SF 732

2nd Engrossment - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to commerce; enacting the revised article 8 
  1.3             of the uniform commercial code proposed by the 
  1.4             national conference of commissioners on uniform state 
  1.5             laws; regulating investment securities; amending 
  1.6             Minnesota Statutes 1994, sections 336.1-105; 
  1.7             336.1-206; 336.4-104; 336.5-114; 336.9-103; 336.9-105; 
  1.8             336.9-106; 336.9-203; 336.9-301; 336.9-302; 336.9-304; 
  1.9             336.9-305; 336.9-306; 336.9-309; 336.9-312; and 
  1.10            336.10-104; proposing coding for new law in Minnesota 
  1.11            Statutes, chapter 336; repealing Minnesota Statutes 
  1.12            1994, sections 336.8-101; 336.8-102; 336.8-103; 
  1.13            336.8-104; 336.8-105; 336.8-106; 336.8-107; 336.8-108; 
  1.14            336.8-201; 336.8-202; 336.8-203; 336.8-204; 336.8-205; 
  1.15            336.8-206; 336.8-207; 336.8-208; 336.8-301; 336.8-302; 
  1.16            336.8-303; 336.8-304; 336.8-305; 336.8-306; 336.8-307; 
  1.17            336.8-308; 336.8-309; 336.8-310; 336.8-311; 336.8-312; 
  1.18            336.8-313; 336.8-314; 336.8-315; 336.8-316; 336.8-317; 
  1.19            336.8-318; 336.8-319; 336.8-320; 336.8-321; 336.8-401; 
  1.20            336.8-402; 336.8-403; 336.8-404; 336.8-405; 336.8-406; 
  1.21            336.8-407; and 336.8-408.  
  1.22  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.23                             ARTICLE 1 
  1.24                      UNIFORM COMMERCIAL CODE 
  1.25                         Revised Article 8 
  1.26                       INVESTMENT SECURITIES 
  1.27                               Part 1 
  1.28                  SHORT TITLE AND GENERAL MATTERS
  1.29     Section 1.  [336.8-101] [SHORT TITLE.] This article may be 
  1.30  cited as Uniform Commercial Code - Investment Securities. 
  1.31     Sec. 2.  [336.8-102] [DEFINITIONS.] 
  1.32     (a) In this article: 
  1.33     (1) "Adverse claim" means a claim that a claimant has a 
  2.1   property interest in a financial asset and that it is a 
  2.2   violation of the rights of the claimant for another person to 
  2.3   hold, transfer, or deal with the financial asset. 
  2.4      (2) "Bearer form," as applied to a certificated security, 
  2.5   means a form in which the security is payable to the bearer of 
  2.6   the security certificate according to its terms but not by 
  2.7   reason of an endorsement. 
  2.8      (3) "Broker" means a person defined as a broker or dealer 
  2.9   under the federal securities laws, but without excluding a bank 
  2.10  acting in that capacity. 
  2.11     (4) "Certificated security" means a security that is 
  2.12  represented by a certificate. 
  2.13     (5) "Clearing corporation" means: 
  2.14     (i) a person that is registered as a "clearing agency" 
  2.15  under the federal securities laws; 
  2.16     (ii) a federal reserve bank; or 
  2.17     (iii) any other person that provides clearance or 
  2.18  settlement services with respect to financial assets that would 
  2.19  require it to register as a clearing agency under the federal 
  2.20  securities laws but for an exclusion or exemption from the 
  2.21  registration requirement, if its activities as a clearing 
  2.22  corporation, including promulgation of rules, are subject to 
  2.23  regulation by a federal or state governmental authority. 
  2.24     (6) "Communicate" means to: 
  2.25     (i) send a signed writing; or 
  2.26     (ii) transmit information by any mechanism agreed upon by 
  2.27  the persons transmitting and receiving the information. 
  2.28     (7) "Entitlement holder" means a person identified in the 
  2.29  records of a securities intermediary as the person having a 
  2.30  security entitlement against the securities intermediary.  If a 
  2.31  person acquires a security entitlement by virtue of section 
  2.32  336.8-501(b)(2) or (3), that person is the entitlement holder. 
  2.33     (8) "Entitlement order" means a notification communicated 
  2.34  to a securities intermediary directing transfer or redemption of 
  2.35  a financial asset to which the entitlement holder has a security 
  2.36  entitlement. 
  3.1      (9) "Financial asset," except as otherwise provided in 
  3.2   section 336.8-103, means: 
  3.3      (i) a security; 
  3.4      (ii) an obligation of a person or a share, participation, 
  3.5   or other interest in a person or in property or an enterprise of 
  3.6   a person, which is, or is of a type, dealt in or traded on 
  3.7   financial markets, or which is recognized in any area in which 
  3.8   it is issued or dealt in as a medium for investment; or 
  3.9      (iii) any property that is held by a securities 
  3.10  intermediary for another person in a securities account if the 
  3.11  securities intermediary has expressly agreed with the other 
  3.12  person that the property is to be treated as a financial asset 
  3.13  under this article.  
  3.14  As context requires, the term means either the interest itself 
  3.15  or the means by which a person's claim to it is evidenced, 
  3.16  including a certificated or uncertificated security, a security 
  3.17  certificate, or a security entitlement. 
  3.18     (10) "Good faith," for purposes of the obligation of good 
  3.19  faith in the performance or enforcement of contracts or duties 
  3.20  within this article, means honesty in fact and the observance of 
  3.21  reasonable commercial standards of fair dealing. 
  3.22     (11) "Endorsement" means a signature that alone or 
  3.23  accompanied by other words is made on a security certificate in 
  3.24  registered form or on a separate document for the purpose of 
  3.25  assigning, transferring, or redeeming the security or granting a 
  3.26  power to assign, transfer, or redeem it. 
  3.27     (12) "Instruction" means a notification communicated to the 
  3.28  issuer of an uncertificated security which directs that the 
  3.29  transfer of the security be registered or that the security be 
  3.30  redeemed. 
  3.31     (13) "Registered form," as applied to a certificated 
  3.32  security, means a form in which: 
  3.33     (i) the security certificate specifies a person entitled to 
  3.34  the security; and 
  3.35     (ii) a transfer of the security may be registered upon 
  3.36  books maintained for that purpose by or on behalf of the issuer, 
  4.1   or the security certificate so states. 
  4.2      (14) "Securities intermediary" means: 
  4.3      (i) a clearing corporation; or 
  4.4      (ii) a person, including a bank or broker, that in the 
  4.5   ordinary course of its business maintains securities accounts 
  4.6   for others and is acting in that capacity. 
  4.7      (15) "Security," except as otherwise provided in section 
  4.8   336.8-103, means an obligation of an issuer or a share, 
  4.9   participation, or other interest in an issuer or in property or 
  4.10  an enterprise of an issuer: 
  4.11     (i) which is represented by a security certificate in 
  4.12  bearer or registered form, or the transfer of which may be 
  4.13  registered upon books maintained for that purpose by or on 
  4.14  behalf of the issuer; 
  4.15     (ii) which is one of a class or series or by its terms is 
  4.16  divisible into a class or series of shares, participations, 
  4.17  interests, or obligations; and 
  4.18     (iii) which: 
  4.19     (A) is, or is of a type, dealt in or traded on securities 
  4.20  exchanges or securities markets; or 
  4.21     (B) is a medium for investment and by its terms expressly 
  4.22  provides that it is a security governed by this article. 
  4.23     (16) "Security certificate" means a certificate 
  4.24  representing a security. 
  4.25     (17) "Security entitlement" means the rights and property 
  4.26  interest of an entitlement holder with respect to a financial 
  4.27  asset specified in part 5. 
  4.28     (18) "Uncertificated security" means a security that is not 
  4.29  represented by a certificate. 
  4.30     (b) Other definitions applying to this article and the 
  4.31  sections in which they appear are: 
  4.32     "Appropriate person," section 336.8-107 
  4.33     "Control," section 336.8-106 
  4.34     "Delivery," section 336.8-301 
  4.35     "Investment company security," section 336.8-103 
  4.36     "Issuer," section 336.8-201 
  5.1      "Overissue," section 336.8-210 
  5.2      "Protected purchaser," section 336.8-303 
  5.3      "Securities account," section 336.8-501 
  5.4      (c) In addition, article 1 contains general definitions and 
  5.5   principles of construction and interpretation applicable 
  5.6   throughout this article. 
  5.7      (d) The characterization of a person, business, or 
  5.8   transaction for purposes of this article does not determine the 
  5.9   characterization of the person, business, or transaction for 
  5.10  purposes of any other law, regulation, or rule. 
  5.11     Sec. 3.  [336.8-103] [RULES FOR DETERMINING WHETHER CERTAIN 
  5.12  OBLIGATIONS AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS.] 
  5.13     (a) A share or similar equity interest issued by a 
  5.14  corporation, business trust, joint stock company, or similar 
  5.15  entity is a security. 
  5.16     (b) An "investment company security" is a security.  
  5.17  "Investment company security" means a share or similar equity 
  5.18  interest issued by an entity that is registered as an investment 
  5.19  company under the federal investment company laws, an interest 
  5.20  in a unit investment trust that is so registered, or a 
  5.21  face-amount certificate issued by a face-amount certificate 
  5.22  company that is so registered.  Investment company security does 
  5.23  not include an insurance policy or endowment policy or annuity 
  5.24  contract issued by an insurance company. 
  5.25     (c) An interest in a partnership or limited liability 
  5.26  company is not a security unless it is dealt in or traded on 
  5.27  securities exchanges or in securities markets, its terms 
  5.28  expressly provide that it is a security governed by this 
  5.29  article, or it is an investment company security.  However, an 
  5.30  interest in a partnership or limited liability company is a 
  5.31  financial asset if it is held in a securities account. 
  5.32     (d) A writing that is a security certificate is governed by 
  5.33  this article and not by article 3, even though it also meets the 
  5.34  requirements of that article.  However, a negotiable instrument 
  5.35  governed by article 3 is a financial asset if it is held in a 
  5.36  securities account. 
  6.1      (e) An option or similar obligation issued by a clearing 
  6.2   corporation to its participants is not a security, but is a 
  6.3   financial asset. 
  6.4      (f) A commodity contract, as defined in section 336.9-115, 
  6.5   is not a security or a financial asset. 
  6.6      Sec. 4.  [336.8-104] [ACQUISITION OF SECURITY OR FINANCIAL 
  6.7   ASSET OR INTEREST THEREIN.] 
  6.8      (a) A person acquires a security or an interest therein, 
  6.9   under this article, if: 
  6.10     (1) the person is a purchaser to whom a security is 
  6.11  delivered pursuant to section 336.8-301; or 
  6.12     (2) the person acquires a security entitlement to the 
  6.13  security pursuant to section 336.8-501. 
  6.14     (b) A person acquires a financial asset, other than a 
  6.15  security, or an interest therein, under this article, if the 
  6.16  person acquires a security entitlement to the financial asset. 
  6.17     (c) A person who acquires a security entitlement to a 
  6.18  security or other financial asset has the rights specified in 
  6.19  part 5, but is a purchaser of any security, security 
  6.20  entitlement, or other financial asset held by the securities 
  6.21  intermediary only to the extent provided in section 336.8-503. 
  6.22     (d) Unless the context shows that a different meaning is 
  6.23  intended, a person who is required by other law, regulation, 
  6.24  rule, or agreement to transfer, deliver, present, surrender, 
  6.25  exchange, or otherwise put in the possession of another person a 
  6.26  security or financial asset satisfies that requirement by 
  6.27  causing the other person to acquire an interest in the security 
  6.28  or financial asset pursuant to subsection (a) or (b). 
  6.29     Sec. 5.  [336.8-105] [NOTICE OF ADVERSE CLAIM.] 
  6.30     (a) A person has notice of an adverse claim if: 
  6.31     (1) the person knows of the adverse claim; 
  6.32     (2) the person is aware of facts sufficient to indicate 
  6.33  that there is a significant probability that the adverse claim 
  6.34  exists and deliberately avoids information that would establish 
  6.35  the existence of the adverse claim; or 
  6.36     (3) the person has a duty, imposed by statute or 
  7.1   regulation, to investigate whether an adverse claim exists, and 
  7.2   the investigation so required would establish the existence of 
  7.3   the adverse claim. 
  7.4      (b) Having knowledge that a financial asset or interest 
  7.5   therein is or has been transferred by a representative imposes 
  7.6   no duty of inquiry into the rightfulness of a transaction and is 
  7.7   not notice of an adverse claim.  However, a person who knows 
  7.8   that a representative has transferred a financial asset or 
  7.9   interest therein in a transaction that is, or whose proceeds are 
  7.10  being used, for the individual benefit of the representative or 
  7.11  otherwise in breach of duty has notice of an adverse claim. 
  7.12     (c) An act or event that creates a right to immediate 
  7.13  performance of the principle obligation represented by a 
  7.14  security certificate or sets a date on or after which the 
  7.15  certificate is to be presented or surrendered for redemption or 
  7.16  exchange does not itself constitute notice of an adverse claim 
  7.17  except in the case of a transfer more than: 
  7.18     (1) one year after a date set for presentment or surrender 
  7.19  for redemption or exchange; or 
  7.20     (2) six months after a date set for payment of money 
  7.21  against presentation or surrender of the certificate, if money 
  7.22  was available for payment on that date. 
  7.23     (d) A purchaser of a certificated security has notice of an 
  7.24  adverse claim if the security certificate: 
  7.25     (1) whether in bearer or registered form, has been endorsed 
  7.26  "for collection" or "for surrender" or for some other purpose 
  7.27  not involving transfer; or 
  7.28     (2) is in bearer form and has on it an unambiguous 
  7.29  statement that it is the property of a person other than the 
  7.30  transferor, but the mere writing of a name on the certificate is 
  7.31  not such a statement. 
  7.32     (e) Filing of a financing statement under article 9 is not 
  7.33  notice of an adverse claim to a financial asset. 
  7.34     Sec. 6.  [336.8-106] [CONTROL.] 
  7.35     (a) A purchaser has "control" of a certificated security in 
  7.36  bearer form if the certificated security is delivered to the 
  8.1   purchaser. 
  8.2      (b) A purchaser has "control" of a certificated security in 
  8.3   registered form if the certificated security is delivered to the 
  8.4   purchaser, and: 
  8.5      (1) the certificate is endorsed to the purchaser or in 
  8.6   blank by an effective endorsement; or 
  8.7      (2) the certificate is registered in the name of the 
  8.8   purchaser, upon original issue or registration of transfer by 
  8.9   the issuer. 
  8.10     (c) A purchaser has "control" of an uncertificated security 
  8.11  if: 
  8.12     (1) the uncertificated security is delivered to the 
  8.13  purchaser; or 
  8.14     (2) the issuer has agreed that it will comply with 
  8.15  instructions originated by the purchaser without further consent 
  8.16  by the registered owner. 
  8.17     (d) A purchaser has "control" of a security entitlement if: 
  8.18     (1) the purchaser becomes the entitlement holder; or 
  8.19     (2) the securities intermediary has agreed that it will 
  8.20  comply with entitlement orders originated by the purchaser 
  8.21  without further consent by the entitlement holder. 
  8.22     (e) If an interest in a security entitlement is granted by 
  8.23  the entitlement holder to the entitlement holder's own 
  8.24  securities intermediary, the securities intermediary has control.
  8.25     (f) A purchaser who has satisfied the requirements of 
  8.26  subsection (c)(2) or (d)(2) has control even if the registered 
  8.27  owner in the case of subsection (c)(2) or the entitlement holder 
  8.28  in the case of subsection (d)(2) retains the right to make 
  8.29  substitutions for the uncertificated security or security 
  8.30  entitlement, to originate instructions or entitlement orders to 
  8.31  the issuer or securities intermediary, or otherwise to deal with 
  8.32  the uncertificated security or security entitlement. 
  8.33     (g) An issuer or a securities intermediary may not enter 
  8.34  into an agreement of the kind described in subsection (c)(2) or 
  8.35  (d)(2) without the consent of the registered owner or 
  8.36  entitlement holder, but an issuer or a securities intermediary 
  9.1   is not required to enter into such an agreement even though the 
  9.2   registered owner or entitlement holder so directs.  An issuer or 
  9.3   securities intermediary that has entered into such an agreement 
  9.4   is not required to confirm the existence of the agreement to 
  9.5   another party unless requested to do so by the registered owner 
  9.6   or entitlement holder. 
  9.7      Sec. 7.  [336.8-107] [WHETHER ENDORSEMENT, INSTRUCTION, OR 
  9.8   ENTITLEMENT ORDER IS EFFECTIVE.] 
  9.9      (a) "Appropriate person" means: 
  9.10     (1) with respect to an endorsement, the person specified by 
  9.11  a security certificate or by an effective special endorsement to 
  9.12  be entitled to the security; 
  9.13     (2) with respect to an instruction, the registered owner of 
  9.14  an uncertificated security; 
  9.15     (3) with respect to an entitlement order, the entitlement 
  9.16  holder; 
  9.17     (4) if the person designated in paragraph (1), (2), or (3) 
  9.18  is deceased, the designated person's successor taking under 
  9.19  other law or the designated person's personal representative 
  9.20  acting for the estate of the decedent; or 
  9.21     (5) if the person designated in paragraph (1), (2), or (3) 
  9.22  lacks capacity, the designated person's guardian, conservator, 
  9.23  or other similar representative who has power under other law to 
  9.24  transfer the security or financial asset. 
  9.25     (b) An endorsement, instruction, or entitlement order is 
  9.26  effective if: 
  9.27     (1) it is made by the appropriate person; 
  9.28     (2) it is made by a person who has power under the law of 
  9.29  agency to transfer the security or financial asset on behalf of 
  9.30  the appropriate person, including, in the case of an instruction 
  9.31  or entitlement order, a person who has control under section 
  9.32  336.8-106(c)(2) or (d)(2); or 
  9.33     (3) the appropriate person has ratified it or is otherwise 
  9.34  precluded from asserting its ineffectiveness. 
