Document:

EX-4.2

 Exhibit 4.2 

EXECUTION VERSION 

FRANKLIN FINANCIAL NETWORK, INC. 

and 
 U.S. BANK NATIONAL
ASSOCIATION 
 as Trustee 

FIRST SUPPLEMENTAL INDENTURE 

Dated as of March 31, 2016 

to 
 INDENTURE 

Dated as of March 31, 2016 

Fixed-to-Floating Rate Subordinated Notes due 2026 

 THIS FIRST SUPPLEMENTAL INDENTURE (this “First Supplemental Indenture”),
dated as of March 31, 2016, between Franklin Financial Network, Inc., a Tennessee corporation (the “Company”), and U.S. Bank National Association, as Trustee (the “Trustee”), under the Base Indenture (as
hereinafter defined). 
 RECITALS 

WHEREAS, the Company and the Trustee have heretofore executed and delivered the Indenture, dated as of March 31, 2016 (the
“Base Indenture,” and as hereby supplemented and amended, the “Indenture”), providing for the establishment from time to time of series of the Company’s unsecured debt securities, which may be notes, debentures
or other evidences of indebtedness (hereinafter called the “Securities”) and the issuance from time to time of Securities under the Indenture; 

WHEREAS, Section 9.01(d) of the Base Indenture provides that the Company and the Trustee may enter into an indenture supplemental to the
Base Indenture to establish a series of Securities thereunder and the form and terms of Securities of such series of Securities as permitted by Section 2.01 and Section 3.01 of the Base Indenture; 

WHEREAS, pursuant to Section 3.01 of the Base Indenture, the Company desires to establish a new series of Securities under the
Indenture to be known as its “Fixed-to Floating Rate Subordinated Notes due 2026” (the “2026 Series”) and to establish and set the form and terms of the notes of the 2026 Series (the “Notes”), as provided
in this First Supplemental Indenture and to provide for the initial issuance of Notes of the 2026 Series in the aggregate principal amount of $40,000,000; and 

WHEREAS, the Company has requested that the Trustee execute and deliver this First Supplemental Indenture; all requirements necessary to make
this First Supplemental Indenture a valid, binding and enforceable agreement in accordance with its terms, and to make Notes, when executed by the Company and authenticated and delivered by the Trustee, the valid, binding and enforceable obligations
of the Company, have been satisfied; and the execution and delivery of this First Supplemental Indenture has been duly authorized in all respects. 

NOW, THEREFORE, in consideration of the covenants and agreements set forth in the Indenture and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 
 ARTICLE 1 

DEFINITIONS 

Section 1.01 Relation to Base Indenture. This First Supplemental Indenture constitutes an integral part of the Base
Indenture. 
 Section 1.02 Definition of Terms. For all purposes of this First Supplemental Indenture: 

 (a) capitalized terms used herein without definition shall have the meanings set forth in the
Base Indenture, provided that if the definition of a capitalized term defined in this First Supplemental Indenture conflicts with the definition of that capitalized term in the Base Indenture, the definition of that capitalized term in this
First Supplemental Indenture shall control for purposes of this First Supplemental Indenture and the Notes; 
 (b) a term defined anywhere in
this First Supplemental Indenture has the same meaning throughout; 
 (c) the singular includes the plural and vice versa; 

(d) headings are for convenience of reference only and do not affect interpretation; 

(e) unless otherwise specified or unless the context requires otherwise, (i) all references in this First Supplemental Indenture to
Sections refer to the corresponding Sections of this First Supplemental Indenture and (ii) the terms “herein”, “hereof”, “hereunder” and any other word of similar import refer to this First Supplemental Indenture;
and 
 (f) for purposes of this First Supplemental Indenture and the Notes, the following terms have the meanings given to them in this
Section 1.02(f): 
 “Business Day” means, for interest payable on or prior to the First Reset Date or for any
principal repayable on the Maturity Date, any day other than a Saturday, a Sunday, or a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed, and for interest payable after
the First Reset Date, any day that would be considered a business day with respect to interest payable on or prior to the First Reset Date that is also a London Banking Day. 

“Calculation Agent” means U.S. Bank National Association, or any other successor appointed by the Company, acting as
calculation agent. 
 “Designated LIBOR Page” means the display on Reuters, or any successor service, on page
LIBOR01, or any other page as may replace that page on that service, for the purpose of displaying the London interbank rates for U.S. dollars. 

“DTC” shall have the meaning set forth in Section 2.03 hereof. 

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System or any successor regulatory
authority with jurisdiction over financial holding companies. 
 “First Reset Date” shall have the meaning
set forth in Section 2.05(a) hereof. 
 “Fixed Rate Interest Payment Date” shall have the meaning set
forth in Section 2.05(a) hereof. 
 “Floating Rate Interest Payment Date” shall have the meaning set
forth in Section 2.05(a) hereof. 
 “Global Note” shall be a Global Security representing Notes and have
the meaning set forth in Section 2.04 hereof. 

  
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 “Interest Payment Date” shall have the meaning set forth in
Section 2.05(a) hereof. 
 “Interest Period” shall have the meaning set forth in Section 2.05(b)
hereof. 
 “London Banking Day” means any day on which commercial banks are open for business (including
dealings in U.S. dollars) in London.  
 “Maturity Date” means, with respect to the principal repayable on
such date, the Stated Maturity Date or date of earlier redemption, if applicable. 
 “Place of Payment” shall
mean an office or agency of the Company maintained for such purpose in Nashville, Tennessee, which shall initially be the Corporate Trust Office of the Trustee located at 333 Commerce Street, Suite 800, Nashville Tennessee 37201, Attn: Global
Corporate Trust Services. 
 “Regular Record Date” means the March 15 or September 15, whether or
not a Business Day, that is immediately preceding the applicable Fixed Rate Interest Payment Date or the 15th day immediately preceding the applicable Floating Rate Interest Payment Date, as the
case may be. 
 “Regulatory Capital Treatment Event” means the Company’s good faith determination that
as a result of: 
 (a) any amendment to, or change in, the laws, rules or regulations of the United States (including, for the
avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve Board and other appropriate federal bank regulatory agencies) or any political subdivision of or in the United States that is enacted or becomes
effective after the initial issuance of the Notes; 
 (b) any proposed change in those laws, rules or regulations that is announced or
becomes effective after the initial issuance of the Notes; or 
 (c) any official administrative decision or judicial decision or
administrative action or other official pronouncement interpreting or applying those laws, rules or regulations or policies with respect thereto that is announced after the initial issuance of the Notes, 

in each case, there is more than an insubstantial risk that the Company will not be entitled to treat the Notes then outstanding as “Tier 2 Capital”
(or its equivalent) for purposes of the capital adequacy rules of the Federal Reserve Board (or, as and if applicable, the capital adequacy rules or regulations of any successor appropriate federal banking agency) as then in effect and applicable,
for so long as any Note is outstanding. “Appropriate federal banking agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance
Act or any successor provision. 
 “Reset Rate Determination Date” means the second London Banking Day immediately
preceding the first day of each applicable Interest Period commencing on the First Reset Date. 
 “Stated Maturity
Date” shall have the meaning set forth in Section 2.02 hereof. 

