15 U.S.C. § 77nnn — Reports by obligor; evidence of compli-

Page 192 TITLE 15—COMMERCE AND TRADE § 77nnn (2) 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 that purpose; and (3) except in the case of reports pursuant to subsection (b) of this section, to all holders of indenture securities whose names and address- es have been furnished to or received by the indenture trustee pursuant to section 77lll of this title. (d) Filing of report with stock exchanges A copy of each such report shall, at the time of such transmission to indenture security hold- ers, be filed with each stock exchange upon which the indenture securities are listed, and also with the Commission. (May 27, 1933, ch. 38, title III, § 313, as added Aug. 3, 1939, ch. 411, 53 Stat. 1165; amended Pub. L. 101–550, title IV, §§ 411, 412, Nov. 15, 1990, 104 Stat. 2729; Pub. L. 105–353, title III, § 301(e)(3), Nov. 3, 1998, 112 Stat. 3237.) Editorial Notes AMENDMENTS 1998—Subsec. (a)(4). Pub. L. 105–353, § 301(e)(3)(A), in- serted ‘‘any change to’’ before ‘‘the amount’’. Subsec. (a)(6). Pub. L. 105–353, § 301(e)(3)(B), struck out ‘‘any change to’’ before ‘‘any release’’. 1990—Subsec. (a). Pub. L. 101–550, § 411(1), (2), sub- stituted ‘‘The indenture trustee shall’’ for ‘‘The inden- ture to be qualified shall contain provisions requiring the indenture trustee to’’ and inserted ‘‘any of the fol- lowing events which may have occurred within the pre- vious 12 months (but if no such event has occurred within such period no report need be transmitted):’’ after ‘‘a brief report with respect to’’. Subsec. (a)(1). Pub. L. 101–550, § 411(3), (4), inserted ‘‘any change to’’ before ‘‘its eligibility’’ and struck out ‘‘, or in lieu thereof, if to the best of its knowledge it has continued to be eligible and qualified under such section, a written statement to such effect’’ after ‘‘of this title’’. Subsec. (a)(2). Pub. L. 101–550, § 411(5), added par. (2) and redesignated former par. (2) as (3). Subsec. (a)(3), (4). Pub. L. 101–550, § 411(5)(A), redesig- nated pars. (2) and (3) as (3) and (4), respectively. Former par. (4) redesignated (5). Subsec. (a)(5). Pub. L. 101–550, § 411(5)(A), redesignated par. (4) as (5). Former par. (5) redesignated (6). Pub. L. 101–550, § 411(3), inserted ‘‘any change to’’ after the paragraph designation. Subsec. (a)(6). Pub. L. 101–550, § 411(5)(A), redesignated par. (5) as (6). Former par. (6) redesignated (7). Pub. L. 101–550, § 411(3), inserted ‘‘any change to’’ after the paragraph designation. Subsec. (a)(7), (8). Pub. L. 101–550, § 411(5)(A), redesig- nated pars. (6) and (7) as (7) and (8), respectively. Subsec. (b). Pub. L. 101–550, § 412(1), substituted ‘‘The indenture trustee shall’’ for ‘‘The indenture to be quali- fied shall also contain provisions requiring the inden- ture trustee to’’. Subsec. (c). Pub. L. 101–550, § 412(2), substituted ‘‘Re- ports’’ for ‘‘The indenture to be qualified shall also pro- vide that reports’’. Subsec. (d). Pub. L. 101–550, § 412(3), substituted ‘‘A copy’’ for ‘‘The indenture to be qualified shall also pro- vide that a copy’’. Executive Documents TRANSFER OF FUNCTIONS For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title. § 77nnn. Reports by obligor; evidence of compli- ance with indenture provisions (a) Periodic reports Each person who, as set forth in the registra- tion statement or application, is or is to be an obligor upon the indenture securities covered thereby shall— (1) file with the indenture trustee copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations pre- scribe) which such obligor is required to file with the Commission pursuant to section 78m or 78o(d) of this title; or, if the obligor is not required to file information, documents, or re- ports pursuant to either of such sections, then to file with the indenture trustee and the Commission, in accordance with rules and reg- ulations prescribed by the Commission, such of the supplementary and periodic informa- tion, documents, and reports which may be re- quired pursuant to section 78m of this title, in respect of a security listed and registered on a national securities exchange as may be pre- scribed in such rules and regulations; (2) file with the indenture trustee and the Commission, in accordance with rules and reg- ulations prescribed by the Commission, such additional information, documents, and re- ports with respect to compliance by such obli- gor with the conditions and covenants pro- vided for in the indenture, as may be required by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of subsection (e) of this section, as to compliance with conditions or covenants, compliance with which is subject to verification by accountants, but no