indenture


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Related to indenture: indenture deed, Bond indenture

Indenture

An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading.

The term indenture primarily describes secured contracts and has several applications in U.S. law. At its simplest, an indenture is an agreement that declares benefits and obligations between two or more parties. In bankruptcy law, for example, it is a mortgage or deed of trust that constitutes a claim against a debtor. The most common usage of indenture appears in the bond market. Before a bond is issued, the issuer executes a legally binding indenture governing all of the bond's terms. Finally, the concept of indenture has an ignominious place in the history of U.S. labor. Indentured servants of the seventeenth and eighteenth centuries were commonly European workers who contracted to provide labor for a number of years and in return received passage to the American colonies as well as room and board.

As an investment product that is used to raise capital, a bond is simply a written document by which a government, corporation, or individual promises to pay a definite sum of money on a certain date. The issuer of a bond, in cooperation with an underwriter (i.e., a financial organization that sells the bond to the public), prepares in advance an indenture outlining the terms of the bond. The issuer and the under-writer negotiate provisions such as the interest rate, the maturity date, and any restrictions on the issuer's actions. The last detail is especially important to corporate bonds because corporations Accrue liability upon becoming bond issuers and therefore seek to have the fewest possible restrictions placed on their business behavior by the terms of the indenture. As a consequence, potential buyers of corporate bonds should know what the indenture specifies before buying them.

Federal law governs these indentures. For 50 years, the Trust Indenture Act of 1939 (TIA) (15 U.S.C.A. § 77aaa) was the relevant law. Significant changes in financial markets prompted Congress to amend the TIA through the Securities Act Amendments of 1990 (Pub. L. No. 101-550, 1990; 104 Stat. 2713), which included the Trust Indenture Reform Act (Pub. L. No. 101-550, 104 Stat. 2713). The reforms simplified the writing of indentures, recognized the increasing internationalization of corporations by creating opportunities for foreign institutions to serve as trustees, and revised standards for conflicts of interest. The reforms also broadened the authority of the Securities and Exchange Commission.

In early American history, indenture was a form of labor contract. Beginning during the colonial period, employers in the largely agricultural economy faced a labor shortage. They addressed it in two ways: by buying slaves and by hiring indentured servants. The former were Africans who were brought to the colonies against their will to serve for life; the latter were generally Europeans from England and Germany who had entered multiyear employment contracts. From the late sixteenth century to the late eighteenth century, approximately half of the 350,000 European immigrants to the colonies were indentured servants. During the seventeenth century, these servants outnumbered slaves.

An indentured servant agreed to a four-to seven-year contract, and in return received passage from Europe and guarantees of work, food, and lodging. Colonial courts enforced the contracts of indentured servants, which were often harsh. Employers were seen as masters, and the servants had not only to work for them but also to obey their orders in all matters. For some, indentured servitude was not a Voluntary Act. Impoverished women and children were pressed into servitude, as were convicts. Nevertheless, this servitude was not equivalent to Slavery. Slaves remained slaves for life, whereas indentured servants were released at the end of their contracts. Moreover, as parties to a contract, indentured servants had rights that slaves never enjoyed. The practice of indentured servitude persisted into the early nineteenth century.

Further readings

Ballam, Deborah A. 1996. "Exploding the Original Myth Regarding Employment-At-Will: The True Origins of the Doctrine." Berkeley Journal of Employment and Labor Law 17.

——. 1995. "The Traditional View on the Origins of the Employment-At-Will Doctrine: Myth or Reality?" American Business Law Journal 33 (fall).

Riger, Martin. 1991."The Trust Indenture as Bargained Contract: The Persistence of Myth." Journal of Corporation Law 16 (winter).

indenture

n. a type of real property deed in which two parties agree to continuing mutual obligations. One party may agree to maintain the property, while the other agrees to make periodic payments. 2) a contract binding one person to work for another. 3) v. to bind a person to work for another.

indenture

noun agreement, agreement to work, apprenticeship agreement, arrangement, commitment, contract, contract to work, contractual obligation, connractual statement, covenant, deed of agreement, instrument, mutual agreement, mutual undertaking, pact, pactum, stipulation, undertaking
See also: bind, bond, compact, contract, liability, obligate, obligation, pact, security, servitude, specialty, stock, undertake

indenture

see APPRENTICE.

