Section 8--202. Issuer's Responsibility and Defenses; Notice of Defect

or Defense.

(a) Even against a purchaser for value and without notice, the terms
of a certificated security include terms stated on the certificate and
terms made part of the security by reference on the certificate to
another instrument, indenture, or document or to a constitution,
statute, ordinance, rule, regulation, order, or the like, to the extent
the terms referred to do not conflict with terms stated on the
certificate. A reference under this subsection does not of itself charge
a purchaser for value with notice of a defect going to the validity of
the security, even if the certificate expressly states that a person
accepting it admits notice. The terms of an uncertificated security
include those stated in any instrument, indenture, or document or in a
constitution, statute, ordinance, rule, regulation, order, or the like,
pursuant to which the security is issued.

(b) The following rules apply if an issuer asserts that a security is
not valid:

(1) A security other than one issued by a government or

governmental subdivision, agency, or instrumentality, even

though issued with a defect going to its validity, is valid

in the hands of a purchaser for value and without notice of

the particular defect unless the defect involves a violation

of a constitutional provision. In that case, the security is

valid in the hands of a purchaser for value and without

notice of the defect, other than one who takes by original

issue.

(2) Paragraph (1) applies to an issuer that is a government or

governmental subdivision, agency, or instrumentality only if

there has been substantial compliance with the legal

requirements governing the issue or the issuer has received a

substantial consideration for the issue as a whole or for the

particular security and a stated purpose of the issue is one

for which the issuer has power to borrow money or issue the

security.

(c) Except as otherwise provided in Section 8--205, lack of
genuineness of a certificated security is a complete defense, even
against a purchaser for value and without notice.

(d) All other defenses of the issuer of a security, including
nondelivery and conditional delivery of a security, are ineffective
against a purchaser for value who has taken the security without notice
of the particular defense.

(e) This section does not affect the right of a party to cancel a
contract for a security "when, as and if issued" or "when distributed"
in the event of a material change in the character of the security that
is the subject of the contract or in the plan or arrangement pursuant to
which the security is to be issued or distributed.

(f) If a security is held by a securities intermediary against whom an
entitlement holder has a security entitlement with respect to the
security, the issuer may not assert any defense that the issuer could
not assert if the entitlement holder held the security directly.