such certificate or opinion shall be required as to any matter specified in clauses (A), (B), or (C) of paragraph (3) of subsection (c); (3) transmit to the holders of the indenture securities upon which such person is an obli- gor, in the manner and to the extent provided in subsection (c) of section 77mmm of this title, such summaries of any information, doc- uments, and reports required to be filed by such obligor pursuant to the provisions of paragraph (1) or (2) of this subsection as may be required by rules and regulations prescribed by the Commission; and (4) furnish to the indenture trustee, not less often than annually, a brief certificate from the principal executive officer, principal finan- cial officer or principal accounting officer as to his or her knowledge of such obligor’s com- pliance with all conditions and covenants under the indenture. For purposes of this para- graph, such compliance shall be determined without regard to any period of grace or re- quirement of notice provided under the inden- ture. The rules and regulations prescribed under this subsection shall be such as are necessary or ap- Page 193 TITLE 15—COMMERCE AND TRADE § 77nnn propriate in the public interest or for the pro- tection of investors, having due regard to the types of indentures, and the nature of the busi- ness of the class of obligors affected thereby, and the amount of indenture securities out- standing under such indentures, and, in the case of any such rules and regulations prescribed after the indentures to which they apply have been qualified under this subchapter, the addi- tional expense, if any, of complying with such rules and regulations. Such rules and regula- tions may be prescribed either before or after qualification becomes effective as to any such indenture. (b) Evidence of recording of indenture If the indenture to be qualified is or is to be secured by the mortgage or pledge of property, the obligor upon the indenture securities shall furnish to the indenture trustee— (1) promptly after the execution and delivery of the indenture, an opinion of counsel (who may be of counsel for such obligor) either stat- ing that in the opinion of such counsel the in- denture has been properly recorded and filed so as to make effective the lien intended to be created thereby, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to make such lien effective; and (2) at least annually after the execution and delivery of the indenture, an opinion of coun- sel (who may be of counsel for such obligor) ei- ther stating that in the opinion of such coun- sel such action has been taken with respect to the recording, filing, re-recording, and refiling of the indenture as is necessary to maintain the lien of such indenture, and reciting the de- tails of such action, or stating that in the opinion of such counsel no such action is nec- essary to maintain such lien. (c) Evidence of compliance with conditions precedent The obligor upon the indenture securities shall furnish to the indenture trustee evidence of compliance with the conditions precedent, if any, provided for in the indenture (including any covenants compliance with which con- stitutes a condition precedent) which relate to the authentication and delivery of the indenture securities, to the release or the release and sub- stitution of property subject to the lien of the indenture, to the satisfaction and discharge of the indenture, or to any other action to be taken by the indenture trustee at the request or upon the application of such obligor. Such evi- dence shall consist of the following: (1) certificates or opinions made by officers of such obligor who are specified in the inden- ture, stating that such conditions precedent have been complied with; (2) an opinion of counsel (who may be of counsel for such obligor) stating that in his opinion such conditions precedent have been complied with; and (3) in the case of conditions precedent com- pliance with which is subject to verification by accountants (such as conditions with re- spect to the preservation of specified ratios, the amount of net quick assets, negative- pledge clauses, and other similar specific con- ditions), a certificate or opinion of an account- ant, who, in the case of any such conditions precedent to the authentication and delivery of indenture securities, and not otherwise, shall be an independent public accountant se- lected or approved by the indenture trustee in the exercise of reasonable care, if the aggre- gate principal amount of such indenture secu- rities and of other indenture securities au- thenticated and delivered since the com- mencement of the then current calendar year (other than those with respect to which a