H 206 — An act relating to the Uniform Commercial Code

BILL AS PASSED BY THE HOUSE H.206 Page 20 of 124 § 4A—202.

AUTHORIZED AND VERIFIED PAYMENT ORDERS * * * (b) If a bank and its customer have agreed that the authenticity of payment orders issued to the bank in the name of the customer as sender will be verified VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 20 of 124 pursuant to a security procedure, a payment order received by the receiving bank is effective as the order of the customer, whether or not authorized, if (i) the security procedure is a commercially reasonable method of providing security against unauthorized payment orders, and (ii) the bank proves that it accepted the payment order in good faith and in compliance with the bank’s obligations under the security procedure and any written agreement or instruction of the customer, evidenced by a record, restricting acceptance of payment orders issued in the name of the customer.

(c) Commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer expressed to the bank, the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer to the bank, alternative security procedures offered to the customer, and security BILL AS PASSED BY THE HOUSE H.206 Page 21 of 124 procedures in general use by customers and receiving banks similarly situated.

A security procedure is deemed to be commercially reasonable if (i) the security procedure was chosen by the customer after the bank offered, and the customer refused, a security procedure that was commercially reasonable for VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 21 of 124 that customer, and (ii) the customer expressly agreed in writing a record to be bound by any payment order, whether or not authorized, issued in its name and accepted by the bank in compliance with the bank’s obligations under the security procedure chosen by the customer.

MISDESCRIPTION OF BENEFICIARY * * * BILL AS PASSED BY THE HOUSE H.206 Page 22 of 124 (c) If (i) a payment order described in subsection (b) of this section is accepted, (ii) the originator’s payment order described the beneficiary inconsistently by name and number, and (iii) the beneficiary’s bank pays the VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 22 of 124 person identified by number as permitted by subdivision (b)(1) of this section, the following rules apply:

MISDESCRIPTION OF INTERMEDIARY BANK OR BENEFICIARY’S BANK * * * BILL AS PASSED BY THE HOUSE H.206 Page 23 of 124 (b) This subsection applies to a payment order identifying an intermediary bank or the beneficiary’s bank both by name and an identifying number if the name and number identify different persons.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 23 of 124 * * * (2) If the sender is not a bank and the receiving bank proves that the sender, before the payment order was accepted, had notice that the receiving bank might rely on the number as the proper identification of the intermediary or beneficiary’s bank even if it identifies a person different from the bank identified by name, the rights and obligations of the sender and the receiving bank are governed by subdivision (1) of this subsection, as though the sender were a bank.

Rejection is effective when the notice is given if transmission is BILL AS PASSED BY THE HOUSE H.206 Page 24 of 124 by a means that is reasonable in the circumstances.

If an agreement of the sender and receiving bank establishes the VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 24 of 124 means to be used to reject a payment order, (i) any means complying with the agreement is reasonable and (ii) any means not complying is not reasonable unless no significant delay in receipt of the notice resulted from the use of the noncomplying means.

LIABILITY FOR LATE OR IMPROPER EXECUTION OR FAILURE TO EXECUTE PAYMENT ORDER * * * BILL AS PASSED BY THE HOUSE H.206 Page 25 of 124 (c) In addition to the amounts payable under subsections (a) and (b) of this section, damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank, evidenced by a record.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 25 of 124 (d) If a receiving bank fails to execute a payment order it was obliged by express agreement to execute, the receiving bank is liable to the sender for its expenses in the transaction and for incidental expenses and interest losses resulting from the failure to execute.

* * * BILL AS PASSED BY THE HOUSE H.206 Page 26 of 124 § 5—116.

CHOICE OF LAW AND FORUM (a) The liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction chosen by an agreement in the form of a record signed or otherwise authenticated by the affected parties in VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 26 of 124 the manner provided in section 5—104 of this title or by a provision in the person’s letter of credit, confirmation, or other undertaking.

If more than one address is indicated, the branch BILL AS PASSED BY THE HOUSE H.206 Page 27 of 124 is considered to be located at the address from which the undertaking was issued.

(c)(e) Except as otherwise provided in this subsection, the liability of an issuer, nominated person, or adviser is governed by any rules of custom or practice, such as the Uniform Customs and Practice for Documentary Credits, VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 27 of 124 to which the letter of credit, confirmation, or other undertaking is expressly made subject.

* * * BILL AS PASSED BY THE HOUSE H.206 Page 28 of 124 Sec.

or VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 28 of 124 (B) to attach to or logically associate with the record an electronic sound, symbol, or process.[Reserved.] * * * § 7—106.

