Document:

Exhibit 4.2

 

SOUTHSIDE BANCSHARES,
INC.

 

FIRST SUPPLEMENTAL
INDENTURE

dated as of September 19, 2016 

 

to the Subordinated Indenture

dated as of September 19, 2016 

 

5.50% Fixed-to-Floating Rate Subordinated
Notes due 2026 

 

Wilmington Trust, National Association,
as Trustee

 

     

     

    

 

FIRST SUPPLEMENTAL
INDENTURE

 

THIS FIRST SUPPLEMENTAL
INDENTURE (“First Supplemental Indenture”), dated as of September 19, 2016 between Southside Bancshares, Inc.,
a Texas corporation (the “Company”), and Wilmington Trust, National Association, a national banking association,
not in its individual capacity but solely as trustee (the “Trustee”).

 

RECITALS

 

WHEREAS, the Company
and the Trustee have executed and delivered a Subordinated Indenture, dated as of September 19, 2016 (the “Base Indenture”
and as supplemented by this First Supplemental Indenture and further supplemented from time to time, the “Indenture”),
to provide for the issuance from time to time by the Company of its unsecured subordinated indebtedness to be issued in one or
more series as provided in the Indenture;

 

WHEREAS, the issuance
and sale of One Hundred Million Dollars ($100,000,000) aggregate principal amount of a new series of Securities of the Company
designated as its 5.50% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “2026 Notes”) have been authorized
by resolutions adopted by the Board of Directors of the Company;

 

WHEREAS, the Company
desires to issue and sell One Hundred Million Dollars ($100,000,000) aggregate principal amount of the 2026 Notes as of the date
hereof;

 

WHEREAS, the Company
desires to establish the terms of the 2026 Notes;

 

WHEREAS, all things
necessary to make this First Supplemental Indenture a legal and binding supplement to the Base Indenture in accordance with its
terms and the terms of the Base Indenture have been done;

 

WHEREAS, the Company
has complied with all conditions precedent provided for in the Base Indenture relating to this First Supplemental Indenture; and

 

WHEREAS, the Company
has requested that the Trustee execute and deliver this First Supplemental Indenture.

 

NOW, THEREFORE,
for and in consideration of the premises stated herein and the purchase of the 2026 Notes by the Holders thereof, the Company and
the Trustee covenant and agree, for the equal and proportionate benefit of the Holders of the 2026 Notes, as follows:

 

Article
I

SCOPE OF FIRST SUPPLEMENTAL INDENTURE 

 

Section 1.01         Scope.
This First Supplemental Indenture constitutes a supplement to the Base Indenture and an integral part of the Indenture and shall
be read together with the Base Indenture as though all the provisions thereof are contained in one instrument. Except as expressly
amended by the First Supplemental Indenture, the terms and provisions of the Base Indenture shall remain in full force and effect.
Notwithstanding the foregoing, this First Supplemental Indenture shall only apply to the 2026 Notes.

 

     

     

    

 

Article
II

DEFINITIONS 

 

Section 2.01       Definitions
and Other Provisions of General Application. For all purposes of this First Supplemental Indenture unless otherwise specified
herein:

 

(a)          all
terms used in this First Supplemental Indenture which are not otherwise defined herein shall have the meanings they are given in
the Base Indenture;

 

(b)          the
provisions of general application stated in Sections 10.1 through 10.14 of the Base Indenture shall apply to this First Supplemental
Indenture, except that the words “herein”, “hereof”, “hereto” and “hereunder”
and other words of similar import refer to this First Supplemental Indenture as a whole and not to the Base Indenture or any particular
Article, Section or other subdivision of the Base Indenture or this First Supplemental Indenture;

 

(c)          Section
1.1 of the Base Indenture is amended and supplemented, solely with respect to the 2026 Notes, by inserting the following additional
defined terms in their appropriate alphabetical positions:

 

“Calculation Agent”
has the meaning ascribed in Section 3.02(e)(iv).

 

“Designated LIBOR
Page” means the display on Bloomberg Page BBAM1 (or any successor or substitute page of such service, or any successor
to such service selected by the Company), 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”
has the meaning provided in Section 3.02(g).

 

“Federal Reserve”
has the meaning provided in the definition of “Tier 2 Capital Event.”

 

“Fixed Rate Interest
Payment Date” has the meaning provided in Section 3.02(e)(i).

 

“Fixed Rate
Period” has the meaning provided in Section 3.02(e)(i).

 

“Fixed Rate Regular
Record Date” has the meaning provided in Section 3.02(e)(i).

 

“Floating Rate
Interest Payment Date” has the meaning provided in Section 3.02(e)(ii).

 

“Floating Rate
Period” has the meaning provided in Section 3.02(e)(ii).

 

“Floating Rate
Regular Record Date” has the meaning provided in Section 3.02(e)(ii).

 

“Interest Payment
Date” has the meaning provided in Section 3.02(e)(ii).

 

“Issue Date”
means September 19, 2016.

 

“London Banking
Day” means any day on which commercial banks are open for business (including dealing in U.S. dollars) in London.

 

“Representative
Amount” has the meaning provided in the definition of “Three-Month LIBOR.”

 

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“Reset Rate Determination
Date” means the second London Banking Day immediately preceding the first day of each applicable interest period commencing
on the first Floating Rate Interest Payment Date.

 

“Tax Event”
shall mean the receipt by the Company of an opinion of independent tax counsel to the effect that as a result of (a) an amendment
to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any
political subdivision or taxing authority thereof or therein, or (b) any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change becomes effective or which pronouncement or decision
is announced on or after the date of original issuance of the 2026 Notes, there is more than an insubstantial risk that the interest
payable by the Company on the 2026 Notes is not, or within 90 days of the date of such opinion will not be, deductible by the Company,
in whole or in part, for United States federal income tax purposes.

 

“Tier 2 Capital
Event” shall mean the Company’s good faith determination that, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws or any regulations thereunder of the United States or any rules, guidelines
or policies of an applicable regulatory authority for the Company or (b) any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision
is announced on or after the date of original issuance of the 2026 Notes, in each case, that there is more than an insubstantial
risk that the Company will not be entitled to treat the 2026 Notes then outstanding as Tier 2 Capital (or its then equivalent if
the Company were subject to such capital requirement) for purposes of capital adequacy guidelines of the Board of Governors of
the Federal Reserve System (the “Federal Reserve”) (or any successor regulatory authority with jurisdiction over bank
holding companies), as then in effect and applicable, for so long as an 2026 Note is outstanding.

