressed and in the case of an instrument to an address specified thereon
or otherwise agreed, or if there be none to any address reasonable under
the circumstances. The receipt of any writing or notice within the time
at which it would have arrived if properly sent has the effect of a proper
sending.

(39) ``Signed'' includes any symbol executed or adopted by a party
with present intention to authenticate a writing.

(40) ``Surety'' includes guarantor.

(41) ``Telegram'' includes a message transmitted by radio, teletype,
cable, any mechanical method of transmission or the like.

(42) ``Term'' means that portion of an agreement which relates to a
particular matter.

(43) ``Unauthorized'' signature means one made without actual, im-
plied or apparent authority and includes a forgery.

(44) ``Value.'' Except as otherwise provided with respect to negotiable
instruments and bank collections (K.S.A. 84-3-303, 84-4-208 and 84-4-
209, and amendments thereto) a person gives ``value'' for rights if the
person acquires them:

(a) In return for a binding commitment to extend credit or for the
extension of immediately available credit whether or not drawn upon and
whether or not a charge-back is provided for in the event of difficulties
in collection; or

(b) as security for or in total or partial satisfaction of a preexisting
claim; or

(c) by accepting delivery pursuant to a preexisting contract for pur-
chase; or

(d) generally, in return for any consideration sufficient to support a
simple contract.

(45) ``Warehouse receipt'' means a receipt issued by a person engaged
in the business of storing goods for hire.

(46) ``Written'' or ``writing'' includes printing, typewriting or any
other intentional reduction to tangible form.

Sec. 137. K.S.A. 84-2-103 is hereby amended to read as follows: 84-
2-103. (1) In this article unless the context otherwise requires:

(a) ``Buyer'' means a person who buys or contracts to buy goods.

(b) ``Good faith'' in the case of a merchant means honesty in fact and
the observance of reasonable commercial standards of fair dealing in the
trade.

(c) ``Receipt'' of goods means taking physical possession of them.

(d) ``Seller'' means a person who sells or contracts to sell goods.

(2) Other definitions applying to this article or to specified parts
thereof, and the sections in which they appear are:

``Acceptance.'' ~~Section~~ K.S.A. 84-2-606.

``Banker's credit.'' ~~Section~~ K.S.A. 84-2-325.

``Between merchants.'' ~~Section~~ K.S.A. 84-2-104.

``Cancellation.'' ~~Section~~ K.S.A. 84-2-106(4).

``Commercial unit.'' ~~Section~~ K.S.A. 84-2-105.

``Confirmed credit.'' ~~Section~~ K.S.A. 84-2-325.

``Conforming to contract.'' ~~Section~~ K.S.A. 84-2-106.

``Contract for sale.'' ~~Section~~ K.S.A. 84-2-106.

``Cover.'' ~~Section~~ K.S.A. 84-2-712.

``Entrusting.'' ~~Section~~ K.S.A. 84-2-403.

``Financing agency.'' ~~Section~~ K.S.A. 84-2-104.

``Future goods.'' ~~Section~~ K.S.A. 84-2-105.

``Goods.'' ~~Section~~ K.S.A. 84-2-105.

``Identification.'' ~~Section~~ K.S.A. 84-2-501.

``Installment contract.'' ~~Section~~ K.S.A. 84-2-612.

``Letter of credit.'' ~~Section~~ K.S.A. 84-2-325.

``Lot.'' ~~Section~~ K.S.A. 84-2-105.

``Merchant.'' ~~Section~~ K.S.A. 84-2-104.

``Overseas.'' ~~Section~~ K.S.A. 84-2-323.

``Person in position of seller.'' ~~Section~~ K.S.A. 84-2-707.

``Present sale.'' ~~Section~~ K.S.A. 84-2-106.

``Sale.'' ~~Section~~ K.S.A. 84-2-106.

``Sale on approval.'' ~~Section~~ K.S.A. 84-2-326.

``Sale or return.'' ~~Section~~ K.S.A. 84-2-326.

``Termination.'' ~~Section~~ K.S.A. 84-2-106.

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

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

``Consignee.'' ~~Section~~ K.S.A. 84-7-102.

``Consignor.'' ~~Section~~ K.S.A. 84-7-102.

``Consumer goods.'' Section ~~84-9-109~~ 2.

``Dishonor.'' ~~Section 84-3-507~~ K.S.A. 84-3-502.

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

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

Sec. 138. K.S.A. 84-2-210 is hereby amended to read as follows: 84-
2-210. (1) A party may perform his duty through a delegate unless oth-
erwise agreed or unless the other party has a substantial interest in having
his original promisor perform or control the acts required by the contract.
No delegation of performance relieves the party delegating of any duty
to perform or any liability for breach.

(2) Except as otherwise provided in section 68 and amendments
thereto, unless otherwise agreed all rights of either seller or buyer can be
assigned except where the assignment would materially change the duty
of the other party, or increase materially the burden or risk imposed on
him by his contract, or impair materially his chance of obtaining return
performance. A right to damages for breach of the whole contract or a
right arising out of the assignor's due performance of his entire obligation
can be assigned despite agreement otherwise.

(3) The creation, attachment, perfection, or enforcement of a security
interest in the seller's interest under a contract is not a transfer that ma-
terially changes the duty of or increases materially the burden or risk
imposed on the buyer or impairs materially the buyer's chance of obtain-
ing return performance within the purview of subsection (2) unless, and
then only to the extent that, enforcement actually results in a delegation
of material performance of the seller. Even in that event, the creation,
attachment, perfection, and enforcement of the security interest remain
effective, but (i) the seller is liable to the buyer for damages caused by the
delegation to the extent that the damages could not reasonably be pre-
vented by the buyer, and (ii) a court having jurisdiction may grant other
appropriate relief, including cancellation of the contract for sale or an
injunction against enforcement of the security interest or consummation
of the enforcement.

(4) Unless the circumstances indicate the contrary a prohibition of
assignment of ``the contract'' is to be construed as barring only the del-
egation to the assignee of the assignor's performance.