* * * BILL AS PASSED BY THE HOUSE H.206 Page 29 of 124 (c) A system satisfies subsection (a) of this section, and a person has control of an electronic document of title, if an authoritative electronic copy of the document, a record attached to or logically associated with the electronic copy, or a system in which the electronic copy is recorded:

(2) enables the person readily to identify itself in any way, including by name, identifying number, cryptographic key, office, or account number, as the VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 29 of 124 person to which each authoritative electronic copy was issued or transferred;

(1) the authoritative electronic copy, a record attached to or logically associated with the authoritative electronic copy, or a system in which the authoritative electronic copy is recorded limits the use of the document of title or has a protocol that is programmed to cause a change, including a transfer or BILL AS PASSED BY THE HOUSE H.206 Page 30 of 124 loss of control;

(A) can exercise the power without exercise of the power by the VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 30 of 124 person;

BILL AS PASSED BY THE HOUSE H.206 Page 31 of 124 (i) If a person acknowledges that it has or will obtain control on behalf of another person, unless the person otherwise agrees or law other than this article or Article 9 of this title otherwise provides, the person does not owe any duty to the other person and is not required to confirm the acknowledgment to any other person.

* * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 31 of 124 Sec.

Appropriate person section 8—107 Control section 8—106 BILL AS PASSED BY THE HOUSE H.206 Page 32 of 124 Controllable account section 9—102 Controllable electronic record section 12—102 Controllable payment intangible section 9—102 Delivery section 8—301 * * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 32 of 124 § 8—103.

RULES FOR DETERMINING WHETHER CERTAIN OBLIGATIONS AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS * * * (h) A controllable account, controllable electronic record, or controllable payment intangible is not a financial asset unless subdivisions 8—102(a)(9)(iii)8— 102(a)(9)(iii) applies.

BILL AS PASSED BY THE HOUSE H.206 Page 33 of 124 (A) has control of the security entitlement and acknowledges that it has control on behalf of the purchaser;

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 33 of 124 * * * (h) A person that has control under this section is not required to acknowledge that it has control on behalf of a purchaser.

* * * BILL AS PASSED BY THE HOUSE H.206 Page 34 of 124 § 8—303.

and VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 34 of 124 (3) obtains control of the certificated or uncertificated security.

(2) “Account,” except as used in “account for,” “account statement,” “account to,” “commodity account” in subdivision (14) of this subsection, “customer’s account,” “deposit account” in subdivision (29) of this subsection, “on account of,” and “statement of account,” means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property BILL AS PASSED BY THE HOUSE H.206 Page 35 of 124 that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 35 of 124 charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state.

BILL AS PASSED BY THE HOUSE H.206 Page 36 of 124 (A) authenticated signed by a secured party;

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 36 of 124 * * * (7) “Authenticate” means:

The term includes a secured party that has transferred a security interest to another BILL AS PASSED BY THE HOUSE H.206 Page 37 of 124 person.

* * * (11) “Chattel paper” means a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 37 of 124 goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods.

or (B) a right to payment of a monetary obligation owed by a lessee BILL AS PASSED BY THE HOUSE H.206 Page 38 of 124 under a lease agreement with respect to specific goods and a monetary obligation owed by the lessee in connection with the transaction giving rise to the lease, if:

and VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 38 of 124 (ii) the predominant purpose of the transaction giving rise to the lease was to give the lessee the right to possession and use of the goods.

(27A) “Controllable account” means an account evidenced by a controllable electronic record that provides that the account debtor undertakes to pay the person that has control under section 12—105 of this title of the BILL AS PASSED BY THE HOUSE H.206 Page 39 of 124 controllable electronic record.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 39 of 124 * * * (31) “Electronic chattel paper” means chattel paper evidenced by a record or records consisting of information stored in an electronic medium.

* * * (47) “Instrument” means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business BILL AS PASSED BY THE HOUSE H.206 Page 40 of 124 is transferred by delivery with any necessary indorsement or assignment.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 40 of 124 * * * (54A) “Money” has the meaning in subdivision 1—201(b)(24) of this title, but does not include (i) a deposit account or (ii) money in an electronic form that cannot be subjected to control under section 9—105A of this title.

BILL AS PASSED BY THE HOUSE H.206 Page 41 of 124 (67) “Production of crops” includes tilling and otherwise preparing land for growing, planting, cultivating, fertilizing, irrigating, harvesting and gathering crops, and protecting them from damage or disease.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 41 of 124 (69) “Proposal” means a record authenticated signed by a secured party which includes the terms on which the secured party is willing to accept collateral in full or partial satisfaction of the obligation it secures pursuant to sections 9—620, 9—621, and 9—622 of this title.