cer- tificate or opinion of an accountant is not re- quired, or with respect to which a certificate or opinion of an independent public account- ant has previously been furnished) is 10 per centum or more of the aggregate amount of the indenture securities at the time out- standing; but no certificate or opinion need be made by any person other than an officer or employee of such obligor who is specified in the indenture, as to (A) dates or periods not covered by annual reports required to be filed by the obligor, in the case of conditions prece- dent which depend upon a state of facts as of a date or dates or for a period or periods dif- ferent from that required to be covered by such annual reports, or (B) the amount and value of property additions, except as provided in paragraph (3) of subsection (d), or (C) the adequacy of depreciation, maintenance, or re- pairs. (d) Certificates of fair value If the indenture to be qualified is or is to be secured by the mortgage or pledge of property or securities, the obligor upon the indenture secu- rities shall furnish to the indenture trustee a certificate or opinion of an engineer, appraiser, or other expert as to the fair value— (1) of any property or securities to be re- leased from the lien of the indenture, which certificate or opinion shall state that in the opinion of the person making the same the proposed release will not impair the security under such indenture in contravention of the provisions thereof, and requiring further that such certificate or opinion shall be made by an independent engineer, appraiser, or other ex- pert, if the fair value of such property or secu- rities and of all other property or securities released since the commencement of the then current calendar year, as set forth in the cer- tificates or opinions required by this para- graph, is 10 per centum or more of the aggre- gate principal amount of the indenture securi- ties at the time outstanding; but such a cer- tificate or opinion of an independent engineer, appraiser, or other expert shall not be required in the case of any release of property or secu- rities, if the fair value thereof as set forth in the certificate or opinion required by this paragraph is less than $25,000 or less than 1 per centum of the aggregate principal amount of the indenture securities at the time out- standing; (2) to such obligor of any securities (other than indenture securities and securities se- cured by a lien prior to the lien of the inden- ture upon property subject to the lien of the indenture), the deposit of which with the Page 194 TITLE 15—COMMERCE AND TRADE § 77nnn trustee is to be made the basis for the authen- tication and delivery of indenture securities, the withdrawal of cash constituting a part of the trust estate or the release of property or securities subject to the lien of the indenture, and requiring further that if the fair value to such obligor of such securities and of all other such securities made the basis of any such au- thentication and delivery, withdrawal, or re- lease since the commencement of the then current calendar year, as set forth in the cer- tificates or opinions required by this para- graph, is 10 per centum or more of the aggre- gate principal amount of the indenture securi- ties at the time outstanding, such certificate or opinion shall be made by an independent engineer, appraiser, or other expert and, in the case of the authentication and delivery of in- denture securities, shall cover the fair value to such obligor of all other such securities so deposited since the commencement of the cur- rent calendar year as to which a certificate or opinion of an independent engineer, appraiser, or other expert has not previously been fur- nished; but such a certificate of an inde- pendent engineer, appraiser, or other expert shall not be required with respect to any secu- rities so deposited, if the fair value thereof to such obligor as set forth in the certificate or opinion required by this paragraph is less than $25,000 or less than 1 per centum of the aggre- gate principal amount of the indenture securi- ties at the time outstanding; and (3) to such obligor of any property the sub- jection of which to the lien of the indenture is to be made the basis for the authentication and delivery of indenture securities, the with- drawal of cash constituting a part of the trust estate, or the release of property or securities subject to the lien of the indenture, and re- quiring further that if (A) within six months prior to the date of acquisition thereof by such obligor, such property has been used or operated, by a per- son or persons other than such obligor, in a business similar to that in which it has been