 

“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 Company for
this purpose and whose names and contact information will be provided by the Company to 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 for a single transaction in U.S. dollars in the relevant market at the relevant time as determined by the Company and
provided to the Calculation Agent (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 selected by the Company for this purpose and whose names and contact information will be
provided by the Company to the Calculation Agent, 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 Floating Rate Interest Payment Date, 5.00%. 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%. Notwithstanding the foregoing, in the event that Three-Month LIBOR as
determined in accordance with this definition is less than zero, Three-Month LIBOR for such interest period shall be deemed
to be zero.

 

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(d)         Section
1.1 of the Base Indenture is amended and supplemented, solely with respect to the 2026 Notes, by replacing the corresponding defined
term in the Base Indenture with the following defined terms:

 

“Senior Indebtedness”
means: (i) the principal and any premium or interest for money borrowed or purchased by the Company; (ii) the principal
and any premium or interest for money borrowed or purchased by another Person and guaranteed by the Company; (iii) any deferred
obligation for the payment of the purchase price of property or assets evidenced by a note or similar instrument or agreement;
(iv) any obligations to general and trade creditors; (v) any obligation arising from direct credit substitutes; (vi) any obligation
associated with derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements;
and (vii) all obligations of the type referred to in clauses (i) through (vi) above of other persons or entities for the payment
of which the Company is responsible or liable as obligor, guarantor or otherwise, whether or not classified as a liability on a
balance sheet prepared in accordance with accounting principles generally accepted in the United States; in each case, whether
outstanding on the date this Subordinated Indenture becomes effective, or created, assumed or incurred after that date. Senior
Indebtedness excludes any indebtedness that: (a) expressly states that it is junior to, or ranks equally in right of payment with,
the 2026 Notes; or (b) is identified as junior to, or equal in right of payment with, the 2026 Notes in any Board Resolution
establishing such series of Securities or in any supplemental indenture. Notwithstanding the foregoing, and for the avoidance of
doubt, if the Federal Reserve (or other competent regulatory agency or authority) promulgates any rule or issues any interpretation
that defines general creditor(s), the main purpose of which is to establish criteria for determining whether the subordinated debt
of a financial or bank holding company is to be included in its capital, then the term “general creditors” as used
in this definition will have the meaning as described in that rule or interpretation.

 

Article
III

FORM AND TERMS OF THE 2026 Notes 

 

Section 3.01         Form
and Dating.

 

(a)          The
2026 Notes shall be substantially in the form of Exhibit A attached hereto. The 2026 Notes shall be executed on behalf of
the Company by two Officers, one of which must be its Chairman of the Board, its Chief Executive Officer, its President or one
of its Executive Vice Presidents. The 2026 Notes may have a legend or legends or endorsements as may be required to comply with
any law or with any rules of any securities exchange or usage. The 2026 Notes shall be dated the date of their authentication.

 

(b)          The
terms contained in the 2026 Notes shall constitute, and are hereby expressly made, a part of the Indenture as supplemented by this
First Supplemental Indenture, and the Company and the Trustee, by their execution and delivery of this First Supplemental Indenture,
expressly agree to such terms and provisions and to be bound thereby.

 

Section 3.02         Terms
of the 2026 Notes. The following terms relating to the 2026 Notes are hereby established:

 

(a)          Title.
The 2026 Notes shall constitute a series of Securities having the title “Southside Bancshares, Inc. 5.50% Fixed-to-Floating
Rate Subordinated Notes due 2026” and the CUSIP number 84470P AC3.

 

(b)          Principal
Amount. The aggregate principal amount of the 2026 Notes that may be authenticated and delivered under the Indenture, as amended
hereby, shall be One Hundred Million Dollars ($100,000,000) on the Issue Date. Provided that no Event of Default has occurred and
is continuing with

 

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respect to the 2026 Notes, the Company may, without notice to or the consent of the Holders, create and issue
additional Securities having the same terms as, and ranking equally and ratably with, the 2026 Notes in all respects and so that
such additional 2026 Notes will be consolidated and form a single series with, and have the same terms as to status, redemption
or otherwise as, the 2026 Notes initially issued, provided that such additional 2026 Notes are fungible for U.S. federal income
tax purposes with the 2026 Notes.

 

(c)          Person
to Whom Interest is Payable. Interest payable, and punctually paid or duly provided for, on any Interest Payment Date will
be paid to the person in whose name the 2026 Notes are registered for such interest at the close of business on the 15th day of
the month immediately preceding the applicable Interest Payment Date, whether or not such day is a Business Day. Any such interest
which is payable, but not so punctually paid or duly provided for on any Interest Payment Date shall cease to be payable to the
Holder on such relevant record date by virtue of having been a Holder on such date, and such defaulted interest may be paid by
the Company to the person in whose name the 2026 Note is registered at the close of business on a special record date for the payment
of such defaulted interest to be fixed by the Company, notice whereof shall be given to Holders of 2026 Notes of this series not
less than 10 days prior to such special record date that complies with Section 2.13 of the Base Indenture, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any securities exchange on which the 2026 Notes may be listed
and upon such notice as may be required by such exchange and in compliance with the Base Indenture.

 

(d)          Maturity
Date. The entire outstanding Principal of the 2026 Notes shall be payable on September 30, 2026.

 

(e)          Interest.

 

(i)          The
2026 Notes will bear interest at a fixed rate of 5.50% per annum from and including September 19, 2016 to, but excluding, September
30, 2021 (the “Fixed Rate Period”). Interest accrued on the 2026 Notes during the Fixed Rate Period will be
payable semi-annually in arrears on March 30 and September 30 of each year, commencing on March 30, 2017 (each such date a
“Fixed Rate Interest Payment Date”). The interest payable during the Fixed Rate Period will be paid to each
holder in whose name a 2026 Note is registered at the close of business on the fifteenth day (whether or not a Business Day) of
the month immediately preceding the applicable Fixed Rate Interest Payment Date (each such date, a “Fixed Rate Regular
Record Date”).

