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.