  9.35     (c) An endorsement, instruction, or entitlement order made 
  9.36  by a representative is effective even if: 
 10.1      (1) the representative has failed to comply with a 
 10.2   controlling instrument or with the law of the state having 
 10.3   jurisdiction of the representative relationship, including any 
 10.4   law requiring the representative to obtain court approval of the 
 10.5   transaction; or 
 10.6      (2) the representative's action in making the endorsement, 
 10.7   instruction, or entitlement order or using the proceeds of the 
 10.8   transaction is otherwise a breach of duty. 
 10.9      (d) If a security is registered in the name of or specially 
 10.10  endorsed to a person described as a representative, or if a 
 10.11  securities account is maintained in the name of a person 
 10.12  described as a representative, an endorsement, instruction, or 
 10.13  entitlement order made by the person is effective even though 
 10.14  the person is no longer serving in the described capacity. 
 10.15     (e) Effectiveness of an endorsement, instruction, or 
 10.16  entitlement order is determined as of the date the endorsement, 
 10.17  instruction, or entitlement order is made, and an endorsement, 
 10.18  instruction, or entitlement order does not become ineffective by 
 10.19  reason of any later change of circumstances. 
 10.20     Sec. 8.  [336.8-108] [WARRANTIES IN DIRECT HOLDING.] 
 10.21     (a) A person who transfers a certificated security to a 
 10.22  purchaser for value warrants to the purchaser, and an endorser, 
 10.23  if the transfer is by endorsement, warrants to any subsequent 
 10.24  purchaser, that: 
 10.25     (1) the certificate is genuine and has not been materially 
 10.26  altered; 
 10.27     (2) the transferor or endorser does not know of any fact 
 10.28  that might impair the validity of the security; 
 10.29     (3) there is no adverse claim to the security; 
 10.30     (4) the transfer does not violate any restriction on 
 10.31  transfer; 
 10.32     (5) if the transfer is by endorsement, the endorsement is 
 10.33  made by an appropriate person, or if the endorsement is by an 
 10.34  agent, the agent has actual authority to act on behalf of the 
 10.35  appropriate person; and 
 10.36     (6) the transfer is otherwise effective and rightful. 
 11.1      (b) A person who originates an instruction for registration 
 11.2   of transfer of an uncertificated security to a purchaser for 
 11.3   value warrants to the purchaser that: 
 11.4      (1) the instruction is made by an appropriate person, or if 
 11.5   the instruction is by an agent, the agent has actual authority 
 11.6   to act on behalf of the appropriate person; 
 11.7      (2) the security is valid; 
 11.8      (3) there is no adverse claim to the security; and 
 11.9      (4) at the time the instruction is presented to the issuer: 
 11.10     (i) the purchaser will be entitled to the registration of 
 11.11  transfer; 
 11.12     (ii) the transfer will be registered by the issuer free 
 11.13  from all liens, security interests, restrictions, and claims 
 11.14  other than those specified in the instruction; 
 11.15     (iii) the transfer will not violate any restriction on 
 11.16  transfer; and 
 11.17     (iv) the requested transfer will otherwise be effective and 
 11.18  rightful. 
 11.19     (c) A person who transfers an uncertificated security to a 
 11.20  purchaser for value and does not originate an instruction in 
 11.21  connection with the transfer warrants that: 
 11.22     (1) the uncertificated security is valid; 
 11.23     (2) there is no adverse claim to the security; 
 11.24     (3) the transfer does not violate any restriction on 
 11.25  transfer; and 
 11.26     (4) the transfer is otherwise effective and rightful. 
 11.27     (d) A person who endorses a security certificate warrants 
 11.28  to the issuer that: 
 11.29     (1) there is no adverse claim to the security; and 
 11.30     (2) the endorsement is effective. 
 11.31     (e) A person who originates an instruction for registration 
 11.32  of transfer of an uncertificated security warrants to the issuer 
 11.33  that: 
 11.34     (1) the instruction is effective; and 
 11.35     (2) at the time the instruction is presented to the issuer 
 11.36  the purchaser will be entitled to the registration of transfer. 
 12.1      (f) A person who presents a certificated security for 
 12.2   registration of transfer or for payment or exchange warrants to 
 12.3   the issuer that the person is entitled to the registration, 
 12.4   payment, or exchange, but a purchaser for value and without 
 12.5   notice of adverse claims to whom transfer is registered warrants 
 12.6   only that the person has no knowledge of any unauthorized 
 12.7   signature in a necessary endorsement. 
 12.8      (g) If a person acts as agent of another in delivering a 
 12.9   certificated security to a purchaser, the identity of the 
 12.10  principal was known to the person to whom the certificate was 
 12.11  delivered, and the certificate delivered by the agent was 
 12.12  received by the agent from the principal or received by the 
 12.13  agent from another person at the direction of the principal, the 
 12.14  person delivering the security certificate warrants only that 
 12.15  the delivering person has authority to act for the principal and 
 12.16  does not know of any adverse claim to the certificated security. 
 12.17     (h) A secured party who redelivers a security certificate 
 12.18  received, or after payment and on order of the debtor delivers 
 12.19  the security certificate to another person, makes only the 
 12.20  warranties of an agent under subsection (g). 
 12.21     (i) Except as otherwise provided in subsection (g), a 
 12.22  broker acting for a customer makes to the issuer and a purchaser 
 12.23  the warranties provided in subsections (a) through (f).  A 
 12.24  broker that delivers a security certificate to its customer, or 
 12.25  causes its customer to be registered as the owner of an 
 12.26  uncertificated security, makes to the customer the warranties 
 12.27  provided in subsection (a) or (b), and has the rights and 
 12.28  privileges of a purchaser under this section.  The warranties of 
 12.29  and in favor of the broker acting as an agent are in addition to 
 12.30  applicable warranties given by and in favor of the customer. 
 12.31     Sec. 9.  [336.8-109] [WARRANTIES IN INDIRECT HOLDING.] 
 12.32     (a) A person who originates an entitlement order to a 
 12.33  securities intermediary warrants to the securities intermediary 
 12.34  that: 
 12.35     (1) the entitlement order is made by an appropriate person, 
 12.36  or if the entitlement order is by an agent, the agent has actual 
 13.1   authority to act on behalf of the appropriate person; and 
 13.2      (2) there is no adverse claim to the security entitlement. 
 13.3      (b) A person who delivers a security certificate to a 
 13.4   securities intermediary for credit to a securities account or 
 13.5   originates an instruction with respect to an uncertificated 
 13.6   security directing that the uncertificated security be credited 
 13.7   to a securities account makes to the securities intermediary the 
 13.8   warranties specified in section 336.8-108(a) or (b). 
 13.9      (c) If a securities intermediary delivers a security 
 13.10  certificate to its entitlement holder or causes its entitlement 
 13.11  holder to be registered as the owner of an uncertificated 
 13.12  security, the securities intermediary makes to the entitlement 
 13.13  holder the warranties specified in section 336.8-108(a) or (b). 
 13.14     Sec. 10.  [336.8-110] [APPLICABILITY; CHOICE OF LAW.] 
 13.15     (a) The local law of the issuer's jurisdiction, as 
 13.16  specified in subsection (d), governs: 
 13.17     (1) the validity of a security; 
 13.18     (2) the rights and duties of the issuer with respect to 
 13.19  registration of transfer; 
 13.20     (3) the effectiveness of registration of transfer by the 
 13.21  issuer; 
 13.22     (4) whether the issuer owes any duties to an adverse 
 13.23  claimant to a security; and 
 13.24     (5) whether an adverse claim can be asserted against a 
 13.25  person to whom transfer of a certificated or uncertificated 
 13.26  security is registered or a person who obtains control of an 
 13.27  uncertificated security. 
 13.28     (b) The local law of the securities intermediary's 
 13.29  jurisdiction, as specified in subsection (e), governs: 
 13.30     (1) acquisition of a security entitlement from the 
 13.31  securities intermediary; 
 13.32     (2) the rights and duties of the securities intermediary 
 13.33  and entitlement holder arising out of a security entitlement; 
 13.34     (3) whether the securities intermediary owes any duties to 
 13.35  an adverse claimant to a security entitlement; and 
 13.36     (4) whether an adverse claim can be asserted against a 
 14.1   person who acquires a security entitlement from the securities 
 14.2   intermediary or a person who purchases a security entitlement or 
 14.3   interest therein from an entitlement holder. 
 14.4      (c) The local law of the jurisdiction in which a security 
 14.5   certificate is located at the time of delivery governs whether 
 14.6   an adverse claim can be asserted against a person to whom the 
 14.7   security certificate is delivered. 
 14.8      (d) "Issuer's jurisdiction" means the jurisdiction under 
 14.9   which the issuer of the security is organized or, if permitted 
 14.10  by the law of that jurisdiction, the law of another jurisdiction 
 14.11  specified by the issuer.  An issuer organized under the law of 
 14.12  this state may specify the law of another jurisdiction as the 
 14.13  law governing the matters specified in subsection (a)(2) through 
 14.14  (5). 
 14.15     (e) The following rules determine a "securities 
 14.16  intermediary's jurisdiction" for purposes of this section: 
 14.17     (1) If an agreement between the securities intermediary and 
 14.18  its entitlement holder specifies that it is governed by the law 
 14.19  of a particular jurisdiction, that jurisdiction is the 
 14.20  securities intermediary's jurisdiction. 
 14.21     (2) If an agreement between the securities intermediary and 
 14.22  its entitlement holder does not specify the governing law as 
 14.23  provided in paragraph (1), but expressly specifies that the 
 14.24  securities account is maintained at an office in a particular 
 14.25  jurisdiction, that jurisdiction is the securities intermediary's 
 14.26  jurisdiction. 
 14.27     (3) If an agreement between the securities intermediary and 
 14.28  its entitlement holder does not specify a jurisdiction as 
 14.29  provided in paragraph (1) or (2), the securities intermediary's 
 14.30  jurisdiction is the jurisdiction in which is located the office 
 14.31  identified in an account statement as the office serving the 
 14.32  entitlement holder's account. 
 14.33     (4) If an agreement between the securities intermediary and 
 14.34  its entitlement holder does not specify a jurisdiction as 
 14.35  provided in paragraph (1) or (2) and an account statement does 
 14.36  not identify an office serving the entitlement holder's account 
 15.1   as provided in paragraph (3), the securities intermediary's 
 15.2   jurisdiction is the jurisdiction in which is located the chief 
 15.3   executive office of the securities intermediary. 
 15.4      (f) A securities intermediary's jurisdiction is not 
 15.5   determined by the physical location of certificates representing 
 15.6   financial assets, or by the jurisdiction in which is organized 
 15.7   the issuer of the financial asset with respect to which an 
 15.8   entitlement holder has a security entitlement, or by the 
 15.9   location of facilities for data processing or other record 
 15.10  keeping concerning the account. 
 15.11     Sec. 11.  [336.8-111] [CLEARING CORPORATION RULES.] 
 15.12     A rule adopted by a clearing corporation governing rights 
 15.13  and obligations among the clearing corporation and its 
 15.14  participants in the clearing corporation is effective even if 
 15.15  the rule conflicts with this chapter and affects another party 
 15.16  who does not consent to the rule. 
 15.17     Sec. 12.  [336.8-112] [CREDITOR'S LEGAL PROCESS.] 
 15.18     (a) The interest of a debtor in a certificated security may 
 15.19  be reached by a creditor only by actual seizure of the security 
 15.20  certificate by the officer making the attachment or levy, except 
 15.21  as otherwise provided in subsection (d).  However, a 
 15.22  certificated security for which the certificate has been 
 15.23  surrendered to the issuer may be reached by a creditor by legal 
 15.24  process upon the issuer. 
 15.25     (b) The interest of a debtor in an uncertificated security 
 15.26  may be reached by a creditor only by legal process upon the 
 15.27  issuer at its chief executive office in the United States, 
 15.28  except as otherwise provided in subsection (d). 
 15.29     (c) The interest of a debtor in a security entitlement may 
 15.30  be reached by a creditor only by legal process upon the 
 15.31  securities intermediary with whom the debtor's securities 
 15.32  account is maintained, except as otherwise provided in 
 15.33  subsection (d). 
 15.34     (d) The interest of a debtor in a certificated security for 
 15.35  which the certificate is in the possession of a secured party, 
 15.36  or in an uncertificated security registered in the name of a 
 16.1   secured party, or a security entitlement maintained in the name 
 16.2   of a secured party, may be reached by a creditor by legal 
 16.3   process upon the secured party. 
 16.4      (e) A creditor whose debtor is the owner of a certificated 
 16.5   security, uncertificated security, or security entitlement is 
 16.6   entitled to aid from a court of competent jurisdiction, by 
 16.7   injunction or otherwise, in reaching the certificated security, 
 16.8   uncertificated security, or security entitlement or in 
 16.9   satisfying the claim by means allowed at law or in equity in 
 16.10  regard to property that cannot readily be reached by other legal 
 16.11  process.  
 16.12     Sec. 13.  [336.8-113] [STATUTE OF FRAUDS INAPPLICABLE.] 
 16.13     A contract or modification of a contract for the sale or 
 16.14  purchase of a security is enforceable whether or not there is a 
 16.15  writing signed or record authenticated by a party against whom 
 16.16  enforcement is sought, even if the contract or modification is 
 16.17  not capable of performance within one year of its making. 
 16.18     Sec. 14.  [336.8-114] [EVIDENTIARY RULES CONCERNING 
 16.19  CERTIFICATED SECURITIES.] 
 16.20     The following rules apply in an action on a certificated 
 16.21  security against the issuer: 
 16.22     (1) Unless specifically denied in the pleadings, each 
 16.23  signature on a security certificate or in a necessary 
 16.24  endorsement is admitted. 
 16.25     (2) If the effectiveness of a signature is put in issue, 
 16.26  the burden of establishing effectiveness is on the party 
 16.27  claiming under the signature, but the signature is presumed to 
 16.28  be genuine or authorized. 
 16.29     (3) If signatures on a security certificate are admitted or 
 16.30  established, production of the certificate entitles a holder to 
 16.31  recover on it unless the defendant establishes a defense or a 
 16.32  defect going to the validity of the security. 
 16.33     (4) If it is shown that a defense or defect exists, the 
 16.34  plaintiff has the burden of establishing that the plaintiff or 
 16.35  some person under whom the plaintiff claims is a person against 
 16.36  whom the defense or defect cannot be asserted. 
 17.1      Sec. 15.  [336.8-115] [SECURITIES INTERMEDIARY AND OTHERS 
 17.2   NOT LIABLE TO ADVERSE CLAIMANT.] 
 17.3      A securities intermediary that has transferred a financial 
 17.4   asset pursuant to an effective entitlement order, or a broker or 
 17.5   other agent or bailee that has dealt with a financial asset at 
 17.6   the direction of its customer or principal, is not liable to a 
 17.7   person having an adverse claim to the financial asset, unless 
 17.8   the securities intermediary, or broker or other agent or bailee: 
 17.9      (1) took the action after it had been served with an 
 17.10  injunction, restraining order, or other legal process enjoining 
 17.11  it from doing so, issued by a court of competent jurisdiction, 
 17.12  and had a reasonable opportunity to act on the injunction, 
 17.13  restraining order, or other legal process; or 
 17.14     (2) acted in collusion with the wrongdoer in violating the 
 17.15  rights of the adverse claimant; or 
 17.16     (3) in the case of a security certificate that has been 
 17.17  stolen, acted with notice of the adverse claim. 
 17.18     Sec. 16.  [336.8-116] [SECURITIES INTERMEDIARY AS PURCHASER 
 17.19  FOR VALUE.] 
 17.20     A securities intermediary that receives a financial asset 
 17.21  and establishes a security entitlement to the financial asset in 
 17.22  favor of an entitlement holder is a purchaser for value of the 
 17.23  financial asset.  A securities intermediary that acquires a 
 17.24  security entitlement to a financial asset from another 
 17.25  securities intermediary acquires the security entitlement for 
 17.26  value if the securities intermediary acquiring the security 
 17.27  entitlement establishes a security entitlement to the financial 
 17.28  asset in favor of an entitlement holder. 
 17.29                               Part 2  
 17.30                          ISSUE AND ISSUER 
 17.31     Sec. 17.  [336.8-201] [ISSUER.] 
 17.32     (a) With respect to an obligation on or a defense to a 
 17.33  security, an "issuer" includes a person that: 
 17.34     (1) places or authorizes the placing of its name on a 
 17.35  security certificate, other than as authenticating trustee, 
 17.36  registrar, transfer agent, or the like, to evidence a share, 
 18.1   participation, or other interest in its property or in an 
 18.2   enterprise, or to evidence its duty to perform an obligation 
 18.3   represented by the certificate; 
 18.4      (2) creates a share, participation, or other interest in 
 18.5   its property or in an enterprise, or undertakes an obligation, 
 18.6   that is an uncertificated security; 
 18.7      (3) directly or indirectly creates a fractional interest in 
 18.8   its rights or property, if the fractional interest is 
 18.9   represented by a security certificate; or 
 18.10     (4) becomes responsible for, or in place of, another person 
 18.11  described as an issuer in this section. 
 18.12     (b) With respect to an obligation on or defense to a 
 18.13  security, a guarantor is an issuer to the extent of its 
 18.14  guaranty, whether or not its obligation is noted on a security 
 18.15  certificate. 
 18.16     (c) With respect to a registration of a transfer, issuer 
 18.17  means a person on whose behalf transfer books are maintained. 