~~(4)~~ (5) An assignment of ``the contract'' or of ``all my rights under the
contract'' or an assignment in similar general terms is an assignment of
rights and unless the language or the circumstances (as in an assignment
for security) indicate the contrary, it is a delegation of performance of
the duties of the assignor and its acceptance by the assignee constitutes
a promise by him to perform those duties. This promise is enforceable
by either the assignor or the other party to the original contract.

~~(5)~~ (6) The other party may treat any assignment which delegates
performance as creating reasonable grounds for insecurity and may with-
out prejudice to his rights against the assignor demand assurances from
the assignee (~~section~~ K.S.A. 84-2-609).

Sec. 139. K.S.A. 84-2-326 is hereby amended to read as follows: 84-
2-326. (1) Unless otherwise agreed, if delivered goods may be returned
by the buyer even though they conform to the contract, the transaction
is

(a) a ``sale on approval'' if the goods are delivered primarily for use,
and

(b) a ``sale or return'' if the goods are delivered primarily for resale.

(2) ~~Except as provided in subsection (3),~~ Goods held on approval are
not subject to the claims of the buyer's creditors until acceptance; goods
held on sale or return are subject to such claims while in the buyer's
possession.

~~(3) Where goods are delivered to a person for sale and such person~~
~~maintains a place of business at which such person deals in goods of the~~
~~kind involved, under a name other than the name of the person making~~
~~delivery, then with respect to claims of creditors of the person conducting~~
~~the business the goods are deemed to be on sale or return. The provisions~~
~~of this subsection are applicable even though an agreement purports to~~
~~reserve title to the person making delivery until payment or resale or uses~~
~~such words as ``on consignment'' or ``on memorandum.'' However, this~~
~~subsection is not applicable if the person making delivery does any of the~~
~~following:~~

~~(a) Complies with an applicable law providing for a consignor's in-~~
~~terest or the like to be evidenced by a sign;~~

~~(b) establishes that the person conducting the business is generally~~
~~known by such person's creditors to be substantially engaged in selling~~
~~the goods of others;~~

~~(c) complies with the filing provisions of the article on secured trans-~~
~~actions (article 9); or~~

~~(d) delivers goods which the person making delivery used or bought~~
~~for use for personal, family or household purposes.~~

~~(4)~~ (3) Any ``or return'' term of a contract for sale is to be treated as
a separate contract for sale within the statute of frauds section of this
article (~~section~~ K.S.A. 84-2-201) and as contradicting the sale aspect of
the contract within the provisions of this article on parol or extrinsic ev-
idence (~~section~~ K.S.A. 84-2-202).

~~(5)~~ (4) If a person delivers or consigns for sale goods which the person
used or bought for use of personal, family, or household purposes, these
goods do not become the property of the deliveree or consignee unless
the deliveree or consignee purchases and fully pays for the goods. Nothing
in this subsection shall prevent the deliveree or consignee from acting as
the deliverer's agent to transfer title to these goods to a buyer who pays
the full purchase price. Any payment received by the deliveree or con-
signee from a buyer of these goods, less any amount which the deliverer
expressly agreed could be deducted from the payment for commissions,
fees, or expenses, is the property of the deliverer and shall not be subject
to the claims of the deliveree's or consignee's creditors.

Sec. 140. K.S.A. 84-2-502 is hereby amended to read as follows: 84-
2-502. (1) Subject to ~~subsection~~ subsections (2) and (3) and even though
the goods have not been shipped a buyer who has paid a part or all of
the price of goods in which he has a special property under the provisions
of the immediately preceding section may on making and keeping good
a tender of any unpaid portion of their price recover them from the seller
if: (a) In the case of goods bought for personal, family or household pur-
poses, the seller repudiates or fails to deliver as required by the contract;
or

(b) in all cases, the seller becomes insolvent within ten days after
receipt of the first installment on their price.

(2) The buyer's right to recover the goods under subsection (1)(a)
vests upon acquisition of a special property, even if the seller had not then
repudiated or failed to deliver.

(3) If the identification creating his special property has been made
by the buyer he acquires the right to recover the goods only if they con-
form to the contract for sale.

Sec. 141. K.S.A. 84-2-716 is hereby amended to read as follows: 84-
2-716. (1) Specific performance may be decreed where the goods are
unique or in other proper circumstances.

(2) The decree for specific performance may include such terms and
conditions as to payment of the price, damages, or other relief as the
court may deem just.

(3) The buyer has a right of replevin for goods identified to the con-
tract if after reasonable effort he is unable to effect cover for such goods
or the circumstances reasonably indicate that such effort will be unavail-
ing or if the goods have been shipped under reservation and satisfaction
of the security interest in them has been made or tendered. In the case
of goods bought for personal, family or household purposes, the buyer's
right of replevin vests upon acquisition of a special property, even if the
seller had not then repudiated or failed to deliver.

Sec. 142. K.S.A. 84-2a-103 is hereby amended to read as follows: 84-
2a-103. (1) In this article unless the context otherwise requires:

(a) ``Buyer in ordinary course of business'' means a person who in
good faith and without knowledge that the sale to such person is in vio-
lation of the ownership rights or security interest or leasehold interest of
a third party in the goods buys in ordinary course from a person in the
business of selling goods of that kind but does not include a pawnbroker.
``Buying'' may be for cash or by exchange of other property or on secured
or unsecured credit and includes receiving goods or documents of title
under a preexisting contract for sale but does not include a transfer in
bulk or as security for or in total or partial satisfaction of a money debt.

(b) ``Cancellation'' occurs when either party puts an end to the lease
contract for default by the other party.

(c) ``Commercial unit'' means such a unit of goods as by commercial
usage is a single whole for purposes of lease and division of which ma-
terially impairs its character or value on the market or in use. A com-
mercial unit may be a single article, as a machine, or a set of articles, as
a suite of furniture or a line of machinery, or a quantity, as a gross or
carload, or any other unit treated in use or in the relevant market as a
single whole.