[Reserved.] * * * BILL AS PASSED BY THE HOUSE H.206 Page 42 of 124 (82) “Tangible chattel paper” means chattel paper evidenced by a record or records consisting of information that is inscribed on a tangible medium.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 42 of 124 “Applicant” Section 5—102.

BILL AS PASSED BY THE HOUSE H.206 Page 43 of 124 “Issuer” (with respect to documents of title) Section 7—102.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 43 of 124 “Lessee in ordinary course of business” Section 2A—103.

* * * BILL AS PASSED BY THE HOUSE H.206 Page 44 of 124 § 9—104.

(2) the debtor, secured party, and bank have agreed in an authenticated a signed record that the bank will comply with instructions originated by the VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 44 of 124 secured party directing disposition of the funds in the account without further consent by the debtor;

BILL AS PASSED BY THE HOUSE H.206 Page 45 of 124 (b) A system satisfies subsection (a) of this section if the record or records comprising the chattel paper are created, stored, and assigned in such a manner that:

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 45 of 124 (2) the authoritative copy identifies the secured party as the assignee of the record or records;

CONTROL OF ELECTRONIC COPY OF RECORD EVIDENCING CHATTEL PAPER (a) A purchaser has control of an authoritative electronic copy of a record evidencing chattel paper if a system employed for evidencing the assignment of interests in the chattel paper reliably establishes the purchaser as the person BILL AS PASSED BY THE HOUSE H.206 Page 46 of 124 to which the authoritative electronic copy was assigned.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 46 of 124 (2) the authoritative copy identifies the purchaser as the assignee of the record or records;

(1) enables the purchaser readily to identify each electronic copy as BILL AS PASSED BY THE HOUSE H.206 Page 47 of 124 either an authoritative copy or a nonauthoritative copy;

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 47 of 124 (A) prevent others from adding or changing an identified assignee of the authoritative electronic copy;

and BILL AS PASSED BY THE HOUSE H.206 Page 48 of 124 (2) the other person:

(f) If a purchaser has the powers specified in subdivisions (c)(3)(A) and (B) VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 48 of 124 of this section, the powers are presumed to be exclusive.

(A) power to avail itself of substantially all the benefit from the BILL AS PASSED BY THE HOUSE H.206 Page 49 of 124 electronic money;

and (ii) transfer control of the electronic money to another person or cause another person to obtain control of other electronic money as a result of VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 49 of 124 the transfer of the electronic money;

BILL AS PASSED BY THE HOUSE H.206 Page 50 of 124 (1) the person can exercise the power only if the power also is exercised by the other person;

or (B) is the transferor to the person of an interest in the electronic VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 50 of 124 money.

* * * §§  9—107A.

BILL AS PASSED BY THE HOUSE H.206 Page 51 of 124 (b) A secured party has control of a controllable account or controllable payment intangible if the secured party has control of the controllable electronic record that evidences the controllable account or controllable payment intangible.

VT§  LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 51 of 124 § 9—107B.

BILL AS PASSED BY THE HOUSE H.206 Page 52 of 124 (b) Except as otherwise provided in subsections (c) through (i) of this section, a security interest is enforceable against the debtor and third parties with respect to the collateral only if:

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 52 of 124 (2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party;

or (D) the collateral is controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic chattel paper, electronic documents, electronic money, investment property, or letter- of-credit rights, or electronic documents, and the secured party has control BILL AS PASSED BY THE HOUSE H.206 Page 53 of 124 under section 7—106, 9—104, 9—105, 9-105A, 9—106, or 9—107, or 9- 107A of this title pursuant to the debtor’s security agreement;

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 53 of 124 * * * § 9—204.

FUTURE ADVANCES (a) Except as otherwise provided in subsection (b) of this section, a security agreement may create or provide for a security interest in after-acquiredafter- acquired collateral.

(2) to a commercial tort claim as proceeds under subsection 9-315(a) of BILL AS PASSED BY THE HOUSE H.206 Page 54 of 124 this title;

* * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 54 of 124 § 9—207.