 18.18     Sec. 18.  [336.8-202] [ISSUER'S RESPONSIBILITY AND 
 18.19  DEFENSES; NOTICE OF DEFECT OR DEFENSE.] 
 18.20     (a) Even against a purchaser for value and without notice, 
 18.21  the terms of a certificated security include terms stated on the 
 18.22  certificate and terms made part of the security by reference on 
 18.23  the certificate to another instrument, indenture, or document or 
 18.24  to a constitution, statute, ordinance, rule, regulation, order, 
 18.25  or the like, to the extent the terms referred to do not conflict 
 18.26  with terms stated on the certificate.  A reference under this 
 18.27  subsection does not of itself charge a purchaser for value with 
 18.28  notice of a defect going to the validity of the security, even 
 18.29  if the certificate expressly states that a person accepting it 
 18.30  admits notice.  The terms of an uncertificated security include 
 18.31  those stated in any instrument, indenture, or document or in a 
 18.32  constitution, statute, ordinance, rule, regulation, order, or 
 18.33  the like, pursuant to which the security is issued. 
 18.34     (b) The following rules apply if an issuer asserts that a 
 18.35  security is not valid: 
 18.36     (1) A security other than one issued by a government or 
 19.1   governmental subdivision, agency, or instrumentality, even 
 19.2   though issued with a defect going to its validity, is valid in 
 19.3   the hands of a purchaser for value and without notice of the 
 19.4   particular defect unless the defect involves a violation of a 
 19.5   constitutional provision.  In that case, the security is valid 
 19.6   in the hands of a purchaser for value and without notice of the 
 19.7   defect, other than one who takes by original issue. 
 19.8      (2) Paragraph (1) applies to an issuer that is a government 
 19.9   or governmental subdivision, agency, or instrumentality only if 
 19.10  there has been substantial compliance with the legal 
 19.11  requirements governing the issue or the issuer has received a 
 19.12  substantial consideration for the issue as a whole or for the 
 19.13  particular security and a stated purpose of the issue is one for 
 19.14  which the issuer has power to borrow money or issue the security.
 19.15     (c) Except as otherwise provided in section 336.8-205, lack 
 19.16  of genuineness of a certificated security is a complete defense, 
 19.17  even against a purchaser for value and without notice. 
 19.18     (d) All other defenses of the issuer of a security, 
 19.19  including nondelivery and conditional delivery of a certificated 
 19.20  security, are ineffective against a purchaser for value who has 
 19.21  taken the certificated security without notice of the particular 
 19.22  defense. 
 19.23     (e) This section does not affect the right of a party to 
 19.24  cancel a contract for a security "when, as and if issued" or 
 19.25  "when distributed" in the event of a material change in the 
 19.26  character of the security that is the subject of the contract or 
 19.27  in the plan or arrangement pursuant to which the security is to 
 19.28  be issued or distributed. 
 19.29     (f) If a security is held by a securities intermediary 
 19.30  against whom an entitlement holder has a security entitlement 
 19.31  with respect to the security, the issuer may not assert any 
 19.32  defense that the issuer could not assert if the entitlement 
 19.33  holder held the security directly. 
 19.34     Sec. 19.  [336.8-203] [STALENESS AS NOTICE OF DEFECT OR 
 19.35  DEFENSE.] 
 19.36     After an act or event, other than a call that has been 
 20.1   revoked, creating a right to immediate performance of the 
 20.2   principal obligation represented by a certificated security or 
 20.3   setting a date on or after which the security is to be presented 
 20.4   or surrendered for redemption or exchange, a purchaser is 
 20.5   charged with notice of any defect in its issue or defense of the 
 20.6   issuer, if the act or event: 
 20.7      (1) requires the payment of money, the delivery of a 
 20.8   certificated security, the registration of transfer of an 
 20.9   uncertificated security, or any of them on presentation or 
 20.10  surrender of the security certificate, the money or security is 
 20.11  available on the date set for payment or exchange, and the 
 20.12  purchaser takes the security more than one year after that date; 
 20.13  or 
 20.14     (2) is not covered by paragraph (1) and the purchaser takes 
 20.15  the security more than two years after the date set for 
 20.16  surrender or presentation or the date on which performance 
 20.17  became due. 
 20.18     Sec. 20.  [336.8-204] [EFFECT OF ISSUER'S RESTRICTION ON 
 20.19  TRANSFER.] 
 20.20     A restriction on transfer of a security imposed by the 
 20.21  issuer, even if otherwise lawful, is ineffective against a 
 20.22  person without knowledge of the restriction unless: 
 20.23     (1) the security is certificated and the restriction is 
 20.24  noted conspicuously on the security certificate; or 
 20.25     (2) the security is uncertificated and the registered owner 
 20.26  has been notified of the restriction. 
 20.27     Sec. 21.  [336.8-205] [EFFECT OF UNAUTHORIZED SIGNATURE ON 
 20.28  SECURITY CERTIFICATE.] 
 20.29     An unauthorized signature placed on a security certificate 
 20.30  before or in the course of issue is ineffective, but the 
 20.31  signature is effective in favor of a purchaser for value of the 
 20.32  certificated security if the purchaser is without notice of the 
 20.33  lack of authority and the signing has been done by: 
 20.34     (1) an authenticating trustee, registrar, transfer agent, 
 20.35  or other person entrusted by the issuer with the signing of the 
 20.36  security certificate or of similar security certificates, or the 
 21.1   immediate preparation for signing of any of them; or 
 21.2      (2) an employee of the issuer, or of any of the persons 
 21.3   listed in paragraph (1), entrusted with responsible handling of 
 21.4   the security certificate. 
 21.5      Sec. 22.  [336.8-206] [COMPLETION OR ALTERATION OF SECURITY 
 21.6   CERTIFICATE.] 
 21.7      (a) If a security certificate contains the signatures 
 21.8   necessary to its issue or transfer but is incomplete in any 
 21.9   other respect: 
 21.10     (1) any person may complete it by filling in the blanks as 
 21.11  authorized; and (2) even if the blanks are incorrectly filled 
 21.12  in, the security certificate as completed is enforceable by a 
 21.13  purchaser who took it for value and without notice of the 
 21.14  incorrectness. 
 21.15     (b) A complete security certificate that has been 
 21.16  improperly altered, even if fraudulently, remains enforceable, 
 21.17  but only according to its original terms. 
 21.18     Sec. 23.  [336.8-207] [RIGHTS AND DUTIES OF ISSUER WITH 
 21.19  RESPECT TO REGISTERED OWNERS.] 
 21.20     (a) Before due presentment for registration of transfer of 
 21.21  a certificated security in registered form or of an instruction 
 21.22  requesting registration of transfer of a uncertificated 
 21.23  security, the issuer or indenture trustee may treat the 
 21.24  registered owner as the person exclusively entitled to vote, 
 21.25  receive notifications, and otherwise exercise all the rights and 
 21.26  power of an owner. 
 21.27     (b) This article does not affect the liability of the 
 21.28  registered owner of a security for a call, assessment, or the 
 21.29  like. 
 21.30     Sec. 24.  [336.8-208] [EFFECT OF SIGNATURE OF 
 21.31  AUTHENTICATING TRUSTEE, REGISTRAR, OR TRANSFER AGENT. ] 
 21.32     (a) A person signing a security certificate as 
 21.33  authenticating trustee, registrar, transfer agent, or the like, 
 21.34  warrants to a purchaser for value of the certificated security, 
 21.35  if the purchaser is without notice of a particular defect, that: 
 21.36     (1) the certificate is genuine; 
 22.1      (2) the person's own participation in the issue of the 
 22.2   security is within the person's capacity and within the scope of 
 22.3   the authority received by the person from the issuer; and 
 22.4      (3) the person has reasonable grounds to believe that the 
 22.5   certificated security is in the form and within the amount the 
 22.6   issuer is authorized to issue. 
 22.7      (b) Unless otherwise agreed, a person signing under 
 22.8   subsection (a) does not assume responsibility for the validity 
 22.9   of the security in other respects. 
 22.10     Sec 25.  [336.8-209] [ISSUER'S LIEN.] 
 22.11     A lien in favor of an issuer upon a certificated security 
 22.12  is valid against a purchaser only if the right of the issuer to 
 22.13  the lien is noted conspicuously on the security certificate. 
 22.14     Sec. 26.  [336.8-210] [OVERISSUE.] 
 22.15     (a) In this section, "overissue" means the issue of 
 22.16  securities in excess of the amount the issuer has corporate 
 22.17  power to issue, but an overissue does not occur if appropriate 
 22.18  action has cured the overissue. 
 22.19     (b) Except as otherwise provided in subsections (c) and 
 22.20  (d), the provisions of this article which validate a security or 
 22.21  compel its issue or reissue do not apply to the extent that 
 22.22  validation, issue, or reissue would result in overissue. 
 22.23     (c) If an identical security not constituting an overissue 
 22.24  is reasonably available for purchase, a person entitled to issue 
 22.25  or validation may compel the issuer to purchase the security and 
 22.26  deliver it if certificated, or register its transfer if 
 22.27  uncertificated, against surrender of any security certificate 
 22.28  the person holds. 
 22.29     (d) If a security is not reasonably available for purchase, 
 22.30  a person entitled to issue or validation may recover from the 
 22.31  issuer the price the person or the last purchaser for value paid 
 22.32  for it with interest from the date of the person's demand. 
 22.33                               Part 3 
 22.34                      TRANSFER OF CERTIFICATED 
 22.35                   AND UNCERTIFICATED SECURITIES 
 22.36     Sec. 27.  [336.8-301] [DELIVERY.] 
 23.1      (a) Delivery of a certificated security to a purchaser 
 23.2   occurs when: 
 23.3      (1) the purchaser acquires possession of the security 
 23.4   certificate; 
 23.5      (2) another person, other than a securities intermediary, 
 23.6   either acquires possession of the security certificate on behalf 
 23.7   of the purchaser or, having previously acquired possession of 
 23.8   the certificate, acknowledges that it holds for the purchaser; 
 23.9   or 
 23.10     (3) a securities intermediary acting on behalf of the 
 23.11  purchaser acquires possession of the security certificate, only 
 23.12  if the certificate is in registered form and has been specially 
 23.13  endorsed to the purchaser by an effective endorsement. 
 23.14     (b) Delivery of an uncertificated security to a purchaser 
 23.15  occurs when: 
 23.16     (1) the issuer registers the purchaser as the registered 
 23.17  owner, upon original issue or registration of transfer; or 
 23.18     (2) another person, other than a securities intermediary, 
 23.19  either becomes the registered owner of the uncertificated 
 23.20  security on behalf of the purchaser or, having previously become 
 23.21  the registered owner, acknowledges that it holds for the 
 23.22  purchaser.  
 23.23     Sec 28.  [336.8-302] [RIGHTS OF PURCHASER.] 
 23.24     (a) Except as otherwise provided in subsections (b) and 
 23.25  (c), upon delivery of a certificated or uncertificated security 
 23.26  to a purchaser, the purchaser acquires all rights in the 
 23.27  security that the transferor had or had power power to transfer. 
 23.28     (b) A purchaser of a limited interest acquires rights only 
 23.29  to the extent of the interest purchased. 
 23.30     (c) A purchaser of a certificated security who as a 
 23.31  previous holder had notice of an adverse claim does not improve 
 23.32  its position by taking from a protected purchaser. 
 23.33     Sec. 29.  [336.8-303] [PROTECTED PURCHASER.] 
 23.34     (a) "Protected purchaser" means a purchaser of a 
 23.35  certificated or uncertificated security, or of an interest 
 23.36  therein, who: 
 24.1      (1) gives value; 
 24.2      (2) does not have notice of any adverse claim to the 
 24.3   security; and 
 24.4      (3) obtains control of the certificated or uncertificated 
 24.5   security. 
 24.6      (b) In addition to acquiring the rights of a purchaser, a 
 24.7   protected purchaser also acquires its interest in the security 
 24.8   free of any adverse claim. 
 24.9      Sec. 30.  [336.8-304] [ENDORSEMENT.] 
 24.10     (a) An endorsement may be in blank or special.  An 
 24.11  endorsement in blank includes an endorsement to bearer.  A 
 24.12  special endorsement specifies to whom a security is to be 
 24.13  transferred or who has power to transfer it.  A holder may 
 24.14  convert a blank endorsement to a special endorsement. 
 24.15     (b) An endorsement purporting to be only of part of a 
 24.16  security certificate representing units intended by the issuer 
 24.17  to be separately transferable is effective to the extent of the 
 24.18  endorsement. 
 24.19     (c) An endorsement, whether special or in blank, does not 
 24.20  constitute a transfer until delivery of the certificate on which 
 24.21  it appears or, if the endorsement is on a separate document, 
 24.22  until delivery of both the document and the certificate. 
 24.23     (d) If a security certificate in registered form has been 
 24.24  delivered to a purchaser without a necessary endorsement, the 
 24.25  purchaser may become a protected purchaser only when the 
 24.26  endorsement is supplied.  However, against a transferor, a 
 24.27  transfer is complete upon delivery and the purchaser has a 
 24.28  specifically enforceable right to have any necessary endorsement 
 24.29  supplied. 
 24.30     (e) An endorsement of a security certificate in bearer form 
 24.31  may give notice of an adverse claim to the certificate, but it 
 24.32  does not otherwise affect a right to registration that the 
 24.33  holder possesses. 
 24.34     (f) Unless otherwise agreed, a person making an endorsement 
 24.35  assumes only the obligations provided in section 336.8-108 and 
 24.36  not an obligation that the security will be honored by the 
 25.1   issuer. 
 25.2      Sec. 31.  [336.8-305] [INSTRUCTION.] 
 25.3      (a) If an instruction has been originated by an appropriate 
 25.4   person but is incomplete in any other respect, any person may 
 25.5   complete it as authorized and the issuer may rely on it as 
 25.6   completed, even though it has been completed incorrectly. 
 25.7      (b) Unless otherwise agreed, a person initiating an 
 25.8   instruction assumes only the obligations imposed by section 
 25.9   336.8-108 and not an obligation that the security will be 
 25.10  honored by the issuer. 
 25.11     Sec. 32.  [336.8-306] [EFFECT OF GUARANTEEING SIGNATURE, 
 25.12  ENDORSEMENT, OR INSTRUCTION.] 
 25.13     (a) A person who guarantees a signature of an endorser of a 
 25.14  security certificate warrants that at the time of signing: 
 25.15     (1) the signature was genuine; 
 25.16     (2) the signer was an appropriate person to endorse, or if 
 25.17  the signature is by an agent, the agent had actual authority to 
 25.18  act on behalf of the appropriate person; and 
 25.19     (3) the signer had legal capability to sign. 
 25.20     (b) A person who guarantees a signature of the originator 
 25.21  of an instruction warrants that at the time of signing: 
 25.22     (1) the signature was genuine; 
 25.23     (2) the signer was an appropriate person to originate the 
 25.24  instruction, or if the signature is by an agent, the agent had 
 25.25  actual authority to act on behalf of the appropriate person, if 
 25.26  the person specified in the instruction as the registered owner 
 25.27  was, in fact, the registered owner, as to which fact the 
 25.28  signature guarantor does not make a warranty; and 
 25.29     (3) the signer had legal capacity to sign. 
 25.30     (c) A person who specially guarantees the signature of an 
 25.31  originator of an instruction makes the warranties of a signature 
 25.32  guarantor under subsection (b) and also warrants that at the 
 25.33  time the instruction is presented to the issuer: 
 25.34     (1) the person specified in the instruction as the 
 25.35  registered owner of the uncertificated security will be the 
 25.36  registered owner; and 
 26.1      (2) the transfer of the uncertificated security requested 
 26.2   in the instruction will be registered by the issuer free from 
 26.3   all liens, security interests, restrictions, and claims other 
 26.4   than those specified in the instruction. 
 26.5      (d) A guarantor under subsections (a) and (b) or a special 
 26.6   guarantor under subsection (c) does not otherwise warrant the 
 26.7   rightfulness of the transfer. 
 26.8      (e) A person who guarantees an endorsement of a security 
 26.9   certificate makes the warranties of a signature guarantor under 
 26.10  subsection (a) and also warrants the rightfulness of the 
 26.11  transfer in all respects. 
 26.12     (f) A person who guarantees an instruction requesting the 
 26.13  transfer of an uncertificated security makes the warranties of a 
 26.14  special signature guarantor under subsection (c) and also 
 26.15  warrants the rightfulness of the transfer in all respects. 
 26.16     (g) An issuer may not require a special guaranty of 
 26.17  signature, a guaranty of endorsement, or a guaranty of 
 26.18  instruction as a condition to registration of transfer. 
 26.19     (h) The warranties under this section are made to a person 
 26.20  taking or dealing with the security in reliance on the guaranty, 
 26.21  and the guarantor is liable to the person for loss resulting 
 26.22  from their breach.  An endorser or originator of an instruction 
 26.23  whose signature, endorsement, or instruction has been guaranteed 
 26.24  is liable to a guarantor for any loss suffered by the guarantor 
 26.25  as a result of breach of the warranties of the guarantor. 
 26.26     Sec. 33.  [336.8-307] [PURCHASER'S RIGHT TO REQUISITES FOR 
 26.27  REGISTRATION OF TRANSFER.] 
 26.28     Unless otherwise agreed, the transferor of a security on 
 26.29  due demand shall supply the purchaser with proof of authority to 
 26.30  transfer or with any other requisite necessary to obtain 
 26.31  registration of the transfer of the security, but if the 
 26.32  transfer is not for value, a transferor need not comply unless 
 26.33  the purchaser pays the necessary expenses.  If the transferor 
 26.34  fails within a reasonable time to comply with the demand, the 
 26.35  purchaser may reject or rescind the transfer. 