(d) ``Conforming'' goods or performance under a lease contract
means goods or performance that are in accordance with the obligations
under the lease contract.

(e) ``Consumer lease'' means a lease that a lessor regularly engaged
in the business of leasing or selling makes to a lessee who is an individual
and who takes under the lease primarily for a personal, family, or house-
hold purpose, if the total payments to be made under the lease contract,
excluding payments for options to renew or buy, do not exceed $25,000.

(f) ``Fault'' means wrongful act, omission, breach or default.

(g) ``Finance lease'' means a lease with respect to which:

(i) The lessor does not select, manufacture or supply the goods;

(ii) the lessor acquires the goods or the right to possession and use
of the goods in connection with the lease; and

(iii) one of the following occurs:

(A) The lessee receives a copy of the contract by which the lessor
acquired the goods or the right to possession and use of the goods before
signing the lease contract;

(B) the lessee's approval of the contract by which the lessor acquired
the goods or the right to possession and use of the goods is a condition
to effectiveness of the lease contract;

(C) the lessee, before signing the lease contract, receives an accurate
and complete statement designating the promises and warranties, and any
disclaimers of warranties, limitations or modifications of remedies, or liq-
uidated damages, including those of a third party, such as the manufac-
turer of the goods, provided to the lessor by the person supplying the
goods in connection with or as part of the contract by which the lessor
acquired the goods or the right to possession and use of the goods; or

(D) if the lease is not a consumer lease, the lessor, before the lessee
signs the lease contract, informs the lessee in writing (a) of the identity
of the person supplying the goods to the lessor, unless the lessee has
selected that person and directed the lessor to acquire the goods or the
right to possession and use of the goods from that person, (b) that the
lessee is entitled under this article to the promises and warranties, in-
cluding those of any third party, provided to the lessor by the person
supplying the goods in connection with or as part of the contract by which
the lessor acquired the goods or the right to possession and use of the
goods, and (c) that the lessee may communicate with the person supplying
the goods to the lessor and receive an accurate and complete statement
of those promises and warranties, including any disclaimers and limita-
tions of them or of remedies.

(h) ``Goods'' means all things that are movable at the time of identi-
fication to the lease contract, or are fixtures (K.S.A. 84-2a-309), but the
term does not include money, documents, instruments, accounts, chattel
paper, general intangibles, or minerals or the like, including oil and gas,
before extraction. The term also includes the unborn young of animals.

(i) ``Installment lease contract'' means a lease contract that authorizes
or requires the delivery of goods in separate lots to be separately accepted,
even though the lease contract contains a clause ``each delivery is a sep-
arate lease'' or its equivalent.

(j) ``Lease'' means a transfer of the right to possession and use of
goods for a term in return for consideration, but a sale, including a sale
on approval or a sale or return, or retention or creation of a security
interest is not a lease. Unless the context clearly indicates otherwise, the
term includes a sublease.

(k) ``Lease agreement'' means the bargain, with respect to the lease,
of the lessor and the lessee in fact as found in their language or by im-
plication from other circumstances including course of dealing or usage
of trade or course of performance as provided in this article. Unless the
context clearly indicates otherwise, the term includes a sublease agree-
ment.

(l) ``Lease contract'' means the total legal obligation that results from
the lease agreement as affected by this article and any other applicable
rules of law. Unless the context clearly indicates otherwise, the term in-
cludes a sublease contract.

(m) ``Leasehold interest'' means the interest of the lessor or the lessee
under a lease contract.

(n) ``Lessee'' means a person who acquires the right to possession
and use of goods under a lease. Unless the context clearly indicates oth-
erwise, the term includes a sublessee.

(o) ``Lessee in ordinary course of business'' means a person who in
good faith and without knowledge that the lease is in violation of the
ownership rights or security interest or leasehold interest of a third party
in the goods leases in ordinary course from a person in the business of
selling or leasing goods of that kind but does not include a pawnbroker.
``Leasing'' may be for cash or by exchange of other property or on secured
or unsecured credit and includes receiving goods or documents of title
under a preexisting lease contract but does not include a transfer in bulk
or as security for or in total or partial satisfaction of a money debt.

(p) ``Lessor'' means a person who transfers the right to possession
and use of goods under a lease. Unless the context clearly indicates oth-
erwise, the term includes a sublessor.

(q) ``Lessor's residual interest'' means the lessor's interest in the
goods after expiration, termination or cancellation of the lease contract.

(r) ``Lien'' means a charge against or interest in goods to secure pay-
ment of a debt or performance of an obligation, but the term does not
include a security interest.

(s) ``Lot'' means a parcel or a single article that is the subject matter
of a separate lease or delivery, whether or not it is sufficient to perform
the lease contract.

(t) ``Merchant lessee'' means a lessee that is a merchant with respect
to goods of the kind subject to the lease.

(u) ``Present value'' means the amount as of a date certain of one or
more sums payable in the future, discounted to the date certain. The
discount is determined by the interest rate specified by the parties if the
rate was not manifestly unreasonable at the time the transaction was en-
tered into; otherwise, the discount is determined by a commercially rea-
sonable rate that takes into account the facts and circumstances of each
case at the time the transaction was entered into.

(v) ``Purchase'' includes taking by sale, lease, mortgage, security in-
terest, pledge, gift, or any other voluntary transaction creating an interest
in goods.

(w) ``Sublease'' means a lease of goods the right to possession and
use of which was acquired by the lessor as a lessee under an existing lease.

(x) ``Supplier'' means a person from whom a lessor buys or leases
goods to be leased under a finance lease.

(y) ``Supply contract'' means a contract under which a lessor buys or
leases goods to be leased.

(z) ``Termination'' occurs when either party pursuant to a power cre-
ated by agreement or law puts an end to the lease contract otherwise than
for default.

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

``Accessions,'' K.S.A. 84-2a-310(1);

``Construction mortgage,'' K.S.A. 84-2a-309(1)(d);

``Encumbrance,'' K.S.A. 84-2a-309(1)(e);

``Fixtures,'' K.S.A. 84-2a-309(1)(a);

``Fixture filing,'' K.S.A. 84-2a-309(1)(b); and

``Purchase money lease,'' K.S.A. 84-2a-309(1)(c).