BILL AS PASSED BY THE HOUSE H.206 Page 55 of 124 * * * (3) a secured party, other than a buyer, having control of electronic chattel paper under section 9—105 of this title shall:

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 55 of 124 (A) communicate the authoritative copy of the electronic chattel paper to the debtor or its designated custodian;

(4) a secured party having control of investment property under subdivision 8—106(d)(2) or subsection 9—106(b) of this title shall send to the BILL AS PASSED BY THE HOUSE H.206 Page 56 of 124 securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained an authenticated a signed record that releases the securities intermediary or commodity intermediary VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 56 of 124 from any further obligation to comply with entitlement orders or directions originated by the secured party;

and BILL AS PASSED BY THE HOUSE H.206 Page 57 of 124 (C) take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party a secured party having control under section 7—106 of this VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 57 of 124 title of an authoritative electronic copy of an electronic document shall transfer control of the electronic copy to the debtor or a person designated by the debtor;

DUTIES OF SECURED PARTY IF ACCOUNT DEBTOR HAS BEEN NOTIFIED OF ASSIGNMENT * * * (b) Within 10 days after receiving an authenticated a signed demand by the debtor, a secured party shall send to an account debtor that has received notification under subsection 9-406(a) or 12-106(b) of this title of an BILL AS PASSED BY THE HOUSE H.206 Page 58 of 124 assignment to the secured party as assignee under subsection 9—406(a) of this title an authenticated a signed record that releases the account debtor from any further obligation to the secured party.

* * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 58 of 124 § 9—210.

(4) “Request regarding a statement of account” means a record authenticated signed by a debtor requesting that the recipient approve or correct a statement indicating what the debtor believes to be the aggregate BILL AS PASSED BY THE HOUSE H.206 Page 59 of 124 amount of unpaid obligations secured by collateral as of a specified date and reasonably identifying the transaction or relationship that is the subject of the request.

(b) Subject to subsections (c), (d), (e), and (f) of this section, a secured party, other than a buyer of accounts, chattel paper, payment intangibles, or VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 59 of 124 promissory notes or a consignor, shall comply with a request within 14 days after receipt:

and BILL AS PASSED BY THE HOUSE H.206 Page 60 of 124 (2) if known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient’s interest in the collateral.

(e) A person that receives a request for an accounting or a request regarding a statement of account, claims no interest in the obligations when it receives the request, and claimed an interest in the obligations at an earlier time shall VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 60 of 124 comply with the request within 14 days after receipt by sending to the debtor an authenticated a signed record:

BILL AS PASSED BY THE HOUSE H.206 Page 61 of 124 (B) perfection of a security interest in timber to be cut;

* * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 61 of 124 § 9—304.

* * * BILL AS PASSED BY THE HOUSE H.206 Page 62 of 124 § 9—306.

LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN LETTER-OF-CREDIT RIGHTS * * * §§ 9-306A. 9-306A.

LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN CHATTEL PAPER (a) Except as provided in subsection (d) of this section, if chattel paper is VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 62 of 124 evidenced only by an authoritative electronic copy of the chattel paper or is evidenced by an authoritative electronic copy and an authoritative tangible copy, the local law of the chattel paper’s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the chattel paper, even if the transaction does not bear any relation to the chattel paper’s jurisdiction.

(2) If subdivision (1) of this subsection does not apply and the rules of BILL AS PASSED BY THE HOUSE H.206 Page 63 of 124 the system in which the authoritative electronic copy is recorded are readily available for review and expressly provide that a particular jurisdiction is the chattel paper’s jurisdiction for purposes of this part, this article, or the Uniform Commercial Code, that jurisdiction is the chattel paper’s jurisdiction.

(3) If subdivisions (1) and (2) of this subsection do not apply and the authoritative electronic copy, or a record attached to or logically associated VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 63 of 124 with the electronic copy and readily available for review, expressly provides that the chattel paper is governed by the law of a particular jurisdiction, that jurisdiction is the chattel paper’s jurisdiction.

(1) perfection of a security interest in the chattel paper by possession BILL AS PASSED BY THE HOUSE H.206 Page 64 of 124 under section 9-314A of this title;

VT§ 9-306B. LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 64 of 124 § 9-306B.

BILL AS PASSED BY THE HOUSE H.206 Page 65 of 124 * * * § 9—310.

SECURITY INTERESTS AND AGRICULTURAL LIENS TO WHICH FILING PROVISIONS DO NOT APPLY * * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 65 of 124 (b) The filing of a financing statement is not necessary to perfect a security interest:

PERFECTION OF SECURITY INTERESTS IN CHATTEL PAPER, CONTROLLABLE ACCOUNTS, CONTROLLABLE ELECTRONIC RECORDS, CONTROLLABLE PAYMENT INTANGIBLES, DEPOSIT ACCOUNTS, NEGOTIABLE BILL AS PASSED BY THE HOUSE H.206 Page 66 of 124 DOCUMENTS, GOODS COVERED BY DOCUMENTS, INSTRUMENTS, INVESTMENT PROPERTY, LETTER-OF- CREDIT RIGHTS, AND MONEY;

TEMPORARY PERFECTION WITHOUT FILING OR TRANSFER OF POSSESSION VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 66 of 124 (a) A security interest in chattel paper, negotiable documents, controllable accounts, controllable electronic records, controllable payment intangibles, instruments, or investment property, or negotiable documents may be perfected by filing.