 26.36                               Part 4
 27.1                             REGISTRATION 
 27.2      Sec.  34.  [336.8-401] [DUTY OF ISSUER TO REGISTER 
 27.3   TRANSFER.] 
 27.4      (a) If a certificated security in registered form is 
 27.5   presented to an issuer with a request to register transfer or an 
 27.6   instruction is presented to an issuer with a request to register 
 27.7   transfer of an uncertificated security, the issuer shall 
 27.8   register the transfer as requested if: 
 27.9      (1) under the terms of the security, the person seeking 
 27.10  registration of transfer is eligible to have the security 
 27.11  registered in its name; 
 27.12     (2) the endorsement or instruction is made by the 
 27.13  appropriate person or by an agent who has actual authority to 
 27.14  act on behalf of the appropriate person; 
 27.15     (3) reasonable assurance is given that the endorsement or 
 27.16  instruction is genuine and authorized (section 336.8-402); 
 27.17     (4) any applicable law relating to the collection of taxes 
 27.18  has been complied with; 
 27.19     (5) the transfer does not violate any restriction on 
 27.20  transfer imposed by the issuer in accordance with section 
 27.21  336.8-204; 
 27.22     (6) a demand that the issuer not register transfer has not 
 27.23  become effective under section 336.8-403, or the issuer has 
 27.24  complied with section 336.8-403(b) but no legal process or 
 27.25  indemnity bond is obtained as provided in section 336.8-403(d); 
 27.26  and 
 27.27     (7) the transfer is in fact rightful or is to a protected 
 27.28  purchaser. 
 27.29     (b) If an issuer is under a duty to register a transfer of 
 27.30  a security, the issuer is liable to a person presenting a 
 27.31  certificated security or an instruction for registration or to 
 27.32  the person's principal for loss resulting from unreasonable 
 27.33  delay in registration or failure or refusal to register the 
 27.34  transfer. 
 27.35     Sec. 35.  [336.8-402] [ASSURANCE THAT ENDORSEMENT OR 
 27.36  INSTRUCTION IS EFFECTIVE.] 
 28.1      (a) An issuer may require the following assurance that each 
 28.2   necessary endorsement of each instruction is genuine and 
 28.3   authorized: 
 28.4      (1) in all cases, a guaranty of the signature of the person 
 28.5   making an endorsement or originating an instruction including, 
 28.6   in the case of an instruction, reasonable assurance of identity; 
 28.7      (2) if the endorsement is made or the instruction is 
 28.8   originated by an agent, appropriate assurance of actual 
 28.9   authority to sign; 
 28.10     (3) if the endorsement is made or the instruction is 
 28.11  originated by a fiduciary pursuant to section 336.8-107(a)(4) or 
 28.12  (a)(5), appropriate evidence of appointment or incumbency; 
 28.13     (4) if there is more than one fiduciary, reasonable 
 28.14  assurance that all who are required to sign have done so; and 
 28.15     (5) if the endorsement is made or the instruction is 
 28.16  originated by a person not covered by another provision of this 
 28.17  subsection, assurance appropriate to the case corresponding as 
 28.18  nearly as may be to the provisions of this subsection. 
 28.19     (b) An issuer may elect to require reasonable assurance 
 28.20  beyond that specified in this section. 
 28.21     (c) In this section: 
 28.22     (1) "Guaranty of the signature" means a guaranty signed by 
 28.23  or on behalf of a person reasonably believed by the issuer to be 
 28.24  responsible.  An issuer may adopt standards with respect to 
 28.25  responsibility if they are not manifestly unreasonable. 
 28.26     (2) "Appropriate evidence of appointment or incumbency" 
 28.27  means: 
 28.28     (i) in the case of a fiduciary appointed or qualified by a 
 28.29  court, a certificate issued by or under the direction or 
 28.30  supervision of the court or an officer thereof and dated within 
 28.31  60 days before the date of presentation for transfer; or 
 28.32     (ii) in any other case, a copy of a document showing the 
 28.33  appointment or a certificate issued by or on behalf of a person 
 28.34  reasonably believed by an issuer to be responsible or, in the 
 28.35  absence of that document or certificate, other evidence the 
 28.36  issuer reasonably considered appropriate. 
 29.1      Sec. 36.  [336.8-403] [DEMAND THAT ISSUER NOT REGISTER 
 29.2   TRANSFER.] 
 29.3      (a) A person who is an appropriate person to make an 
 29.4   endorsement or originate an instruction may demand that the 
 29.5   issuer not register transfer of a security by communicating to 
 29.6   the issuer a notification that identifies the registered owner 
 29.7   and the issue of which the security is a part and provides an 
 29.8   address for communications directed to the person making the 
 29.9   demand.  The demand is effective only if it is received by the 
 29.10  issuer at a time and in a manner affording the issuer reasonable 
 29.11  opportunity to act on it.  
 29.12     (b) If a certificated security in registered form is 
 29.13  presented to an issuer with a request to register transfer or an 
 29.14  instruction is presented to an issuer with a request to register 
 29.15  transfer of an uncertificated security after a demand that the 
 29.16  issuer not register transfer has become effective, the issuer 
 29.17  shall promptly communicate to (i) the person who initiated the 
 29.18  demand at the address provided in the demand and (ii) the person 
 29.19  who presented the security for registration of transfer or 
 29.20  initiated the instruction requesting registration of transfer a 
 29.21  notification stating that:  
 29.22     (1) the certificated security has been presented for 
 29.23  registration of transfer or the instruction for registration of 
 29.24  transfer of the uncertificated security has been received; 
 29.25     (2) a demand that the issuer not register transfer had 
 29.26  previously been received; and 
 29.27     (3) the issuer will withhold registration of transfer for a 
 29.28  period of time stated in the notification in order to provide 
 29.29  the person who initiated the demand an opportunity to obtain 
 29.30  legal process or an indemnity bond.  
 29.31     (c) The period described in subsection (b)(3) may not 
 29.32  exceed 30 days after the date of communication of the 
 29.33  notification.  A shorter period may be specified by the issuer 
 29.34  if it is not manifestly unreasonable.  
 29.35     (d) An issuer is not liable to a person who initiated a 
 29.36  demand that the issuer not register transfer for any loss the 
 30.1   person suffers as a result of registration of a transfer 
 30.2   pursuant to an effective endorsement or instruction if the 
 30.3   person who initiated the demand does not, within the time stated 
 30.4   in the issuer's communication, either:  
 30.5      (1) obtain an appropriate restraining order, injunction, or 
 30.6   other process from a court of competent jurisdiction enjoining 
 30.7   the issuer from registering the transfer; or 
 30.8      (2) file with the issuer an indemnity bond, sufficient in 
 30.9   the issuer's judgment to protect the issuer and any transfer 
 30.10  agent, registrar, or other agent of the issuer involved from any 
 30.11  loss it or they may suffer by refusing to register the transfer. 
 30.12     (e) This section does not relieve an issuer from liability 
 30.13  for registering transfer pursuant to an endorsement or 
 30.14  instruction that was not effective.  
 30.15     Sec. 37.  [336.8-404] [WRONGFUL REGISTRATION.] 
 30.16     (a) Except as otherwise provided in section 336.8-406, an 
 30.17  issuer is liable for wrongful registration of transfer if the 
 30.18  issuer has registered a transfer of a security to a person not 
 30.19  entitled to it, and the transfer was registered:  
 30.20     (1) pursuant to an ineffective endorsement or instruction; 
 30.21     (2) after a demand that the issuer not register transfer 
 30.22  became effective under section 336.8-403(a) and the issuer did 
 30.23  not comply with section 336.8-403(b); 
 30.24     (3) after the issuer had been served with an injunction, 
 30.25  restraining order, or other legal process enjoining it from 
 30.26  registering the transfer, issued by a court of competent 
 30.27  jurisdiction, and the issuer had a reasonable opportunity to act 
 30.28  on the injunction, restraining order, or other legal process; or 
 30.29     (4) by an issuer acting in collusion with the wrongdoer.  
 30.30     (b) An issuer that is liable for wrongful registration of 
 30.31  transfer under subsection (a) on demand shall provide the person 
 30.32  entitled to the security with a like certificated or 
 30.33  uncertificated security, and any payments or distributions that 
 30.34  the person did not receive as a result of the wrongful 
 30.35  registration.  If an overissue would result, the issuer's 
 30.36  liability to provide the person with a like security is governed 
 31.1   by section 336.8-210.  
 31.2      (c) Except as otherwise provided in subsection (a) or in a 
 31.3   law relating to the collection of taxes, an issuer is not liable 
 31.4   to an owner or other person suffering loss as a result of the 
 31.5   registration of a transfer of a security if registration was 
 31.6   made pursuant to an effective endorsement or instruction.  
 31.7      Sec. 38.  [336.8-405] [REPLACEMENT OF LOST, DESTROYED, OR 
 31.8   WRONGFULLY TAKEN SECURITY CERTIFICATE.] 
 31.9      (a) If an owner of a certificated security, whether in 
 31.10  registered or bearer form, claims that the certificate has been 
 31.11  lost, destroyed, or wrongfully taken, the issuer shall issue a 
 31.12  new certificate if the owner:  
 31.13     (1) so requests before the issuer has notice that the 
 31.14  certificate has been acquired by a protected purchaser; 
 31.15     (2) files with the issuer a sufficient indemnity bond; and 
 31.16     (3) satisfies other reasonable requirements imposed by the 
 31.17  issuer.  
 31.18     (b) If, after the issue of a new security certificate, a 
 31.19  protected purchaser of the original certificate presents it for 
 31.20  registration of transfer, the issuer shall register the transfer 
 31.21  unless an overissue would result.  In that case, the issuer's 
 31.22  liability is governed by section 336.8-210.  In addition to any 
 31.23  rights on the indemnity bond, an issuer may recover the new 
 31.24  certificate from a person to whom it was issued or any person 
 31.25  taking under that person, except a protected purchaser.  
 31.26     Sec. 39.  [336.8-406] [OBLIGATION TO NOTIFY ISSUER OF LOST, 
 31.27  DESTROYED, OR WRONGFULLY TAKEN SECURITY CERTIFICATE.] 
 31.28     If a security certificate has been lost, apparently 
 31.29  destroyed, or wrongfully taken, and the owner fails to notify 
 31.30  the issuer of that fact within a reasonable time after the owner 
 31.31  has notice of it and the issuer registers a transfer of the 
 31.32  security before receiving notification, the owner may not assert 
 31.33  against the issuer a claim for registering the transfer under 
 31.34  section 336.8-404 or a claim to a new security certificate under 
 31.35  section 336.8-405.  
 31.36     Sec. 40.  [336.8-407] [AUTHENTICATING TRUSTEE, TRANSFER 
 32.1   AGENT, AND REGISTRAR.] 
 32.2      A person acting as authenticating trustee, transfer agent, 
 32.3   registrar, or other agent for an issuer in the registration of a 
 32.4   transfer of its securities, in the issue of new security 
 32.5   certificates or uncertificated securities, or in the 
 32.6   cancellation of surrendered security certificates has the same 
 32.7   obligation to the holder or owner of a certificated or 
 32.8   uncertificated security with regard to the particular functions 
 32.9   performed as the issuer has in regard to those functions.  
 32.10                               Part 5 
 32.11                       SECURITY ENTITLEMENTS 
 32.12     Sec. 41.  [336.8-501] [SECURITIES ACCOUNT; ACQUISITION OF 
 32.13  SECURITY ENTITLEMENT FROM SECURITIES INTERMEDIARY.] 
 32.14     (a) "Securities account" means an account to which a 
 32.15  financial asset is or may be credited in accordance with an 
 32.16  agreement under which the person maintaining the account 
 32.17  undertakes to treat the person for whom the account is 
 32.18  maintained as entitled to exercise the rights that comprise the 
 32.19  financial asset.  
 32.20     (b) Except as otherwise provided in subsections (d) and 
 32.21  (e), a person acquires a security entitlement if a securities 
 32.22  intermediary:  
 32.23     (1) indicates by book entry that a financial asset has been 
 32.24  credited to the person's securities account; 
 32.25     (2) receives a financial asset from the person or acquires 
 32.26  a financial asset for the person and, in either case, accepts it 
 32.27  for credit to the person's securities account; or 
 32.28     (3) becomes obligated under other law, regulation, or rule 
 32.29  to credit a financial asset to the person's securities account.  
 32.30     (c) If a condition of subsection (b) has been met, a person 
 32.31  has a security entitlement even though the securities 
 32.32  intermediary does not itself hold the financial asset.  
 32.33     (d) If a securities intermediary holds a financial asset 
 32.34  for another person, and the financial asset is registered in the 
 32.35  name of, payable to the order of, or specially endorsed to the 
 32.36  other person, and has not been endorsed to the securities 
 33.1   intermediary or in blank, the other person is treated as holding 
 33.2   the financial asset directly rather than as having a security 
 33.3   entitlement with respect to the financial asset.  
 33.4      (e) Issuance of a security is not establishment of a 
 33.5   security entitlement. 
 33.6      Sec. 42.  [336.8-502] [ASSERTION OF ADVERSE CLAIM AGAINST 
 33.7   ENTITLEMENT HOLDER.] 
 33.8      An action based on an adverse claim to a financial asset, 
 33.9   whether framed in conversion, replevin, constructive trust, 
 33.10  equitable lien, or other theory, may not be asserted against a 
 33.11  person who acquires a security entitlement under section 
 33.12  336.8-501 for value and without notice of the adverse claim.  
 33.13     Sec. 43.  [336.8-503] [PROPERTY INTEREST OF ENTITLEMENT 
 33.14  HOLDER IN FINANCIAL ASSET HELD BY SECURITIES INTERMEDIARY.] 
 33.15     (a) To the extent necessary for a securities intermediary 
 33.16  to satisfy all security entitlements with respect to a 
 33.17  particular financial asset, all interests in that financial 
 33.18  asset held by the securities intermediary are held by the 
 33.19  securities intermediary for the entitlement holders, are not 
 33.20  property of the securities intermediary, and are not subject to 
 33.21  claims of creditors of the securities intermediary, except as 
 33.22  otherwise provided in section 336.8-511. 
 33.23     (b) An entitlement holder's property interest with respect 
 33.24  to a particular financial asset under subsection (a) is a pro 
 33.25  rata property interest in all interests in that financial asset 
 33.26  held by the securities intermediary, without regard to the time 
 33.27  the entitlement holder acquired the security entitlement or the 
 33.28  time the securities intermediary acquired the interest in that 
 33.29  financial asset. 
 33.30     (c) An entitlement holder's property interest with respect 
 33.31  to a particular financial asset under subsection (a) may be 
 33.32  enforced against the securities intermediary only by exercise of 
 33.33  the entitlement holder's rights under sections 336.8-505 through 
 33.34  336.8-508.  
 33.35     (d) An entitlement holder's property interest with respect 
 33.36  to a particular financial asset under subsection (a) may be 
 34.1   enforced against a purchaser of the financial asset or interest 
 34.2   therein only if:  
 34.3      (1) insolvency proceedings have been initiated by or 
 34.4   against the securities intermediary; 
 34.5      (2) the securities intermediary does not have sufficient 
 34.6   interests in the financial asset to satisfy the security 
 34.7   entitlements of all of its entitlement holders to that financial 
 34.8   asset; 
 34.9      (3) the securities intermediary violated its obligations 
 34.10  under section 336.8-504 by transferring the financial asset or 
 34.11  interest therein to the purchaser; and 
 34.12     (4) the purchaser is not protected under subsection (e).  
 34.13  The trustee or other liquidator, acting on behalf of all 
 34.14  entitlement holders having security entitlements with respect to 
 34.15  a particular financial asset, may recover the financial asset, 
 34.16  or interest therein, from the purchaser.  If the trustee or 
 34.17  other liquidator elects not to pursue that right, an entitlement 
 34.18  holder whose security entitlement remains unsatisfied has the 
 34.19  right to recover its interest in the financial asset from the 
 34.20  purchaser.  
 34.21     (e) An action based on the entitlement holder's property 
 34.22  interest with respect to a particular financial asset under 
 34.23  subsection (a), whether framed in conversion, replevin, 
 34.24  constructive trust, equitable lien, or other theory, may not be 
 34.25  asserted against any purchaser of a financial asset or interest 
 34.26  therein who gives value, obtains control, and does not act in 
 34.27  collusion with the securities intermediary in violating the 
 34.28  securities intermediary's obligations under section 336.8-504. 
 34.29     Sec. 44.  [336.8-504] [DUTY OF SECURITIES INTERMEDIARY TO 
 34.30  MAINTAIN FINANCIAL ASSET.] 
 34.31     (a) A securities intermediary shall promptly obtain and 
 34.32  thereafter maintain a financial asset in a quantity 
 34.33  corresponding to the aggregate of all security entitlements it 
 34.34  has established in favor of its entitlement holders with respect 
 34.35  to that financial asset.  The securities intermediary may 
 34.36  maintain those financial assets directly or through one or more 
 35.1   other securities intermediaries.  
 35.2      (b) Except to the extent otherwise agreed to by its 
 35.3   entitlement holder, a securities intermediary may not grant any 
 35.4   security interests in a financial asset it is obligated to 
 35.5   maintain pursuant to subsection (a). 
 35.6      (c) A securities intermediary satisfies the duty in 
 35.7   subsection (a) if:  
 35.8      (1) the securities intermediary acts with respect to the 
 35.9   duty as agreed upon by the entitlement holder and the securities 
 35.10  intermediary; or 
 35.11     (2) in the absence of agreement, the securities 
 35.12  intermediary exercises due care in accordance with reasonable 
 35.13  commercial standards to obtain and maintain the financial asset. 
 35.14     (d) This section does not apply to a clearing corporation 
 35.15  that is itself the obligor of an option or similar obligation to 
 35.16  which its entitlement holders have security entitlements.  