  
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 “Three-Month LIBOR” means, for any Interest Period, the offered rate for
deposits in U.S. dollars having a maturity of three months that appears on the Designated LIBOR Page as of 11:00 a.m., London time, on the Reset Rate Determination Date related to such Interest Period. If such rate does not appear on such page
at such time, then the Calculation Agent will request the principal London office of each of four major reference banks in the London interbank market, selected by the Calculation Agent, to provide such bank’s offered quotation to prime banks
in the London interbank market for deposits in U.S. dollars with a term of three months as of 11:00 a.m., London time, on such Reset Rate Determination Date and in a principal amount equal to an amount that, in the judgment of the Calculation
Agent, is representative for a single transaction in U.S. dollars in the relevant market at the relevant time (a “Representative Amount”). If at least two such quotations are so provided, Three-Month LIBOR for the Interest Period
related to such Reset Rate Determination Date will be the arithmetic mean of such quotations. If fewer than two such quotations are provided, the Calculation Agent will request each of three major banks in The City of New York to provide such
bank’s rate for loans in U.S. dollars to leading European banks with a term of three months as of approximately 11:00 a.m., New York City time, on such Reset Rate Determination Date and in a Representative Amount. If at least two such
rates are so provided, Three-Month LIBOR for the Interest Period related to such Reset Rate Determination Date will be the arithmetic mean of such quotations. If fewer than two such rates are so provided, then Three-Month LIBOR for the Interest
Period related to such Reset Rate Determination Date will be set to equal the Three-Month LIBOR for the immediately preceding Interest Period or, in the case of the Interest Period commencing on the First Reset Date, 0.63085%. All percentages used
in or resulting from any calculation of Three-Month LIBOR will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with 0.000005% rounded up to 0.00001%. 

The terms “Company,” “Trustee,” “Indenture,” “Base Indenture,”
“Notes,” “Securities,” “First Supplemental Indenture” and “2026 Series” shall have the respective meanings set forth in the recitals to this First Supplemental Indenture and the
paragraph preceding such recitals. 
 ARTICLE 2 

ESTABLISHMENT OF THE 2026 SERIES 

AND TERMS OF THE NOTES 

Section 2.01 Establishment of the Series of the Notes and Designation. There is hereby authorized and established a series of
Securities designated as the “Fixed-to-Floating Rate Subordinated Notes due 2026,” which are referred to herein as the Notes. The Notes that are a part of such series of Securities shall be in the form and have the terms set forth in the
Base Indenture, this First Supplemental Indenture and the Notes in the form attached hereto as Exhibit A. 

Section 2.02 Maturity. The date upon which the Notes shall become due and payable at final maturity, together with
any accrued and unpaid interest then owing, is March 30, 2026 (the “Stated Maturity Date”), unless such Notes shall have been redeemed in full prior to such date pursuant to Article 3 hereof. 

  
 4 

 Section 2.03 Form, Payment and Appointment. Except as provided in Section 3.05
of the Base Indenture, the Notes will be issued in book-entry only form and will be represented by one or more Global Notes registered in the name of or held by The Depository Trust Company (and any successor thereto) (“DTC”) or its
nominee. Principal and, in the case of redemption, interest, if any, due on the Stated Maturity Date or any earlier date of redemption of a Note shall be payable against presentation and surrender of such Note at the Place of Payment. Interest
payable on an Interest Payment Date will be made by wire transfer in immediately available funds or, at the option of the Company in the event that the Notes are not represented by one or more Global Notes, by check mailed to the Person entitled
thereto at such address as shall appear in the Security Register. 
 The Notes shall have such other terms as are set forth in the form
thereof attached hereto as Exhibit A. 
 The Security Registrar, Paying Agent and Calculation Agent for the Notes shall initially be
the Trustee. 
 The Notes will be issuable and may be transferred only in denominations of $2,000 or any amount in excess thereof
that is an integral multiple of $1,000. The amounts payable with respect to the Notes shall be payable in U.S. Dollars. 

Section 2.04 Global Note. The Notes shall be issued initially in the form of one or more fully registered global
notes in book-entry form (each such global note, a “Global Note”) registered in the name of DTC or its nominee and deposited with DTC or its designated custodian or such other Depositary as any officer of the Company may from time
to time designate. Unless and until a Global Note is exchanged for Notes in certificated form, such Global Note may be transferred, in whole but not in part, and any payments on the Notes shall be made, only to DTC or a nominee
of DTC, or to a successor Depositary selected or approved by the Company or to a nominee of such successor Depositary as provided in the Indenture. 

Section 2.05 Interest. 

(a) The Notes will bear interest (i) at an initial rate of 6.875% per annum, payable semi-annually in arrears on March 30
and September 30 of each year (each, a “Fixed Rate Interest Payment Date”), commencing on September 30, 2016, from and including the date of issuance to but excluding March 30, 2021 (the “First Reset
Date”) and (ii) thereafter at an annual floating rate equal to Three-Month LIBOR as determined for the applicable Interest Period, plus a spread of 5.636%, payable quarterly in arrears on
March 30, June 30, September 30 and December 30 of each year (each, a “Floating Rate Interest Payment Date,” and together with the Fixed Rate Interest Payment Dates, the “Interest Payment
Dates”), commencing on June 30, 2021. The determination of Three-Month LIBOR for each relevant Interest Period by the Calculation Agent will (in the absence of manifest error) be final and binding. The Calculation Agent’s
calculation of the amount of any interest payable after the First Reset Date will be maintained on file at the Calculation Agent’s principal offices. 

