                                 CODE OF VIRGINIA

WARRANTIES IN DIRECT HOLDING (§ 8.8A-108)

a. A person who transfers a certificated security to a purchaser for value
warrants to the purchaser, and an endorser, if the transfer is by endorsement,
warrants to any subsequent purchaser, that:

   1. the certificate is genuine and has not been materially altered;

   2. the transferor or endorser does not know of any fact that might impair the
   validity of the security;

   3. there is no adverse claim to the security;

   4. the transfer does not violate any restriction on transfer;

   5. if the transfer is by endorsement, the endorsement is made by an
   appropriate person, or if the endorsement is by an agent, the agent has actual
   authority to act on behalf of the appropriate person; and

   6. the transfer is otherwise effective and rightful.

b. A person who originates an instruction for registration of transfer of an
uncertificated security to a purchaser for value warrants to the purchaser that:

   1. the instruction is made by an appropriate person, or if the instruction is
   by an agent, the agent has actual authority to act on behalf of the
   appropriate person;

   2. the security is valid;

   3. there is no adverse claim to the security; and

   4. at the time the instruction is presented to the issuer:

i. the purchaser will be entitled to the registration of transfer;

   ii. the transfer will be registered by the issuer free from all liens,
   security interests, restrictions, and claims other than those specified in the
   instruction;

   iii. the transfer will not violate any restriction on transfer; and

   iv. the requested transfer will otherwise be effective and rightful.

c. A person who transfers an uncertificated security to a purchaser for value
and does not originate an instruction in connection with the transfer warrants
that:

   1. the uncertificated security is valid;

   2. there is no adverse claim to the security;

   3. the transfer does not violate any restriction on transfer; and

   4. the transfer is otherwise effective and rightful.

d. A person who endorses a security certificate warrants to the issuer that:

   1. there is no adverse claim to the security; and

   2. the endorsement is effective.

e. A person who originates an instruction for registration of transfer of an
uncertificated security warrants to the issuer that:

   1. the instruction is effective; and

   2. at the time the instruction is presented to the issuer the purchaser will
   be entitled to the registration of transfer.

f. A person who presents a certificated security for registration of transfer or
for payment or exchange warrants to the issuer that the person is entitled to
the registration, payment, or exchange, but a purchaser for value and without
notice of adverse claims to whom transfer is registered warrants only that the
person has no knowledge of any unauthorized signature in a necessary
endorsement.

g. If a person acts as agent of another in delivering a certificated security to
a purchaser, the identity of the principal was known to the person to whom the
certificate was delivered, and the certificate delivered by the agent was
received by the agent from the principal or received by the agent from another
person at the direction of the principal, the person delivering the security
certificate warrants only that the delivering person has authority to act for
the principal and does not know of any adverse claim to the certificated
security.

h. A secured party who redelivers a security certificate received, or after
payment and on order of the debtor delivers the security certificate to another
person, makes only the warranties of an agent under subsection (g).

i. Except as otherwise provided in subsection (g), a broker acting for a
customer makes to the issuer and a purchaser the warranties provided in
subsections (a) through (f). A broker that delivers a security certificate to
its customer, or causes its customer to be registered as the owner of an
uncertificated security, makes to the customer the warranties provided in
subsection (a) or (b), and has the rights and privileges of a purchaser under
this section. The warranties of and in favor of the broker acting as an agent
are in addition to applicable warranties given by and in favor of the customer.

HISTORY: 1996, c. 216.