 35.17     Sec. 45.  [336.8-505] [DUTY OF SECURITIES INTERMEDIARY WITH 
 35.18  RESPECT TO PAYMENTS AND DISTRIBUTIONS.] 
 35.19     (a) A securities intermediary shall take action to obtain a 
 35.20  payment or distribution made by the issuer of a financial 
 35.21  asset.  A securities intermediary satisfies the duty if:  
 35.22     (1) the securities intermediary acts with respect to the 
 35.23  duty as agreed upon by the entitlement holder and the securities 
 35.24  intermediary; or 
 35.25     (2) in the absence of agreement, the securities 
 35.26  intermediary exercises due care in accordance with reasonable 
 35.27  commercial standards to attempt to obtain the payment or 
 35.28  distribution.  
 35.29     (b) A securities intermediary is obligated to its 
 35.30  entitlement holder for a payment or distribution made by the 
 35.31  issuer of a financial asset if the payment or distribution is 
 35.32  received by the securities intermediary.  
 35.33     Sec. 46.  [336.8-506] [DUTY OF SECURITIES INTERMEDIARY TO 
 35.34  EXERCISE RIGHTS AS DIRECTED BY ENTITLEMENT HOLDER.] 
 35.35     A securities intermediary shall exercise rights with 
 35.36  respect to a financial asset if directed to do so by an 
 36.1   entitlement holder.  A securities intermediary satisfies the 
 36.2   duty if:  
 36.3      (1) the securities intermediary acts with respect to the 
 36.4   duty as agreed upon by the entitlement holder and the securities 
 36.5   intermediary; or 
 36.6      (2) in the absence of agreement, the securities 
 36.7   intermediary either places the entitlement holder in a position 
 36.8   to exercise the rights directly or exercises due care in 
 36.9   accordance with reasonable commercial standards to follow the 
 36.10  direction of the entitlement holder. 
 36.11     Sec. 47.  [336.8-507] [DUTY OF SECURITIES INTERMEDIARY TO 
 36.12  COMPLY WITH ENTITLEMENT ORDER.] 
 36.13     (a) A securities intermediary shall comply with an 
 36.14  entitlement order if the entitlement order is originated by the 
 36.15  appropriate person, the securities intermediary has had 
 36.16  reasonable opportunity to assure itself that the entitlement 
 36.17  order is genuine and authorized, and the securities intermediary 
 36.18  has had reasonable opportunity to comply with the entitlement 
 36.19  order.  A securities intermediary satisfies the duty if:  
 36.20     (1) the securities intermediary acts with respect to the 
 36.21  duty as agreed upon by the entitlement holder and the securities 
 36.22  intermediary; or 
 36.23     (2) in the absence of agreement, the securities 
 36.24  intermediary exercises due care in accordance with reasonable 
 36.25  commercial standards to comply with the entitlement order.  
 36.26     (b) If a securities intermediary transfers a financial 
 36.27  asset pursuant to an ineffective entitlement order, the 
 36.28  securities intermediary shall reestablish a security entitlement 
 36.29  in favor of the person entitled to it, and pay or credit any 
 36.30  payments or distributions that the person did not receive as a 
 36.31  result of the wrongful transfer.  If the securities intermediary 
 36.32  does not reestablish a security entitlement, the securities 
 36.33  intermediary is liable to the entitlement holder for damages.  
 36.34     Sec. 48.  [336.8-508] [DUTY OF SECURITIES INTERMEDIARY TO 
 36.35  CHANGE ENTITLEMENT HOLDER'S POSITION TO OTHER FORM OF SECURITY 
 36.36  HOLDING.] 
 37.1      A securities intermediary shall act at the direction of an 
 37.2   entitlement holder to change a security entitlement into another 
 37.3   available form of holding for which the entitlement holder is 
 37.4   eligible, or to cause the financial asset to be transferred to a 
 37.5   securities account of the entitlement holder with another 
 37.6   securities intermediary.  A securities intermediary satisfies 
 37.7   the duty if:  
 37.8      (1) the securities intermediary acts as agreed upon by the 
 37.9   entitlement holder and the securities intermediary; or 
 37.10     (2) in the absence of agreement, the securities 
 37.11  intermediary exercises due care in accordance with reasonable 
 37.12  commercial standards to follow the direction of the entitlement 
 37.13  holder. 
 37.14     Sec. 49.  [336.8-509] [SPECIFICATION OF DUTIES OF 
 37.15  SECURITIES INTERMEDIARY BY OTHER STATUTE OR REGULATION; MANNER 
 37.16  OF PERFORMANCE OF DUTIES OF SECURITIES INTERMEDIARY AND EXERCISE 
 37.17  OF RIGHTS OF ENTITLEMENT HOLDER.] 
 37.18     (a) If the substance of a duty imposed upon a securities 
 37.19  intermediary by sections 336.8-504 through 336.8-508 is the 
 37.20  subject of other statute, regulation, or rule, compliance with 
 37.21  that statute, regulation, or rule satisfies the duty.  
 37.22     (b) To the extent that specific standards for the 
 37.23  performance of the duties of a securities intermediary or the 
 37.24  exercise of the rights of an entitlement holder are not 
 37.25  specified by other statute, regulation, or rule or by agreement 
 37.26  between the securities intermediary and entitlement holder, the 
 37.27  securities intermediary shall perform its duties and the 
 37.28  entitlement holder shall exercise its rights in a commercially 
 37.29  reasonable manner.  
 37.30     (c) The obligation of a securities intermediary to perform 
 37.31  the duties imposed by sections 336.8-504 through 336.8-508 is 
 37.32  subject to:  
 37.33     (1) rights of the securities intermediary arising out of a 
 37.34  security interest under a security agreement with the 
 37.35  entitlement holder or otherwise; and 
 37.36     (2) rights of the securities intermediary under other law, 
 38.1   regulation, rule, or agreement to withhold performance of its 
 38.2   duties as a result of unfulfilled obligations of the entitlement 
 38.3   holder to the securities intermediary.  
 38.4      Sec. 50.  [336.8-510] [RIGHTS OF PURCHASER OF SECURITY 
 38.5   ENTITLEMENT FROM ENTITLEMENT HOLDER.] 
 38.6      (a) An action based on an adverse claim to a financial 
 38.7   asset or security entitlement, whether framed in conversion, 
 38.8   replevin, constructive trust, equitable lien, or other theory, 
 38.9   may not be asserted against a person who purchases a security 
 38.10  entitlement, or an interest therein, from an entitlement holder 
 38.11  if the purchaser gives value, does not have notice of the 
 38.12  adverse claim, and obtains control.  
 38.13     (b) If an adverse claim could not have been asserted 
 38.14  against an entitlement holder under section 336.8-502, the 
 38.15  adverse claim cannot be asserted against a person who purchases 
 38.16  a security entitlement, or an interest therein, from the 
 38.17  entitlement holder.  
 38.18     (c) In a case not covered by the priority rules in article 
 38.19  9, a purchaser for value of a security entitlement, or an 
 38.20  interest therein, who obtains control has priority over a 
 38.21  purchaser of a security entitlement, or an interest therein, who 
 38.22  does not obtain control.  Purchasers who have control rank 
 38.23  equally, except that a securities intermediary as purchaser has 
 38.24  priority over a conflicting purchaser who has control, unless 
 38.25  otherwise agreed by the securities intermediary.  
 38.26     Sec. 51.  [336.8-511] [PRIORITY AMONG SECURITY INTERESTS 
 38.27  AND ENTITLEMENT HOLDERS.] 
 38.28     (a) Except as otherwise provided in subsections (b) and 
 38.29  (c), if a securities intermediary does not have sufficient 
 38.30  interests in a particular financial asset to satisfy both its 
 38.31  obligations to entitlement holders who have security 
 38.32  entitlements to that financial asset and its obligation to a 
 38.33  creditor of the securities intermediary who has a security 
 38.34  interest in that financial asset, the claims of entitlement 
 38.35  holders, other than the creditor, have priority over the claim 
 38.36  of the creditor. 
 39.1      (b) A claim of a creditor of a securities intermediary who 
 39.2   has a security interest in a financial asset held by a 
 39.3   securities intermediary has priority over claims of the 
 39.4   securities intermediary's entitlement holders who have security 
 39.5   entitlements with respect to that financial asset if the 
 39.6   creditor has control over the financial asset.  
 39.7      (c) If a clearing corporation does not have sufficient 
 39.8   financial assets to satisfy both its obligations to entitlement 
 39.9   holders who have security entitlements with respect to a 
 39.10  financial asset and its obligation to a creditor of the clearing 
 39.11  corporation who has a security interest in that financial asset, 
 39.12  the claim of the creditor has priority over the claims of 
 39.13  entitlement holders.  
 39.14                               Part 6 
 39.15            TRANSITION PROVISIONS for Revised Article 8
 39.16       and CONFORMING AMENDMENTS to Articles 1, 5, 9, and 10
 39.17     Sec. 52.  [336.8-601] [EFFECTIVE DATE.] 
 39.18     This act takes effect January 1, 1996. 
 39.19     Sec. 53.  [336.8-602] [REPEALS.] 
 39.20     Minnesota Statutes 1994, sections 336.8-101; 336.8-102; 
 39.21  336.8-103; 336.8-104; 336.8-105; 336.8-106; 336.8-107; 
 39.22  336.8-108; 336.8-201; 336.8-202; 336.8-203; 336.8-204; 
 39.23  336.8-205; 336.8-206; 336.8-207; 336.8-208; 336.8-301; 
 39.24  336.8-302; 336.8-303; 336.8-304; 336.8-305; 336.8-306; 
 39.25  336.8-307; 336.8-308; 336.8-309; 336.8-310; 336.8-311; 
 39.26  336.8-312; 336.8-313; 336.8-314; 336.8-315; 336.8-316; 
 39.27  336.8-317; 336.8-318; 336.8-319; 336.8-320; 336.8-321; 
 39.28  336.8-401; 336.8-402; 336.8-403; 336.8-404; 336.8-405; 
 39.29  336.8-406; 336.8-407; and 336.8-408, are repealed. 
 39.30     Sec. 54.  [336.8-603] [SAVINGS CLAUSE.] 
 39.31     (a) This act does not affect an action or proceeding 
 39.32  commenced before this act takes effect.  
 39.33     (b) If a security interest in a security is perfected at 
 39.34  the date this act takes effect, and the action by which the 
 39.35  security interest was perfected would suffice to perfect a 
 39.36  security interest under this act, no further action is required 
 40.1   to continue perfection.  If a security interest in a security is 
 40.2   perfected at the date this act takes effect but the action by 
 40.3   which the security interest was perfected would not suffice to 
 40.4   perfect a security interest under this act, the security 
 40.5   interest remains perfected for a period of four months after the 
 40.6   effective date and continues perfected thereafter if appropriate 
 40.7   action to perfect under this act is taken within that period.  
 40.8   If a security interest is perfected at the date this act takes 
 40.9   effect and the security interest can be perfected by filing 
 40.10  under this act, a financing statement signed by the secured 
 40.11  party instead of the debtor may be filed within that period to 
 40.12  continue perfection or thereafter to perfect. 
 40.13                             ARTICLE 2 
 40.14                 Conforming Amendments to Article 9 
 40.15     Section 1.  Minnesota Statutes 1994, section 336.9-103, is 
 40.16  amended to read: 
 40.17     336.9-103 [PERFECTION OF SECURITY INTERESTS IN MULTIPLE 
 40.18  STATE TRANSACTIONS.] 
 40.19     (1) Documents, instruments and ordinary goods. 
 40.20     (a) This subsection applies to documents and instruments 
 40.21  and to goods other than those covered by a certificate of title 
 40.22  described in subsection (2), mobile goods described in 
 40.23  subsection (3), and minerals described in subsection (5). 
 40.24     (b) Except as otherwise provided in this subsection, 
 40.25  perfection and the effect of perfection or nonperfection of a 
 40.26  security interest in collateral are governed by the law of the 
 40.27  jurisdiction where the collateral is when the last event occurs 
 40.28  on which is based the assertion that the security interest is 
 40.29  perfected or unperfected. 
 40.30     (c) If the parties to a transaction creating a purchase 
 40.31  money security interest in goods in one jurisdiction understand 
 40.32  at the time that the security interest attaches that the goods 
 40.33  will be kept in another jurisdiction, then the law of the other 
 40.34  jurisdiction governs the perfection and the effect of perfection 
 40.35  or nonperfection of the security interest from the time it 
 40.36  attaches until 30 days after the debtor receives possession of 
 41.1   the goods and thereafter if the goods are taken to the other 
 41.2   jurisdiction before the end of the 30 day period. 
 41.3      (d) When collateral is brought into and kept in this state 
 41.4   while subject to a security interest perfected under the law of 
 41.5   the jurisdiction from which the collateral was removed, the 
 41.6   security interest remains perfected, but if action is required 
 41.7   by part 3 of this article to perfect the security interest, 
 41.8      (i) if the action is not taken before the expiration of the 
 41.9   period of perfection in the other jurisdiction or the end of 
 41.10  four months after the collateral is brought into this state, 
 41.11  whichever period first expires, the security interest becomes 
 41.12  unperfected at the end of that period and is thereafter deemed 
 41.13  to have been unperfected as against a person who became a 
 41.14  purchaser after removal; 
 41.15     (ii) if the action is taken before the expiration of the 
 41.16  period specified in subparagraph (i), the security interest 
 41.17  continues perfected thereafter; 
 41.18     (iii) for the purpose of priority over a buyer of consumer 
 41.19  goods (subsection (2) of section 336.9-307), the period of the 
 41.20  effectiveness of a filing in the jurisdiction from which the 
 41.21  collateral is removed is governed by the rules with respect to 
 41.22  perfection in subparagraphs (i) and (ii). 
 41.23     (2) Certificate of title. 
 41.24     (a) This subsection applies to goods covered by a 
 41.25  certificate of title issued under a statute of this state or of 
 41.26  another jurisdiction under the law of which indication of a 
 41.27  security interest on the certificate is required as a condition 
 41.28  of perfection. 
 41.29     (b) Except as otherwise provided in this subsection, 
 41.30  perfection and the effect of perfection or nonperfection of the 
 41.31  security interest are governed by the law (including the 
 41.32  conflict of laws rules) of the jurisdiction issuing the 
 41.33  certificate until four months after the goods are removed from 
 41.34  that jurisdiction and thereafter until the goods are registered 
 41.35  in another jurisdiction, but in any event not beyond surrender 
 41.36  of the certificate.  After the expiration of that period, the 
 42.1   goods are not covered by the certificate of title within the 
 42.2   meaning of this section. 
 42.3      (c) Except with respect to the rights of a buyer described 
 42.4   in the next paragraph, a security interest, perfected in another 
 42.5   jurisdiction otherwise than by notation on a certificate of 
 42.6   title, in goods brought into this state and thereafter covered 
 42.7   by a certificate of title issued by this state is subject to the 
 42.8   rules stated in paragraph (d) of subsection (1). 
 42.9      (d) If goods are brought into this state while a security 
 42.10  interest therein is perfected in any manner under the law of the 
 42.11  jurisdiction from which the goods are removed and a certificate 
 42.12  of title is issued by this state and the certificate does not 
 42.13  show that the goods are subject to the security interest or that 
 42.14  they may be subject to security interests not shown on the 
 42.15  certificate, the security interest is subordinate to the rights 
 42.16  of a buyer of the goods who is not in the business of selling 
 42.17  goods of that kind to the extent that the buyer gives value and 
 42.18  receives delivery of the goods after issuance of the certificate 
 42.19  and without knowledge of the security interest. 
 42.20     (3) Accounts, general intangibles and mobile goods. 
 42.21     (a) This subsection applies to accounts (other than an 
 42.22  account described in subsection (5) on minerals) and general 
 42.23  intangibles (other than uncertificated securities) and to goods 
 42.24  which are mobile and which are of a type normally used in more 
 42.25  than one jurisdiction, such as motor vehicles, trailers, rolling 
 42.26  stock, airplanes, shipping containers, road building and 
 42.27  construction machinery and commercial harvesting machinery and 
 42.28  the like, if the goods are equipment or are inventory leased or 
 42.29  held for lease by the debtor to others, and are not covered by a 
 42.30  certificate of title described in subsection (2). 
 42.31     (b) The law (including the conflict of laws rules) of the 
 42.32  jurisdiction in which the debtor is located governs the 
 42.33  perfection and the effect of perfection or nonperfection of the 
 42.34  security interest. 
 42.35     (c) If, however, the debtor is located in a jurisdiction 
 42.36  which is not a part of the United States, and which does not 
 43.1   provide for perfection of the security interest by filing or 
 43.2   recording in that jurisdiction, the law of the jurisdiction in 
 43.3   the United States in which the debtor has its major executive 
 43.4   office in the United States governs the perfection and the 
 43.5   effect of perfection or nonperfection of the security interest 
 43.6   through filing.  In the alternative, if the debtor is located in 
 43.7   a jurisdiction which is not a part of the United States or 
 43.8   Canada and the collateral is accounts or general intangibles for 
 43.9   money due or to become due, the security interest may be 
 43.10  perfected by notification to the account debtor.  As used in 
 43.11  this paragraph, "United States" includes its territories and 
 43.12  possessions and the Commonwealth of Puerto Rico. 
 43.13     (d) A debtor shall be deemed located at the debtor's place 
 43.14  of business if the debtor has one, at the chief executive office 
 43.15  if there is more than one place of business, otherwise at the 
 43.16  debtor's residence.  If, however, the debtor is a foreign air 
 43.17  carrier under the Federal Aviation Act of 1958, as amended, it 
 43.18  shall be deemed located at the designated office of the agent 
 43.19  upon whom service of process may be made on behalf of the 
 43.20  foreign air carrier. 
 43.21     (e) A security interest perfected under the law of the 
 43.22  jurisdiction of the location of the debtor is perfected until 
 43.23  the expiration of four months after a change of the debtor's 
 43.24  location to another jurisdiction, or until perfection would have 
 43.25  ceased by the law of the first jurisdiction, whichever period 
 43.26  first expires.  Unless perfected in the new jurisdiction before 
 43.27  the end of that period, it becomes unperfected thereafter and is 
 43.28  deemed to have been unperfected as against a person who became a 
 43.29  purchaser after the change. 