  
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 (b) Interest on the Notes will accrue from and including the immediately preceding
Interest Payment Date in respect of which interest has been paid or duly provided for (or from and including the date of issuance of the Notes, if no interest has previously been paid or duly provided for with respect to any of the Notes) to but
excluding the applicable Interest Payment Date or the Maturity Date (each, an “Interest Period”).  
 (c) Interest on
the Notes on any Interest Payment Date shall be payable to the Persons in whose names the relevant Notes are registered at the close of business on the Regular Record Date for such Interest Payment Date, except as provided in Section 3.07(a) of
the Base Indenture. For the purpose of determining the Persons in whose names the relevant Notes are registered at the close of business on a Regular Record Date that is not a Business Day, the close of business shall mean 5:00 p.m., New York City
time, on that day. 
 (d) Any interest payable on the Notes on or prior to the First Reset Date will be computed on the basis of a 360-day
year consisting of twelve 30-day months and any interest payable on the Notes after the First Reset Date will be computed on the basis of the actual number of days in the Interest Period in respect of which interest is payable divided by 360. Dollar
amounts resulting from that calculation will be rounded to the nearest cent, with one-half cent being rounded upward. 
 (e) In the event
that a Fixed Rate Interest Payment Date or the Maturity Date falls on a day that is not a Business Day, then the amounts payable on such date will be paid on the next succeeding Business Day without the accumulation of additional interest. In the
event that a Floating Rate Interest Payment Date falls on a day that is not a Business Day, then such Floating Rate Interest Payment Date will be postponed to the next succeeding Business Day unless such day falls in the next succeeding calendar
month, in which case such Floating Rate Interest Payment Date will be accelerated to the immediately preceding Business Day, and, in each such case, the amounts payable on such Business Day will include interest accrued to but excluding such
Business Day.
 Section 2.06 Subordination. The Company, for itself, its successors and assigns, covenants and agrees, and each
Holder of Notes by the Holder’s acceptance thereof, likewise covenants and agrees, that the indebtedness evidenced by the Notes and the payment of the principal of, and interest, on each and all of the Notes is and will be expressly
subordinated in right of payment to the prior payment in full of all Senior Indebtedness to the extent and in the manner described in Article XV of the Base Indenture. 

Section 2.07 No Sinking Fund. The Notes are not entitled to the benefit of, or subject to, any sinking fund. 

Section 2.08 No Conversion or Exchange Rights. The Notes shall not be convertible into, or exchangeable for, any equity
securities, other securities or other assets of the Company or any Subsidiary. 
 Section 2.09 No Defeasance or Covenant
Defeasance. Article XIII of the Base Indenture shall not be applicable to the Notes. 

  
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 ARTICLE 3 

REDEMPTION OF THE NOTES 

Section 3.01 Redemption. The Company may, at its option, redeem the Notes (a) in whole or in part on or after
March 30, 2021 or (b) in whole, but not in part, at any time within 90 days following the occurrence of a Regulatory Capital Treatment Event. Any such redemption will be at a Redemption Price equal to 100% of the principal amount of
the Notes to be redeemed, plus unpaid interest, if any, accrued thereon to but excluding the Redemption Date fixed by the Company; provided, however, that the interest due on an Interest Payment Date falling on or prior to the
scheduled Redemption Date will be payable to the Holders thereof on the Regular Record Date for such Interest Payment Date. Any early redemption of the Notes by the Company will be subject to the receipt of the prior approval of the Federal Reserve
Board, to the extent then required under applicable laws or regulations, including capital regulations. The provisions of Article XI of the Base Indenture shall apply to any redemption of the Notes pursuant to this Article 3. 

ARTICLE 4 
 FORM OF
NOTES 
 Section 4.01 Form of Notes. The Notes and the Trustee’s certificate of authentication thereon are to be
substantially in the form attached as Exhibit A hereto, with such changes therein as the officers of the Company executing the Notes (by manual or facsimile signature) may approve in accordance with the terms hereof and of the Base Indenture,
such approval to be conclusively evidenced by their execution thereof. 
 ARTICLE 5 

ISSUE OF NOTES 

Section 5.01 Original Issue of Notes. Notes having an aggregate principal amount of $40,000,000 may from time to
time, upon execution of this First Supplemental Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Notes in accordance with a Company Order pursuant to
Section 3.03 of the Base Indenture without any further action by the Company (other than as required by the Base Indenture). 

Section 5.02 Additional Issues of Notes. The Company may from time to time, without notice to or the consent of the
Holders of the Notes, create and issue additional Subordinated Securities, which Subordinated Securities will rank pari passu with the Notes and be identical in all respects as the Notes except for their issuance date, the issue price and the
first Interest Payment Date, provided that such additional Subordinated Securities either shall be fungible with the Notes for federal income tax purposes or shall be issued under a separate CUSIP number. Such additional Subordinated
Securities will be consolidated and form a single series with the Notes under the Indenture. 

  
 7 

 ARTICLE 6 

IMMUNITY OF STOCKHOLDERS, EMPLOYEES, AGENTS, OFFICERS AND 

DIRECTORS 

Section 6.01 Indenture and Notes Solely Corporate Obligations. No recourse for the payment of the principal of or interest on any
Note, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, shareholder, officer, director, employee or agent, as such, past, present or future, of the Company or of any successor Person to the
Company, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this First Supplemental Indenture and the issue of the Notes. 

ARTICLE 7 

MISCELLANEOUS 

Section 7.01 Ratification of Base Indenture. The Base Indenture, as supplemented by this First Supplemental
Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Base Indenture in the manner and to the extent herein and therein provided. 

Section 7.02 Trustee Not Responsible for Recitals. The recitals contained herein and in the Notes, except the
Trustee’s certificates of authentication, shall be taken as statements of the Company and not those of the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representations as to the
validity or sufficiency of this First Supplemental Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of the Notes or of the proceeds thereof. 

Section 7.03 New York Law To Govern. THIS FIRST SUPPLEMENTAL INDENTURE AND EACH NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 
 Section 7.04 Separability. In case any
provision in this First Supplemental Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired by such invalid, illegal or
unenforceable provision. 
 Section 7.05 Counterparts. This First Supplemental Indenture may be executed in
any number of counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. The exchange of copies of this First Supplemental Indenture and of signature pages by facsimile or
electronic format (i.e., “.pdf” or “.tif”) transmission shall constitute effective execution and delivery of this First Supplemental Indenture as to the parties hereto and may be used in lieu of the original First Supplemental
Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or electronic format (i.e., “.pdf” or “.tif”) shall be deemed to be their original signatures for all purposes. 

  
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 Section 7.06 Benefits of First Supplemental Indenture. Nothing in this First
Supplemental Indenture or in the Notes, express or implied, shall give to any Person, other than the parties to this First Supplemental Indenture and their successors under this First Supplemental Indenture and the Persons in whose names the Notes
are registered on the Security Register from time to time, any benefit or any legal or equitable right, remedy or claim under this First Supplemental Indenture. 