* * * BILL AS PASSED BY THE HOUSE H.206 Page 67 of 124 (e) A security interest in certificated securities, negotiable documents, or instruments is perfected without filing or the taking of possession or control for a period of 20 days from the time it attaches to the extent that it arises for new value given under an authenticated a signed security agreement.

* * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 67 of 124 § 9—313.

BILL AS PASSED BY THE HOUSE H.206 Page 68 of 124 (1) the person in possession authenticates signs a record acknowledging that it holds possession of the collateral for the secured party’s benefit;

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 68 of 124 (d) If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs no not earlier than the time the secured party takes possession and continues only while the secured party retains possession.

(b) A security interest in deposit accounts, electronic chattel paper, letter- of-credit rights, or electronic documents controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, BILL AS PASSED BY THE HOUSE H.206 Page 69 of 124 electronic documents, electronic money, or letter-of-credit rights is perfected by control under section 7—106, 9—104, 9-105, or 9—105A, 9-107, or 9— 107A of this title when not earlier than the time the secured party obtains control and remains perfected by control only while the secured party retains control.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 69 of 124 (c) A security interest in investment property is perfected by control under section 9—106 of this title from not earlier than the time the secured party obtains control and remains perfected by control until:

* * * §§ 9—314A. 9—314A.

(c) Subsections 9—313(c) and (f)–(i) of this title apply to perfection by possession of an authoritative tangible copy of a record evidencing chattel BILL AS PASSED BY THE HOUSE H.206 Page 70 of 124 paper.

* * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 70 of 124 § 9—316.

INTERESTS THAT TAKE PRIORITY OVER OR TAKE FREE OF SECURITY INTEREST OR AGRICULTURAL LIEN * * * (b) Except as otherwise provided in subsection (e) of this section, a buyer, other than a secured party, of tangible chattel paper, tangible documents, of goods, instruments, tangible documents, or a certificated security takes free of BILL AS PASSED BY THE HOUSE H.206 Page 71 of 124 a security interest or agricultural lien if the buyer gives value and receives VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 71 of 124 delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.

(g) A buyer of an electronic document takes free of a security interest if, BILL AS PASSED BY THE HOUSE H.206 Page 72 of 124 without knowledge of the security interest and before it is perfected, the buyer VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 72 of 124 gives value and, if each authoritative electronic copy of the document can be subjected to control under section 7-106 of this title, obtains control of each authoritative electronic copy.

* * * (f) Except as otherwise provided in subsection (g) of this section, a lessee of goods, other than a lessee in ordinary course of business, takes the leasehold VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 73 of 124 interest free of a security interest to the extent that it secures advances made after the earlier of:

* * * (d) Subject to subsection (e) of this section and except as otherwise provided in subsection (g) of this section, a perfected purchase-money security VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 74 of 124 interest in livestock that are farm products has priority over a conflicting security interest in the same livestock, and, except as otherwise provided in section 9—327 of this title, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority, if:

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 75 of 124 (1) the production-money security interest is perfected by filing when the production-money secured party first gives new value to enable the debtor to produce the crops;

(d) To the extent that a person holding a perfected security interest in production-money crops that are the subject of a production-money security interest gives new value to enable the debtor to produce the production-money crops and the value is in fact used for the production of the production-money VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 76 of 124 crops, the security interests rank according to priority in time of filing under subsection 9—322(a) of this title.

PRIORITY OF SECURITY INTERESTS CREATED BY NEW DEBTOR * * * §§ 9—326A. 9—326A.

* * * VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 77 of 124 § 9—330.

(b) A purchaser of chattel paper has priority over a security interest in the chattel paper which is claimed other than merely as proceeds of inventory subject to a security interest if the purchaser gives new value and, takes possession of each authoritative tangible copy of the record evidencing the chattel paper or, and obtains control of under section 9—105 of this title of each authoritative electronic copy of the record evidencing the chattel paper under section 9—105 of this title in good faith, in the ordinary course of the VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 78 of 124 purchaser’s business, and without knowledge that the purchase violates the rights of the secured party.