or is to be used or operated by such obligor, and (B) the fair value to such obligor of such property as set forth in such certificate or opinion is not less than $25,000 and not less than 1 per centum of the aggregate principal amount of the indenture securities at the time outstanding, such certificate or opinion shall be made by an independent engineer, appraiser, or other ex- pert and, in the case of the authentication and delivery of indenture securities, shall cover the fair value to the obligor of any property so used or operated which has been so subjected to the lien of the indenture since the com- mencement of the then current calendar year, and as to which a certificate or opinion of an independent engineer, appraiser, or other ex- pert has not previously been furnished. The indenture to be qualified shall automati- cally be deemed (unless it is expressly provided therein that such provision is excluded) to pro- vide that any such certificate or opinion may be made by an officer or employee of the obligor upon the indenture securities who is duly au- thorized to make such certificate or opinion by the obligor from time to time, except in cases in which this subsection requires that such certifi- cate or opinion be made by an independent per- son. In such cases, such certificate or opinion shall be made by an independent engineer, ap- praiser, or other expert selected or approved by the indenture trustee in the exercise of reason- able care. (e) Recitals as to basis of certificate or opinion Each certificate or opinion with respect to compliance with a condition or covenant pro- vided for in the indenture (other than certifi- cates provided pursuant to subsection (a)(4) of this section) shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the ex- amination or investigation upon which the statements or opinions contained in such certifi- cate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. (f) Parties may provide for additional evidence Nothing in this section shall be construed ei- ther as requiring the inclusion in the indenture to be qualified of provisions that the obligor upon the indenture securities shall furnish to the indenture trustee any other evidence of compliance with the conditions and covenants provided for in the indenture than the evidence specified in this section, or as preventing the in- clusion of such provisions in such indenture, if the parties so agree. (May 27, 1933, ch. 38, title III, § 314, as added Aug. 3, 1939, ch. 411, 53 Stat. 1167; amended Pub. L. 101–550, title IV, § 413, Nov. 15, 1990, 104 Stat. 2729.) Editorial Notes AMENDMENTS 1990—Subsec. (a). Pub. L. 101–550, § 413(1)–(6), in intro- ductory provision substituted ‘‘Each’’ for ‘‘The inden- ture to be qualified shall contain provisions requiring each’’ and inserted ‘‘shall’’ after ‘‘thereby’’ and in pars. (1) to (3) struck out ‘‘to’’ after the paragraph designa- tion, and directed the addition of par. (4) at the end which was executed by inserting par. (4) after par. (3) to reflect the probable intent of Congress. Subsec. (b). Pub. L. 101–550, § 413(7), (8), struck out ‘‘such indenture shall contain provisions requiring’’ be- fore ‘‘the obligor’’ and substituted ‘‘securities shall fur- nish’’ for ‘‘securities to furnish’’. Subsec. (c). Pub. L. 101–550, § 413(9), (10), substituted ‘‘The obligor’’ for ‘‘The indenture to be qualified shall contain provisions requiring the obligor’’ and ‘‘securi- ties shall furnish’’ for ‘‘securities to furnish’’. Subsec. (d). Pub. L. 101–550, § 413(11), (13), (14), sub- stituted ‘‘the obligor upon the indenture securities shall furnish to the indenture trustee a certificate or opinion of an engineer, appraiser, or other expert as to the fair value’’ for ‘‘such indenture shall contain provi- sions’’ in introductory provisions and ‘‘The indenture to be qualified shall automatically be deemed (unless it Page 195 TITLE 15—COMMERCE AND TRADE § 77ooo is expressly provided therein that such provision is ex- cluded) to provide that’’ for ‘‘If the indenture to be qualified so provides,’’ and ‘‘duly authorized to make such certificate or opinion by the obligor from time to time’’ for ‘‘specified in the indenture’’ in penultimate sentence. Subsec. (d)(1) to (3). Pub. L. 101–550, § 413(12), which di- rected that ‘‘requiring the obligor upon the indenture securities to furnish to the indenture trustee a certifi- cate or opinion of an engineer, appraiser or other ex- pert as to the fair value’’ be struck out after the para- graph designations in pars. (1) to (3), was executed by striking out ‘‘requiring the obligor upon the indenture securities to furnish to the indenture trustee a certifi- cate or opinion of an engineer, appraiser, or