Section 7.07 Conflict with Base Indenture. If any provision of this First Supplemental Indenture relating to the Notes is
inconsistent with any provision of the Base Indenture, such provision of this First Supplemental Indenture shall control. 

Section 7.08 Provisions of Trust Indenture Act Controlling. This First Supplemental Indenture is subject to the provisions of the
Trust Indenture Act that are required to be part of the Indenture and shall, to the extent applicable, be governed by such provisions. If any provision of this First Supplemental Indenture limits, qualifies, or conflicts with a provision of the
Trust Indenture Act that is required under the Trust Indenture Act to be a part of and govern this First Supplemental Indenture, the provision of the Trust Indenture Act shall control. 

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.] 

  
 9 

 IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly
executed as of the day and year first written above. 
  

			
	FRANKLIN FINANCIAL NETWORK, INC.
		
	By:	 	 /s/ Sally P. Kimble

		 	Name: Sally P. Kimble
		 	Title: EVP/CFO
	
	U.S. BANK NATIONAL ASSOCIATION, as Trustee
		
	By:	 	 /s/ Wally Jones

		 	Name: Wally Jones
		 	Title: Vice President

 [Franklin Financial – Signature Page to First Supplemental Indenture] 

 EXHIBIT A 

[NOTE: The following legend is to be placed at the beginning of any Global Note representing the Notes.] 

GLOBAL NOTE 
 [THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE REFERRED TO IN THIS SECURITY AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR ITS NOMINEE. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES OF THIS SERIES IN CERTIFICATED
FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH DEPOSITARY. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF SUCH A TRANSFEROR TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF SUCH A TRANSFEREE OR SUCH OTHER
NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF SUCH A TRANSFEROR AND ANY PAYMENT IS MADE TO SUCH A TRANSFEREE, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
SUCH A TRANSFEROR, HAS AN INTEREST HEREIN. 
 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (“DTC”), TO THE COMPANY (AS DEFINED HEREIN) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] 
 THIS SECURITY AND THE OBLIGATIONS OF THE
COMPANY AS EVIDENCED HEREBY (1) ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR ANY OF THE COMPANY’S SUBSIDIARIES AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY AND (2) ARE SUBORDINATE IN THE RIGHT OF PAYMENT TO THE SENIOR INDEBTEDNESS (AS DEFINED IN THE INDENTURE REFERRED TO IN THIS SECURITY). 

 FRANKLIN FINANCIAL NETWORK, INC. 

FIXED-TO-FLOATING RATE SUBORDINATED NOTE DUE 2026 
  

			
	No. R-1	  	CUSIP: 35352P AA2
		
	$40,000,000	  	ISIN: US35352PAA21

 Franklin Financial Network, Inc., a Tennessee corporation (hereinafter called the “Company”,
which term includes any permitted successor under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of FORTY MILLION DOLLARS ($40,000,000.00) (or such
other amount as set forth in the Schedule of Increases or Decreases in Global Note attached hereto) on March 30, 2026 (such date is hereinafter referred to as the “Stated Maturity Date”), unless redeemed prior to such date as
permitted below, and to pay interest on the outstanding principal amount of this Note from and including the date of issuance or from and including the most recent Interest Payment Date to which interest has been paid or duly provided for, as the
case may be, at the rate of 6.875% per annum, payable semi-annually in arrears on March 30 and September 30 of each year (each, a “Fixed Rate Interest Payment Date”), commencing on September 30, 2016, from and
including the date of issuance to but excluding March 30, 2021 (the “First Reset Date”), and thereafter at an annual floating rate equal to Three-Month LIBOR (as defined in the First Supplemental Indenture hereinafter referred
to) as determined for the applicable Interest Period (as defined in the First Supplemental Indenture hereinafter referred to), plus a spread of 5.636%, payable quarterly in arrears on March 30, June 30, September 30 and
December 30 of each year (each, a “Floating Rate Interest Payment Date,” and together with the Fixed Rate Interest Payment Dates, the “Interest Payment Dates”), commencing on June 30, 2021, with such
interest, in the case of any interest payable on this Note on or prior to the First Reset Date, calculated on the basis of a 360-day year consisting of twelve 30-day months, or, in the case of any interest payable on this Note after the First Reset
Date, calculated on the basis of the actual number of days in the Interest Period in respect of which interest is payable divided by 360, until the principal of the Notes has been paid in full or a sum sufficient to pay the principal of the Notes in
full has been made available for payment. 
 The interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in, and subject to exceptions specified in, the Indenture, be paid to the Person in whose name this Note, or any predecessor Note, is registered at the close of business on the Regular Record Date for such Interest
Payment Date. 
 Principal and, in the case of redemption, interest, if any, due on the Stated Maturity Date or any earlier date of
redemption of a Note shall be payable against presentation and surrender of this Note at the office or agency of the Company maintained for such purpose in Nashville, Tennessee, which shall initially be the Corporate Trust Office of U.S. Bank
National Association, as Trustee, located at 333 Commerce Street, Suite 800, Nashville, Tennessee 37201, Attn: Global Corporate Trust Services (the “Place of Payment”). Interest payable on an Interest Payment Date will be made by
wire transfer in immediately available funds or, at the option of the Company in the event that the Notes are not represented by one or more Global Notes, by check mailed to the Person entitled thereto at such address as shall appear in the Security
Register. 

 Reference is hereby made to the further provisions of this Note set forth on the reverse hereof,
which further provisions shall for all purposes have the same effect as if set forth at this place. 
 Unless the certificate of
authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual or facsimile signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 

[Signature Page Follows] 

 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. 

Dated: March 31, 2016 
  

									
	Attested:	 		 	FRANKLIN FINANCIAL NETWORK, INC.
					
	By:	 	  
	 		 	By:	 	  

		 	Name:	 		 		 	Name:
		 	Title:	 		 		 	Title:

 TRUSTEE’S CERTIFICATE OF AUTHENTICATION 

This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture. 

Dated: March 31, 2016 
  

			
	U.S. BANK NATIONAL ASSOCIATION, as Trustee
		
	By:	 	  

		 	Authorized Signatory

 REVERSE OF NOTE 

FRANKLIN FINANCIAL NETWORK, INC. 

