EXHIBIT 4
SECOND SUPPLEMENTAL INDENTURE
DATED AS OF MAY 27, 1997
BETWEEN
THE FORTRESS GROUP, INC.
AND
IBJ XXXXXXXX BANK & TRUST COMPANY,
TRUSTEE
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as
of May 27, 1997 between THE FORTRESS GROUP, INC., a Delaware corporation (the
A "Company") and IBJ XXXXXXXX BANK & TRUST COMPANY, a banking organization under
the laws of New York, as trustee (the A "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company issued its 13.75% Senior Notes due 2003 in the
aggregate principal amount of $100,000,000 (the "Securities") pursuant to that
certain Indenture, dated as of May 21, 1996, between the Company and the
Trustee, as supplemented by the First Supplemental Indenture, dated as of May
21, 1996 (the "Indenture"); and
WHEREAS, the Company desires to amend the Indenture to (i) increase the
Company's flexibility to finance current and future operations by permitting
borrowing to be incurred by Restricted Subsidiaries, as well as the Company,
subject to limitations on incurrence of Indebtedness imposed by (a) the
limitation on consolidated Indebtedness and (b) the limitation on Liens; (ii)
limit Indebtedness secured by Liens to 65% of Consolidated Tangible Net Assets;
and (iii) facilitate the Company's ability to make acquisitions by supplementing
the terms of the definition of Coverage Ratio to make clear that the calculation
of the Coverage Ratio includes, on a pro forma basis, the results of acquired
companies and businesses; and
WHEREAS, pursuant to Section 12.2 of the Indenture, the Company and the
Trustee, with the consent of the Holders of at least a majority in principal
amount of the Outstanding Securities, may amend the Indenture; and
WHEREAS, pursuant to a consent solicitation by the Company dated April
25, 1997, as supplemented by a supplemental consent solicitation dated May 15,
1997, the Holders of at least a majority in principal amount of the Outstanding
Securities have consented to this Supplemental Indenture;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Capitalized Terms. Except as provided in this Article I,
any capitalized terms used in this Supplemental Indenture and not otherwise
defined herein shall have the same
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meanings as set forth in the Indenture.
SECTION 1.2. Definitions. Article I of the Indenture is hereby amended
to add to or revise the definitions therein as follows:
"Consolidated Fixed Charge Coverage Ratio" of the Company means, with
respect to any determination date, the ratio of (i) Consolidated Cash Flow
Available for Fixed Charges of the Company for the prior four full fiscal
quarters for which financial results have been reported immediately preceding
the determination date, to (ii) the aggregate Consolidated Interest Incurred of
the Company for the prior four fiscal quarters for which financial results have
been reported immediately preceding the determination date. If the Company or
any Restricted Subsidiary incurs, assumes, guaranties or redeems (other than
borrowings under the Existing Credit Facility or other short-term Indebtedness
in the ordinary course of business) any Indebtedness or issues or redeems any
Disqualified Stock at any time during the four full fiscal quarters prior to a
determination date or between the conclusion of the last full fiscal quarter and
a determination date, then the Consolidated Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guaranty,
issuance or redemption, as if the same had occurred at the beginning of such
four full fiscal quarters. In addition, for the purposes of making the
computation referred to above, acquisitions that have been made by the Company
or any Restricted Subsidiary, including through merger, consolidation or
purchase of assets and including any related financing transaction, at any time
during the four full fiscal quarters prior to a determination date or between
the conclusion of the last full fiscal quarter and a determination date shall be
given pro forma effect as if the same had occurred at the beginning of such four
full fiscal quarters, except that Consolidated Cash Flow Available for Fixed
Charges attributable to discontinued operations, as determined in accordance
with GAAP, shall be excluded and Consolidated Interest Incurred attributable to
discontinued operations, as determined in accordance with GAAP, shall be
excluded, but only to the extent that the obligations giving rise to such
Interest Incurred are not Indebtedness of the Company or its Restricted
Subsidiaries following the determination date.