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

``Account,'' ~~K.S.A. 84-9-106~~ section 2, and amendments thereto;

``Between merchants,'' K.S.A. 84-2-104(3), and amendments thereto;

``Buyer,'' K.S.A. 84-2-103(1)(a), and amendments thereto;

``Chattel paper,'' ~~K.S.A. 84-9-105(1)(b)~~ section 2(a)(11), and amend-
ments thereto;

``Consumer goods,'' ~~K.S.A. 84-9-109(1)~~ section 2(a)(23), and amend-
ments thereto;

``Document,'' ~~K.S.A. 84-9-105(1)(f)~~ section 2(a)(30), and amendments
thereto;

``Entrusting,'' K.S.A. 84-2-403(3), and amendments thereto;

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

``General intangible,'' section 2(a)(42), and amendments thereto;

``Good faith,'' K.S.A. 84-2-103(1)(b), and amendments thereto;

``Instrument,'' ~~K.S.A. 84-9-105(1)(i)~~ section 2(a)(47), and amendments
thereto;

``Merchant,'' K.S.A. 84-2-104(1), and amendments thereto;

``Mortgage,'' ~~K.S.A. 84-9-105(1)(j)~~ section 2(a)(55), and amendments
thereto;

``Pursuant to commitment,'' ~~K.S.A. 84-9-105(1)(k)~~ section 2(a)(68), and
amendments thereto;

``Receipt,'' K.S.A. 84-2-103(1)(c), and amendments thereto;

``Sale,'' K.S.A. 84-2-106(1), and amendments thereto;

``Sale on approval,'' K.S.A. 84-2-326, and amendments thereto;

``Sale or return,'' K.S.A. 84-2-326, and amendments thereto; and

``Seller,'' K.S.A. 84-2-103(1)(d), and amendments thereto.

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

Sec. 143. K.S.A. 84-2a-303 is hereby amended to read as follows: 84-
2a-303. (1) As used in this section, ``creation of a security interest'' in-
cludes the sale of a lease contract that is subject to article 9, secured
transactions, by reason of ~~subsection (1)(b) of K.S.A. 84-9-102~~ section
9(a)(3) and amendments thereto.

(2) Except as provided in ~~subsections (3) and (4)~~ subsection 3 and
section 69 and amendments thereto, a provision in a lease agreement
which (a) prohibits the voluntary or involuntary transfer, including a trans-
fer by sale, sublease, creation or enforcement of a security interest, or
attachment, levy, or other judicial process, of an interest of a party under
the lease contract or of the lessor's residual interest in the goods, or (b)
makes such a transfer an event of default, gives rise to the rights and
remedies provided in subsection ~~(5)~~ (4), but a transfer that is prohibited
or is an event of default under the lease agreement is otherwise effective.

~~(3) A provision in a lease agreement which (a) prohibits the creation~~
~~or enforcement of a security interest in an interest of a party under the~~
~~lease contract or in the lessor's residual interest in the goods, or (b) makes~~
~~such a transfer an event of default, is not enforceable unless, and then~~
~~only to the extent that, there is an actual transfer by the lessee of the~~
~~lessee's right of possession or use of the goods in violation of the provision~~
~~or an actual delegation of a material performance of either party to the~~
~~lease contract in violation of the provision. Neither the granting nor the~~
~~enforcement of a security interest in (i) the lessor's interest under the~~
~~lease contract or (ii) the lessor's residual interest in the goods is a transfer~~
~~that materially impairs the prospect of obtaining return performance by,~~
~~materially changes the duty of, or materially increases the burden or risk~~
~~imposed on, the lessee within the purview of subsection (5) unless, and~~
~~then only to the extent that, there is an actual delegation of a material~~
~~performance of the lessor.~~

~~(4)~~ (3) A provision in a lease agreement which (a) prohibits a transfer
of a right to damages for default with respect to the whole lease contract
or of a right to payment arising out of the transferor's due performance
of the transferor's entire obligation, or (b) makes such a transfer an event
of default, is not enforceable, and such a transfer is not a transfer that
materially impairs the prospect of obtaining return performance by, ma-
terially changes the duty of, or materially increases the burden or risk
imposed on, the other party to the lease contract within the purview of
subsection ~~(5)~~ (4).

~~(5)~~ (4) Subject to ~~subsections (3) and (4)~~ subsection (3) and section
69 and amendments thereto:

(a) If a transfer is made which is made an event of default under a
lease agreement, the party to the lease contract not making the transfer,
unless that party waives the default or otherwise agrees, has the rights
and remedies described in K.S.A. 84-2a-501(2);

(b) if paragraph (a) is not applicable and if a transfer is made that (i)
is prohibited under a lease agreement or (ii) materially impairs the pros-
pect of obtaining return performance by, materially changes the duty of,
or materially increases the burden or risk imposed on, the other party to
the lease contract, unless the party not making the transfer agrees at any
time to the transfer in the lease contract or otherwise, then, except as
limited by contract, (A) the transferor is liable to the party not making
the transfer for damages caused by the transfer to the extent that the
damages could not reasonably be prevented by the party not making the
transfer and (B) a court having jurisdiction may grant other appropriate
relief, including cancellation of the lease contract or an injunction against
the transfer.

~~(6)~~ (5) A transfer of ``the lease'' or of ``all my rights under the lease,''
or a transfer in similar general terms, is a transfer of rights and, unless
the language or the circumstances, as in a transfer for security, indicate
the contrary, the transfer is a delegation of duties by the transferor to the
transferee. Acceptance by the transferee constitutes a promise by the
transferee to perform those duties. The promise is enforceable by either
the transferor or the other party to the lease contract.

~~(7)~~ (6) Unless otherwise agreed by the lessor and the lessee, a dele-
gation of performance does not relieve the transferor as against the other
party of any duty to perform or of any liability for default.