FIXED-TO-FLOATING RATE SUBORDINATED NOTES DUE 2026 

This Note is one of a duly authorized issue of Securities of the Company of a series designated as the “Fixed-to-Floating Rate
Subordinated Notes due 2026” (herein called the “Notes”) initially issued in an aggregate principal amount of $40,000,000 on March 31, 2016. Such series of Securities has been established pursuant to
the Indenture, dated as of March 31, 2016 (the “Base Indenture”), between the Company and U.S. Bank National Association, as Trustee (herein called the “Trustee,” which term includes any successor trustee), as
supplemented and amended by the First Supplemental Indenture between the Company and the Trustee, dated as of March 31, 2016 (the “First Supplemental Indenture”, and the Base Indenture as supplemented and amended by the First
Supplemental Indenture, the “Indenture”), to which Indenture and any other indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Persons in whose names Notes are registered on the Security Register from time to time and of the terms upon which the Notes are, and are to be, authenticated and delivered. The terms of the
Notes are those stated in the Indenture, those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, and those set forth in this Note. To the extent that the terms of this Note modify,
supplement or are inconsistent with those of the Indenture, then the terms of this Note shall govern to the extent such terms of this Note are not inconsistent with the terms made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended. 
 All capitalized terms used in this Note and not defined herein that are defined in the Base Indenture or
the First Supplemental Indenture shall have the meanings assigned to them in the Base Indenture or the First Supplemental Indenture. If any capitalized term used and defined in this Note is also defined in the Base Indenture or the First
Supplemental Indenture, in the event of any conflict in the meanings ascribed to such capitalized term, the definition of the capitalized term in this Note shall control. 

The indebtedness of the Company evidenced by the Notes, including the principal thereof and interest thereon, is subordinated in right
of payment to all existing and future obligations of the Company constituting Senior Indebtedness (as defined in the Base Indenture), on the terms and subject to the terms and conditions as provided and set forth in Article XV of the Base Indenture
and shall rank at least equally in right of payment with all other unsecured subordinated indebtedness of the Company, including Subordinated Securities issued under the Indenture by the Company in the future. Each Holder of this Security, by
the acceptance hereof, agrees to and shall be bound by such provisions of the Indenture and authorizes and directs the Trustee on his behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided.

 If an Event of Default with respect to Notes shall occur and be continuing, the principal and interest owed on the Notes shall
only become due and payable in accordance with the terms and conditions set forth in Article V of the Base Indenture. Accordingly, the Holder of this 

 
Note has no right to accelerate the maturity of this Note in the event the Company fails to pay the principal of, or interest on, any of the Notes or fails to perform any other obligations under
the Notes or in the Indenture that are applicable to the Notes other than in the case of an Event of Default. 
 The Company may,
at its option, redeem the Notes: (a) in whole or in part on or after March 30, 2021 or (b) in whole, but not in part, at any time within 90 days following the occurrence of a Regulatory Capital Treatment Event. Any such
redemption will be at a Redemption Price equal to 100% of the principal amount of the Notes to be redeemed, plus unpaid interest, if any, accrued thereon to but excluding the Redemption Date fixed by the Company; provided, however,
that the interest due on an Interest Payment Date falling on or prior to the scheduled Redemption Date will be payable to the Holders thereof on the Regular Record Date for such Interest Payment Date. Any early redemption of the Notes by the Company
will be subject to the receipt of the prior approval of the Federal Reserve Board, to the extent then required under applicable laws or regulations, including capital regulations.  

The Notes of this series are not entitled to the benefit of, or subject to, any sinking fund. 

The Base Indenture provisions relating to defeasance and covenant defeasance in Article XIII of the Base Indenture shall not be applicable to
the Notes. 
 The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the Holders of the Securities at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities of each series (each
series voting as a class) affected thereby and at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of a series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. 

As provided in the Indenture and subject to certain limitations herein and therein set forth, the transfer of this Note is registrable in the
Security Register, upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal of, and interest on, this Note are payable, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of this series, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or transferees. 
 The Notes of this series shall not be
convertible into, or exchangeable for, any equity securities, other securities or other assets of the Company or any Subsidiary. 

 The Notes of this series are issuable only in registered form without coupons in denominations of
$2,000 and any integral multiple of $1,000 in excess thereof. 
 The Company and the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. 

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and interest (if any) on this Security at the times, place and rate, and in the coin or currency, herein prescribed. 

U.S. Bank National Association will act as the Company’s principal Paying Agent with respect to the Notes through its offices
presently located at 333 Commerce Street, Suite 800, Nashville, Tennessee 37201. The Company may at any time rescind the designation of a Paying Agent, appoint a successor Paying Agent, or approve a change in the office through which any
Paying Agent acts. 
 The Indenture contains provisions setting forth certain conditions to the institution of proceedings by the
Holders of Notes with respect to the Indenture or for any remedy under the Indenture. 
 THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 
 [end reverse side of note] 

 ASSIGNMENT FORM 

To assign the within Security, fill in the form below: 
 I or we
assign and transfer the within Security to: 
  

 
 (Insert
assignee’s legal name) 
  
  

(Insert assignee’s social security or tax I.D. no.) 
  

 
  

 
 (Print or type
assignee’s name, address and zip code) 
 and irrevocably appoint as agent to transfer this Security on the books of Independent Bank Group, Inc. The
agent may substitute another to act for it. 
 Your
Signature:                                       
                                         
                          

                          
(Sign exactly as your name appears on the other side of this Security) 
 Your
Name:                                        
                                         
                               

Date:                     

Signature Guarantee:
*                                         
                                         
             
 NOTICE: The Signature must be guaranteed by an Institution which is a member
of one of the following recognized signature Guarantee Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock Exchange Medallion Program
(SEMP); or (iv) such other guarantee program acceptable to the Trustee. 

 SIGNATURE GUARANTEE 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements
include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 

 SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE 

The initial outstanding principal amount of this Global Note is $40,000,000. The following increases or decreases in the principal amount of this Global Note
have been made: 
  

									
	 Date of Exchange
	  	 Amount of

Decrease in
 Principal Amount

of this Global Note
	  	 Amount of

Increase in the
 Principal Amount

of this Global Note
	  	 Principal Amount

of this Global Note
 following
such
 Decrease or

Increase
	  	 Signature of

Authorized
 Signatory of

Trusteematr-ex101_6.htm

 

Exhibit 10.1

FIRST Amendment

to 

SECOND AMENDED AND RESTATED Loan and security agreement

 

This First Amendment to Second Amended and Restated Loan and Security Agreement (this “Amendment”) is entered into this 25th day of March, 2016, by and between (a)  SILICON VALLEY BANK, a California corporation with a loan production office located at 380 Interlocken Crescent, Suite 600, Broomfield, Colorado 80021 (“Bank”), and (b) (i) MATTERSIGHT CORPORATION, a Delaware corporation (“Mattersight Corporation”), (ii) MATTERSIGHT EUROPE HOLDING CORPORATION, a Delaware corporation (“Mattersight Europe”), and (iii) MATTERSIGHT INTERNATIONAL HOLDING, INC., an Illinois corporation (“Mattersight International”; and together with Mattersight Corporation and Mattersight Europe, jointly and severally, individually and collectively, “Borrower”).