"Permitted Liens" means (i) Liens for taxes, assessments or
governmental charges or claims that either (a) are not yet delinquent or (b) are
being contested in good faith by appropriate proceedings and as to which
appropriate reserves have been established or other provisions have been made in
accordance with GAAP, (ii) statutory Liens of landlords and carriers',
warehousemen's, mechanics', suppliers', materialman's, repairmen's or other
Liens imposed by law and arising in the ordinary course of business and with
respect to amounts that, to the extent applicable, either (a) are not yet
delinquent or (b) are being contested in good faith by appropriate proceedings
and as to which appropriate reserves have been established or other
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provisions have been made in accordance with GAAP, (iii) Liens (other than any
Lien imposed by the Employee Retirement Income Security Act of 1974, as amended)
incurred or deposits made in the ordinary course of business in connection with
workers, compensation, unemployment insurance and other types of social
security, (iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds, progress
payments, government contracts and other obligations of like nature (exclusive
of obligations for the payment of borrowed money), in each case incurred in the
ordinary course of business of the Company and its Subsidiaries, (v) attachment
or judgment Liens not giving rise to a Default or an Event of Default and which
are being contested in good faith by appropriate proceedings, (vi) easements,
rights-of-way, restrictions and other similar charges or encumbrances not
materially interfering with the ordinary course of business of the Company and
its Subsidiaries, (vii) zoning restrictions, licenses, restrictions on the use
of real property or minor irregularities in title thereto, which do not
materially impair the use of such real property in the ordinary course of
business of the Company and its Subsidiaries or the value of such real property
for the purpose of such business, (viii) leases or subleases granted to others
not materially interfering with the ordinary course of business of the Company
and its Subsidiaries, (ix) purchase money mortgages (including, without
limitation, Capitalized Lease Obligations and Indebtedness and purchase money
security interests), (x) Liens securing Refinancing Indebtedness, provided that
such refinanced Indebtedness was secured and that the assets covered by the
Liens securing such Refinancing Indebtedness are the same as or similar to, and
not greater in value than, the assets which secured such refinanced
Indebtedness, (xi) Liens securing Indebtedness of the Company and its Restricted
Subsidiaries; provided that, at the time any such Indebtedness is Incurred, the
aggregate amount of Indebtedness of the Company secured by Liens and
Indebtedness of Restricted Subsidiaries whether or not secured by Liens will not
exceed 65 percent of Consolidated Tangible Net Assets (calculated giving pro
forma effect to any incurrence, assumption, guaranty, issuance or redemption
(other than borrowings under the Existing Credit Facility or other short term
Indebtedness in the ordinary course of business) of any Indebtedness, to any
issuance or redemption of Capital Stock or acquisition by the Company or any
Restricted Subsidiary after the end of the last full fiscal quarter), (xii) any
interest in or title of a lessor to property subject to any Capitalized Lease
Obligations incurred in compliance with the provisions of this Indenture, (xiii)
Liens existing on the Issue Date, including, without limitation, Liens securing
Existing Indebtedness, (xiv) any option, contract or other agreement to sell an
asset; provided such sale is not otherwise prohibited under this Indenture, (xv)
Liens securing Non-Recourse Indebtedness of the Company or a Restricted
Subsidiary thereof, (xvi) Liens on property or assets of any Restricted
Subsidiary securing Indebtedness of such Restricted Subsidiary owing to the
Company or one or more Restricted Subsidiaries, (xvii) Liens securing
Indebtedness of an Unrestricted Subsidiary, (xviii) any right of a lender or
lenders to which the Company or a Restricted Subsidiary may
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be indebted to offset against, or appropriate and apply to the payment of, such
Indebtedness any and all balances, credits, deposits, accounts or monies of the
Company or a Restricted Subsidiary with or held by such lender or lenders and
(xix) any pledge or deposit of cash or property in conjunction with obtaining
surety and performance bonds and letters of credit required to engage in
constructing on-site and off-site improvements required by municipalities or
other governmental authorities in the ordinary course of business of the Company
by the Company or any Restricted Subsidiary.