 

(ii)         The
2026 Notes will bear a floating interest rate from and including September 30, 2021 to the Maturity Date or Redemption Date (the
“Floating Rate Period”). The floating interest rate will be reset quarterly, and the interest rate for any Floating
Rate Period shall be equal to Three-Month LIBOR plus 4.297%. During the Floating Rate Period, interest on the 2026 Notes will be
payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year commencing on December 30, 2021
through the Maturity Date or Redemption Date (each such date, a “Floating Rate Interest Payment Date”, together
with a Fixed Rate Interest Payment Date, an “Interest Payment Date”). The interest payable during the Floating
Rate Period will be paid to each holder in whose name a Note is registered at the close of business on the fifteenth day (whether
or not a Business Day) of the month immediately preceding the applicable Floating Rate Interest Payment Date (each such date, a
“Floating Rate Regular Record Date”).

 

(iii)        The
amount of interest payable on any Fixed Rate Interest Payment Date during the Fixed Rate Period will be computed on the basis of
a 360-day year consisting of twelve 30-day months up to, but excluding September 30, 2021, and, the amount of interest payable
on any Floating Rate Interest Payment Date during the Floating Rate Period will be computed on the basis of a 360-day year and
the number of days actually elapsed. In the event that any scheduled Interest Payment Date for the 2026 Notes

 

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falls on a day that
is not a Business Day, then payment of interest payable on such Interest Payment Date will be paid on the next succeeding day which
is a Business Day (any payment made on such date will be treated as being made on the date that the payment was first due and no
interest on such payment will accrue for the period from and after such scheduled Interest Payment Date); provided, that
in the event that any scheduled Floating Rate Interest Payment Date falls on a day that is not a Business Day and the next succeeding
Business Day falls in the next succeeding calendar month, 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. Dollar amounts resulting from interest calculations will be rounded to the nearest cent, with one-half cent
being rounded upward.

 

(iv)        The
Company agrees that for so long as any of the 2026 Notes are outstanding there will at all times be an agent appointed to calculate
Three-Month LIBOR in respect of each Floating Rate Period (the “Calculation Agent”). The calculation of Three-Month
LIBOR for each applicable Floating Rate Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
The Calculation Agent shall have all the rights, protections and indemnities afforded to the Trustee under the Base Indenture and
hereunder. The Company hereby appoints Wilmington Trust, National Association, as Calculation Agent for the purposes of determining
Three-Month LIBOR for each Floating Interest Period and Wilmington Trust, National Association accepts the appointment. The Calculation
Agent may be removed by the Company at any time. If the Calculation Agent is unable or unwilling to act as Calculation Agent or
is removed by the Company, the Company will promptly appoint a replacement Calculation Agent, which does not control or is not
controlled by or under common control with the Company or its Affiliates. The Calculation Agent may not resign its duties without
a successor having been duly appointed; provided, that if a successor Calculation Agent has not been appointed by the Company
and such successor accepted such position within 30 days after the giving of notice of resignation by the Calculation Agent, the
resigning Calculation Agent may petition, at the expense of the Company, any court of competent jurisdiction for the appointment
of a successor Trustee with respect to such series. The Calculation Agent’s calculation of the amount of any interest payable
after the first Reset Rate Determination Date will be maintained on file at the Calculation Agent’s principal offices.

 

(f)          Place
of Payment of Principal and Interest. So long as the 2026 Notes shall be issued in global form, the Company shall make, or
cause the Paying Agent to make, all payments of principal and interest on the 2026 Notes by wire transfer in immediately available
funds to the Depository or its nominee, in accordance with applicable procedures of the Depository. If the 2026 Notes are not in
global form, the Company, may, at its option, make, or cause the Paying Agent to make, payments of principal and interest on the
2026 Notes by check mailed to the address of the person specified for payment in accordance with Sections 3.02(e)(i) and 3.02(e)(ii)
above. A global security with respect to the 2026 Notes shall be exchangeable for physical securities of such series only if:

 

		·	The U.S. Depository is at any time unwilling or unable or ineligible to continue as a depository
or ceases to be a clearing agency registered under the Exchange Act and a successor depository is not appointed by the Company
within 90 days of the date the Company is so notified in writing;

 

		·	The Company executes and delivers to the Trustee a Company Order to the effect that such global
securities shall be so exchangeable (and the Trustee consents thereto); or

 

		·	An Event of Default has occurred and is continuing with respect to the global securities and a
Holder requests such exchange.

 

    	 	6	 

     

    

 

(g)          Redemption.
The 2026 Notes shall be redeemable, in each case, in whole or in part from time to time, at the option of the Company prior to
the Maturity Date beginning with the Interest Payment Date on September 30, 2021, and on any Interest Payment Date thereafter subject
to obtaining the prior approval of the Federal Reserve to the extent such approval is required under the rules of the Federal Reserve.
The 2026 Notes may not otherwise be redeemed prior to the Maturity Date, except that the Company may, at its option, redeem the
2026 Notes before the Maturity Date in whole but not in part from time to time, upon the occurrence of a Tier 2 Capital Event or
a Tax Event, or if the Company is required to register as an investment company pursuant to the Investment Company Act of 1940,
as amended (15 U.S.C. 80a-1 et seq.). Any such redemption will be at a Redemption Price equal to 100% of the principal amount of
the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date fixed by the Company. The
provisions of Article III of the Base Indenture shall apply to any redemption of the 2026 Notes pursuant to this Article III. Any
partial redemption will be made in accordance with The Depository Trust Company’s (“DTC”) applicable procedures
among all of the Holders of the 2026 Notes. If any 2026 Note is to be redeemed in part only, the notice of redemption relating
to such 2026 Note shall state that it is a partial redemption and the portion of the principal amount thereof to be redeemed. The
2026 Notes are not subject to redemption or prepayment at the option of the Holders.

 

(h)          Sinking
Fund. There shall be no sinking fund for the 2026 Notes.

 

(i)           Denomination.
The 2026 Notes and any beneficial interest in the 2026 Notes shall be in minimum denominations of $1,000 and integral multiples
of $1,000 in excess thereof.