Recitals

A.Bank and Borrower have entered into that certain Second Amended and Restated Loan and Security Agreement dated as of March 10, 2015 (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”).  

B.Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.  

C.Borrower has requested that Bank amend the Loan Agreement to (i) extend the Revolving Line Maturity Date, (ii) revise the financial covenants, (iii) provide for the Term Loan 2016, as described below, and (iv) make certain other revisions to the Loan Agreement as more fully set forth herein.

D.Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

Agreement

Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.Definitions.  Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

1

 

 

2.Amendments to Loan Agreement. 

2.1Section 2.1.2 (Term Loan 2016).  The following new Section 2.1.2 shall be inserted immediately following Section 2.1.1 thereof:

 

“2.1.2Term Loan 2016.

 

(a)Availability.  Bank shall make one (1) term loan available to Borrower on the First Amendment Effective Date, in an amount equal to Six Million Dollars ($6,000,000), subject to the satisfaction of the terms and conditions of this Agreement.

 

(b)Repayment.  Borrower shall make monthly payments of interest with respect to the Term Loan 2016 commencing on the first day of the month following the month in which the Funding Date occurs, and thereafter on the first day of each successive calendar month until the Term Loan 2016 is paid in full.  Borrower shall repay the principal amount of the Term Loan 2016 in thirty-six (36) equal installments of principal, based on a thirty-six (36) month amortization schedule (each payment of principal and/or interest being a “Term Loan 2016 Payment”) commencing on the first day of the month that is twelve (12) months after the Funding Date of the Term Loan 2016 and thereafter on the first day of each successive calendar month.  Borrower’s final Term Loan 2016 Payment, due on the Term Loan 2016 Maturity Date, shall include all outstanding principal and accrued and unpaid interest under the Term Loan 2016.  Once repaid, the Term Loan 2016 may not be reborrowed.

 

(c)Prepayment.  The Borrower may prepay all or any portion, of the Term Loan 2016 prior to the Term Loan 2016 Maturity Date, effective three (3) Business Days after written notice of such prepayment is given to Bank.  Notwithstanding any such prepayment, Bank’s lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations.  Such prepayments shall be in a minimum amount of Five Hundred Thousand Dollars ($500,000) and increments of Five Hundred Thousand ($500,000) in excess thereof (or, if less, the then-remaining outstanding principal amount of the Term Loan 2016).  If any such prepayment is at Borrower’s election or at Bank’s election due to the occurrence and continuance of an Event of Default, Borrower shall pay to Bank, in addition to the payment of any other expenses or fees then-owing, a prepayment premium in an amount equal to (i) one percent (1.00%) of the principal amount of the Term Loan 2016 so prepaid on or prior to the first anniversary of the First Amendment Effective Date; (ii) one-half of one percent (0.50%) of the principal amount of the Term Loan 2016 so prepaid after the first anniversary of the First Amendment Effective Date, but on or before the second anniversary of the First Amendment Effective Date; and (iii) zero percent (0.00%) of the principal amount of the Term Loan 2016 so prepaid after the second anniversary of the First Amendment Effective Date; provided that no prepayment premium shall be charged if the Term Loan 2016 is replaced with a new facility from Bank.

2

 

 

 

(d)Use of Proceeds.   Proceeds of the Term Loan 2016 will be utilized by Borrower as working capital, to fund its general business requirements and not for personal, family, household or agricultural purposes.”

 

2.2Section 2.3(a) (Interest Rate).  Section 2.3(a) is amended in its entirety and replaced with the following:

 

“(a)Interest Rate.

 

(i)Revolving Line.  Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the Prime Rate plus one and one-quarter percent (1.25%), which interest shall be payable monthly in accordance with Section 2.3(f) below.

 

(ii)Term Loan 2016.  Subject to Section 2.3(b), the principal amount outstanding under the Term Loan 2016 shall accrue interest at a floating per annum rate equal to the Prime Rate plus one and one-half percent (1.50%), which interest shall be payable monthly.”

2.3Section 2.4 (b) and Section 2.4(c) (Termination Fee).  Section 2.4(b) and Section 2.4(c) are each amended in their entirety and replaced with the following:

 

“(b)[Reserved];

 

(c)Termination Fee.  Upon termination of the Revolving Line for any reason prior to the Revolving Line Maturity Date, in addition to the payment of any other amounts then-owing, a termination fee in an amount equal to (i) one percent (1.00%) of the Revolving Line (i.e. One Hundred Fifty Thousand Dollars ($150,000.00)) if such termination occurs on or prior to the first anniversary of the First Amendment Effective Date; or (ii) one-quarter of one percent (0.25%) of the Revolving Line (i.e. Thirty Seven Thousand Five Hundred Dollars ($37,500.00)) if such termination occurs at any time after the first anniversary of the First Amendment Effective Date but prior to the Revolving Line Maturity Date; provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from Bank;”

 

3

 

 

2.4Section 6.7 (Financial Covenants).  Section 6.7 is amended in its entirety and replaced with the following: 

 

“6.7Financial Covenants.

 

Maintain at all times, subject to periodic reporting as of the last day of each month, unless otherwise noted, on a consolidated basis with respect to Borrower:

 

(a)Free Cash Flow.  Achieve Free Cash Flow (negative Free Cash Flow), measured quarterly, on a trailing three month basis, of not less than (no worse than) the following for the quarterly compliance periods indicated below:

 

	
Quarterly Period Ending

 
	
Minimum Adjusted Free Cash Flow
(negative Free Cash Flow no worse than)

	
March 31, 2016
	
($4,300,000)

	
June 30, 2016
	
($5,200,000)

	
September 30, 2016
	
($3,350,000)

	
December 31, 2016
	
($1,350,000)

	
March 31, 2017
	
($2,100,000)

	
June 30, 2017
	
($1,550,000)

	
September 30, 2017
	
($750,000)

	
December 31, 2017 
	
$0.00

 

For the quarterly periods ending March 31, 2018 and thereafter, the quarterly Free Cash Flow requirements shall be determined by Bank, based on the annual projections delivered by Borrower to Bank in accordance with Section 6.2(i); provided, that in any event such quarterly requirements will not be less than $0.00 for any such quarterly period.

