KRS 355.9-203: Attachment and enforceability of security interest -- Proceeds --

Supporting obligations -- Formal requisites.

(1) A security interest attaches to collateral when it becomes enforceable against the

debtor with respect to the collate ral, unless an agreement expressly postpones the

time of attachment.

(2) Except as otherwise provided in subsections (3) to (9) of this section, a security

interest is enforceable against the debtor and third parties with respect to the

collateral only if:

(a) Value has been given;

(b) The debtor has rights in the collateral or the power to transfer rights in the

collateral to a secured party; and

(c) One (1) of the following conditions is met:

1. The debtor has signed a security agreement that provides a d escription

of the collateral and, if the security interest covers timber to be cut, a

description of the land concerned;

2. The collateral is not a certificated security and is in the possession of the

secured party under KRS 355.9 -313 pursuant to the debt or's security

agreement;

3. The collateral is a certificated security in registered form and the

security certificate has been delivered to the secured party under KRS

355.8-301 pursuant to the debtor's security agreement;

4. The collateral is controllable accounts, controllable electronic records,

controllable payment intangibles, deposit accounts, electronic

documents, electronic money, investment property, or letter -of-credit

rights, and the secured party has control under K RS 355.7-106, 355.9-

104, 355.9 -1051, 355.9 -106, 355.9 -107, or 355.9 -1071 pursuant to the

debtor's security agreement; or

5. The collateral is chattel paper and the secured party has possession and

control under KRS 355.9 -3141 pursuant to the debtor's secur ity

agreement.

(3) Subsection (2) of this section is subject to KRS 355.4-210 on the security interest of

a collecting bank, KRS 355.5-118 on the security interest of a letter -of-credit issuer

or nominated person, KRS 355.9 -110 on a security interest arisi ng under Article 2

or 2A of this chapter, and KRS 355.9 -206 on security interests in investment

property.

(4) A person becomes bound as debtor by a security agreement entered into by another

person if, by operation of law other than this article or by contract:

(a) The security agreement becomes effective to create a security interest in the

person's property; or

(b) The person becomes generally obligated for the obligations of the other

person, including the obligation secured under the security agreement, and

acquires or succeeds to all or substantially all of the assets of the other person.

(5) If a new debtor becomes bound as debtor by a security agreement entered into by

another person:

(a) The agreement satisfies subsection (2)(c) of this section with respect to

existing or after-acquired property of the new debtor to the extent the property

is described in the agreement; and

(b) Another agreement is not necessary to make a security interest in the property

enforceable.

(6) The attachment of a security interest in collateral gives the secured party the rights

to proceeds provided by KRS 355.9-315 and is also attachment of a security interest

in a supporting obligation for the collateral.

(7) The attachment of a security interest in a right to payment or performance secured

by a security interest or other lien on personal or real property is also attachment of

a security interest in the security interest, mortgage, or other lien.

(8) The attachment of a security interest in a securities account is also att achment of a

security interest in the security entitlements carried in the securities account.

(9) The attachment of a security interest in a commodity account is also attachment of a

security interest in the commodity contracts carried in the commodity account.