§ 130-K — Exemptions from restrictions on trustees and trust indentures

New York § 130-K

• Jurisdiction: New York
• Law RPP: Real Property
• Art. 4-A: Trust Indentures and Interests Therein

Text

§ 130-k. Exemptions from restrictions on trustees and trust\nindentures. The provisions of sections one hundred and twenty-six and\none hundred and twenty-seven of this article shall not apply to any\nmortgage, deed of trust, trust indenture, or other similar instrument\nwhich has been qualified with the United States securities and exchange\ncommission pursuant to the provisions of the trust indenture act of\nnineteen hundred thirty-nine, as from time to time amended and in force.\nIn the case of a mortgage, deed of trust, trust indenture, or other\nsimilar instrument which has not been so qualified, the provisions of\nsection one hundred twenty-seven shall not apply if such instrument\n(hereinafter referred to as the "indenture") contains provisions in\nsubstance to the following effect:\n (a) If the trustee has or shall acquire any conflicting interest as\nhereinafter defined,\n (1) such trustee shall, within ninety days after ascertaining that it\nhas such conflicting interest, either eliminate such conflicting\ninterest or resign, such resignation to become effective upon the\nappointment of a successor trustee and such successor's acceptance of\nsuch appointment; and the obligor upon the bonds, notes or other\nevidences of indebtedness issued under the indenture (hereinafter\nreferred to as the "indenture securities") shall take prompt steps to\nhave a successor appointed in the manner provided in the indenture;\n (2) in the event that such trustee shall fail to comply with the\nprovisions of subparagraph (1), such trustee shall, within ten days\nafter the expiration of such ninety-day period, transmit notice of such\nfailure by mail (i) to all registered holders of indenture securities,\nas the names and addresses of such holders appear upon the registration\nbooks of the obligor upon the indenture securities, (ii) to such holders\nof indenture securities as have, within the two years preceding such\ntransmission, filed their names and addresses with the indenture trustee\nfor the purpose of receiving notices or reports to indenture security\nholders, and (iii) to all holders of indenture securities whose names\nand addresses are contained in information currently preserved by the\ntrustee for such purpose in accordance with provisions of the indenture\nrequiring the obligor to furnish or cause to be furnished to the trustee\nat stated intervals of not more than six months, and at such other times\nas the trustee may request in writing, all information in the possession\nor control of such obligor, or of any of its paying agents, as to the\nnames and addresses of the indenture security holders, and requiring the\ntrustee to preserve, in as currrent a form as is reasonably practicable,\nall such information so furnished to it or received by it in the\ncapacity of paying agent; and\n (3) subject to any provision of the indenture to the effect that in a\nsuit against the trustee (unless instituted by a holder or group of\nholders of more than ten per centum in principal amount of the indenture\nsecurities outstanding) the court may in its discretion require an\nundertaking for costs and may assess reasonable costs, including\nreasonable attorneys' fees, against any party litigant, any security\nholder who has been a bona fide holder of indenture securities for at\nleast six months may, on behalf of himself and all others similarly\nsituated, petition any court of competent jurisdiction for the removal\nof such trustee, and the appointment of a successor, if such trustee\nfails, after written request therefor by such holder, to comply with the\nprovisions of subparagraph (1).\n (b) For purposes of paragraph (a), the trustee shall be deemed to have\na conflicting interest if---\n (1) such trustee is trustee under another indenture under which any\nother securities, or certificates of interest or participation in any\nother securities, of an obligor upon the indenture securities are\noutstanding unless (A) the indenture securities are collateral trust\nnotes under which the only collateral consists of securities issued\nunder such other indenture, or (B) such other indenture is a collateral\ntrust indenture under which the only collateral consists of indenture\nsecurities, or (C) such obligor has no substantial unmortgaged assets\nand is engaged primarily in the business of owning, or of owning and\ndeveloping and/or operating, real estate, and the indenture to be\nqualified and such other indenture are secured by wholly separate and\ndistinct parcels of real estate: Provided, that the indenture may\ncontain a provision excluding from the operation of this subparagraph\nany other indenture or indentures which shall have been qualified with\nthe United States securities and exchange commission pursuant to