~~(8)~~ (7) In a consumer lease, to prohibit the transfer of an interest of
a party under the lease contract or to make a transfer an event of default,
the language must be specific, by a writing and conspicuous.

Sec. 144. K.S.A. 84-2a-307 is hereby amended to read as follows: 84-
2a-307. (1) Except as otherwise provided in K.S.A. 84-2a-306, a creditor
of a lessee takes subject to the lease contract.

(2) Except as otherwise provided in ~~subsections~~ subsection (3) ~~and~~
~~(4)~~ and in K.S.A. 84-2a-306 and 84-2a-308 and amendments thereto, a
creditor of a lessor takes subject to the lease contract unless:

~~(a) The~~ the creditor holds a lien that attached to the goods before
the lease contract became enforceable;.

~~(b) the creditor holds a security interest in the goods and the lessee~~
~~did not give value and receive delivery of the goods without knowledge~~
~~of the security interest; or~~

~~(c) the creditor holds a security interest in the goods which was per-~~
~~fected (K.S.A. 84-9-303) before the lease contract became enforceable.~~

~~(3) A lessee in the ordinary course of business takes the leasehold~~
~~interest free of a security interest in the goods created by the lessor even~~
~~though the security interest is perfected (K.S.A. 84-2a-303) and the lessee~~
~~knows of its existence.~~

~~(4) A lessee other than a lessee in the ordinary course of business~~
~~takes the leasehold interest free of a security interest to the extent that it~~
~~secures future advances made after the secured party acquires knowledge~~
~~of the lease or more than 45 days after the lease contract becomes en-~~
~~forceable, whichever first occurs, unless the future advances are made~~
~~pursuant to a commitment entered into without knowledge of the lease~~
~~and before the expiration of the 45-day period.~~

(3) Except as provided in sections 37, 41 and 43 and amendments
thereto, a lessee takes a leasehold interest subject to a security interest
held by a creditor of the lessor.

Sec. 145. K.S.A. 84-2a-309 is hereby amended to read as follows: 84-
2a-309. (1) In this section:

(a) Goods are ``fixtures'' when they become so related to particular
real estate that an interest in them arises under real estate law;

(b) a ``fixture filing'' is the filing, in the office where a record of a
mortgage on the real estate would be filed or recorded, of a financing
statement covering goods that are or are to become fixtures and conform-
ing to the requirements of ~~K.S.A. 84-9-402(5)~~ section 73(a) and (b), and
amendments thereto;

(c) a lease is a ``purchase money lease'' unless the lessee has posses-
sion or use of the goods or the right to possession or use of the goods
before the lease agreement is enforceable;

(d) a mortgage is a ``construction mortgage'' to the extent it secures
an obligation incurred for the construction of an improvement on land
including the acquisition cost of the land, if the recorded writing so in-
dicates; and

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

(2) Under this article a lease may be of goods that are fixtures or may
continue in goods that become fixtures, but no lease exists under this
article of ordinary building materials incorporated into an improvement
on land.

(3) This article does not prevent creation of a lease of fixtures pur-
suant to real estate law.

(4) The perfected interest of a lessor of fixtures has priority over a
conflicting interest of an encumbrancer or owner of the real estate if:

(a) The lease is a purchase money lease, the conflicting interest of
the encumbrancer or owner arises before the goods become fixtures, the
interest of the lessor is perfected by a fixture filing before the goods
become fixtures or within 10 days thereafter, and the lessee has an interest
of record in the real estate or is in possession of the real estate; or

(b) the interest of the lessor is perfected by a fixture filing before the
interest of the encumbrancer or owner is of record, the lessor's interest
has priority over any conflicting interest of a predecessor in title of the
encumbrancer or owner, and the lessee has an interest of record in the
real estate or is in possession of the real estate.

(5) The interest of a lessor of fixtures, whether or not perfected, has
priority over the conflicting interest of an encumbrancer or owner of the
real estate if:

(a) The fixtures are readily removable factory or office machines,
readily removable equipment that is not primarily used or leased for use
in the operation of the real estate, or readily removable replacements of
domestic appliances that are goods subject to a consumer lease, and be-
fore the goods become fixtures the lease contract is enforceable;

(b) the conflicting interest is a lien on the real estate obtained by legal
or equitable proceedings after the lease contract is enforceable;

(c) the encumbrancer or owner has consented in writing to the lease
or has disclaimed an interest in the goods as fixtures; or

(d) the lessee has a right to remove the goods as against the encum-
brancer or owner. If the lessee's right to remove terminates, the priority
of the interest of the lessor continues for a reasonable time.

(6) Notwithstanding subsection (4)(a) but otherwise subject to sub-
sections (4) and (5), the interest of a lessor of fixtures, including the
lessor's residual interest, is subordinate to the conflicting interest of an
encumbrancer of the real estate under a construction mortgage recorded
before the goods become fixtures if the goods become fixtures before the
completion of the construction. To the extent given to refinance a con-
struction mortgage, the conflicting interest of an encumbrancer of the
real estate under a mortgage has this priority to the same extent as the
encumbrancer of the real estate under the construction mortgage.

(7) In cases not within the preceding subsections, priority between
the interest of a lessor of fixtures, including the lessor's residual interest,
and the conflicting interest of an encumbrancer or owner of the real estate
who is not the lessee is determined by the priority rules governing con-
flicting interests in real estate.

(8) If the interest of a lessor of fixtures, including the lessor's residual
interest, has priority over all conflicting interests of all encumbrancers
and owners of the real estate, the lessor or the lessee may (i) on default,
expiration, termination or cancellation of the lease agreement but subject
to the lease agreement and this article, or (ii) if necessary to enforce other
rights and remedies of the lessor or lessee under this article, remove the
goods from the real estate, free and clear of all conflicting interests of all
encumbrancers and owners of the real estate, but the lessor or lessee
must reimburse any encumbrancer or owner of the real estate who is not
the lessee and who has not otherwise agreed for the cost of repair of any
physical injury, but not for any diminution in value of the real estate
caused by the absence of the goods removed or by any necessity of re-
placing them. A person entitled to reimbursement may refuse permission
to remove until the party seeking removal gives adequate security for the
performance of this obligation.