PRIORITY OF INTERESTS IN FINANCIAL ASSETS AND SECURITY ENTITLEMENTS AND PROTECTION AGAINST ASSERTION OF CLAIM UNDER ARTICLE ARTICLES 8 AND 12 (a) This article does not limit the rights of a holder in due course of a negotiable instrument, a holder to which a negotiable document of title has been duly negotiated, or a protected purchaser of a security, or a qualifying purchaserBILL ofAS aPASSED controllableBY account,THE controllableHOUSE electronicH.206 record,Page or79 VTof LEG124 #381760purchaser v.1of ASa PASSEDcontrollable BYaccount, HOUSEcontrollable H.206electronic Pagerecord, 79or of 124 controllable payment intangible.

(b) A transferee of funds from a deposit account takes the funds free of a security interest in the deposit account unless the transferee acts if the transferee receives the funds without actingacting in in collusion with the debtor in violating the rights of the secured party.

*BILL * * VT LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 80 of 124 * * * § 9—334.

* * * VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 81 of 124 § 9—404.

RESTRICTIONS ON ASSIGNMENT OF ACCOUNTS, CHATTEL PAPER, PAYMENT INTANGIBLES, AND PROMISSORY NOTES INEFFECTIVE (a) Subject to subsections (b) through (h)(i) and (l) of this section, an account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated signed by the assignor or the VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 82 of 124 assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee.

* * * VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 83 of 124 (e) Subsection (d) of this section does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under section 9—610 of this title or an acceptance of collateral under section 9—620 of this title.

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 84 of 124 (g) This section is subject to law other than this article which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

RESTRICTIONS ON ASSIGNMENT OF PROMISSORY NOTES, HEALTH CARE INSURANCE RECEIVABLES, AND CERTAIN GENERAL INTANGIBLES INEFFECTIVE VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 85 of 124 (a) Except as otherwise provided in subsection subsections (b) and (f) of this section, a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health care insurance receivable or a general intangible, including a contract, permit, license, or franchise, and which term prohibits, restricts, or requires the consent of the person obligated on the promissory note or the account debtor to, the assignment or transfer of, or creation, attachment, or perfection of a security interest in, the promissory note, health care insurance receivable, or general intangible, is ineffective to the extent that the term:

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 86 of 124 (c) A Except as otherwise provided in subsection (f) of this section, a rule of law, statute, or regulation, which prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or creation of a security interest in, a promissory note, health care insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation:

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 87 of 124 (1) is not enforceable against the person obligated on the promissory note or the account debtor;

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 88 of 124 (g) In this section, “promissory note” includes a negotiable instrument that evidences chattel paper.

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 89 of 124 (1) within one month after there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value;

* * * VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 90 of 124 § 9—605.

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 91 of 124 (1) A secured party shall apply or pay over for application the cash proceeds of collection or enforcement under section 9—607 of this title in the following order to:

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 92 of 124 (c) To comply with subsection (b) of this section, the secured party shall send an authenticated a signed notification of disposition to:

* * * VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 93 of 124 (5) The following form of notification and the form appearing in subdivision 9—614(3) 9—614(a)(3) of this title, when completed in accordance with the instructions in subsection (b) of this section and subsection 9—614(b) of this title, each provides sufficient information:

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 94 of 124 NOTIFICATION OF DISPOSITION OF COLLATERAL To:

(Name of each debtor) {2} We will sellsell (describe (describe collateral) (to the highest qualified bidder) at public sale.

(Date) (Time) (Place) {3} We will sell (describe collateral) at private sale sometime afterafter (date). (date).

The numbers and VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 95 of 124 braces are used only for the purpose of these instructions.

* * * BILL AS PASSED BY THE HOUSE H.206 Page 96 of 124 (3) The following form of notification, when completed in accordance with the instructions in subsection (b) of this section, provides sufficient information:

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 96 of 124 .........................................

or BILL AS PASSED BY THE HOUSE H.206 Page 97 of 124 For a private disposition:

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 97 of 124 The money that we get from the sale (after paying our costs) will reduce the amount you owe.

BILL AS PASSED BY THE HOUSE H.206 Page 98 of 124 We are sending this notice to the following other people who have an interest in ......

(Name and address of secured party) VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 98 of 124 (Date) NOTICE OF OUR PLAN TO SELL PROPERTY (Name and address of any obligor who is also a debtor) Subject:

{1} We will sellsell (describe (describe collateral) at public sale.

{2} We will sell (describe collateral) at private sale sometime afterafter (date). (date).

If we get less money than you owe, youyou (will (will or will not, as applicable)applicable) still still owe us the difference.