 

(b)Liquidity.  Maintain at all times, to be certified by Borrower as of the last day of each month, the sum of (i) unrestricted cash at Bank plus (ii) the unused Availability Amount, in an amount equal to or greater than Seventeen Million Dollars ($17,000,000).”

 

2.5Section 8.1 (Payment Default).  Section 8.1 is amended in its entirety and replaced with the following:

 

“8.1Payment Default.  Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to payments due on the Revolving Line Maturity Date and/or the Term Loan 2016 Maturity Date).  During the cure period, the failure to make or pay any payment specified under clause (a) or (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);”

 

4

 

 

2.6Section 13 (Definitions).  The following new terms and their respective definitions are hereby inserted in Section 13.1 thereof, each in its applicable alphabetical order: 

 

“Capital Expenditures” means, with respect to any Person for any period, the sum of (a) the aggregate of all expenditures by such Person and its Subsidiaries during such period that are capital expenditures as determined in accordance with GAAP, whether such expenditures are paid in cash or financed, plus (b) to the extent not covered by clause (a), the aggregate of all expenditures by such Person and its Subsidiaries during such period to acquire by purchase or otherwise the business or capitalized assets or the capital stock of any other Person.

 

“Free Cash Flow” is, on any date of measurement, is (a) the sum of (i) Net Income, plus (ii) Interest Expense, plus (iii) income tax expense, plus (iv) to the extent deducted from the calculation of Net Income, depreciation and amortization expense, plus (v) non-cash stock compensation expense; minus (b) Capital Expenditures.

 

“First Amendment” is that certain First Amendment to Second Amended and Restated Loan and Security Agreement, dated as of the First Amendment Effective Date, by and between Bank and Borrower.

 

“First Amendment Effective Date” is March 25, 2016.

 

“Interest Expense” means for any fiscal period, interest expense (whether cash or non-cash) determined in accordance with GAAP for the relevant period ending on such date, including, in any event, interest expense with respect to any Credit Extension and other Indebtedness of Borrower and its Subsidiaries, including, without limitation or duplication, all commissions, discounts, or related amortization and other fees and charges with respect to letters of credit and bankers’ acceptance financing and the net costs associated with interest rate swap, cap, and similar arrangements, and the interest portion of any deferred payment obligation (including leases of all types).

 

“Net Income” means, as calculated on a consolidated basis for Borrower and its Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period.

 

“Term Loan 2016” is a loan made by Bank pursuant to the terms of Section 2.1.2 hereof.

 

“Term Loan 2016 Maturity Date” is March 1, 2020 (i.e. the first day of the month that is forty-eight (48) months after the First Amendment Effective Date).

 

“Term Loan 2016 Payment” is defined in Section 2.1.2(b).

 

5

 

 

2.7Section 13 (Definitions).  The following terms and their respective definitions set forth in Section 13.1 are amended in their entirety and replaced with the following:  

 

“Credit Extension” is any Advance, the Term Loan 2016 or any other extension of credit by Bank for Borrower’s benefit under this Agreement.

 

“Revolving Line Maturity Date” is March 31, 2018.

 

2.8Section 13 (Definitions).  The following terms and their respective definition are hereby deleted in their entirety:

 

“Tangible Net Worth” is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus (a) any amounts attributable to (i) goodwill, (ii) intangible items including unamortized debt discount and expense, Patents, Trademarks, Copyrights, and research and development expenses except prepaid expenses, (iii) notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates, and (iv) reserves not already deducted from assets, minus (b) Total Liabilities, plus (c) Subordinated Debt.

 

“Total Liabilities” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s consolidated balance sheet, including all Indebtedness.

 

2.9Exhibit A (Compliance Certificate).  The Compliance Certificate is amended in its entirety and replaced with the Compliance Certificate in the form of Exhibit A attached hereto.

 

3.Limitation of Amendments.

3.1The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

3.2This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4.Representations and Warranties.  To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.1Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and 

6

 

 

warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing; 

4.2Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3The organizational documents of Borrower previously delivered to Bank on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized; 

4.5The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower; 

4.6The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on either Borrower, except as already has been obtained or made; and

4.7This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5.Updated Perfection Certificate.  In connection with this Amendment, Borrower has delivered to Bank an updated Perfection Certificate (the “Updated Perfection Certificate”).  Bank and Borrower acknowledge and agree that from and after the First Amendment Effective Date, all references in the Loan Agreement or any other Loan Document to the “Perfection Certificate” shall be deemed to mean the Updated Perfection Certificate.

6.No Defenses of Borrower.  Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.

7

 

 

7.Integration.  This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents. 

8.Counterparts.  This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

9.Effectiveness.  This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto; (b) Borrower’s payment of (i) a Revolving Line commitment fee in an amount equal to Fifty Six Thousand Two Hundred Fifty Dollars ($56,250.00), (ii) a Term Loan 2016 commitment fee in an amount equal to Sixty Thousand Dollars ($60,000), and (iii) Bank’s legal fees and expenses incurred in connection with the existing Loan Documents and this Amendment; (c) Bank’s receipt of the updated Perfection Certificate, the updated certificates of insurance and the Bank’s Invoice for Loan Charges, in each case duly authorized and executed (as applicable), and otherwise in form and substance reasonably acceptable to Bank; (d) a legal opinion of Borrower’s counsel dated as of the First Amendment Effective Date, together with the duly executed original signature thereto; and (e) Bank’s receipt of updated Corporate Borrowing Certificates for each Borrower, including the applicable attachments in connection therewith.

10.Anniversary Fee.  Borrower shall pay to Bank an anniversary fee of Fifty Six Thousand Two Hundred Fifty Dollars ($56,250.00), which shall be fully earned, non-refundable and due and payable on the first anniversary of the First Amendment Effective Date.

[Signature page follows.]

 

8

 

 

In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

 

 

	
BORROWER:

	
MATTERSIGHT CORPORATION

	
By:
	
/s/ Sheau-ming K. Ross

	
Name:
	
Sheau-ming K. Ross

	
Title:
	
CFO

	
MATTERSIGHT EUROPE HOLDING CORPORATION

	
By:
	
/s/ Sheau-ming K. Ross

	
Name:
	
Sheau-ming K. Ross

	
Title:
	
CFO

	
MATTERSIGHT INTERNATIONAL HOLDING, INC.