INDENTURE, conveyancing. An instrument of writing containing a conveyance or contract between two or more persons, usually indented or cut unevenly, or in and out, on the top or, side.
     2. Formerly it was common to make two instruments exactly alike, and it was then usual to write both on the same parchment, with some words or letters written between them, through which the parchment was cut, either in a straight or indented line, in such a manner as to leave one-half of the word on one part, and half on the other. The instrument usually commences with these words, "This indenture," which were not formerly sufficient, unless the parchment or paper was actually indented to make an indenture 5 Co. 20; but now, if the form of indenting the parchment be wanting, it may be supplied by being done in court, this being mere form. Besides, it would be exceedingly difficult with even the most perfect instruments, to out parchment or paper without indenting it. Vide Bac. Ab. Leases, &c. E 2; Com. Dig. Fait, C, and note d; Litt. sec. 370; Co. Litt. 143 b, 229 a; Cruise, Dig t. 32, c. 1, s. 24; 2 Bl. Com. 294; 1 Sess. Cas. 222.

References in periodicals archive ?
The Consent of the Holders of at least a majority in principal amount of Notes outstanding under an Indenture (with respect to the series of Notes issued under such Indenture, the "Requisite Consents" for such series) is required to authorize the Proposed Amendments as they relate to the Notes issued under such Indenture.
The supplemental indenture requires that at least 40% of all loans be fully insured by the FHA, while privately insured loans are limited to 50% of the portfolio and RHCD loans to $3 million.
A copy of the Supplemental Indenture has been filed under Pinetree s profile on SEDAR at www.
In 1991, Commissioner Garamendi placed Executive Life in receivership and announced that he would not make any payments to the indenture trustees, on the asserted ground that the Muni-GICs were not insurance policies.
the trustee under the indenture governing the 2011 Notes, intend to enter into a supplemental indenture, which will amend the indenture under which the 2011 Notes were issued.
In connection with the tender offer, the Company has agreed that it will not exercise its right under the indenture governing the Notes to redeem all or a portion of the Notes at any time prior to December 29, 2006 for a redemption price equal to 102% of the principal amount thereof.
The tender offer is subject to several conditions, including, among other things, AGT's receipt of proceeds from a new issuance of debt securities or a new second lien credit facility, which proceeds must be sufficient (and, under the terms of the agreements governing AGT's indebtedness, are permitted to be used) to pay the aggregate total consideration and/or the purchase price for the Notes accepted in the tender offer; a minimum tender condition; receipt of the requisite consents and execution of a supplemental indenture and execution of an amendment terminating the registration rights agreement.
Subject to (i) obtaining the Requisite Consents and the Senior Lenders Consents, and (ii) execution of a supplemental indenture by the Company, the guarantors of the Notes and the trustee for the Notes reflecting the proposed amendment, the Company will pay to each holder from whom the Company receives a valid and timely consent that is not revoked a consent fee equal to $1.
Although EFI reserves the right to take any action it deems appropriate, and has not conceded that any default has occurred under the indenture, EFI currently expects that, upon a valid acceleration (if any) of the Debentures, it would repay all outstanding amounts due thereunder.
New York time) on October 24, 2006 of its Senior Notes, to approve a proposed amendment to the indenture for its Senior Notes to extend the time for the Company to file the Third Quarter 10-Q no later than February 23, 2007.
If Impsat receives the required consents and signs the supplemental indentures, Impsat will make cash payments to each record holder of Notes that validly consents to the proposed amendments and does not revoke such consent, other than holders whose Notes are not deemed to be outstanding under the indentures governing the Notes for purposes of the consents, in the amount of $2.