If we get more money than BILL AS PASSED BY THE HOUSE H.206 Page 99 of 124 you owe, you will get the extra money, unless we must pay it to someone else.

To learn the exact amount you must pay, call us at (telephone VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 99 of 124 number).

{5} If you want us to explain to you in (writing) (writing or in (description of electronic record)) (description of electronic record) how we have figured the amount that you owe us, {6} call us at (telephone number) (or) (write us at (secured party’s address)) (or contact us byby (description (description of electronic communication method)) {7} and request (a written explanation) (a written explanation or an explanation in (description of electronic record)) (an explanation in (description of electronic record)).

{10} We are sending this notice to the following other people who have an interest in (describe collateral)collateral) or or who owe money under your agreement:

(Names of all other debtors and obligors, if any) BILL AS PASSED BY THE HOUSE H.206 Page 100 of 124 * * * (b) The following instructions apply to the form of notification in subdivision (a)(3) of this section:

(1) The instructions in this subsection refer to the numbers in braces VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 100 of 124 before items in the form of notification in subdivision (a)(3) of this section.

(6) In item {7}, include and complete the method or methods for the explanation—writing, writing or electronic record, or electronic record— BILL AS PASSED BY THE HOUSE H.206 Page 101 of 124 included in item {5}.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 101 of 124 (8) In item {9}, include either the telephone number or the address or both the telephone number and the address.

BILL AS PASSED BY THE HOUSE H.206 Page 102 of 124 (A) the secured party receives from the holder of the subordinate security interest or other lien an authenticated a signed demand for proceeds before distribution of the proceeds is completed;

and VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 102 of 124 (4) a secured party that is a consignor of the collateral if the secured party receives from the consignor an authenticated a signed demand for proceeds before distribution of the proceeds is completed.

BILL AS PASSED BY THE HOUSE H.206 Page 103 of 124 (1) send an explanation to the debtor or consumer obligor, as applicable, after the disposition and:

and * * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 103 of 124 (c) To comply with subdivision (a)(1)(B) of this section, a writing an explanation must provide the following information in the following order:

BILL AS PASSED BY THE HOUSE H.206 Page 104 of 124 (2) the secured party does not receive, within the time set forth in subsection (d) of this section, a notification of objection to the proposal authenticated signed by:

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 104 of 124 (1) the secured party consents to the acceptance in an authenticated a signed record or sends a proposal to the debtor;

* * * BILL AS PASSED BY THE HOUSE H.206 Page 105 of 124 (f) To comply with subsection (e) of this section, the secured party shall dispose of the collateral:

* * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 105 of 124 § 9—621.

BILL AS PASSED BY THE HOUSE H.206 Page 106 of 124 (c) Except in a consumer goods transaction, a debtor or secondary obligor may waive the right to redeem collateral under section 9—623 of this title only by an agreement to that effect entered into and authenticated signed after default.

* * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 106 of 124 § 9—628.

and BILL AS PASSED BY THE HOUSE H.206 Page 107 of 124 (2) the secured party knows that the information in subdivision (b)(1)(A), (B), or (C) of this section relating to the person is not provided by the collateral, a record attached to or logically associated with the collateral, or the system in which the collateral is recorded.

* * * VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 107 of 124 Sec.

CONTROLLABLE ELECTRONIC RECORDS §§ 12—101. 12—101.

§§ 12—102. 12—102.

(2) “Qualifying purchaser” means a purchaser of a controllable electronic record or an interest in a controllable electronic record that obtains BILL AS PASSED BY THE HOUSE H.206 Page 108 of 124 control of the controllable electronic record for value, in good faith, and without notice of a claim of a property right in the controllable electronic record.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 108 of 124 (A) in section 201(a)(1) of the Electronic Signatures in Global and National Commerce Act, 15 U.S.C.

§§ 12—103. 12—103.

(b) A transaction subject to this article is subject to any applicable rule of law that establishes a different rule for consumers, to any other statute or rule of this State that regulates the rates, charges, agreements, and practices for BILL AS PASSED BY THE HOUSE H.206 Page 109 of 124 loans, credit sales, or other extensions of credit, and to any consumer protection statute or rule of this State.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 109 of 124 12—104.

BILL AS PASSED BY THE HOUSE H.206 Page 110 of 124 (d) A purchaser of a controllable electronic record acquires all rights in the controllable electronic record that the transferor had or had power to transfer, except that a purchaser of a limited interest in a controllable electronic record acquires rights only to the extent of the interest purchased.

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 110 of 124 (e) A qualifying purchaser acquires its rights in the controllable electronic record free of a claim of a property right in the controllable electronic record.