 

(j)           Currency
of the 2026 Notes. The 2026 Notes shall be denominated, and payment of principal and interest of the 2026 Notes shall be payable
in, the currency of the United States of America.

 

(k)          Acceleration.
Neither the Trustee nor the Holders of the 2026 Notes shall have the right to accelerate the maturity of the 2026 Notes unless
there is an Event of Default specified under clause (e), (f) or (h) of Section 6.1 (as amended herein) of the Base Indenture. If
an Event of Default specified in clause (e), (f) or (h) of Section 6.1 (as amended herein) of the Base Indenture occurs, then
the principal amount of all of the outstanding 2026 Notes, including any accrued and unpaid interest on the 2026 Notes and premium,
if any, shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee
or the Holders of the 2026 Notes in accordance with the provisions of Section 6.2 of the Base Indenture.

 

(l)           Stated
Maturity. The principal of the 2026 Notes shall be payable on September 30, 2026 subject to acceleration as provided under
the Indenture.

 

(m)         Registered
Form. The 2026 Notes shall be issuable as registered global Securities, and the U.S. Depository for the 2026 Notes shall be
DTC or any successor U.S. Depository appointed by the Company within 90 days of the termination of services of DTC (or any successor
to DTC). Sections 2.11 and 2.13 of the Base Indenture shall apply to the 2026 Notes.

 

(n)          Events
of Default. The Events of Default provided for in Section 6.1 of the Base Indenture shall apply to the 2026 Notes; provided
that:

 

(i)          the
text of clause (c) of Section 6.1 of the Base Indenture is deleted and replaced with the word “Reserved”;

 

(ii)         the
text of clause (e) of Section 6.1 of the Base Indenture shall be substituted with the following:

 

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“(e) The
Company shall consent to the appointment of a Custodian in any receivership, insolvency, liquidation or similar proceeding with
respect to the Company;”

 

(iii)        the
text of clause (f) of Section 6.1 of the Base Indenture shall be substituted with the following:

 

“(f) A
court having jurisdiction in the premises shall enter a decree or order for the appointment of a Custodian in any receivership,
insolvency, liquidation, or similar proceeding relating to the Company, and such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days;” and

 

(iv)        a
new clause (h), reading in its entirety as follows, shall be inserted:

 

“(h) in
the event of an appointment of a Custodian for our principal banking subsidiary, Southside Bank and such appointment shall not
have been rescinded for a period of 60 consecutive days from the date thereof.”

 

(o)          Acceleration
of Maturity, Rescission and Annulment. Section 6.2 of the Base Indenture shall apply to the 2026 Notes, except that the first
paragraph thereof shall be substituted with the following:

 

“If an Event of Default specified
in Sections 6.1(e), 6.1(f) or 6.1(h) occurs, the principal amount of all the 2026 Notes, together with accrued and unpaid interest,
if any, thereon, shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become
immediately due and payable. The Maturity of the 2026 Notes shall not otherwise be accelerated as a result of an Event of Default.”

 

(p)          Collection
of Indebtedness and Suits for Enforcement by Trustee. Section 6.3 of the Base Indenture shall apply to the 2026 Notes, except
the text of clause (c) of Section 6.3 of the Base Indenture is deleted and replaced with the word “Reserved”.

 

(q)          Ranking.
The 2026 Notes shall rank junior to and shall be subordinated to all Senior Indebtedness of the Company, whether existing as of
the date of this First Supplemental Indenture, or hereafter issued or incurred, including all indebtedness relating to money owed
to general creditors and trade creditors. The 2026 Notes shall rank senior to the Company’s Floating Rate Junior Subordinated
Deferrable Interest Debentures due 2033, its Floating Rate Junior Subordinated Debt Securities due 2035, and its Junior Subordinated
Notes due 2037. Subject to the terms of the Base Indenture, if the Trustee or any holder of any of the 2026 Notes receives any
payment or distribution of the Company’s assets in contravention of the subordination provisions applicable to the 2026 Notes
before all Senior Indebtedness is paid in full in cash, property or securities, including by way of set-off or any such payment
or distribution that may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated
to the payment of the 2026 Notes, then such payment or distribution will be held in trust for the benefit of holders of Senior
Indebtedness or their representatives to the extent necessary to make payment in full in cash or payment satisfactory to the holders
of Senior Indebtedness of all unpaid Senior Indebtedness.

 

(r)           No
Collateral. The 2026 Notes shall not be entitled to the benefit of any security interest in, or collateralization by, any rights,
property or interest of the Company.

 

(s)          Additional
Terms. Other terms applicable to the 2026 Notes are as otherwise provided for in the Base Indenture, as supplemented by this
First Supplemental Indenture.

 

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Article
IV

SUPPLEMENTAL INDENTURES 

 

Section 4.01         Supplemental
Indentures. The following paragraph shall be added to the end of Section 9.2 of the Base Indenture and shall only apply to
the 2026 Notes:

 

“Not in limitation of the foregoing,
without the consent of any Holder of 2026 Notes, the Company and the Trustee may amend or supplement the Indenture or the 2026
Notes to conform the terms of the Indenture and the 2026 Notes to the description of the 2026 Notes in the prospectus supplement
dated September 14, 2016 relating to the offering of the 2026 Notes.”

 

Article
V

MISCELLANEOUS 

 

Section 5.01         Trust
Indenture Act. 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 such
act to be a part of and govern this First Supplemental Indenture, the latter provision shall control.

 

Section 5.02         GOVERNING
LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS FIRST SUPPLEMENTAL INDENTURE AND THE 2026 NOTES.

 

Section 5.03         Duplicate
Originals. The parties may sign any number of copies of this First Supplemental Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement.

 

Section 5.04         Severability.
In case any provision in this First Supplemental Indenture or the 2026 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 thereby.

 

Section 5.05         Ratification.
The Base Indenture, as supplemented and amended by this First Supplemental Indenture, is in all respects ratified and confirmed.
The Base Indenture and this First Supplemental Indenture shall be read, taken and construed as one and the same instrument. All
provisions included in this First Supplemental Indenture supersede any conflicting provisions included in the Base Indenture unless
not permitted by law. The Trustee accepts the trusts created by the Base Indenture, as supplemented by this First Supplemental
Indenture, and agrees to perform the same upon the terms and conditions of the Base Indenture, as supplemented by this First Supplemental
Indenture.

