§490:8-202  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
490:8-205, 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 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 "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. [L 1997,
c 33, pt of §2]