CONTROL OF CONTROLLABLE ELECTRONIC RECORD BILL AS PASSED BY THE HOUSE H.206 Page 111 of 124 (a) A person has control of a controllable electronic record if the electronic record, a record attached to or logically associated with the electronic record, or a system in which the electronic record is recorded:

(A) power to avail itself of substantially all the benefit from the VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 111 of 124 electronic record;

(1) the controllable electronic record, a record attached to or logically associated with the electronic record, or a system in which the electronic record is recorded limits the use of the electronic record or has a protocol programmed to cause a change, including a transfer or loss of control or a BILL AS PASSED BY THE HOUSE H.206 Page 112 of 124 modification of benefits afforded by the electronic record;

(1) the person can exercise the power only if the power also is exercised VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 112 of 124 by the other person;

or (2) obtains control of the electronic record after having acknowledged BILL AS PASSED BY THE HOUSE H.206 Page 113 of 124 that it will obtain control of the electronic record on behalf of the person.

(g) If a person acknowledges that it has or will obtain control on behalf of another person, unless the person otherwise agrees or law other than this article VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 113 of 124 or Article 9 otherwise provides, the person does not owe any duty to the other person and is not required to confirm the acknowledgment to any other person.

BILL AS PASSED BY THE HOUSE H.206 Page 114 of 124 (2) reasonably identifies the controllable account or controllable payment intangible;

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 114 of 124 (4) identifies the transferee, in any reasonable way, including by name, identifying number, cryptographic key, office, or account number;

BILL AS PASSED BY THE HOUSE H.206 Page 115 of 124 (2) to the extent an agreement between the account debtor and seller of a payment intangible limits the account debtor’s duty to pay a person other than the seller and the limitation is effective under law other than this article;

VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 115 of 124 (A) divide a payment;

(f) A person furnishes reasonable proof under subsection (e) of this section that control has been transferred if the person demonstrates, using the method BILL AS PASSED BY THE HOUSE H.206 Page 116 of 124 in the agreement referred to in subdivision (d)(1) of this section, that the transferee has the power to:

and VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 116 of 124 (3) transfer the powers specified in subdivisions (1) and (2) of this subsection to another person.

(b) For a controllable electronic record that evidences a controllable account or controllable payment intangible, the local law of the controllable electronic record’s jurisdiction governs a matter covered by section 12—106 BILL AS PASSED BY THE HOUSE H.206 Page 117 of 124 of this title unless an effective agreement determines that the local law of another jurisdiction governs.

(1) If the controllable electronic record, or a record attached to or logically associated with the controllable electronic record and readily VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 117 of 124 available for review, expressly provides that a particular jurisdiction is the controllable electronic record’s jurisdiction for purposes of this article or title, that jurisdiction is the controllable electronic record’s jurisdiction.

BILL AS PASSED BY THE HOUSE H.206 Page 118 of 124 (4) If subdivisions (1), (2), and (3) of this subsection do not apply and the rules of the system in which the controllable electronic record is recorded are readily available for review and expressly provide that the controllable VT LEG #381760 v.1 AS PASSED BY HOUSE H.206 Page 118 of 124 electronic record or the system is governed by the law of a particular jurisdiction, that jurisdiction is the controllable electronic record’s jurisdiction.

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 119 of 124 Sec.

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 120 of 124 (H) “Financing statement” has the same meaning as in section 9— 102 of the Uniform Commercial Code—Secured Transactions.

(A) a transaction, lien, or interest in property that was validly entered into, created, or transferred before July 1, 2025 and was not governed by the Uniform Commercial Code, but would be subject to Article 9 as amended by VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 121 of 124 this act or Article 12 if it had been entered into, created, or transferred on or after July 1, 2025, including the rights, duties, and interests flowing from the transaction, lien, or interest, remains valid on and after July 1, 2025;

(B) remains enforceable thereafter only if the security interest satisfies the requirements for enforceability under section 9—203 of the VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 122 of 124 Uniform Commercial Code, as amended by this act, before the adjustment date;

(1) If action, other than the filing of a financing statement, is taken before July 1, 2025 and the action would have resulted in perfection of the security interest had the security interest become enforceable before July 1, VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 123 of 124 2025, the action is effective to perfect a security interest that attaches under this act before the adjustment date.

VTBILL LEG #381760 v.1 AS PASSED BY THE HOUSE H.206 Page 124 of 124 (1) Subject to subdivisions (2) and (3) of this subsection, Article 12 determines the priority of conflicting claims to Article 12 property when the priority rules of Article 9 as amended by this act do not apply.

VT LEG #381760 v.1