KRS 355.9-103: Purchase -money security interest -- Application of payments -- Burden

of establishing.

(1) In this section:

(a) "Purchase-money collateral" means goods or software that secures a purchase-

money obligation incurred with respect to that collateral; and

(b) "Purchase-money obligation" means an obligation of an obligor incurred as all

or part of the price of the collateral or for value given to enable the debtor to

acquire rights in or the use of the collateral if the value is in fact so used.

(2) A security interest in goods is a purchase-money security interest:

(a) To the extent that the goods are purchase-money collateral with respect to that

security interest;

(b) If the security interest is in inventory that is or was purchase-money collateral,

also to the extent that the security interest secures a purchase -money

obligation incurred with respect to other inventory in which the secured party

holds or held a purchase-money security interest; and

(c) Also to the extent that the security interest secure s a purchase -money

obligation incurred with respect to software in which the secured party holds

or held a purchase-money security interest.

(3) A security interest in software is a purchase -money security interest to the extent

that the security interest also secures a purchase -money obligation incurred with

respect to goods in which the secured party holds or held a purchase-money security

interest if:

(a) The debtor acquired its interest in the software in an integrated transaction in

which it acquired an interest in the goods; and

(b) The debtor acquired its interest in the software for the principal purpose of

using the software in the goods.

(4) The security interest of a consignor in goods that are the subject of a consignment is

a purchase-money security interest in inventory.

(5) In a transaction other than a consumer -goods transaction, if the extent to which a

security interest is a purchase-money security interest depends on the application of

a payment to a particular obligation, the payment must be applied:

(a) In accordance with any reasonable method of application to which the parties

agree;

(b) In the absence of the parties' agreement to a reasonable method, in accordance

with any intention of the obligor manifested at or before the time of pay ment;

or

(c) In the absence of an agreement to a reasonable method and a timely

manifestation of the obligor's intention, in the following order:

1. To obligations that are not secured; and

2. If more than one (1) obligation is secured, to obligations secured by

purchase-money security interests in the order in which those obligations

were incurred.

(6) In a transaction other than a consumer-goods transaction, a purchase-money security

interest does not lose its status as such, even if:

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

purchase-money obligation;

(b) Collateral that is not purchase -money collateral also secures the purchase -

money obligation; or

(c) The pur chase-money obligation has been renewed, refinanced, consolidated,

or restructured.

(7) In a transaction other than a consumer-goods transaction, a secured party claiming a

purchase-money security interest has the burden of establishing the extent to which

the security interest is a purchase-money security interest.

(8) The limitation of the rules in subsections (5), (6), and (7) of this section to

transactions other than consumer-goods transactions is intended to leave to the court

the determination of the proper rules in consumer -goods transactions. The court

may not infer from that limitation the nature of the proper rule in consumer -goods

transactions and may continue to apply established approaches.