the\nprovisions of the trust indenture act of nineteen hundred thirty-nine,\nas from time to time amended and in force;\n (2) such trustee or any of its directors or executive officers is an\nobligor upon the indenture securities or an underwriter for such an\nobligor;\n (3) such trustee directly or indirectly controls or is directly or\nindirectly controlled by or is under direct or indirect common control\nwith an obligor upon the indenture securities or an underwriter for such\nan obligor;\n (4) such trustee or any of its directors or executive officers is a\ndirector, officer, partner, employee, appointee, or representative of an\nobligor upon the indenture securities, or of an underwriter (other than\nthe trustee itself) for such an obligor who is currently engaged in the\nbusiness of underwriting, except that (A) one individual may be a\ndirector and/or an executive officer of the trustee and a director\nand/or an executive officer of such obligor, but may not be at the same\ntime an executive officer of both the trustee and of such obligor, and\n(B) if and so long as the number of directors of the trustee in office\nis more than nine, one additional individual may be a director and/or an\nexecutive officer of the trustee and a director of such obligor, and (C)\nsuch trustee may be designated by any such obligor or by any underwriter\nfor any such obligor, to act in the capacity of transfer agent,\nregistrar, custodian, paying agent, fiscal agent, escrow agent or\ndepositary, or in any other similar capacity, or, subject to the\nprovisions of subparagraph (1) of this paragraph, to act as trustee,\nwhether under an indenture or otherwise;\n (5) ten per centum or more of the voting securities of such trustee is\nbeneficially owned either by an obligor upon the indenture securities or\nby any director, partner, or executive officer thereof, or twenty per\ncentum or more of such voting securities is beneficially owned,\ncollectively, by any two or more of such persons; or ten per centum or\nmore of the voting securities of such trustee is beneficially owned\neither by an underwriter for any such obligor or by any director,\npartner, or executive officer thereof, or is beneficially owned,\ncollectively, by any two or more such persons;\n (6) such trustee is the beneficial owner of, or holds as collateral\nsecurity for an obligation which is in default as hereinafter defined,\n(A) five per centum or more of the voting securities, or ten per centum\nor more of any other class of security, of an obligor upon the indenture\nsecurities, not including indenture securities and securities issued\nunder any other indenture under which such trustee is also such trustee,\nor (B) ten per centum or more of any class of security of an underwriter\nfor any such obligor;\n (7) such trustee is the beneficial owner of, or holds as collateral\nsecurity for an obligation which is in default as hereinafter defined,\nfive per centum or more of the voting securities of any person who, to\nthe knowledge of the trustee, owns ten per centum or more of the voting\nsecurities of, or controls directly or indirectly or is under direct or\nindirect common control with, an obligor upon the indenture securities;\n (8) such trustee is the beneficial owner of, or holds as collateral\nsecurity for an obligation which is in default as hereinafter defined,\nten per centum or more of any class of security of any person who, to\nthe knowledge of the trustee, owns fifty per centum or more of the\nvoting securities of an obligor upon the indenture securities; or\n (9) such trustee owns, on May fifteenth in any calendar year, in the\ncapacity of executor, administrator, testamentary or inter vivos\ntrustee, guardian, committee or conservator, or in any other similar\ncapacity, an aggregate of twenty-five per centum or more of the voting\nsecurities, or of any class of security, of any person, the beneficial\nownership of a specified percentage of which would have constituted a\nconflicting interest under subparagraph (6), (7) or (8) of this\nparagraph. The indenture may provide, as to any such securities of\nwhich the trustee acquired ownership through becoming executor,\nadministrator or testamentary trustee of an estate which included them,\nthat the provisions of the preceding sentence shall not apply, for a\nperiod of not more than two years from the date of such acquisition, to\nthe extent that such securities included in such estate do not exceed\ntwenty-five per centum of such voting securities or twenty-five per\ncentum of any such class of security. The indenture shall provide that\npromptly after May fifteenth in each calendar year, the trustee shall\nmake a check of its holdings of such securities in any of the\nabove-mentioned capacities as of such May fifteenth. Such indenture\nshall also provide that if the obligor upon the indenture securities\nfails to make payment in full of principal or interest under such\nindenture when and as the same becomes due and payable, and such failure\ncontinues for thirty days thereafter, the trustee shall make a prompt\ncheck of its holdings of such securities in any of the above-mentioned\ncapacities as of the date of the expiration of such thirty-day period,\nand after such date, notwithstanding the foregoing provisions of this\nsubparagraph, all such securities so held by the trustee, with sole or\njoint control over such securities vested in it, shall be considered as\nthough beneficially owned by such trustee, for the purposes of\nsubparagraphs (6), (7) and (8) of this paragraph.