 

Section 5.06         Effectiveness.
The provisions of this First Supplemental Indenture shall become effective as of the date hereof.

 

Section 5.07         Successors.
All agreements of the Company in this First Supplemental Indenture shall bind its successors. All agreements of the Trustee in
this First Supplemental Indenture shall bind its successors.

 

Section 5.08         Indenture
and Notes Solely Corporate Obligations. No recourse for the payment of the principal of or interest on any 2026 Note, or for
any claim based thereon or otherwise in respect thereof, shall be had against any shareholder, employee, agent, officer or director,
as such, past, present or future, of the Company or of any successor Person; it being expressly understood that all such liability
is

 

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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 2026 Notes.

 

Section 5.09         Trustee’s
Disclaimer. The recitals contained herein shall be taken as the statements of the Company and the Trustee assumes no responsibility
for their correctness. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency
of this First Supplemental Indenture, the 2026 Notes, or for or in respect of the recitals contained herein, all of which recitals
are made solely by the Company.

 

Section 5.10         USA
PATRIOT Act. The parties hereto acknowledge that in accordance with Section 326 of the USA PATRIOT Act the Trustee, like all
financial institutions and in order to help fight the funding of terrorism and money laundering, are required to obtain, verify,
and record information that identifies each person or legal entity that establishes a relationship or opens an account. The parties
to this agreement agree that they shall provide the Trustee with such information as they may request in order to satisfy the requirements
of the USA PATRIOT Act.

 

[Remainder of page intentionally left blank.]

 

    	 	10	 

     

    

 

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

 

	 	SOUTHSIDE BANCSHARES, INC.
	 	 	 
	 	By:	/s/ Lee R. Gibson
	 	 	Name:  Lee R. Gibson
	 	 	Title:  President

 

[Signature Page to First Supplemental Indenture]

 

     

     

    

 

	 	Wilmington Trust, National Association, as Trustee
	 	 	 
	 	By:	/s/ Michael H. Wass
	 	 	Name:  Michael H. Wass
	 	 	Title:  Vice President 

 

[Signature Page to First Supplemental Indenture]

 

     

     

    

 

EXHIBIT A

 

FORM OF NOTE

 

See attached.

 

     

     

    

 

THIS SECURITY AND THE OBLIGATIONS OF THE
COMPANY (AS DEFINED HEREIN) AS EVIDENCED HEREBY (1) ARE NOT DEPOSITS WITH OR HELD BY THE COMPANY AND ARE NOT INSURED OR GUARANTEED
BY ANY FEDERAL AGENCY OR INSTRUMENTALITY, INCLUDING, WITHOUT LIMITATION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, AND (2) ARE
SUBORDINATE IN THE RIGHT OF PAYMENT TO THE SENIOR INDEBTEDNESS (AS DEFINED IN THE INDENTURE IDENTIFIED HEREIN). 

 

GLOBAL NOTE

 

This
Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of the
Depository or a nominee of the Depository. This Security is exchangeable for Securities registered in the name of a person other
than the Depository or its nominee only in the limited circumstances described in the Indenture, and may not be transferred except
as a whole by the Depository to a nominee of the Depository, by a nominee of the Depository to the Depository or another nominee
of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such a successor Depository.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO.,
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

 

SOUTHSIDE BANCSHARES,
INC.

 

5.50% Fixed-to-Floating Rate Subordinated Notes
due 2026

 

	
        No.1

         

        $100,000,000
	
        CUSIP:
84470P AC3

         

        ISIN: US84470PAC32

	 	 

Southside
Bancshares, Inc., a Texas corporation (hereinafter called the “Company”, which term includes any successor
corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or
its registered assigns, the principal sum of ONE HUNDRED MILLION DOLLARS ($100,000,000.00) (or such other amount as set forth
in the Schedule of Increases or Decreases in Global Note attached hereto) on September 30, 2026 (such date is hereinafter
referred to as the “Stated Maturity Date”), unless redeemed prior to such date, and to pay interest
thereon (i) from, and including, September 19, 2016, to, but excluding, September 30, 2021, unless redeemed prior to such
date, at a rate of 5.50% per annum, semi-annually in arrears on March 30 and September 30 of each year, commencing March 30,
2017 (each such date, a “Fixed Rate Interest Payment Date,” with the period from, and including,

 

     

     

    

 

September
19, 2016 to, but excluding, the first Fixed Rate Interest Payment Date and each successive period from, and including, a
Fixed Rate Interest Payment Date to, but excluding, the next Fixed Rate Interest Payment Date being a “Fixed Rate
Period”) and (ii) from, and including, September 30, 2021 to, but excluding, the Stated Maturity Date, unless
redeemed subsequent to September 30, 2021 but prior to the Stated Maturity Date, at a rate equal to Three-month LIBOR, reset
quarterly, plus 4.297%, payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year through
the Stated Maturity Date or earlier redemption date (each, a “Floating Rate Interest Payment Date,” and
together with the Fixed Rate Interest Payment Dates, the “Interest Payment Dates,” with the period from,
and including, September 30, 2021 to, but excluding, the first Floating Rate Interest Payment Date and each successive
period from, and including a Floating Rate Interest Payment Date to, but excluding, the next Floating Rate Interest Payment
Date being a “Floating Rate Period”). The amount of interest payable on any Fixed Rate Interest Payment
Date during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months up to,
but excluding September 30, 2021, and, the amount of interest payable on any Floating Rate Interest Payment Date during
the Floating Rate Period will be computed on the basis of a 360-day year and the number of days actually elapsed. In the
event that any scheduled Interest Payment Date for this Note falls on a day that is not a Business Day, then payment of
interest payable on such Interest Payment Date will be paid on the next succeeding day which is a Business Day (any payment
made on such date will be treated as being made on the date that the payment was first due and no interest on such payment
will accrue for the period from and after such scheduled Interest Payment Date); provided, that in the event that any
scheduled Floating Rate Interest Payment Date falls on a day that is not a Business Day and the next succeeding Business Day
falls in the next succeeding calendar month, 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. All percentages used in or resulting from any calculation of Three-month LIBOR shall be rounded,
if necessary, to the nearest one hundred-thousandth of a percentage point, with 0.000005% rounded up to 0.00001%.