(9) Even though the lease agreement does not create a security in-
terest, the interest of a lessor of fixtures, including the lessor's residual
interest, is perfected by filing a financing statement as a fixture filing for
leased goods that are or are to become fixtures in accordance with the
relevant provisions of the article on secured transactions (article 9 of chap-
ter 84 of the Kansas Statutes Annotated, and amendments thereto).

Sec. 146. K.S.A. 84-4-210 is hereby amended to read as follows: 84-
4-210. (a) A collecting bank has a security interest in an item and any
accompanying documents or the proceeds of either:

(1) In case of an item deposited in an account, to the extent to which
credit given for the item has been withdrawn or applied;

(2) in case of an item for which it has given credit available for with-
drawal as of right, to the extent of the credit given, whether or not the
credit is drawn upon or there is a right of charge-back; or

(3) if it makes an advance on or against the item.

(b) If credit given for several items received at one time or pursuant
to a single agreement is withdrawn or applied in part the security interest
remains upon all the items, any accompanying documents or the proceeds
of either. For the purpose of this section, credits first given are first with-
drawn.

(c) Receipt by a collecting bank of a final settlement for an item is a
realization on its security interest in the item, accompanying documents
and proceeds. So long as the bank does not receive final settlement for
the item or give up possession of the item or accompanying documents
for purposes other than collection, the security interest continues to that
extent and is subject to article 9, but:

(1) No security agreement is necessary to make the security interest
enforceable (~~K.S.A. 84-9-203(1)(a)~~ section 13(b)(3)(A) and amendments
thereto);

(2) no filing is required to perfect the security interest; and

(3) the security interest has priority over conflicting perfected secu-
rity interests in the item, accompanying documents, or proceeds.

Sec. 147. K.S.A. 84-7-503 is hereby amended to read as follows: 84-
7-503. (1) A document of title confers no right in goods against a person
who before issuance of the document had a legal interest or a perfected
security interest in them and who neither

(a) delivered or entrusted them or any document of title covering
them to the bailor or his nominee with actual or apparent authority to
ship, store or sell or with power to obtain delivery under this article (~~sec-~~
~~tion~~ K.S.A. 84-7-403) or with power of disposition under this act (~~sections~~
K.S.A. 84-2-403 and ~~84-9-307~~ section 40 and amendments thereto) or
other statute or rule of law; nor

(b) acquiesced in the procurement by the bailor or his nominee of
any document of title.

(2) Title to goods based upon an unaccepted delivery order is subject
to the rights of anyone to whom a negotiable warehouse receipt or bill of
lading covering the goods has been duly negotiated. Such a title may be
defeated under the next section to the same extent as the rights of the
issuer or a transferee from the issuer.

(3) Title to goods based upon a bill of lading issued to a freight for-
warder is subject to the rights of anyone to whom a bill issued by the
freight forwarder is duly negotiated; but delivery by the carrier in ac-
cordance with part 4 of this article pursuant to its own bill of lading
discharges the carrier's obligation to deliver.

Sec. 148. K.S.A. 84-8-103 is hereby amended to read as follows: 84-
8-103. (a) A share or similar equity interest issued by a corporation, busi-
ness 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 2(a)(15) and
amendments thereto, is not a security or a financial asset.

Sec. 149. K.S.A. 84-8-106 is hereby amended to read as follows: 84-
8-106. (a) A purchaser has control of a certificated 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.; or

(3) another person has control of the security entitlement on behalf
of the purchaser or, having previously acquired control of the security
entitlement, acknowledges that it has control on behalf of the purchaser.

(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.

Sec. 150. K.S.A. 84-8-110 is hereby amended to read as follows: 84-
8-110. (a) The local law of the issuer's jurisdiction, as specified in sub-
section (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~~ governing the securities account expressly provides that a par-
ticular jurisdiction is the securities intermediary's jurisdiction for pur-
poses of this part, this article, or this act, that jurisdiction is the securities
intermediary's jurisdiction.

(2) If paragraph (e)(1) does not apply and an agreement between the
securities intermediary and its entitlement holder governing the securities
account expressly provides that the agreement is governed by the law of
a particular jurisdiction, that jurisdiction is the securities intermediary's
jurisdiction.

~~(2)~~ (3) If neither paragraph (e)(1) nor paragraph (e)(2) applies and
an agreement between the securities intermediary and its entitlement
holder ~~does not specify the governing law as provided in paragraph (1),~~
~~but~~ governing the securities account expressly ~~specifies~~ provides that the
securities account is maintained at an office in a particular jurisdiction,
that jurisdiction is the securities intermediary's jurisdiction.

~~(3)~~ (4) If ~~an agreement between the securities intermediary ad its~~
~~entitlement holder does not specify a jurisdiction as provided in paragraph~~
~~(1) or (2)~~ none of the preceding paragraphs apply, the securities inter-
mediary'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 is located.

~~(4)~~ (5) If ~~an agreement between the securities intermediary and its~~
~~entitlement 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)~~ none of the
preceding paragraphs apply, the securities intermediary's jurisdiction is
the jurisdiction in which ~~is located~~ the chief executive office of the se-
curities intermediary is located.

(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.

Sec. 151. K.S.A. 84-8-301 is hereby amended to read as follows: 84-
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~~ is (A) registered in the name of the pur-
chaser, (B) payable to the order of the purchaser, or (C) specially ~~indorsed~~
endorsed to the purchaser by an effective ~~indorsement~~ endorsement and
has not been endorsed to the securities intermediary or bank.

(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.

Sec. 152. K.S.A. 84-8-302 is hereby amended to read as follows: 84-
8-302. (a) Except as otherwise provided in subsections (b) and (c), ~~upon~~
~~delivery~~ a purchaser of a certificated or uncertificated security ~~to a pur-~~
~~chaser, 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.

