N.Y. Real Property Law § 130-k: Exemptions from restrictions on trustees and trust indentures

§ 130-k. Exemptions from restrictions on trustees and trust

indentures. The provisions of sections one hundred and twenty-six and

one hundred and twenty-seven of this article shall not apply to any

mortgage, deed of trust, trust indenture, or other similar instrument

which has been qualified with the United States securities and exchange

commission pursuant to the provisions of the trust indenture act of

nineteen hundred thirty-nine, as from time to time amended and in force.

In the case of a mortgage, deed of trust, trust indenture, or other

similar instrument which has not been so qualified, the provisions of

section one hundred twenty-seven shall not apply if such instrument

(hereinafter referred to as the "indenture") contains provisions in

substance to the following effect:

(a) If the trustee has or shall acquire any conflicting interest as

hereinafter defined,

(1) such trustee shall, within ninety days after ascertaining that it

has such conflicting interest, either eliminate such conflicting

interest or resign, such resignation to become effective upon the

appointment of a successor trustee and such successor's acceptance of

such appointment; and the obligor upon the bonds, notes or other

evidences of indebtedness issued under the indenture (hereinafter

referred to as the "indenture securities") shall take prompt steps to

have a successor appointed in the manner provided in the indenture;

(2) in the event that such trustee shall fail to comply with the

provisions of subparagraph (1), such trustee shall, within ten days

after the expiration of such ninety-day period, transmit notice of such

failure by mail (i) to all registered holders of indenture securities,

as the names and addresses of such holders appear upon the registration

books of the obligor upon the indenture securities, (ii) to such holders

of indenture securities as have, within the two years preceding such

transmission, filed their names and addresses with the indenture trustee

for the purpose of receiving notices or reports to indenture security

holders, and (iii) to all holders of indenture securities whose names

and addresses are contained in information currently preserved by the

trustee for such purpose in accordance with provisions of the indenture

requiring the obligor to furnish or cause to be furnished to the trustee

at stated intervals of not more than six months, and at such other times

as the trustee may request in writing, all information in the possession

or control of such obligor, or of any of its paying agents, as to the

names and addresses of the indenture security holders, and requiring the

trustee to preserve, in as currrent a form as is reasonably practicable,

all such information so furnished to it or received by it in the

capacity of paying agent; and

(3) subject to any provision of the indenture to the effect that in a

suit against the trustee (unless instituted by a holder or group of

holders of more than ten per centum in principal amount of the indenture

securities outstanding) the court may in its discretion require an

undertaking for costs and may assess reasonable costs, including

reasonable attorneys' fees, against any party litigant, any security

holder who has been a bona fide holder of indenture securities for at

least six months may, on behalf of himself and all others similarly

situated, petition any court of competent jurisdiction for the removal

of such trustee, and the appointment of a successor, if such trustee

fails, after written request therefor by such holder, to comply with the

provisions of subparagraph (1).

(b) For purposes of paragraph (a), the trustee shall be deemed to have

a conflicting interest if---

(1) such trustee is trustee under another indenture under which any

other securities, or certificates of interest or participation in any

other securities, of an obligor upon the indenture securities are

outstanding unless (A) the indenture securities are collateral trust

notes under which the only collateral consists of securities issued

under such other indenture, or (B) such other indenture is a collateral

trust indenture under which the only collateral consists of indenture

securities, or (C) such obligor has no substantial unmortgaged assets

and is engaged primarily in the business of owning, or of owning and

developing and/or operating, real estate, and the indenture to be

qualified and such other indenture are secured by wholly separate and

distinct parcels of real estate: Provided, that the indenture may

contain a provision excluding from the operation of this subparagraph

any other indenture or indentures which shall have been qualified with

the United States securities and exchange commission pursuant to the

provisions of the trust indenture act of nineteen hundred thirty-nine,

as from time to time amended and in force;

(2) such trustee or any of its directors or executive officers is an

obligor upon the indenture securities or an underwriter for such an

obligor;

(3) such trustee directly or indirectly controls or is directly or

indirectly controlled by or is under direct or indirect common control

with an obligor upon the indenture securities or an underwriter for such

an obligor;

(4) such trustee or any of its directors or executive officers is a

director, officer, partner, employee, appointee, or representative of an

obligor upon the indenture securities, or of an underwriter (other than

the trustee itself) for such an obligor who is currently engaged in the

business of underwriting, except that (A) one individual may be a

director and/or an executive officer of the trustee and a director

and/or an executive officer of such obligor, but may not be at the same

time an executive officer of both the trustee and of such obligor, and

(B) if and so long as the number of directors of the trustee in office

is more than nine, one additional individual may be a director and/or an

executive officer of the trustee and a director of such obligor, and (C)

such trustee may be designated by any such obligor or by any underwriter

for any such obligor, to act in the capacity of transfer agent,

registrar, custodian, paying agent, fiscal agent, escrow agent or

depositary, or in any other similar capacity, or, subject to the

provisions of subparagraph (1) of this paragraph, to act as trustee,

whether under an indenture or otherwise;

(5) ten per centum or more of the voting securities of such trustee is

beneficially owned either by an obligor upon the indenture securities or

by any director, partner, or executive officer thereof, or twenty per

centum or more of such voting securities is beneficially owned,

collectively, by any two or more of such persons; or ten per centum or

more of the voting securities of such trustee is beneficially owned

either by an underwriter for any such obligor or by any director,

partner, or executive officer thereof, or is beneficially owned,

collectively, by any two or more such persons;