 

Any principal and premium,
and any such installment of interest, which is overdue shall bear interest at the applicable rate set forth in the previous paragraph
(to the extent that the payment of such interest shall be legally enforceable), from the dates such amounts are due until they
are paid or made available for payment, and such interest shall be payable on demand. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this
Note is registered at the close of business on the 15th day of the month (whether or not a Business Day) immediately
preceding such Interest Payment Date.

 

Payment of the principal
of and interest on this Note will be made at the office or agency of the Company maintained for that purpose, which shall initially
be the Corporate Trust Office of the Trustee, in such currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.

 

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 signature, this Note shall
not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

[Remainder of this page intentionally left
blank. Signature page follows.]

 

    	 	2	 

     

    

 

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

 

Date: __________________.

 

	 	SOUTHSIDE BANCSHARES, INC.
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

     

     

    

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes
of the series designated therein referred to in the within-mentioned Indenture.

 

Date of authentication: ________________

 

	 	Wilmington Trust, National Association, as Trustee
	 	 	 
	 	By:	 
	 	 	Authorized Signatory

 

     

     

    

 

REVERSE OF NOTE

 

SOUTHSIDE BANCSHARES,
INC.

 

5.50% 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 “5.50% Fixed-to-Floating Rate Subordinated Notes
due 2026” (herein called the “Notes”) initially issued in an aggregate principal amount of $100,000,000
on September 19, 2016. Such series of Securities has been established pursuant to, and is one of an indefinite number of series
of subordinated debt securities of the Company issued or issuable under and pursuant to the Indenture, dated as of September 19,
2016 (the “Base Indenture”), between the Company and Wilmington Trust, 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 September 19, 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
from time to time and of the terms upon which the Notes are, and are to be, authenticated and delivered. The terms, conditions
and provisions 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 (the “Trust Indenture Act”), and those set forth in this Note. To the extent that the
terms, conditions and provisions of this Note modify, supplement or are inconsistent with those of the Indenture, then the terms,
conditions and other provisions of this Note shall govern to the extent that such terms, conditions and other provisions of this
Note are not inconsistent with the terms, conditions and provisions made part of the Indenture by reference to the Trust Indenture
Act.

 

All capitalized terms used
in this Note and not defined herein that are defined in the Indenture shall have the meanings assigned to them in the Indenture.
To the extent that any capitalized term used in this Note and defined herein is also defined in the Indenture but conflicts with
the definition provided in the Indenture, the definition of the capitalized term in this Note shall control.

 

The indebtedness of the
Company evidenced by the Notes, including the principal thereof, premium, if any, and interest thereon, is, to the extent and in
the manner set forth in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness,
whether outstanding at the date hereof or hereafter incurred, and on the terms and subject to the terms and conditions set forth
in the Indenture, and shall rank pari passu in right of payment with all other Securities and with all other unsecured subordinated
indebtedness of the Company and not by its terms subordinate and subject in right of payment to the prior payment in full of debentures,
notes, bonds or other evidences of indebtedness of types that include the Notes. Each Holder of this Note, 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.

 

The Notes are intended
to be treated as Tier 2 capital (or its then-equivalent if the Company were subject to such capital requirement) for purposes
of capital adequacy guidelines of the Board of Governors of the Federal Reserve System (or any successor regulatory authority
with jurisdiction over bank holding companies) (the “Federal Reserve Board”) as then in effect and applicable to the
Company. 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 VI of the Base Indenture and
Sections 3.02(k) and 3.02(o) of the First Supplemental Indenture.  Accordingly, the Holder of this Note has no right to accelerate
the maturity of this Note in the event that the

 

     

     

    

 

Company fails to pay 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. 

 

The Company may, at its
option, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed,
plus accrued and unpaid interest (the “Redemption Price”) to but excluding, the date of redemption (the “Redemption
Date”), on any Interest Payment Date on or after September 30, 2021. The Company may also, at its option, redeem the
Notes before the Stated Maturity Date, in whole, but not in part, at any time, upon the occurrence of a Tier 2 Capital Event, a
Tax Event or a 1940 Act Event. Any such redemption will be at a redemption price equal to the Redemption Price to, but excluding,
the Redemption Date fixed by the Company. No redemption of the Notes by the Company prior to the Stated Maturity Date shall be
made without the prior approval of the Federal Reserve Board if such prior approval is or will be required at the scheduled Redemption
Date. The provisions of Article III of the Base Indenture and Section 3.02(g) of the First Supplemental Indenture shall apply to
the redemption of any Notes by the Company.

 

The Notes are not entitled
to the benefit of any sinking fund. The Notes are not convertible into or exchangeable for any other securities or property of
the Company or any Subsidiary of the Company.

 

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 Notes at any time by the Company and the Trustee with the consent of the Holders of at least
a majority in principal amount of the Outstanding Notes. The Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Notes at the time Outstanding, on behalf of the Holders of all Notes, 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 therefor 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 therein set forth, the transfer of this Note is registrable in the Register described in Section
2.7 of the Base Indenture, 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 Registrar duly executed by the Holder hereof or his attorney duly authorized
in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.

 

The Notes are issuable
only in registered form without coupons in minimum denominations of $1,000 and any integral multiples 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.

 

This Security is a
global note, represented by one or more permanent global certificates registered in the name of the nominee of The Depository
Trust Company (each a “Global Note” and collectively, the “Global Notes”). Accordingly,
unless and until it is exchanged for individual certificates, this Note may not be transferred except as a whole by The Depository
Trust Company (the “Depositary”) to a nominee of such Depositary or by a nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such successor. Ownership of beneficial interests in this
Security will be shown on, and the transfer of that ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect

 

    	 	2	 

     

    

 

to interest of persons that have accounts with the Depositary (“Participants”))
and the records of Participants (with respect to interests of persons other than Participants). Beneficial interests in Notes
owned by persons that hold through Participants will be evidenced only by, and transfers of such beneficial interests with such
Participants will be effected only through, records maintained by such Participants. Except as provided below, owners of beneficial
interests in this Note will not be entitled to have any individual certificates and will not be considered the owners or Holders
thereof under the Indenture. 