Sec. 153. K.S.A. 84-8-510 is hereby amended to read as follows: 84-
8-510. (a) In a case not covered by the priority rules in article 9 or the
rules stated in subsection (c), an action based on an adverse claim to a
financial asset or security entitlement, whether framed in conversion, re-
plevin, constructive trust, equitable lien or other theory, may not be as-
serted against a person who purchases a security entitlement, or an in-
terest 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 K.S.A. 84-8-502, and amendments thereto, the
adverse claim cannot be asserted against a person who purchases a se-
curity 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. Except as otherwise provided
in subsection (d), purchasers who have control rank ~~equally, except that~~
a according to priority in time of:

(1) The purchaser's becoming the person for whom the securities ac-
count, in which the security entitlement is carried, is maintained, if the
purchaser obtained control under K.S.A. 84-8-106(d)(1) and amendments
thereto;

(2) the securities intermediary's agreement to comply with the pur-
chaser's entitlement orders with respect to security entitlements carried
or to be carried in the securities account in which the security entitlement
is carried, if the purchaser obtained control under K.S.A. 84-8-106(d)(2)
and amendments thereto; (3) if the purchaser obtained control through
another person under K.S.A. 84-8-106(d)(3) and amendments thereto, the
time on which priority would be based under this subsection if the other
person were the secured party.

(d) A securities intermediary as purchaser has priority over a conflict-
ing purchaser who has control unless otherwise agreed by the securities
intermediary.

Sec. 154. K.S.A. 1999 Supp. 58-4301 is hereby amended to read as
follows: 58-4301. (a) (1) Any person who owns real or personal property
or an interest in real or personal property or who is the purported debtor
or obligor and who has reason to believe that any document or instrument
purporting to create a lien or claim against the real or personal property
or an interest in real or personal property previously filed or submitted
for filing and recording is fraudulent as defined in subsection (e) may
complete and file, at any time without any time limitation, with the district
court of the county in which such lien or claim has been filed or submitted
for filing, or with the district court of the county in which the property
or the rights appertaining thereto is situated, a motion for judicial review
of the status of documentation or instrument purporting to create a lien
or claim as provided in this section. Such motion shall be supported by
the affidavit of the movant or the movant's attorney setting forth a concise
statement of the facts upon which the claim for relief is based. Such
motion shall be in substantially the following form:

MISC. DOCKET No. ____________

In Re: A Purported Lien	In the Judicial District
or Claim Against	In and For
(Name of Purported	County, Kansas

Debtor)

Motion for Judicial Review of Documentation or Instrument Purporting to Create a Lien or Claim Now Comes

(name)
and files this motion requesting a judicial determination of the status of documentation or
an instrument purporting to create an interest in real or personal property or a lien or claim
on real or personal property or an interest in real or personal property filed in the office of
the

(filing office and location thereof)
and in support of the motion would show the court as follows:

I.

(Name), movant herein, is

the purported obligor or debtor or person who owns the real or personal property or the
interest in real or personal property described in the documentation or instrument.

II. On ________ (date), in the exercise of the filing

officer's official duties as

(filing officer's position)
the filing officer received and filed and recorded the documentation or instrument attached
hereto and containing ______ pages. Such documentation or instrument purports to
have created a lien on real or personal property or an interest in real or personal property
against ________, the purported debtor.

III. Movant alleges that the documentation or instrument attached hereto is fraudulent, as
defined by subsection (e) of K.S.A. 1999 Supp. 58-4301 and amendments thereto, and that
the documentation or instrument should therefore not be accorded lien status.

IV. Movant attests that assertions herein are true and correct.

V. Movant does not request the court to make ~~a finding~~ findings as to any underlying claim
of the parties involved and acknowledges that this motion does not seek to invalidate a
legitimate lien. Movant further acknowledges that movant may be subject to sanctions if
this motion is determined to be frivolous.

PRAYER Movant requests the court to review the attached documentation or instrument and enter
an order determining whether it should be accorded lien status, together with such other
orders as the court deems appropriate, including an order setting aside the lien and directing
the filing officer to nullify the lien instrument or, if the lien or claim was filed pursuant to
the uniform commercial code, an order acting as a termination statement filed pursuant to
such code.

Respectfully submitted,

(Signature and typed name and address)
~~(b)~~ (2) The completed form for ordinary certificate of acknowledg-
ment must be as follows:

AFFIDAVIT THE STATE OF KANSAS )

)

COUNTY OF )

BEFORE ME, the undersigned authority, personally appeared ________, who, be-
ing by me duly sworn, deposed as follows:

``My name is________. I am over 18 years of age, of sound mind, with personal
knowledge of the following facts, and fully competent to testify.

I further attest that the assertions contained in the accompanying motion are true and
correct.''

Further affiant sayeth not.

SUBSCRIBED and SWORN TO before me, this ______ day of

____________________.

NOTARY PUBLIC, State of Kansas

Notary's printed name:

My commission expires:

~~(2)~~ (3) The clerk of the district court shall not collect a filing fee for
filing a motion as provided in this section.

(b) The court's ~~finding~~ findings may be made solely on a review of
the documentation or instrument attached to the motion and without
hearing any testimonial evidence. The district court's review may be made
ex parte without delay or notice of any kind. An appellate court shall
expedite review of a district court's ~~finding~~ findings as provided in this
section.

(c) After review, the district court shall enter an appropriate ~~finding~~
findings of fact and ~~conclusion~~ conclusions of law in a form as provided
in subsection (d) regarding the documentation or instrument purporting
to create a lien or claim, which shall be filed and indexed in the same
filing office in the appropriate class of records in which the original doc-
umentation or instrument in question was filed. The court's findings of
fact and conclusions of law may include an order setting aside the lien
and directing the filing officer to nullify the lien instrument purporting
to create the lien or claim. If the lien or claim was filed pursuant to the
uniform commercial code, such order shall act as a termination statement
filed pursuant to such code. The filing officer shall not collect a filing fee
for filing a district court's ~~finding~~ findings of fact and ~~conclusion~~ conclu-
sions of law as provided in this section. A copy of the ~~finding~~ findings of
fact and ~~conclusion~~ conclusions of law shall be mailed to the movant and
the person who filed the lien or claim at the last known address of each
person within seven days of the date that the ~~finding~~ findings of fact and
~~conclusion~~ conclusions of law is issued by the district court.