 43.30     (4) Chattel paper. 
 43.31     The rules stated for goods in subsection (1) apply to a 
 43.32  possessory security interest in chattel paper.  The rules stated 
 43.33  for accounts in subsection (3) apply to a nonpossessory security 
 43.34  interest in chattel paper, but the security interest may not be 
 43.35  perfected by notification to the account debtor. 
 43.36     (5) Minerals. 
 44.1      Perfection and the effect of perfection or nonperfection of 
 44.2   a security interest which is created by a debtor who has an 
 44.3   interest in minerals or the like (including oil and gas) before 
 44.4   extraction and which attaches thereto as extracted, or which 
 44.5   attaches to an account resulting from the sale thereof at the 
 44.6   wellhead or minehead are governed by the law (including the 
 44.7   conflict of laws rules) of the jurisdiction wherein the wellhead 
 44.8   or minehead is located. 
 44.9      (6) Uncertificated securities Investment property. 
 44.10     The law (including the conflict of laws rules) of the 
 44.11  jurisdiction of organization of the issuer governs the 
 44.12  perfection and the effect of perfection or nonperfection of a 
 44.13  security interest in uncertificated securities. 
 44.14     (a) This subsection applies to investment property.  
 44.15     (b) Except as otherwise provided in paragraph (f), during 
 44.16  the time that a security certificate is located in a 
 44.17  jurisdiction, perfection of a security interest, the effect of 
 44.18  perfection or nonperfection, and the priority of a security 
 44.19  interest in the certificated security represented thereby are 
 44.20  governed by the local law of that jurisdiction.  
 44.21     (c) Except as otherwise provided in paragraph (f), 
 44.22  perfection of a security interest, the effect of perfection or 
 44.23  nonperfection, and the priority of a security interest in an 
 44.24  uncertificated security are governed by the local law of the 
 44.25  issuer's jurisdiction as specified in section 336.8-110(d).  
 44.26     (d) Except as otherwise provided in paragraph (f), 
 44.27  perfection of a security interest, the effect of perfection or 
 44.28  nonperfection, and the priority of a security interest in a 
 44.29  security entitlement or securities account are governed by the 
 44.30  local law of the securities intermediary's jurisdiction as 
 44.31  specified in section 336.8-110(e).  
 44.32     (e) Except as otherwise provided in paragraph (f), 
 44.33  perfection of a security interest, the effect of perfection or 
 44.34  nonperfection, and the priority of a security interest in a 
 44.35  commodity contract or commodity account are governed by the 
 44.36  local law of the commodity intermediary's jurisdiction.  The 
 45.1   following rules determine a "commodity intermediary's 
 45.2   jurisdiction" for purposes of this paragraph:  
 45.3      (i) If an agreement between the commodity intermediary and 
 45.4   commodity customer specifies that it is governed by the law of a 
 45.5   particular jurisdiction, that jurisdiction is the commodity 
 45.6   intermediary's jurisdiction.  
 45.7      (ii) If an agreement between the commodity intermediary and 
 45.8   commodity customer does not specify the governing law as 
 45.9   provided in subparagraph (i), but expressly specifies that the 
 45.10  commodity account is maintained at an office in a particular 
 45.11  jurisdiction, that jurisdiction is the commodity intermediary's 
 45.12  jurisdiction.  
 45.13     (iii) If an agreement between the commodity intermediary 
 45.14  and commodity customer does not specify a jurisdiction as 
 45.15  provided in subparagraph (i) or (ii), the commodity 
 45.16  intermediary's jurisdiction is the jurisdiction in which is 
 45.17  located the office identified in an account statement as the 
 45.18  office serving the commodity customer's account.  
 45.19     (iv) If an agreement between the commodity intermediary and 
 45.20  commodity customer does not specify a jurisdiction as provided 
 45.21  in subparagraph (i) or (ii) and an account statement does not 
 45.22  identify an office serving the commodity customer's account as 
 45.23  provided in subparagraph (iii), the commodity intermediary's 
 45.24  jurisdiction is the jurisdiction in which is located the chief 
 45.25  executive office of the commodity intermediary.  
 45.26     (f) Perfection of a security interest by filing, automatic 
 45.27  perfection of a security interest in investment property granted 
 45.28  by a broker or securities intermediary, and automatic perfection 
 45.29  of a security interest in a commodity contract or commodity 
 45.30  account granted by a commodity intermediary are governed by the 
 45.31  local law of the jurisdiction in which the debtor is located. 
 45.32     Sec. 2.  Minnesota Statutes 1994, section 336.9-105, is 
 45.33  amended to read: 
 45.34     336.9-105 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
 45.35     (1) In this article unless the context otherwise requires: 
 45.36     (a) "Account debtor" means the person who is obligated on 
 46.1   an account, chattel paper or general intangible; 
 46.2      (b) "Chattel paper" means a writing or writings which 
 46.3   evidence both a monetary obligation and a security interest in 
 46.4   or a lease of specific goods, but a charter or other contract 
 46.5   involving the use or hire of a vessel is not chattel paper.  
 46.6   When a transaction is evidenced both by such a security 
 46.7   agreement or a lease and by an instrument or a series of 
 46.8   instruments, the group of writings taken together constitutes 
 46.9   chattel paper; 
 46.10     (c) "Collateral" means the property subject to a security 
 46.11  interest, and includes accounts and chattel paper which have 
 46.12  been sold; 
 46.13     (d) "Debtor" means the person who owes payment or other 
 46.14  performance of the obligation secured, whether or not the person 
 46.15  owns or has rights in the collateral, and includes the seller of 
 46.16  accounts or chattel paper.  Where the debtor and the owner of 
 46.17  the collateral are not the same person, the term "debtor" means 
 46.18  the owner of the collateral in any provision of the article 
 46.19  dealing with the collateral, the obligor in any provision 
 46.20  dealing with the obligation, and may include both where the 
 46.21  context so requires; 
 46.22     (e) "Deposit account" means a demand, time, savings, 
 46.23  passbook or like account maintained with a bank, savings and 
 46.24  loan association, credit union or like organization, other than 
 46.25  an account evidenced by a certificate of deposit; 
 46.26     (f) "Document" means document of title as defined in the 
 46.27  general definitions of article 1 (section 336.1-201) and a 
 46.28  receipt of the kind described in subsection (2) of section 
 46.29  336.7-201; 
 46.30     (g) "Encumbrance" includes real estate mortgages and other 
 46.31  liens on real estate and all other rights in real estate that 
 46.32  are not ownership interests; 
 46.33     (h) "Goods" includes all things which are movable at the 
 46.34  time the security interest attaches or which are fixtures 
 46.35  (section 336.9-313), but does not include money, documents, 
 46.36  instruments, investment property, accounts, chattel paper, 
 47.1   general intangibles, or minerals or the like (including oil and 
 47.2   gas) before extraction.  "Goods" also include standing timber 
 47.3   which is to be cut and removed under a conveyance or contract 
 47.4   for sale, the unborn young of animals and growing crops; 
 47.5      (i) "Instrument" means a negotiable instrument (defined in 
 47.6   section 336.3-104), or a certificated security (defined in 
 47.7   section 336.8-102) or any other writing which evidences a right 
 47.8   to the payment of money and is not itself a security agreement 
 47.9   or lease and is of a type which is in ordinary course of 
 47.10  business transferred by delivery with any necessary endorsement 
 47.11  or assignment.  The term does not include investment property; 
 47.12     (j) "Mortgage" means a consensual interest created by a 
 47.13  real estate mortgage, a trust deed on real estate, or the like; 
 47.14     (k) An advance is made "pursuant to commitment" if the 
 47.15  secured party has made a binding promise to make it, whether or 
 47.16  not a subsequent event of default or other event not within the 
 47.17  secured party's control has relieved or may relieve the secured 
 47.18  party from the obligation; 
 47.19     (l) "Security agreement" means an agreement which creates 
 47.20  or provides for a security interest; 
 47.21     (m) "Secured party" means a lender, seller or other person 
 47.22  in whose favor there is a security interest, including a person 
 47.23  to whom accounts or chattel paper have been sold.  When the 
 47.24  holders of obligations issued under an indenture of trust, 
 47.25  equipment trust agreement or the like are represented by a 
 47.26  trustee or other person, the representative is the secured 
 47.27  party; and 
 47.28     (n) "Transmitting utility" means any person engaged in the 
 47.29  railroad, street railway or trolley bus business, the electric 
 47.30  or electronics communications transmission business, the 
 47.31  transmission of goods by pipeline, or the transmission or the 
 47.32  production and transmission of electricity, steam, gas or water, 
 47.33  or the provision of sewer service.  Any person filing a 
 47.34  financing statement under this article and under authority of 
 47.35  the provisions of Minnesota Statutes 1974, Sections 300.111 to 
 47.36  300.115 shall be deemed a "transmitting utility" hereunder. 
 48.1      (2) Other definitions applying to this article and the 
 48.2   sections in which they appear are: 
 48.3      "Account," section 336.9-106. 
 48.4      "Attach," section 336.9-203. 
 48.5      "Commodity contract," section 336.9-115. 
 48.6      "Commodity customer," section 336.9-115. 
 48.7      "Commodity intermediary," section 336.9-115. 
 48.8      "Construction mortgage," section 336.9-313(1). 
 48.9      "Consumer goods," section 336.9-109(1). 
 48.10     "Control," section 336.9-115. 
 48.11     "Equipment," section 336.9-109(2). 
 48.12     "Farm products," section 336.9-109(3). 
 48.13     "Fixture," section 336.9-313. 
 48.14     "Fixture filing," section 336.9-313. 
 48.15     "General intangibles," section 336.9-106. 
 48.16     "Inventory," section 336.9-109(4). 
 48.17     "Investment property," section 336.9-115. 
 48.18     "Lien creditor," section 336.9-301(3). 
 48.19     "Motor vehicle," section 336.9-401(7). 
 48.20     "Proceeds," section 336.9-306(1). 
 48.21     "Purchase money security interest," section 336.9-107. 
 48.22     "United States," section 336.9-103. 
 48.23     (3) The following definitions in other articles apply to 
 48.24  this article: 
 48.25     "Broker," section 336.8-102. 
 48.26     "Certificated security," section 336.8-102. 
 48.27     "Check," section 336.3-104. 
 48.28     "Clearing corporation," section 336.8-102. 
 48.29     "Contract for sale," section 336.2-106. 
 48.30     "Control," section 336.8-106. 
 48.31     "Delivery," section 336.8-301. 
 48.32     "Entitlement holder," section 336.8-102. 
 48.33     "Financial asset," section 336.8-102. 
 48.34     "Holder in due course," section 336.3-302. 
 48.35     "Note," section 336.3-104. 
 48.36     "Sale," section 336.2-106. 
 49.1      "Securities intermediary," section 336.8-102. 
 49.2      "Security," section 336.8-102. 
 49.3      "Security certificate," section 336.8-102. 
 49.4      "Security entitlement," section 336.8-102. 
 49.5      "Uncertificated security," section 336.8-102. 
 49.6      (4) In addition article 1 contains general definitions and 
 49.7   principles of construction and interpretation applicable 
 49.8   throughout this article. 
 49.9      Sec. 3.  Minnesota Statutes 1994, section 336.9-106, is 
 49.10  amended to read: 
 49.11     336.9-106 [DEFINITIONS:  "ACCOUNT"; "GENERAL INTANGIBLES".] 
 49.12     "Account" means any right to payment for goods sold or 
 49.13  leased or for services rendered which is not evidenced by an 
 49.14  instrument or chattel paper whether or not it has been earned by 
 49.15  performance.  "General intangibles" means any personal property 
 49.16  (including things in action) other than goods, accounts, chattel 
 49.17  paper, documents, instruments, investment property, and money.  
 49.18  All rights earned or unearned under a charter or other contract 
 49.19  involving the use or hire of a vessel and all rights incident to 
 49.20  the charter or contract are accounts. 
 49.21     Sec. 4.  [336.9-115] [INVESTMENT PROPERTY.] 
 49.22     In this article:  
 49.23     (a) "Commodity account" means an account maintained by a 
 49.24  commodity intermediary in which a commodity contract is carried 
 49.25  for a commodity customer. 
 49.26     (b) "Commodity contract" means a commodity futures 
 49.27  contract, an option on a commodity futures contract, a commodity 
 49.28  option, or other contract that, in each case, is:  
 49.29     (i) traded on or subject to the rules of a board of trade 
 49.30  that has been designated as a contract market for such a 
 49.31  contract pursuant to the federal commodities laws; or 
 49.32     (ii) traded on a foreign commodity board of trade, 
 49.33  exchange, or market, and is carried on the books of a commodity 
 49.34  intermediary for a commodity customer. 
 49.35     (c) "Commodity customer" means a person for whom a 
 49.36  commodity intermediary carries a commodity contract on its books.
 50.1      (d) "Commodity intermediary" means:  
 50.2      (i) a person who is registered as a futures commission 
 50.3   merchant under the federal commodities laws; or 
 50.4      (ii) a person who in the ordinary course of its business 
 50.5   provides clearance or settlement services for a board of trade 
 50.6   that has been designated as a contract market pursuant to the 
 50.7   federal commodities laws.  
 50.8      (e) "Control" with respect to a certificated security, 
 50.9   uncertificated security, or security entitlement has the meaning 
 50.10  specified in section 336.8-106.  A secured party has control 
 50.11  over a commodity contract if, by agreement among the commodity 
 50.12  customer, the commodity intermediary, and the secured party, the 
 50.13  commodity intermediary has agreed that it will apply any value 
 50.14  distributed on account of the commodity contract as directed by 
 50.15  the secured party without further consent by the commodity 
 50.16  customer.  If a commodity customer grants a security interest in 
 50.17  a commodity contract to its own commodity intermediary, the 
 50.18  commodity intermediary as secured party has control.  A secured 
 50.19  party has control over a securities account or commodity account 
 50.20  if the secured party has control over all security entitlements 
 50.21  or commodity contracts carried in the securities account or 
 50.22  commodity account.  
 50.23     (f) "Investment property" means:  
 50.24     (i) a security, whether certificated or uncertificated; 
 50.25     (ii) a security entitlement; 
 50.26     (iii) a securities account; 
 50.27     (iv) a commodity contract; or 
 50.28     (v) a commodity account.  
 50.29     (2) Attachment or perfection of a security interest in a 
 50.30  securities account is also attachment or perfection of a 
 50.31  security interest in all security entitlements carried in the 
 50.32  securities account.  Attachment or perfection of a security 
 50.33  interest in a commodity account is also attachment or perfection 
 50.34  of a security interest in all commodity contracts carried in the 
 50.35  commodity account.  
 50.36     (3) A description of collateral in a security agreement or 
 51.1   financing statement is sufficient to create or perfect a 
 51.2   security interest in a certificated security, uncertificated 
 51.3   security, security entitlement, securities account, commodity 
 51.4   contract, or commodity account whether it describes the 
 51.5   collateral by those terms, or as investment property, or by 
 51.6   description of the underlying security, financial asset, or 
 51.7   commodity contract.  A description of investment property 
 51.8   collateral in a security agreement or financing statement is 
 51.9   sufficient if it identifies the collateral by specific listing, 
 51.10  by category, by quantity, by a computational or allocational 
 51.11  formula or procedure, or by any other method, if the identity of 
 51.12  the collateral is objectively determinable.  
 51.13     (4) Perfection of a security interest in investment 
 51.14  property is governed by the following rules:  
 51.15     (a) A security interest in investment property may be 
 51.16  perfected by control.  
 51.17     (b) Except as otherwise provided in paragraphs (c) and (d), 
 51.18  a security interest in investment property may be perfected by 
 51.19  filing.  
 51.20     (c) If the debtor is a broker or securities intermediary, a 
 51.21  security interest in investment property is perfected when it 
 51.22  attaches.  The filing of a financing statement with respect to a 
 51.23  security interest in investment property granted by a broker or 
 51.24  securities intermediary has no effect for purposes of perfection 
 51.25  or priority with respect to that security interest.  
 51.26     (d) If a debtor is a commodity intermediary, a security 
 51.27  interest in a commodity contract or a commodity account is 
 51.28  perfected when it attaches.  The filing of a financing statement 
 51.29  with respect to a security interest in a commodity contract or a 
 51.30  commodity account granted by a commodity intermediary has no 
 51.31  effect for purposes of perfection or priority with respect to 
 51.32  that security interest.  
 51.33     (5) Priority between conflicting security interests in the 
 51.34  same investment property is governed by the following rules: 
 51.35     (a) A security interest of a secured party who has control 
 51.36  over investment property has priority over a security interest 
 52.1   of a secured party who does not have control over the investment 
 52.2   property.  
 52.3      (b) Except as otherwise provided in paragraphs (c) and (d), 
 52.4   conflicting security interests of secured parties each of whom 
 52.5   has control rank equally.  
 52.6      (c) Except as otherwise agreed by the securities 
 52.7   intermediary, a security interest in a security entitlement or a 
 52.8   securities account granted to the debtor's own securities 
 52.9   intermediary has priority over any security interest granted by 
 52.10  the debtor to another secured party.  
 52.11     (d) Except as otherwise agreed by the commodity 
 52.12  intermediary, a security interest in a commodity contract or a 
 52.13  commodity account granted to the debtor's own commodity 
 52.14  intermediary has priority over any security interest granted by 
 52.15  the debtor to another secured party. 
 52.16     (e) Conflicting security interests granted by a broker, a 
 52.17  securities intermediary, or a commodity intermediary which are 
 52.18  perfected without control rank equally.  