ARTICLE II
THE SECURITIES
SECTION 2.1. Limitations on Restricted Payments. Section 5.12 of the
Indenture is hereby amended and restated to read as follows:
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, make any Restricted Payment, directly or
indirectly, after the Issue Date of the Securities if at the time of
such Restricted Payment:
(i) the amount of such Restricted Payment (the amount of
such Restricted Payment, if other than in cash, will be
determined by the Board of Directors of the Company), when added
to the aggregate amount of all Restricted Payments made after the
Issue Date of the Securities, exceeds the sum of: (1) 50 percent
of the Company's Consolidated Net Income accrued during the
period (taken as a single period) since January 1, 1996 (or, if
such aggregate Consolidated Net Income is a deficit, minus 100
percent of such aggregate deficit), plus (2) the net cash
proceeds derived from the issuance and sale of Capital Stock of
the Company and its Restricted Subsidiaries that is not
Disqualified Stock (other than a sale to a Subsidiary of the
Company) after the Issue Date of Securities but only to the
extent not applied under clause (c) of the definition of
Restricted Payments set forth in Section 1.2 hereof, plus (3) 100
percent of the principal amount of any Indebtedness of the
Company or a Restricted Subsidiary that is converted into or
exchanged for Capital Stock of the Company that is not
Disqualified Stock, plus (4) 100 percent of the aggregate amounts
received by the Company or any Restricted Subsidiary upon the
sale, disposition or liquidation (including by way of dividends
or other return of capital) of any Investment but only to the
extent (x) not included in Consolidated Net Income pursuant to
clause (2) above and (y) that the making of such Investment
constituted a Restricted Investment made pursuant to this Section
5.12(a)(i), plus (5) 100 percent of the principal amount of, or
if issued at a discount the accreted value of, any Indebtedness
or other obligation that is the subject of a guaranty by the
Company which is
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released after the Issue Date of the Securities, but only to the
extent that the granting of such guaranty constituted a Restricted
Payments under the definition set forth in Section 1.2 hereof; or
(ii) the Company or its Restricted Subsidiaries would be
unable to incur an additional $1.00 of Indebtedness under the
Consolidated Fixed Charge Coverage Ratio contained in the
covenant set forth in Section 5.13(a) hereof; or
(iii) a Default or Event of Default has occurred and is
continuing or occurs as a consequence thereof.
(b) Notwithstanding the foregoing, the provisions of this Section
5.12 will not prevent: (i) the payment of any dividend within 60 days
after the date of declaration thereof if the payment thereof would have
complied with the limitations of this Indenture on the date of
declaration or (ii) retirement of shares of the Company's Capital Stock
or the Company's or a Subsidiary of the Company's Indebtedness for, in
exchange for, or out of the proceeds of a substantially concurrent sale
(other than a sale to a Subsidiary of the Company) of, other shares of
its Capital Stock (other than Disqualified Stock).
SECTION 2.2. Limitations on Additional Indebtedness. Section 5.13 of the
Indenture is hereby amended and restated to read as follows:
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to Incur any Indebtedness (other than
Indebtedness between the Company and its Restricted Subsidiaries which
are Wholly Owned Subsidiaries or among such Restricted Subsidiaries
which are Wholly Owned Subsidiaries), including Acquisition Debt,
unless, after giving effect thereto and the application of the proceeds
therefrom, the Company's Consolidated Fixed Charge Coverage Ratio on the
date thereof would be at least 2.0 to 1.0.
(b) Notwithstanding the foregoing, the provisions of this
Indenture will not prevent: (i) in addition to the Indebtedness
permitted to be Incurred under clauses (ii) and (iii) of this sentence
and Indebtedness permitted to be Incurred under Section 5.13(a) hereof,
the Company or any Restricted Subsidiary from Incurring (A) Refinancing
Indebtedness, (B) Non-Recourse Indebtedness and (C) Indebtedness
Incurred for working capital purposes or to finance the acquisition,
holding or development of property by the Company and its Restricted
Subsidiaries (including, without limitation, the financing of any
related interest reserve) in the ordinary course of business in an
aggregate amount at any one time outstanding not to exceed $50,000,000
(excluding any Indebtedness referred to in Section 5.13(a) hereof and
subclauses (i)(A), (i)(B), (ii) and (iii) of this Section 5.13(b)), less
the amount of any
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Indebtedness repaid pursuant to Section 5.11 (a)(ii)(A) hereof, provided
that until June 30, 1997, the incurrence of such indebtedness for the
refinancing of Acquisition Debt other than Existing Debt shall be no
more than $25,000,000 unless the Company's Consolidated Fixed Charge
Coverage Ratio exceeds 1.75 to 1, (ii) Unrestricted Subsidiaries from
Incurring Indebtedness, (iii) the Company and its Restricted
Subsidiaries from Incurring Indebtedness under any deposits made to
secure performance of tenders, bids, leases, statutory obligations,
surety and appeal bonds, progress statements, government contracts and
other obligations of like nature (exclusive of the obligation for the
payment of borrowed money), in each case incurred in the ordinary course
of business of the Company or the Restricted Subsidiary consistent with
past practice and (iv) Restricted Subsidiaries from guaranteeing
Indebtedness of the Company or another Restricted Subsidiary; provided
that the tangible net assets of all Restricted Subsidiaries guaranteeing
Indebtedness of the Company or other Restricted Subsidiaries (other than
Indebtedness Incurred from time to time under the Existing Credit
Facility) at the end of the fiscal quarter immediately preceding the
date of Incurring any such guaranty, as determined in accordance with
GAAP, shall not exceed 10% of the Company's Consolidated Tangible Net
Assets.
