Exclusive of any special features, however, the usual form of the deed of trust contains the following provisions : 1. Date and names of parties.
2. The preamble, giving a full statement of the legal status of the corporation, including the state in which it is incorporated, the amount of its capital stock and bonds, and a description of its assets, reciting the authority given by the stockholders and directors for the bond issue, and the specific purpose of the issue.
3. Full text of the bond; the interest coupon, if it is a coupon bond; and the trustee's certificate of va lidity, which appears on each bond. A typical form of trustee's certificate and the blank for recording registrations of the bond appear immediately below in connection with the new collateral trust bond of the American Telephone and Telegraph Company.
4. The granting clause, transferring the property to the trustee, and describing it in detail. In a mort gage bond, this clause is in the form of a mortgage upon real estate, in favor of the trustee. In a col lateral trust bond, it is in the form of a pledge of collateral security to the trustee.
5. The duties and responsibility of the trustee are recited, including the statement that the property is granted only in trust and that the trustee shall certify to the validity of each bond issued.
6. The covenant of the corporation to pay prin cipal and interest upon the bond as specified, 7. Provisions relating to the possession and main tenance of the property pledged, with the idea of preserving the lien value of the security. In the case of a mortgage bond, the obligor retains the complete control and possession of the mortgaged property, unless it is taken over by the trustee upon default of principal or interest. In the collateral trust bond, the trustee retains the securities deposited, but, in the absence of default, usually remits the interest or divi dends received thereon to the debtor corporation. In either case, the obligor assumes the duty of preserv ing the value of the property pledged as security pending final payment of the bond.
8. A statement of the nature and standing of sub sidiary companies. This is included only when their earnings or properties form an essential part of the security behind the new bonds.
9. Procedure in case of default, including a defini tion of what constitutes default, the period of grace allowed, the authority and procedure under which the trustee must act, etc. Sometimes the trustee is given arbitrary power to foreclose and sell the property, but usually the consent of a certain proportion of the bondholders is required.
10. Procedure of the trustee in event of receiver ship.
11. The responsibilities, liabilities and compensa tion of the trustee, with the provision for his removal and the appointment of his successor.
12. Clause absolving the officers and directors of the corporation from personal liability, whether arising from the default of the company, or error or fraud on the part of the trustee.
13. A section defining the terms and phrases used thruout the indenture.
14. The signatures and seal of the corporation, by its officers, and the signature and seal of the trustee.
If modifications of the original deed of trust are required, they may take the form of a supplementary indenture, requiring the consent of all parties con cerned. These are required frequently in cases of receivership, reorganization, or changes in the legal status or property of the debtor company. Minor and less formal changes may be made by supplemen tary agreement of a less formal nature. Sometimes clauses are inserted in the deed of trust, providing the manner in which such changes shall be made, or a substitution of security effected.
5. Collateral trust indentures.—In addition to these ordinary provisions, the collateral deed of trust contains a number of safeguards, designed to pre serve the value of the collateral, especially when the latter consists of stock. These relate usually to the following: 1. Any additional stock issued by subsidiaries to be deposited with the trustee in the same proportion as present issues.