 

Except in the limited
circumstances set forth in the Base Indenture, Participants and owners of beneficial interests in the Global Notes will not be
entitled to receive Notes in the form of individual certificates and will not be considered Holders of Notes. None of the Company,
the Trustee, the Registrar, the Paying Agent or any of their respective agents will be liable for any delay by the Depositary,
its nominee or any direct or indirect Participant in identifying the beneficial owners of the related Notes. The Company, the Trustee,
the Registrar, the Paying Agent and each of their respective agents may conclusively rely on, and will be protected in relying
on, instructions from the Depositary or its nominee for all purposes, including with respect to the registration and delivery,
and the respective principal amounts, of the Notes to be issued. 

 

Except as provided in
Section 2.14 of the Base Indenture, beneficial owners of Global Notes will not be entitled to receive physical delivery of Notes
in the form of individual certificates, and no Global Note will be exchangeable except for another Global Note of like denomination
and tenor to be registered in the name of the Depositary or its nominee. Accordingly, each person owning a beneficial interest
in a Global Note must rely on the procedures of the Depositary and, if such person is not a Participant, on the procedures of the
Participant through which such person owns its interest, to exercise any rights of a Holder under the Notes. 

 

The laws of some jurisdictions
may require that certain purchasers of securities take physical delivery of those securities in definitive form. Accordingly, the
ability to transfer interests in the Notes represented by a Global Note to those persons may be limited. In addition, because the
Depositary can act only on behalf of its Participants, who in turn act on behalf of persons who hold interests through Participants,
the ability of a person having an interest in Notes represented by a Global Note to pledge or transfer such interest to persons
or entities that do not participate in the Depositary’s system, or otherwise to take actions in respect of such interest,
may be affected by the lack of a physical definitive security in respect of such interest. None of the Company, the Trustee, the
Paying Agent and the Registrar will have any responsibility or liability for any aspect of the records relating to or payments
made on account of Notes by the Depositary, or for maintaining, supervising or reviewing any records of the Depositary relating
to the Notes. 

 

The Trustee will act as
the Company’s Paying Agent with respect to the Notes through its Corporate Trust Office presently located at 1100 North Market
Street, Wilmington, Delaware 19890. 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.

 

Notices to the Holders
of registered Notes in the form of individual certificates will be given to such Holders at their respective addresses in the Register,
or in the case of Global Notes, electronic delivery in accordance with DTC’s applicable procedures. 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.

 

THIS NOTE SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK.

 

    	 	3	 

     

    

 

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. number)
	 
	 
	(Print or type assignee’s name, address and zip code)

 

and irrevocably appoint the Trustee as agent
to transfer this Security on the books of Southside Bancshares, 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:

 

SIGNATURE GUARANTEE

 

Signatures must be guaranteed
by an “eligible guarantor institution” meeting the requirements of the 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 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 principal amount
of this Global Note is $100,000,000. The following increases or decreases in the principal amount of this Global Note have been
made:

 

	Date	 	Amount of

    decrease in

    principal

    amount of this

    Global Note	 	Amount of

    increase in

    principal

    amount of this

    Global Note	 	Principal

    amount of this

    Global Note

    following such

    decrease or

    increase	 	Signature of

    authorized or

    signatory of

    TrusteeExhibit 4.1

 

EXECUTION VERSION

 

SIXTH SUPPLEMENTAL INDENTURE

 

between

 

ARES CAPITAL CORPORATION

 

and

 

U.S. BANK NATIONAL ASSOCIATION,

 

as Trustee

 

Dated as of September 19, 2016

 

 

SIXTH SUPPLEMENTAL INDENTURE

 

THIS SIXTH SUPPLEMENTAL INDENTURE (this “Sixth Supplemental Indenture”), dated as of September 19, 2016, is between Ares Capital Corporation, a Maryland corporation (the “Company”), and U.S. Bank National Association, as trustee (the “Trustee”). All capitalized terms used herein shall have the meaning set forth in the Base Indenture (as defined below) unless otherwise defined herein.

 

RECITALS OF THE COMPANY

 

The Company and the Trustee executed and delivered an Indenture, dated as of October 21, 2010 (the “Base Indenture” and, as supplemented by this Sixth Supplemental Indenture, together, the “Indenture”), to provide for the issuance by the Company from time to time of the Company’s unsecured debentures, notes or other evidences of indebtedness (the “Securities”), to be issued in one or more series as provided in the Indenture.

 

The Company desires to issue and sell $600,000,000 aggregate principal amount of the Company’s 3.625% Notes due 2022 (the “Notes”).

 

Sections 9.01(v) and 9.01(vii) of the Base Indenture provide that without the consent of Holders of the Securities of any series issued under the Indenture, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental to the Base Indenture to (i) change or eliminate any of the provisions of the Indenture when there is no Security Outstanding of any series created prior to the execution of a supplemental indenture that is entitled to the benefit of such provision and (ii) establish the form or terms of Securities of any series as permitted by Section 2.01 and Section 3.01 of the Base Indenture.

 

The Company desires to establish the form and terms of the Notes and to modify, alter, supplement and change certain provisions of the Base Indenture for the benefit of the Holders of the Notes (except as may be provided in a future supplemental indenture to the Indenture (“Future Supplemental Indenture”)).

 

The Company has duly authorized the execution and delivery of this Sixth Supplemental Indenture to provide for the issuance of the Notes and all acts and things necessary to make this Sixth Supplemental Indenture a valid, binding, and legal obligation of the Company and to constitute a valid agreement of the Company, in accordance with its terms, have been done and performed.

 

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

 

 

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Notes, as follows:

 

ARTICLE I
 TERMS OF THE NOTES

 

Section 1.01.                          Terms of the Notes. The following terms relating to the Notes are hereby established:

 

(a)                                 The Notes shall constitute a series of Securities having the title “3.625% Notes due 2022” and shall be designated as Senior Securities under the Indenture. The Notes shall bear a CUSIP number of 04010L-AR4 and an ISIN number of US04010LAR42.