SECTION 2.3. Restrictions on Restricted Subsidiary Indebtedness. Section
5.14 of the Indenture is hereby amended and restated to read as follows:
The Company will not permit any of its Restricted Subsidiaries,
directly or indirectly, to Incur any additional Indebtedness after the
Issue Date of the Securities other than: (i) Refinancing Indebtedness,
(ii) Non-Recourse Indebtedness, (iii) Indebtedness to the Company, (iv)
any deposits made to secure performance of tenders, bids, leases,
statutory obligations, surety and appeal bonds, progress statements,
government contracts, and other obligations of like nature (exclusive of
the obligation for the payment of borrowed money), in each case Incurred
in the ordinary course of business of the Restricted Subsidiary, (v) any
guaranty of Indebtedness of the Company or another Restricted
Subsidiary; provided that the tangible net assets of all Restricted
Subsidiaries guaranteeing Indebtedness of the Company or other
Restricted Subsidiaries at the end of the fiscal quarter immediately
preceding the date of Incurring any such guaranty, as determined in
accordance with GAAP, shall not exceed 10% of the Company's Consolidated
Tangible Net Assets and (vi) other Indebtedness of Restricted
Subsidiaries; provided that when such other Indebtedness is incurred by
a Restricted Subsidiary such Indebtedness is permitted by Sections 5.13
and 5.18.
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ARTICLE IV
CONDITIONS PRECEDENT
Pursuant to Section 12.2(b) of the Indenture, prior to or concurrently
with the execution of this Supplemental Indenture, the Trustee has or will
receive the following:
(i) a Board Resolution of the Company authorizing the execution
of this Supplemental Indenture;
(ii) evidence of the consent to this Supplemental Indenture of
the Holders of at least a majority in principal amount of the
Outstanding Securities;
(iii) an Opinion of Counsel as to the matters required by Section
12.6 of the Indenture; and
(iv) an Officers' Certificate as to the matters required by
Section 12.6 and 13.8 of the Indenture.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Ratification and Reaffirmation of Indenture. Except as
hereby expressly supplemented or amended, the Indenture shall remain in full
force and effect; and the Indenture, as supplemented and amended hereby, is
ratified and confirmed.
SECTION 4.2. No Personal Liability or Accountability. No covenant or
agreement contained in this Supplemental Indenture shall be deemed to be the
covenant or agreement of any agent or employee of the Company or the Trustee, in
his or her individual capacity, and neither the members of the board of
directors of the Company nor any officer executing the Securities nor any
officer or director of the Trustee shall be liable personally on the Securities
or be subject to any personal liability or accountability by reason of the
execution and delivery of this Supplemental Indenture.
SECTION 4.3. Bindinq Effect. This Supplemental Indenture shall inure to
the benefit of and shall be binding upon the Company, the Trustee, the holders
of the Securities and their respective successors and assigns.
SECTION 4.4. Execution of Counterparts; Effective Date. This
Supplemental Indenture may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument; and this Supplemental Indenture shall become effective when at least
one counterpart hereof has been executed by each of the parties hereto.
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SECTION 3.5. Governing Law. This Supplemental Indenture is governed by
and shall be construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of law.
SIGNATURES APPEAR ON FOLLOWING PAGE
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IN WITNESS WHEREOF, the Company has caused this Supplemental Indenture
to be signed in its name by its President and Chief Executive Officer and its
corporate seal to be hereunto affixed and attested by an authorized officer, and
the Trustee has caused this Supplemental Indenture to be signed in its name by
one of its officers duly authorized so to sign, all as of the day and year first
above written.
(SEAL) THE FORTRESS GROUP, INC.
Attest: By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
/s/ Xxxxx X. Xxxxxxxx Name: Xxxxx X. Xxxxxxx
------------------------- Title: President and Chief Executive
Xxxxx X. Xxxxxxxx
Officer
Chief Financial Officer
IBJ XXXXXXXX BANK & TRUST COMPANY
By: /s/ Xxxx Xxxxx
------------------------------------
Name: Xxxx Xxxxx
Title: Asst. Vice President