\n (c) The indenture shall provide that the specification of percentages\nin subparagraphs (5) to (9), inclusive, of paragraph (b) shall not be\nconstrued as indicating that the ownership of such percentages of the\nsecurities of a person is or is not necessary or sufficient to\nconstitute direct or indirect control for the purposes of subparagraph\n(3) or (7) of paragraph (b).\n (d) For the purposes of subparagraphs (6), (7), (8) and (9) of\nparagraph (b), (A) the terms "security" and "securities" shall include\nonly such securities as are generally known as corporate securities, but\nshall not include any note or other evidence of indebtedness issued to\nevidence an obligation to repay moneys lent to a person by one or more\nbanks, trust companies, or banking firms, or any certificate of interest\nor participation in any such note or evidence of indebtedness; (B) an\nobligation shall be deemed to be in default when a default in payment of\nprincipal shall have continued for thirty days or more, and shall not\nhave been cured; and (C) the trustee shall not be deemed the owner or\nholder of (i) any security which it holds as collateral security (as\ntrustee or otherwise) for an obligation which is not in default as above\ndefined, or (ii) any security which it holds as collateral security\nunder the indenture, irrespective of any default thereunder, or (iii)\nany security which it holds as agent for collection, or as custodian,\nescrow agent, or depositary, or in any similar representative capacity.\n (e) For the purposes of paragraph (b), the term "underwriter" when\nused with reference to an obligor upon the indenture securities means\nevery person who, within three years prior to the time as of which the\ndetermination is made, was an underwriter of any security of such\nobligor outstanding at such time.\n (f) When used in paragraphs (b) to (e), inclusive, unless the context\notherewise requires---\n (1) The term "underwriter" means any person who has purchased from an\nissuer with a view to, or offers or sells for an issuer in connection\nwith, the distribution of any security, or participates or has a direct\nor indirect participation in any such undertaking, or participates or\nhas a participation in the direct or indirect underwriting of any such\nundertaking; but such term shall not include a person whose interest is\nlimited to a commission from an underwriter or dealer not in excess of\nthe usual and customary distributors' or sellers' commission.\n (2) The term "director" means any director of a corporation, or any\nindividual performing similar functions with respect to any organization\nwhether incorporated or unincorporated.\n (3) The term "executive officer" means the president, every vice\npresident, every trust officer, the cashier, the secretary, and the\ntreasurer of a corporation, and any individual customarily performing\nsimilar functions with respect to any organization whether incorporated\nor unincorporated, but shall not include the chairman of the board of\ndirectors.\n (4) The term "obligor", when used with respect to any indenture\nsecurity, means every person who is liable thereon, and, if such\nsecurity is a certificate of interest or participation, such term means\nalso every person who is liable upon the security or securities in which\nsuch certificate evidences an interest or participation; but such term\nshall not include the trustee under an indenture under which\ncertificates of interest or participation, equipment trust certificates,\nor like securities are outstanding.\n (5) The term "voting security" means any security presently entitling\nthe owner or holder thereof to vote in the direction or management of\nthe affairs of a person, or any security issued under or pursuant to any\ntrust, agreement, or arrangement whereby a trustee or trustees or agent\nor agents for the owner or holder of such security are presently\nentitled to vote in the direction or management of the affairs of a\nperson; and a specified percentage of the voting securities of a person\nmeans such amount of the outstanding voting securities of such person as\nentitles the holder or holders thereof to cast such specified percentage\nof the aggregate votes which the holders of all the outstanding voting\nsecurities of such person are entitled to cast in the direction or\nmanagement of the affairs of such person.\n