	
By:
	
/s/ Sheau-ming K. Ross

	
Name:
	
Sheau-ming K. Ross

	
Title:
	
CFO

	
BANK:
	
 

	
SILICON VALLEY BANK

	
By:
	
/s/ Brian Powers 

	
Name:
	
Brian Powers

	
Title:
	
VP

9

 

 

 

Exhibit A to First Amendment

EXHIBIT B

 

 

COMPLIANCE CERTIFICATE

 

	
TO:
	
 
	
SILICON VALLEY BANK
	
Date:
	
 

	
FROM:
	
MATTERSIGHT CORPORATION
	
 
	
 

	
 
	
MATTERSIGHT EUROPE HOLDING CORPORATION
	
 
	
 

	
 
	
MATTERSIGHT INTERNATIONAL HOLDING, INC. (jointly and severally, individually and collectively, the “Borrower”)

 

The undersigned authorized officer of Borrower certifies that under the terms and conditions of the Second Amended and Restated Loan and Security Agreement among Borrower and Bank (as amended, the “Agreement”): 

 

(1) Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, except as otherwise permitted pursuant to the terms of Section 5.8 of the Agreement, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower, except as otherwise permitted pursuant to the terms of Section 5.8 of the Agreement; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. 

 

10

 

 

Attached are the required documents supporting the certification.  The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes.  The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that is determined not just at the date this certificate is delivered.  Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

	
Please indicate compliance status by circling Yes/No under “Complies” column.

	
 

	
Reporting Covenant
	
Required
	
Complies

	
 
	
 
	
 

	
Monthly consolidating financial statements with 
Compliance Certificate
	
Monthly within 30 days
	
Yes   No

	
Annual consolidating financial statement (CPA Audited)
	
FYE within 150 days
	
Yes   No

	
10‐Q, 10‐K and 8-K
	
Within 5 days after filing with SEC
	
Yes   No

	
A/R, A/P Agings, and Deferred Revenue reports 
	
Monthly within 30 days
	
Yes   No

	
Board-approved Projections
	
FYE within 30 days
	
Yes   No

	
Transaction Reports
	
Monthly within 30 days and
with each request for a Credit Extension
	
Yes   No

 

	
Financial Covenant
	
Required
	
Actual
	
Complies

	
 
	
 
	
 
	
 

	
Free Cash Flow (tested quarterly)
	
*
	
$
	
Yes   No

	
Liquidity (at all times, certified monthly)
	
$17,000,000
	
$
	
Yes   No

 

*See Section 6.7(a)

 

The following Intellectual Property not previously disclosed to Bank was registered after the Effective Date (if no registrations, state “None”):

____________________________________________________________________________

 

The following financial covenant analysis and other financial information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.

11

 

 

 

 

The following are the exceptions with respect to the certification above:  (If no exceptions exist, state “No exceptions to note.”)

 

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 

									
	
MATTERSIGHT CORPORATION
	
 
	
BANK USE ONLY

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
Received by:
	
 

	
By:
	
 
	
 
	
authorized signer
	
 

	
Name:
	
 
	
 
	
Date:
	
 

	
Title:
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
Verified:
	
 

	
MATTERSIGHT EUROPE HOLDING CORPORATION
	
authorized signer
	
 

	
 
	
 
	
 
	
Date:
	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 
	
Compliance Status:
	
Yes
	
No

	
Name:
	
 
	
 
	
 
	
 

	
Title:
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
MATTERSIGHT INTERNATIONAL HOLDING, INC.
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 
	
 
	
 

	
Name:
	
 
	
 
	
 
	
 

	
Title:
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

 

12

 

 

Schedule 1 to Compliance Certificate

 

 

In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.

 

Financial Covenant Analysis

 

Dated:____________________

 

I.Free Cash Flow (Section 6.7(a)) 

 

Required:Achieve Free Cash Flow (negative Free Cash Flow), measured quarterly, on a trailing three month basis, of not less than (no worse than) the following for the quarterly compliance periods indicated below:

 

	
Quarterly Period Ending

 
	
Minimum Adjusted Free Cash Flow
(negative Free Cash Flow no worse than)

	
March 31, 2016
	
($4,300,000)
	
 

	
June 30, 2016
	
($5,200,000)
	
 

	
September 30, 2016
	
($3,350,000)
	
 

	
December 31, 2016
	
($1,350,000)
	
 

	
March 31, 2017
	
($2,100,000)
	
 

	
June 30, 2017
	
($1,550,000)
	
 

	
September 30, 2017
	
($750,000)
	
 

	
December 31, 2017
	
$0.00
	
 

 

For the quarterly periods ending March 31, 2018 and thereafter, the quarterly Free Cash Flow requirements shall be determined by Bank, based on the annual projections delivered by Borrower to Bank in accordance with Section 6.2(i); provided, that in any event such quarterly requirements will not be less than $0.00 for any such quarterly period.

 

13

 

 

Actual: All amounts measured on a trailing three month basis:

 

	
A.
	
Net Income

 
	
$
	
 

	
B.
	
Interest Expense

 
	
$
	
 

	
C.
	
Income tax expense

 
	
$
	
 

	
D.
	
To the extent deducted from the calculation of Net Income, depreciation and amortization expense

 
	
$
	
 

	
E.
	
Non-cash stock compensation expense

 
	
$
	
 

	
F.
	
EBITDA (the sum of lines A through E)

 
	
$
	
 

	
G.
	
Capital Expenditures

 
	
$
	
 

	
H.
	
FREE CASH FLOW (line F minus line G)

 
	
$
	
 

 

Is line H equal to or greater than (loss no worse than) $[__________________]?

 

	
 
	
No, not in compliance
	
 
	
Yes, in compliance

 

14

 

 

II.Liquidity (Section 6.7(b)) 

 

Required: Maintain at all times, to be certified by Borrower as of the last day of each month, the sum of (i) unrestricted cash at Bank plus (ii) the unused Availability Amount, in an amount equal to or greater than Seventeen Million Dollars ($17,000,000).

 

Actual: 

 

	
A.
	
Unrestricted cash at Bank 

 
	
$
	
 

	
B.
	
Unused Availability Amount

 
	
$
	
 

	
C.
	
LIQUIDITY (line A plus line B)

 
	
$
	
 

 

Is line C greater than or equal to $17,000,000?

 

	
 
	
No, not in compliance
	
 
	
Yes, in compliance

 

15

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