 52.19     (f) In all other cases, priority between conflicting 
 52.20  security interests in investment property is governed by section 
 52.21  336.9-312(5), (6), and (7).  Section 336.9-312(4) does not apply 
 52.22  to investment property.  
 52.23     (6) If a security certificate in registered form is 
 52.24  delivered to a secured party pursuant to agreement, a written 
 52.25  security agreement is not required for attachment or 
 52.26  enforceability of the security interest, delivery suffices for 
 52.27  perfection of the security interest, and the security interest 
 52.28  has priority over a conflicting security interest perfected by 
 52.29  means other than control, even if a necessary endorsement is 
 52.30  lacking. 
 52.31     Sec. 5.  [336.9-116] [SECURITY INTEREST ARISING IN PURCHASE 
 52.32  OR DELIVERY OF FINANCIAL ASSET.] 
 52.33     (1) If a person buys a financial asset through a securities 
 52.34  intermediary in a transaction in which the buyer is obligated to 
 52.35  pay the purchase price to the securities intermediary at the 
 52.36  time of the purchase, and the securities intermediary credits 
 53.1   the financial asset to the buyer's securities account before the 
 53.2   buyer pays the securities intermediary, the securities 
 53.3   intermediary has a security interest in the buyer's security 
 53.4   entitlement securing the buyer's obligation to pay.  A security 
 53.5   agreement is not required for attachment or enforceability of 
 53.6   the security interest, and the security interest is 
 53.7   automatically perfected. 
 53.8      (2) If a certificated security, or other financial asset 
 53.9   represented by a writing which in the ordinary course of 
 53.10  business is transferred by delivery with any necessary 
 53.11  endorsement or assignment is delivered pursuant to an agreement 
 53.12  between persons in the business of dealing with such securities 
 53.13  or financial assets and the agreement calls for delivery versus 
 53.14  payment, the person delivering the certificate or other 
 53.15  financial asset has a security interest in the certificated 
 53.16  security or other financial asset securing the seller's right to 
 53.17  receive payment.  A security agreement is not required for 
 53.18  attachment or enforceability of the security interest, and the 
 53.19  security interest is automatically perfected.  
 53.20     Sec. 6.  Minnesota Statutes 1994, section 336.9-203, is 
 53.21  amended to read: 
 53.22     336.9-203 [ATTACHMENT AND ENFORCEABILITY OF SECURITY 
 53.23  INTEREST; PROCEEDS; FORMAL REQUISITES.] 
 53.24     (1) Subject to the provisions of section 336.4-210 on the 
 53.25  security interest of a collecting bank, section 336.8-321 
 53.26  sections 336.9-115 and 336.9-116 on security interests 
 53.27  in securities investment property and section 336.9-113 on a 
 53.28  security interest arising under the article on sales, a security 
 53.29  interest is not enforceable against the debtor or third parties 
 53.30  with respect to the collateral and does not attach unless: 
 53.31     (a) the collateral is in the possession of the secured 
 53.32  party pursuant to agreement, the collateral is investment 
 53.33  property and the secured party has control pursuant to 
 53.34  agreement, or the debtor has signed a security agreement which 
 53.35  contains a description of the collateral and, in addition, when 
 53.36  the security interest covers crops growing or to be grown or 
 54.1   timber to be cut, a description of the land concerned; 
 54.2      (b) value has been given; and 
 54.3      (c) the debtor has rights in the collateral. 
 54.4      (2) A security interest attaches when it becomes 
 54.5   enforceable against the debtor with respect to the collateral.  
 54.6   Attachment occurs as soon as all of the events specified in 
 54.7   subsection (1) have taken place unless explicit agreement 
 54.8   postpones the time of attaching. 
 54.9      (3) Unless otherwise agreed a security agreement gives the 
 54.10  secured party the rights to proceeds provided by section 
 54.11  336.9-306. 
 54.12     (4) A transaction, although subject to this article, is 
 54.13  also subject to Minnesota Statutes, Sections 48.153 to 48.157; 
 54.14  Chapters 52, 53, and 56; and Sections 168.66 to 168.77, 222.13 
 54.15  to 222.16, and 334.01 to 334.06, and in the case of conflict 
 54.16  between the provisions of this article and any such statute, the 
 54.17  provisions of such statute control.  Failure to comply with any 
 54.18  applicable statute has only the effect which is specified 
 54.19  therein. 
 54.20     Sec. 7.  Minnesota Statutes 1994, section 336.9-301, is 
 54.21  amended to read: 
 54.22     336.9-301 [PERSONS WHO TAKE PRIORITY OVER UNPERFECTED 
 54.23  SECURITY INTERESTS; RIGHT OF "LIEN CREDITOR."] 
 54.24     (1) Except as otherwise provided in subsection (2), an 
 54.25  unperfected security interest is subordinate to the rights of 
 54.26     (a) persons entitled to priority under section 336.9-312; 
 54.27     (b) a person who becomes a lien creditor before the 
 54.28  security interest is perfected; 
 54.29     (c) in the case of goods, instruments, documents, and 
 54.30  chattel paper, a person who is not a secured party and who is a 
 54.31  transferee in bulk or other buyer not in ordinary course of 
 54.32  business, or is a buyer of farm products in the ordinary course 
 54.33  of business, to the extent that the person gives value and 
 54.34  receives delivery of the collateral without knowledge of the 
 54.35  security interest and before it is perfected; 
 54.36     (d) in the case of accounts and, general intangibles, and 
 55.1   investment property, a person who is not a secured party and who 
 55.2   is a transferee to the extent that the person gives value 
 55.3   without knowledge of the security interest and before it is 
 55.4   perfected. 
 55.5      (2) If the secured party files with respect to a purchase 
 55.6   money security interest before or within 20 days after the 
 55.7   debtor receives possession of the collateral, the secured party 
 55.8   takes priority over the rights of a transferee in bulk or of a 
 55.9   lien creditor which arise between the time the security interest 
 55.10  attaches and the time of filing. 
 55.11     (3) A "lien creditor" means a creditor who has acquired a 
 55.12  lien on the property involved by attachment, levy or the like 
 55.13  and includes an assignee for benefit of creditors from the time 
 55.14  of assignment, and a trustee in bankruptcy from the date of the 
 55.15  filing of the petition or a receiver in equity from the time of 
 55.16  appointment. 
 55.17     (4) A person who becomes a lien creditor while a security 
 55.18  interest is perfected takes subject to the security interest 
 55.19  only to the extent that it secures advances made before the 
 55.20  person becomes a lien creditor or within 45 days thereafter or 
 55.21  made without knowledge of the lien or pursuant to a commitment 
 55.22  entered into without knowledge of the lien. 
 55.23     Sec. 8.  Minnesota Statutes 1994, section 336.9-302, is 
 55.24  amended to read: 
 55.25     336.9-302 [WHEN FILING IS REQUIRED TO PERFECT SECURITY 
 55.26  INTEREST; SECURITY INTERESTS TO WHICH FILING PROVISIONS OF THIS 
 55.27  ARTICLE DO NOT APPLY.] 
 55.28     (1) A financing statement must be filed to perfect all 
 55.29  security interest except the following: 
 55.30     (a) A security interest in collateral in possession of the 
 55.31  secured party under section 336.9-305; 
 55.32     (b) A security interest temporarily perfected in 
 55.33  instruments, certificated securities, or documents without 
 55.34  delivery under section 336.9-304 or in proceeds for a 20 day 
 55.35  period under section 336.9-306; 
 55.36     (c) A security interest created by an assignment of a 
 56.1   beneficial interest in a trust or a decedent's estate; 
 56.2      (d) A purchase money security interest in consumer goods; 
 56.3   but filing is required for a motor vehicle required to be 
 56.4   registered; and fixture filing is required for priority over 
 56.5   conflicting interests in fixtures to the extent provided in 
 56.6   section 336.9-313; 
 56.7      (e) An assignment of accounts which does not alone or in 
 56.8   conjunction with other assignments to the same assignee transfer 
 56.9   a significant part of the outstanding accounts of the assignor; 
 56.10     (f) A security interest of a collecting bank (section 
 56.11  336.4-210) or in securities (section 336.8-321) or arising under 
 56.12  the article on sales (see section 336.9-113) or covered in 
 56.13  subsection (3) of this section; 
 56.14     (g) An assignment for the benefit of all the creditors of 
 56.15  the transferor, and subsequent transfers by the assignee 
 56.16  thereunder; 
 56.17     (h) A security interest in investment property which is 
 56.18  perfected without filing under section 336.9-115 or 336.9-116. 
 56.19     (2) If a secured party assigns a perfected security 
 56.20  interest, no filing under this article is required in order to 
 56.21  continue the perfected status of the security interest against 
 56.22  creditors of and transferees from the original debtor. 
 56.23     (3) The filing of a financing statement otherwise required 
 56.24  by this article is not necessary or effective to perfect a 
 56.25  security interest in property subject to the following statutes 
 56.26  or treaties; except that to the extent such statutes or treaties 
 56.27  are silent on a specific matter, the provisions of this article 
 56.28  shall govern: 
 56.29     (a) a statute or treaty of the United States which provides 
 56.30  for a national or international registration or a national or 
 56.31  international certificate of title or which specifies a place of 
 56.32  filing different from that specified in this article for filing 
 56.33  of the security interest; or 
 56.34     (b) the following statutes of this state; 
 56.35     (i) Sections 168A.01 to 168A.31 and 86B.820 to 86B.920; but 
 56.36  during any period in which collateral is inventory held for sale 
 57.1   by a person who is in the business of selling goods of that 
 57.2   kind, the filing provisions of this article (part 4) apply to a 
 57.3   security interest in that collateral created by the person as a 
 57.4   debtor; or 
 57.5      (ii) Sections 300.11 to 300.115. 
 57.6      (c) a certificate of title statute of another jurisdiction 
 57.7   under the law of which indication of a security interest on the 
 57.8   certificate is required as a condition of perfection (subsection 
 57.9   (2) of section 336.9-103). 
 57.10     (4) Compliance with a statute or treaty described in 
 57.11  subsection (3) is equivalent to the filing of a financing 
 57.12  statement under this article, and a security interest in 
 57.13  property subject to the statute or treaty can be perfected only 
 57.14  by compliance therewith except as provided in section 336.9-103 
 57.15  on multiple state transactions.  A security interest perfected 
 57.16  by compliance with such a statute or treaty is governed by this 
 57.17  article in all respects not inconsistent with the provisions of 
 57.18  the statute or treaty under which it was perfected, provided 
 57.19  that this article shall not be deemed inconsistent if it 
 57.20  provides for a more extensive duration of effectiveness. 
 57.21     Sec. 9.  Minnesota Statutes 1994, section 336.9-304, is 
 57.22  amended to read: 
 57.23     336.9-304 [PERFECTION OF SECURITY INTEREST IN INSTRUMENTS, 
 57.24  DOCUMENTS, AND GOODS COVERED BY DOCUMENTS; PERFECTION BY 
 57.25  PERMISSIVE FILING; TEMPORARY PERFECTION WITHOUT FILING OR 
 57.26  TRANSFER OF POSSESSION.] 
 57.27     (1) A security interest in chattel paper or negotiable 
 57.28  documents may be perfected by filing.  A security interest in 
 57.29  money or instruments (other than certificated securities or 
 57.30  instruments which constitute part of chattel paper) can be 
 57.31  perfected only by the secured party's taking possession, except 
 57.32  as provided in subsections (4) and (5) of this section and 
 57.33  subsections (2) and (3) of section 336.9-306 on proceeds. 
 57.34     (2) During the period that goods are in the possession of 
 57.35  the issuer of a negotiable document therefor, a security 
 57.36  interest in the goods is perfected by perfecting a security 
 58.1   interest in the document, and any security interest in the goods 
 58.2   otherwise perfected during such period is subject thereto. 
 58.3      (3) A security interest in goods in the possession of a 
 58.4   bailee other than one who has issued a negotiable document 
 58.5   therefor is perfected by issuance of a document in the name of 
 58.6   the secured party or by the bailee's receipt of notification of 
 58.7   the secured party's interest or by filing as to the goods. 
 58.8      (4) A security interest in instruments (other than 
 58.9   certificated securities), certificated securities, or negotiable 
 58.10  documents is perfected without filing or the taking of 
 58.11  possession for a period of 21 days from the time it attaches to 
 58.12  the extent that it arises for new value given under a written 
 58.13  security agreement. 
 58.14     (5) A security interest remains perfected for a period of 
 58.15  21 days without filing where a secured party having a perfected 
 58.16  security interest in an instrument (other than a certificated 
 58.17  security), a certificated security, a negotiable document, or 
 58.18  goods in possession of a bailee other than one who has issued a 
 58.19  negotiable document therefor: 
 58.20     (a) makes available to the debtor the goods or documents 
 58.21  representing the goods for the purpose of ultimate sale or 
 58.22  exchange or for the purpose of loading, unloading, storing, 
 58.23  shipping, transshipping, manufacturing, processing or otherwise 
 58.24  dealing with them in a manner preliminary to their sale or 
 58.25  exchange but priority between conflicting security interests in 
 58.26  the goods is subject to subsection (3) of section 336.9-312; or 
 58.27     (b) delivers the instrument or certificated security to the 
 58.28  debtor for the purpose of ultimate sale or exchange or of 
 58.29  presentation, collection, renewal, or registration of transfer. 
 58.30     (6) After the 21 day period in subsections (4) and (5) 
 58.31  perfection depends upon compliance with applicable provisions of 
 58.32  this article. 
 58.33     Sec. 10.  Minnesota Statutes 1994, section 336.9-305, is 
 58.34  amended to read: 
 58.35     336.9-305 [WHEN POSSESSION BY SECURED PARTY PERFECTS 
 58.36  SECURITY INTEREST WITHOUT FILING.] 
 59.1      A security interest in letters of credit and advices of 
 59.2   credit (subsection (2) (a) of section 336.5-116), goods, 
 59.3   instruments (other than certificated securities), money, 
 59.4   negotiable documents, or chattel paper may be perfected by the 
 59.5   secured party's taking possession of the collateral.  If such 
 59.6   collateral other than goods covered by a negotiable document is 
 59.7   held by a bailee, the secured party is deemed to have possession 
 59.8   from the time the bailee receives notification of the secured 
 59.9   party's interest.  A security interest is perfected by 
 59.10  possession from the time possession is taken without relation 
 59.11  back and continues only so long as possession is retained, 
 59.12  unless otherwise specified in this article.  The security 
 59.13  interest may be otherwise perfected as provided in this article 
 59.14  before or after the period of possession by the secured party. 
 59.15     Sec. 11.  Minnesota Statutes 1994, section 336.9-306, is 
 59.16  amended to read: 
 59.17     336.9-306 ["PROCEEDS"; SECURED PARTY'S RIGHTS ON 
 59.18  DISPOSITION OF COLLATERAL.] 
 59.19     (1) "Proceeds" includes whatever is received upon the sale, 
 59.20  exchange, collection or other disposition of collateral or 
 59.21  proceeds.  Insurance payable by reason of loss or damage to the 
 59.22  collateral is proceeds, except to the extent that it is payable 
 59.23  to a person other than a party to the security agreement.  Any 
 59.24  payments or distributions made with respect to investment 
 59.25  property collateral are proceeds.  Money, checks, deposit 
 59.26  accounts, and the like, are "cash proceeds."  All other proceeds 
 59.27  are "noncash proceeds." 
 59.28     (2) Except where this article otherwise provides, a 
 59.29  security interest continues in collateral notwithstanding sale, 
 59.30  exchange or other disposition thereof unless the disposition was 
 59.31  authorized by the secured party in the security agreement or 
 59.32  otherwise, and also continues in any identifiable proceeds 
 59.33  including collections received by the debtor. 
 59.34     (3) The security interest in proceeds is a continuously 
 59.35  perfected security interest if the interest in the original 
 59.36  collateral was perfected but it ceases to be a perfected 
 60.1   security interest and becomes unperfected 20 days after receipt 
 60.2   of the proceeds by the debtor unless 
 60.3      (a) a filed financing statement covers the original 
 60.4   collateral and the proceeds are collateral in which a security 
 60.5   interest may be perfected by filing in the office or offices 
 60.6   where the financing statement has been filed and, if the 
 60.7   proceeds are acquired with cash proceeds, the description of 
 60.8   collateral in the financing statement indicates the types of 
 60.9   property constituting the proceeds; or 
 60.10     (b) a filed financing statement covers the original 
 60.11  collateral and the proceeds are identifiable cash proceeds; or 
 60.12     (c) the original collateral was investment property and the 
 60.13  proceeds are identifiable cash proceeds; or 
 60.14     (d) the security interest in the proceeds is perfected 
 60.15  before the expiration of the 20 day period. 
 60.16     Except as provided in this section, a security interest in 
 60.17  proceeds can be perfected only by the methods or under the 
 60.18  circumstances permitted in this article for original collateral 
 60.19  of the same type. 
 60.20     (4) In the event of insolvency proceedings instituted by or 
 60.21  against a debtor, a secured party with a perfected security 
 60.22  interest in proceeds has a perfected security interest only in 
 60.23  the following proceeds: 
 60.24     (a) in identifiable noncash proceeds and in separate 
 60.25  deposit accounts containing only proceeds; 
 60.26     (b) in identifiable cash proceeds in the form of money 
 60.27  which is neither commingled with other money nor deposited in a 
 60.28  deposit account prior to the insolvency proceedings; 
 60.29     (c) in identifiable cash proceeds in the form of checks and 
 60.30  the like which are not deposited in a deposit account prior to 
 60.31  the insolvency proceedings; and 
 60.32     (d) in all cash and deposit accounts of the debtor, in 
 60.33  which proceeds have been commingled with other funds, but the 
 60.34  perfected security interest under this paragraph (d) is 
 60.35     (i) subject to any right of setoff; and 
 60.36     (ii) limited to an amount not greater than the amount of 
 61.1   any cash proceeds received by the debtor within 20 days before 
 61.2   the institution of the insolvency proceedings less the sum of 
 61.3   (I) the payments to the secured party on account of cash 
 61.4   proceeds received by the debtor during such period and (II) the 
 61.5   cash proceeds received by the debtor during such period to which 
 61.6   the secured party is entitled under paragraphs (a) to (c) of 
 61.7   this subsection (4). 
