Bank made a loan to Debtor, owner of a local dental practice, in 2007.  Bank filed a proper financing statement covering all of Debtor’s equipment on October 1, 2007.  However, the security agreement was not completed, and thus the security interest did not attach, until November 1, 2007.  On October 16, 2012, Bank found out that in September of 2012, Debtor, without Bank’s authorization, sold one of its dental chairs to Bob, another local dentist.  Bob paid Debtor $5,000 for the chair. 

It is now October 17, 2012 and Bank wants to know whether it can still enforce its security interest in the chair as against Bob in the event that Debtor defaults.  Assume that no filings have been made other than the ones specifically mentioned above. Which statement is correct?

1.  Bob holds the chair subject to Bank's perfected security interest because its financing statement is effective for 5 years from November 1, 2007 when its security interest attached.

2.  Bob took the chair free and clear of Bank's security interest because Bank's financing statement has lapsed and Bob purchased the chair for value prior to lapse, but only if Bob did not know of Bank's security interest.

3.  Bob holds the chair subject to Bank's perfected security interest because at the time that Bob purchased the chair, Bank’s security interest was properly perfected.

4.  Bob took the chair free and clear of Bank's security interest because Bank's financing statement has lapsed and Bob purchased the chair for value prior to lapse; whether Bob knew of Bank's security interest is irrelevant.