other ex- pert as to the fair value’’, as the probable intent of Congress. Subsec. (e). Pub. L. 101–550, § 413(15), inserted ‘‘(other than certificates provided pursuant to subsection (a)(4) of this section)’’ after ‘‘indenture’’. Executive Documents TRANSFER OF FUNCTIONS For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title. § 77ooo. Duties and responsibility of the trustee (a) Duties prior to default The indenture to be qualified shall automati- cally be deemed (unless it is expressly provided therein that any such provision is excluded) to provide that, prior to default (as such term is defined in such indenture)— (1) the indenture trustee shall not be liable except for the performance of such duties as are specifically set out in such indenture; and (2) the indenture trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, in the absence of bad faith on the part of such trustee, upon certificates or opinions con- forming to the requirements of the indenture; but the indenture trustee shall examine the evi- dence furnished to it pursuant to section 77nnn of this title to determine whether or not such evidence conforms to the requirements of the in- denture. (b) Notice of defaults The indenture trustee shall give to the inden- ture security holders, in the manner and to the extent provided in subsection (c) of section 77mmm of this title, notice of all defaults known to the trustee, within ninety days after the occurrence thereof: Provided, That such in- denture shall automatically be deemed (unless it is expressly provided therein that such provision is excluded) to provide that, except in the case of default in the payment of the principal of or interest on any indenture security, or in the payment of any sinking or purchase fund in- stallment, the trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or respon- sible officers, of the trustee in good faith deter- mine that the withholding of such notice is in the interests of the indenture security holders. (c) Duties of the trustee in case of default The indenture trustee shall exercise in case of default (as such term is defined in such inden- ture) such of the rights and powers vested in it by such indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the cir- cumstances in the conduct of his own affairs. (d) Responsibility of the trustee The indenture to be qualified shall not contain any provisions relieving the indenture trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that— (1) such indenture shall automatically be deemed (unless it is expressly provided therein that any such provision is excluded) to contain the provisions authorized by paragraphs (1) and (2) of subsection (a) of this section; (2) such indenture shall automatically be deemed (unless it is expressly provided therein that any such provision is excluded) to contain provisions protecting the indenture trustee from liability for any error of judgment made in good faith by a responsible officer or offi- cers of such trustee, unless it shall be proved that such trustee was negligent in ascertaining the pertinent facts; and (3) such indenture shall automatically be deemed (unless it is expressly provided therein that any such provision is excluded) to contain provisions protecting the indenture trustee with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in principal amount of the indenture securities at the time outstanding (determined as provided in subsection (a) of section 77ppp of this title) relating to the time, method, and place of conducting any proceeding for any remedy available to such trustee, or exercising any trust or power conferred upon such trust- ee, under such indenture. (e) Undertaking for costs The indenture to be qualified shall automati- cally be deemed (unless it is expressly provided therein that any such provision is excluded) to contain provisions to the effect that all parties thereto, including the indenture security hold- ers, agree that the court may in its discretion require, in any suit for the enforcement of any right or remedy under such indenture, or in any suit against the trustee for any action taken or omitted by it as trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, includ- ing reasonable attorney’s fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant: Provided, That the provisions of this subsection shall not apply to any suit instituted by such trustee, to any suit instituted by any indenture security holder, or group of indenture security holders, holding in the aggregate more than 10 per centum in prin- cipal amount of the indenture securities out- standing, or to any suit instituted by any inden- ture security holder for the enforcement of the