(6) such trustee is the beneficial owner of, or holds as collateral

security for an obligation which is in default as hereinafter defined,

(A) five per centum or more of the voting securities, or ten per centum

or more of any other class of security, of an obligor upon the indenture

securities, not including indenture securities and securities issued

under any other indenture under which such trustee is also such trustee,

or (B) ten per centum or more of any class of security of an underwriter

for any such obligor;

(7) such trustee is the beneficial owner of, or holds as collateral

security for an obligation which is in default as hereinafter defined,

five per centum or more of the voting securities of any person who, to

the knowledge of the trustee, owns ten per centum or more of the voting

securities of, or controls directly or indirectly or is under direct or

indirect common control with, an obligor upon the indenture securities;

(8) such trustee is the beneficial owner of, or holds as collateral

security for an obligation which is in default as hereinafter defined,

ten per centum or more of any class of security of any person who, to

the knowledge of the trustee, owns fifty per centum or more of the

voting securities of an obligor upon the indenture securities; or

(9) such trustee owns, on May fifteenth in any calendar year, in the

capacity of executor, administrator, testamentary or inter vivos

trustee, guardian, committee or conservator, or in any other similar

capacity, an aggregate of twenty-five per centum or more of the voting

securities, or of any class of security, of any person, the beneficial

ownership of a specified percentage of which would have constituted a

conflicting interest under subparagraph (6), (7) or (8) of this

paragraph. The indenture may provide, as to any such securities of

which the trustee acquired ownership through becoming executor,

administrator or testamentary trustee of an estate which included them,

that the provisions of the preceding sentence shall not apply, for a

period of not more than two years from the date of such acquisition, to

the extent that such securities included in such estate do not exceed

twenty-five per centum of such voting securities or twenty-five per

centum of any such class of security. The indenture shall provide that

promptly after May fifteenth in each calendar year, the trustee shall

make a check of its holdings of such securities in any of the

above-mentioned capacities as of such May fifteenth. Such indenture

shall also provide that if the obligor upon the indenture securities

fails to make payment in full of principal or interest under such

indenture when and as the same becomes due and payable, and such failure

continues for thirty days thereafter, the trustee shall make a prompt

check of its holdings of such securities in any of the above-mentioned

capacities as of the date of the expiration of such thirty-day period,

and after such date, notwithstanding the foregoing provisions of this

subparagraph, all such securities so held by the trustee, with sole or

joint control over such securities vested in it, shall be considered as

though beneficially owned by such trustee, for the purposes of

subparagraphs (6), (7) and (8) of this paragraph.

(c) The indenture shall provide that the specification of percentages

in subparagraphs (5) to (9), inclusive, of paragraph (b) shall not be

construed as indicating that the ownership of such percentages of the

securities of a person is or is not necessary or sufficient to

constitute direct or indirect control for the purposes of subparagraph

(3) or (7) of paragraph (b).

(d) For the purposes of subparagraphs (6), (7), (8) and (9) of

paragraph (b), (A) the terms "security" and "securities" shall include

only such securities as are generally known as corporate securities, but

shall not include any note or other evidence of indebtedness issued to

evidence an obligation to repay moneys lent to a person by one or more

banks, trust companies, or banking firms, or any certificate of interest

or participation in any such note or evidence of indebtedness; (B) an

obligation shall be deemed to be in default when a default in payment of

principal shall have continued for thirty days or more, and shall not

have been cured; and (C) the trustee shall not be deemed the owner or

holder of (i) any security which it holds as collateral security (as

trustee or otherwise) for an obligation which is not in default as above

defined, or (ii) any security which it holds as collateral security

under the indenture, irrespective of any default thereunder, or (iii)

any security which it holds as agent for collection, or as custodian,

escrow agent, or depositary, or in any similar representative capacity.

(e) For the purposes of paragraph (b), the term "underwriter" when

used with reference to an obligor upon the indenture securities means

every person who, within three years prior to the time as of which the

determination is made, was an underwriter of any security of such

obligor outstanding at such time.

(f) When used in paragraphs (b) to (e), inclusive, unless the context

otherewise requires---

(1) The term "underwriter" means any person who has purchased from an

issuer with a view to, or offers or sells for an issuer in connection

with, the distribution of any security, or participates or has a direct

or indirect participation in any such undertaking, or participates or

has a participation in the direct or indirect underwriting of any such

undertaking; but such term shall not include a person whose interest is

limited to a commission from an underwriter or dealer not in excess of

the usual and customary distributors' or sellers' commission.

(2) The term "director" means any director of a corporation, or any

individual performing similar functions with respect to any organization

whether incorporated or unincorporated.

(3) The term "executive officer" means the president, every vice

president, every trust officer, the cashier, the secretary, and the

treasurer of a corporation, and any individual customarily performing

similar functions with respect to any organization whether incorporated

or unincorporated, but shall not include the chairman of the board of

directors.

(4) The term "obligor", when used with respect to any indenture

security, means every person who is liable thereon, and, if such

security is a certificate of interest or participation, such term means

also every person who is liable upon the security or securities in which

such certificate evidences an interest or participation; but such term

shall not include the trustee under an indenture under which

certificates of interest or participation, equipment trust certificates,

or like securities are outstanding.

(5) The term "voting security" means any security presently entitling

the owner or holder thereof to vote in the direction or management of

the affairs of a person, or any security issued under or pursuant to any

trust, agreement, or arrangement whereby a trustee or trustees or agent

or agents for the owner or holder of such security are presently

entitled to vote in the direction or management of the affairs of a

person; and a specified percentage of the voting securities of a person

means such amount of the outstanding voting securities of such person as

entitles the holder or holders thereof to cast such specified percentage

of the aggregate votes which the holders of all the outstanding voting

securities of such person are entitled to cast in the direction or

management of the affairs of such person.