 61.8      (5) If a sale of goods results in an account or chattel 
 61.9   paper which is transferred by the seller to a secured party, and 
 61.10  if the goods are returned to or are repossessed by the seller or 
 61.11  the secured party, the following rules determine priorities: 
 61.12     (a) If the goods were collateral at the time of sale for an 
 61.13  indebtedness of the seller which is still unpaid, the original 
 61.14  security interest attaches again to the goods and continues as a 
 61.15  perfected security interest if it was perfected at the time when 
 61.16  the goods were sold.  If the security interest was originally 
 61.17  perfected by a filing which is still effective, nothing further 
 61.18  is required to continue the perfected status; in any other case, 
 61.19  the secured party must take possession of the returned or 
 61.20  repossessed goods or must file. 
 61.21     (b) An unpaid transferee of the chattel paper has a 
 61.22  security interest in the goods against the transferor.  Such 
 61.23  security interest is prior to a security interest asserted under 
 61.24  paragraph (a) to the extent that the transferee of the chattel 
 61.25  paper was entitled to priority under section 336.9-308. 
 61.26     (c) An unpaid transferee of the account has a security 
 61.27  interest in the goods against the transferor.  Such security 
 61.28  interest is subordinate to a security interest asserted under 
 61.29  paragraph (a). 
 61.30     (d) A security interest of an unpaid transferee asserted 
 61.31  under paragraph (b) or (c) must be perfected for protection 
 61.32  against creditors of the transferor and purchasers of the 
 61.33  returned or repossessed goods. 
 61.34     Sec. 12.  Minnesota Statutes 1994, section 336.9-309, is 
 61.35  amended to read: 
 61.36     336.9-309 [PROTECTION OF PURCHASERS OF INSTRUMENTS, 
 62.1   DOCUMENTS, AND SECURITIES.] 
 62.2      Nothing in this article limits the rights of a holder in 
 62.3   due course of a negotiable instrument (section 336.3-302) or a 
 62.4   holder to whom a negotiable document of title has been duly 
 62.5   negotiated (section 336.7-501) or a bona fide protected 
 62.6   purchaser of a security (section 336.8-302 336.8-303) and the 
 62.7   holders or purchasers take priority over an earlier security 
 62.8   interest even though perfected.  Filing under this article does 
 62.9   not constitute notice of the security interest to the holders or 
 62.10  purchasers. 
 62.11     Sec. 13.  Minnesota Statutes 1994, section 336.9-312, is 
 62.12  amended to read: 
 62.13     336.9-312 [PRIORITIES AMONG CONFLICTING SECURITY INTERESTS 
 62.14  IN THE SAME COLLATERAL.] 
 62.15     (1) The rules of priority stated in other sections of this 
 62.16  part and in the following sections shall govern when 
 62.17  applicable:  section 336.4-210 with respect to the security 
 62.18  interests of collecting banks in items being collected, 
 62.19  accompanying documents and proceeds; section 336.9-103 on 
 62.20  security interests related to other jurisdictions; section 
 62.21  336.9-114 on consignments; section 336.9-115 on security 
 62.22  interests in investment property. 
 62.23     (2) A perfected security interest in crops for new value 
 62.24  given to enable the debtor to produce the crops during the 
 62.25  production season and given not more than three months before 
 62.26  the crops become growing crops by planting or otherwise takes 
 62.27  priority over an earlier perfected security interest to the 
 62.28  extent that such earlier interest secures obligations due more 
 62.29  than six months before the crops become growing crops by 
 62.30  planting or otherwise, even though the person giving new value 
 62.31  had knowledge of the earlier security interest. 
 62.32     (3) A perfected purchase money security interest in 
 62.33  inventory has priority over a conflicting security interest in 
 62.34  the same inventory and also has priority in identifiable cash 
 62.35  proceeds received on or before the delivery of the inventory to 
 62.36  a buyer if 
 63.1      (a) the purchase money security interest is perfected at 
 63.2   the time the debtor receives possession of the inventory; and 
 63.3      (b) the purchase money secured party gives notification in 
 63.4   writing to the holder of the conflicting security interest if 
 63.5   the holder had filed a financing statement covering the same 
 63.6   types of inventory (i) before the date of the filing made by the 
 63.7   purchase money secured party, or (ii) before the beginning of 
 63.8   the 21 day period where the purchase money security interest is 
 63.9   temporarily perfected without filing or possession (subsection 
 63.10  (5) of section 336.9-304); and 
 63.11     (c) the holder of the conflicting security interest 
 63.12  receives the notification within five years before the debtor 
 63.13  receives possession of the inventory; and 
 63.14     (d) the notification states that the person giving the 
 63.15  notice has or expects to acquire a purchase money security 
 63.16  interest in inventory of the debtor, describing such inventory 
 63.17  by item or type. 
 63.18     (4) A purchase money security interest in collateral other 
 63.19  than inventory has priority over a conflicting security interest 
 63.20  in the same collateral or its proceeds if the purchase money 
 63.21  security interest is perfected at the time the debtor receives 
 63.22  possession of the collateral or within 20 days thereafter. 
 63.23     (5) In all cases not governed by other rules stated in this 
 63.24  section (including cases of purchase money security interests 
 63.25  which do not qualify for the special priorities set forth in 
 63.26  subsections (3) and (4) of this section), priority between 
 63.27  conflicting security interests in the same collateral shall be 
 63.28  determined according to the following rules: 
 63.29     (a) Conflicting security interests rank according to 
 63.30  priority in time of filing or perfection.  Priority dates from 
 63.31  the time a filing is first made covering the collateral or the 
 63.32  time the security interest is first perfected, whichever is 
 63.33  earlier, provided that there is no period thereafter when there 
 63.34  is neither filing nor perfection. 
 63.35     (b) so long as conflicting security interests are 
 63.36  unperfected, the first to attach has priority. 
 64.1      (6) For the purposes of subsection (5) a date of filing or 
 64.2   perfection as to collateral is also a date of filing or 
 64.3   perfection as to proceeds. 
 64.4      (7) If future advances are made while a security interest 
 64.5   is perfected by filing, the taking of possession, or under 
 64.6   section 336.8-321 on securities 336.9-115 or 336.9-116 on 
 64.7   investment property, the security interest has the same priority 
 64.8   for the purposes of subsection (5) with respect to the future 
 64.9   advances as it does with respect to the first advance.  If a 
 64.10  commitment is made before or while the security interest is so 
 64.11  perfected, the security interest has the same priority with 
 64.12  respect to advances made pursuant thereto.  In other cases a 
 64.13  perfected security interest has priority from the date the 
 64.14  advance is made. 
 64.15                             ARTICLE 3 
 64.16         Conforming Amendments to Articles 1, 4, 5, and 10
 64.17     Section 1.  Minnesota Statutes 1994, section 336.1-105, is 
 64.18  amended to read: 
 64.19     336.1-105 [TERRITORIAL APPLICATION OF THE CHAPTER; PARTIES' 
 64.20  POWER TO CHOOSE APPLICABLE LAW.] 
 64.21     (1) Except as provided hereafter in this section, when a 
 64.22  transaction bears a reasonable relation to this state and also 
 64.23  to another state or nation the parties may agree that the law 
 64.24  either of this state or of such other state or nation shall 
 64.25  govern their rights and duties.  Failing such agreement this 
 64.26  chapter applies to transactions bearing an appropriate relation 
 64.27  to this state. 
 64.28     (2) Where one of the following provisions of this chapter 
 64.29  specifies the applicable law, that provision governs and a 
 64.30  contrary agreement is effective only to the extent permitted by 
 64.31  the law (including the conflict of laws rules) so specified: 
 64.32     Rights of creditors against sold goods.  Section 336.2-402. 
 64.33     Applicability of the article on leases.  Sections 
 64.34  336.2A-105 and 336.2A-106.  
 64.35     Applicability of the article on bank deposits and 
 64.36  collections.  Section 336.4-102. 
 65.1      Governing law in the article on funds transfers.  Section 
 65.2   336.4A-507. 
 65.3      Applicability of the article on investment securities. 
 65.4   Section 336.8-106 336.8-110. 
 65.5      Perfection provisions of the article on secured 
 65.6   transactions.  Section 336.9-103. 
 65.7      Sec. 2.  Minnesota Statutes 1994, section 336.1-206, is 
 65.8   amended to read: 
 65.9      336.1-206 [STATUTE OF FRAUDS FOR KINDS OF PERSONAL PROPERTY 
 65.10  NOT OTHERWISE COVERED.] 
 65.11     (1) Except in the cases described in subsection (2) of this 
 65.12  section a contract for the sale of personal property is not 
 65.13  enforceable by way of action or defense beyond $5,000 in amount 
 65.14  or value of remedy unless there is some writing which indicates 
 65.15  that a contract for sale has been made between the parties at a 
 65.16  defined or stated price, reasonably identifies the subject 
 65.17  matter, and is signed by the party against whom enforcement is 
 65.18  sought or by that party's authorized agent.  
 65.19     (2) Subsection (1) of this section does not apply to 
 65.20  contracts for the sale of goods (section 336.2-201) nor of 
 65.21  securities (section 336.8-319 336.8-113) nor to security 
 65.22  agreements (section 336.9-203).  
 65.23     Sec. 3.  Minnesota Statutes 1994, section 336.4-104, is 
 65.24  amended to read: 
 65.25     336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
 65.26     (a) In this article, unless the context otherwise requires: 
 65.27     (1) "Account" means any deposit or credit account with a 
 65.28  bank, including a demand, time, savings, passbook, share draft, 
 65.29  or like account, other than an account evidenced by a 
 65.30  certificate of deposit; 
 65.31     (2) "Afternoon" means the period of a day between noon and 
 65.32  midnight; 
 65.33     (3) "Banking day" means that part of any day, excluding 
 65.34  Saturday, Sunday, and holidays, on which a bank is open to the 
 65.35  public for carrying on substantially all of its banking 
 65.36  functions; 
 66.1      (4) "Clearinghouse" means an association of banks or other 
 66.2   payors regularly clearing items; 
 66.3      (5) "Customer" means a person having an account with a bank 
 66.4   or for whom a bank has agreed to collect items, including a bank 
 66.5   that maintains an account at another bank; 
 66.6      (6) "Documentary draft" means a draft to be presented for 
 66.7   acceptance or payment if specified documents, certificated 
 66.8   securities (section 336.8-102) or instructions for 
 66.9   uncertificated securities (section 336.8-308 336.8-102), or 
 66.10  other certificates, statements, or the like are to be received 
 66.11  by the drawee or other payor before acceptance or payment of the 
 66.12  draft; 
 66.13     (7) "Draft" means a draft as defined in section 336.3-104 
 66.14  or an item, other than an instrument, that is an order; 
 66.15     (8) "Drawee" means a person ordered in a draft to make 
 66.16  payment; 
 66.17     (9) "Item" means an instrument or a promise or order to pay 
 66.18  money handled by a bank for collection or payment.  The term 
 66.19  does not include a payment order governed by article 4A or a 
 66.20  credit or debit card slip; 
 66.21     (10) "Midnight deadline" with respect to a bank is midnight 
 66.22  on its next banking day following the banking day on which it 
 66.23  receives the relevant item or notice or from which the time for 
 66.24  taking action commences to run, whichever is later; 
 66.25     (11) "Settle" means to pay in cash, by clearinghouse 
 66.26  settlement, in a charge or credit or by remittance, or otherwise 
 66.27  as agreed.  A settlement may be either provisional or final; 
 66.28     (12) "Suspends payments" with respect to a bank means that 
 66.29  it has been closed by order of the supervisory authorities, that 
 66.30  a public officer has been appointed to take it over, or that it 
 66.31  ceases or refuses to make payments in the ordinary course of 
 66.32  business. 
 66.33     (b) Other definitions applying to this article and the 
 66.34  sections in which they appear are: 
 66.35     "Agreement for electronic presentment," section 336.4-110 
 66.36     "Bank," section 336.4-105 
 67.1      "Collecting bank," section 336.4-105 
 67.2      "Depositary bank," section 336.4-105 
 67.3      "Intermediary bank," section 336.4-105 
 67.4      "Payor bank," section 336.4-105 
 67.5      "Presenting bank," section 336.4-105 
 67.6      "Presentment notice," section 336.4-110 
 67.7      (c) The following definitions in other articles apply to 
 67.8   this article: 
 67.9      "Acceptance," section 336.3-409 
 67.10     "Alteration," section 336.3-407 
 67.11     "Cashier's check," section 336.3-104 
 67.12     "Certificate of deposit," section 336.3-104 
 67.13     "Certified check," section 336.3-409 
 67.14     "Check," section 336.3-104 
 67.15     "Good faith," section 336.3-103 
 67.16     "Holder in due course," section 336.3-302 
 67.17     "Instrument," section 336.3-104 
 67.18     "Notice of dishonor," section 336.3-503 
 67.19     "Order," section 336.3-103 
 67.20     "Ordinary care," section 336.3-103 
 67.21     "Person entitled to enforce," section 336.3-301 
 67.22     "Presentment," section 336.3-501 
 67.23     "Promise," section 336.3-103 
 67.24     "Prove," section 336.3-103 
 67.25     "Teller's check," section 336.3-104 
 67.26     "Unauthorized signature," section 336.3-403 
 67.27     (d) In addition, article 1 contains general definitions and 
 67.28  principles of construction and interpretation applicable 
 67.29  throughout this article. 
 67.30     Sec. 4.  Minnesota Statutes 1994, section 336.5-114, is 
 67.31  amended to read: 
 67.32     336.5-114 [ISSUER'S DUTY AND PRIVILEGE TO HONOR; RIGHT TO 
 67.33  REIMBURSEMENT.] 
 67.34     (1) An issuer must honor a draft or demand for payment 
 67.35  which complies with the terms of the relevant credit regardless 
 67.36  of whether the goods or documents conform to the underlying 
 68.1   contract for sale or other contract between the customer and the 
 68.2   beneficiary.  The issuer is not excused from honor of such a 
 68.3   draft or demand by reason of an additional general term that all 
 68.4   documents must be satisfactory to the issuer, but an issuer may 
 68.5   require that specified documents must be satisfactory to it. 
 68.6      (2) Unless otherwise agreed when documents appear on their 
 68.7   face to comply with the terms of a credit but a required 
 68.8   document does not in fact conform to the warranties made on 
 68.9   negotiation or transfer of a document of title (section 
 68.10  336.7-507) or of a certificated security (section 336.8-306 
 68.11  336.8-108) or is forged or fraudulent or there is fraud in the 
 68.12  transaction: 
 68.13     (a) the issuer must honor the draft on demand for payment 
 68.14  if honor is demanded by a negotiating bank or other holder of 
 68.15  the draft or demand which has taken the draft or demand under 
 68.16  the credit and under circumstances which would make it a holder 
 68.17  in due course (section 336.3-302) and in an appropriate case 
 68.18  would make it a person to whom a document of title has been duly 
 68.19  negotiated (section 336.7-502) or a bona fide purchaser of a 
 68.20  certificated security (section 336.8-302); and 
 68.21     (b) in all other cases as against its customer, an issuer 
 68.22  acting in good faith may honor the draft or demand for payment 
 68.23  despite notification from the customer of fraud, forgery or 
 68.24  other defect not apparent on the face of the documents but a 
 68.25  court of appropriate jurisdiction may enjoin such honor. 
 68.26     (3) Unless otherwise agreed an issuer which has duly 
 68.27  honored a draft or demand for payment is entitled to immediate 
 68.28  reimbursement of any payment made under the credit and to be put 
 68.29  in effectively available funds not later than the day before 
 68.30  maturity of any acceptance made under the credit. 
 68.31     (4) When a credit provides for payment by the issuer on 
 68.32  receipt of notice that the required documents are in the 
 68.33  possession of a correspondent or other agent of the issuer 
 68.34     (a) any payment made on receipt of such notice is 
 68.35  conditional; and 
 68.36     (b) the issuer may reject documents which do not comply 
 69.1   with the credit if it does so within three banking days 
 69.2   following its receipt of the documents; and 
 69.3      (c) in the event of such rejection, the issuer is entitled 
 69.4   by chargeback or otherwise to return of the payment made. 
 69.5      (5) In the case covered by subsection (4) failure to reject 
 69.6   documents within the time specified in subparagraph (b) 
 69.7   constitutes acceptance of the documents and makes the payment 
 69.8   final in favor of the beneficiary. 
 69.9      Sec. 5.  Minnesota Statutes 1994, section 336.10-104, is 
 69.10  amended to read: 
 69.11     336.10-104 [LAWS NOT REPEALED.] 
 69.12     (1) The article on documents of title (article 7) does not 
 69.13  repeal or modify any laws prescribing the form or contents of 
 69.14  documents of title or the services or facilities to be afforded 
 69.15  by bailees, or otherwise regulating bailees' businesses in 
 69.16  respects not specifically dealt with herein; but the fact that 
 69.17  such laws are violated does not affect the status of a document 
 69.18  of title which otherwise complies with the definition of a 
 69.19  document of title (section 336.1-201).  
 69.20     (2) This chapter does not repeal Minnesota Statutes 1961, 
 69.21  Sections 520.21 to 520.31, cited as the uniform act for the 
 69.22  simplification of fiduciary security transfers, and if in any 
 69.23  respect there is any inconsistency between that act and the 
 69.24  article of this chapter on investment securities (article 8) the 
 69.25  provisions of the former act shall control.