                                 CODE OF VIRGINIA

ISSUER&#8217;S RESPONSIBILITY AND DEFENSES; NOTICE OF DEFECT OR DEFENSE (§
8.8A-202)

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 &#xA7; 8.8A-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 certificated security, are ineffective against a
purchaser for value who has taken the certificated 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 &#8220;when, as and if issued&#8221; or &#8220;when distributed&#8221;
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.

HISTORY: 1996, c. 216.