(d) The findings of fact and ~~conclusion~~ conclusions of law shall be in
substantially the following form:

MISC. DOCKET No.

In Re: A Purported Lien	In the Judicial District
or Claim Against	In and For

(Name of Purported County, Kansas

Debtor)

Judicial ~~Finding~~ Findings of Fact and ~~Conclusion~~ Conclusions of Law Regarding a Documentation or Instrument purporting to Create a Lien or Claim. On the (number) day of (month), (year), in the above entitled and numbered cause, this
court reviewed a motion, verified by affidavit, of (name) and the documentation or instru-
ment attached thereto. No testimony was taken from any party, nor was there any notice of
the court's review, the court having made the determination that a decision could be made
solely on review of the documentation or instrument as provided in K.S.A. 1999 Supp. 58-
4301 and amendments thereto.

The court finds as follows (only an item checked and initialed is a valid court ruling):

The documentation or instrument attached to the motion IS asserted against real or
personal property or an interest in real or personal property and:

(1) IS provided for by specific state or federal statutes or constitutional provisions;

(2) IS created by implied or express consent or agreement of the obligor, debtor or the
owner of the real or personal property or an interest in the real or personal property, if
required under the laws of this state, or by consent of an agent, fiduciary or other repre-
sentative of that person; or

(3) IS an equitable, constructive or other lien imposed by a court of competent juris-
diction created or established under the constitution or laws of this state or of the United
States.

The documentation or instrument attached to the motion herein:

(1) IS NOT provided for by specific state or federal statutes or constitutional provisions;

(2) IS NOT created by implied or express consent or agreement of the obligor, debtor
or the owner of the real or personal property or an interest in the real or personal property,
if required under the law of this state or by implied or express consent or agreement of an
agent, fiduciary or other representative of that person;

(3) IS NOT an equitable, constructive or other lien imposed by a court of competent
jurisdiction created by or established under the constitution or laws of this state or of the
United States; or

(4) IS NOT asserted against real or personal property or an interest in real or personal
property. There is no valid lien or claim created by this documentation or instrument.; or

(5) SHALL BE set aside and the filing officer shall nullify the lien instrument and in
the case of a lien or claim filed pursuant to the uniform commercial code, the court order
shall act as a termination statement pursuant to such code.

Except as otherwise provided, this court makes no ~~finding~~ findings as to any underlying
claims of the parties involved and expressly limits its ~~finding~~ findings of fact and ~~conclusion~~
conclusions of law to the review of a ministerial act. The filing officer shall ~~file this finding~~
~~of fact and conclusion of law in the same class of records as the subject documentation or~~
~~instrument was originally filed, and the court directs the filing officer to index it using the~~
~~same names that were used in indexing the subject documentation or instrument~~ file the
findings of fact and conclusions of law in the same class of records as the subject documen-
tation or instrumentation originally filed, and the court directs the filing officer to index the
findings and conclusions using the same names that were used in indexing the subject doc-
umentation or instrument.

SIGNED ON THIS THE

DAY OF

____________ District Judge

____________ Judicial District

____________ County, Kansas

(e) As used in this section, a document or instrument is presumed to
be fraudulent if the document or instrument purports to create a lien or
assert a claim against real or personal property or an interest in real or
personal property and:

(1) Is not a document or instrument provided for by the constitution
or laws of this state or of the United States;

(2) is not created by implied or express consent or agreement of the
obligor, debtor or the owner of the real or personal property or an interest
in the real or personal property, if required under the laws of this state,
or by implied or express consent or agreement of an agent, fiduciary or
other representative of that person; or

(3) is not an equitable, constructive or other lien imposed by a court
with jurisdiction created or established under the constitution or laws of
this state or of the United States.

(f) As used in this subsection, filing office or filing officer refers to
the officer and office where a document or instrument as described in
this section is appropriately filed as provided by law, including, but not
limited to the register of deeds, the secretary of state and the district
court and filing officers related thereto.

Sec. 155. K.S.A. 84-1-105, 84-2-103, 84-2-210, 84-2-326, 84-2-502,
84-2-716, 84-2a-103, 84-2a-303, 84-2a-307, 84-2a-309, 84-4-210, 84-7-
503, 84-8-103, 84-8-106, 84-8-110, 84-8-301, 84-8-302, 84-8-510, 84-9-
101, 84-9-103, 84-9-104, 84-9-105, 84-9-106, 84-9-107, 84-9-108, 84-9-
109, 84-9-110, 84-9-112, 84-9-113, 84-9-114, 84-9-115, 84-9-116,
84-9-201, 84-9-202, 84-9-203, 84-9-204, 84-9-205, 84-9-206, 84-9-207,
84-9-208, 84-9-301, 84-9-303, 84-9-304, 84-9-305, 8 4-9-306, 84-9-307,
84-9-308, 84-9-309, 84-9-310, 84-9-311, 84-9-312, 84-9-313, 84-9-314,
84-9-315, 84-9-316, 84-9-317, 84-9-318, 84-9-319, 84-9-401, 84-9-402,
84-9-402a, 84-9-403, 84-9-404, 84-9-405, 84-9-406, 84-9-407, 84-9-408,
84-9-410, 84-9-411, 84-9-412, 84-9-413, 84-9-501, 84-9-502, 84-9-503,
84-9-504, 84-9-505 and 84-9-506, 84-9-507 and 84-9-508 and K.S.A. 1999
Supp. 58-4301, 84-1-201, 84-9-102, 84-9-302 and 84-9-414 are hereby
repealed.
Sec. 156. This act shall take effect and be in force from and after
July 1, 2001, and its publication in the statute book.

Approved May 15, 2000.
__________