 

(b)                                 The aggregate principal amount of the Notes that may be initially authenticated and delivered under the Indenture (except for Notes authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of, other Notes pursuant to Sections 3.04, 3.05, 3.06, 9.06 or 11.07 of the Base Indenture) shall be $600,000,000. Under a Board Resolution, Officers’ Certificate pursuant to Board Resolutions or an indenture supplement, the Company may from time to time, without the consent of the Holders of Notes, issue additional Notes (in any such case “Additional Notes”) having the same ranking and the same interest rate, maturity, CUSIP number and other terms as the Notes; provided that such Additional Notes must be part of the same issue as the Notes for U.S. federal income tax purposes. Any Additional Notes and the existing Notes will constitute a single series under the Indenture and all references to the relevant Notes herein shall include the Additional Notes unless the context otherwise requires.

 

(c)                                  The entire Outstanding principal amount of the Notes shall be payable on January 19, 2022, unless earlier redeemed or repurchased in accordance with the provisions of this Sixth Supplemental Indenture.

 

(d)                                 The rate at which the Notes shall bear interest shall be 3.625% per annum (the “Applicable Interest Rate”). The date from which interest shall accrue on the Notes shall be September 19, 2016, or the most recent Interest Payment Date to which interest has been paid or provided for; the Interest Payment Dates for the Notes shall be January 19 and July 19 of each year, commencing January 19, 2017 (if an Interest Payment Date falls on a day that is not a Business Day, then the applicable interest payment will be made on the next succeeding Business Day and no additional interest will accrue as a result of such delayed payment); the initial interest period will be the period from and including September 19, 2016 (or the most recent Interest Payment Date to which interest has been paid or provided for), to, but excluding, the initial Interest Payment Date, and the subsequent interest periods will be the periods from and including an Interest Payment Date to, but excluding, the next Interest Payment Date or the Stated Maturity, as the case may be; the interest so payable, and punctually paid or duly provided for, on any Interest Payment Date, will be paid to the Person in whose name the Note (or one or more predecessor Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be January 5 and July 5 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Payment of principal of (and premium, if any) and any such interest on the Notes will be made at the Corporate Trust Office of the Trustee in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Interest on the Notes will be computed on the basis of a 360-day year of twelve 30-day months.

 

2

 

(e)                                  The Notes shall be initially issuable in global form (each such Note, a “Global Note”). The Global Notes and the Trustee’s certificate of authentication thereon shall be substantially in the form of Exhibit A to this Sixth Supplemental Indenture. Each Global Note shall represent the Outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate amount of Outstanding Notes from time to time endorsed thereon and that the aggregate amount of Outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the amount of Outstanding Notes represented thereby shall be made by the Trustee or the Security Registrar, in accordance with Sections 2.03 and 3.05 of the Base Indenture.

 

(f)                                   The depositary for such Global Notes shall be the Depositary. The Security Registrar with respect to the Global Notes shall be the Trustee.

 

(g)                                  The Notes shall be defeasible pursuant to Section 14.02 or Section 14.03 of the Base Indenture. Covenant defeasance contained in Section 14.03 of the Base Indenture shall apply to the covenants contained in Sections 10.06, 10.08 and 10.09 of the Indenture.

 

(h)                                 The Notes shall be redeemable pursuant to Section 11.01 of the Base Indenture and as follows:

 

(i)                                     The Notes will be redeemable, in whole or in part, at any time, or from time to time, at the option of the Company, at a Redemption Price equal to the greater of the following amounts, plus, in each case, accrued and unpaid interest to the Redemption Date:

 

(a)                                 100% of the principal amount of the Notes to be redeemed, or

 

(b)                                 the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of accrued and unpaid interest to the Redemption Date) on the Notes to be redeemed, discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) using the applicable Treasury Rate plus 40 basis points;

 

provided, however, that if the Company redeems any Notes on or after December 19, 2021, the Redemption Price for the Notes will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the Redemption Date.

 

For purposes of calculating the Redemption Price in connection with the redemption of the Notes, on any Redemption Date, the following terms have the meanings set forth below:

 

“Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the semi-annual equivalent yield-to-maturity of the Comparable Treasury Issue (computed as of the third Business Day immediately preceding the redemption), assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date. The Redemption Price and the Treasury Rate will be determined by the Company.

 

“Comparable Treasury Issue” means the United States Treasury security selected by the Reference Treasury Dealer as having a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financing practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes being redeemed.

 

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“Comparable Treasury Price” means (1) the average of the remaining Reference Treasury Dealer Quotations for the Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if the Quotation Agent obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

 

“Quotation Agent” means a Reference Treasury Dealer selected by the Company.

 

“Reference Treasury Dealer” means each of (1) Merrill Lynch, Pierce, Fenner & Smith Incorporated, (2) Wells Fargo Securities, LLC, (3) J.P. Morgan Securities LLC and (4) a Primary Treasury Dealer (as defined below) selected by SunTrust Robinson Humphrey, Inc., or their respective affiliates which are primary U.S. government securities dealers and their respective successors; provided, however, that if any of the foregoing or their affiliates shall cease to be a primary U.S. government securities dealer in the United States (a “Primary Treasury Dealer”), the Company shall select another Primary Treasury Dealer.

 

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 3:30 p.m. New York time on the third Business Day preceding such Redemption Date.

 

All determinations made by any Reference Treasury Dealer, including the Quotation Agent, with respect to determining the Redemption Price will be final and binding absent manifest error.

 

(ii)                                  Notice of redemption shall be given in writing and mailed, first-class postage prepaid or by overnight courier guaranteeing next-day delivery, to each Holder of the Notes to be redeemed, not less than thirty (30) nor more than sixty (60) days prior to the Redemption Date, at the Holder’s address appearing in the Security Register. All notices of redemption shall contain the information set forth in Section 11.04 of the Base Indenture.

 

(iii)                               Any exercise of the Company’s option to redeem the Notes will be done in compliance with the Investment Company Act, to the extent applicable.

 

(iv)                              If the Company elects to redeem only a portion of the Notes, the particular Notes to be redeemed will be selected in accordance with the applicable procedures of the Trustee and, so long as the Notes are registered to the Depositary or its nominee, the Depositary; provided, however, that no such partial redemption shall reduce the portion of the principal amount of a Note not redeemed to less than $2,000.

 

(v)                                 Unless the Company defaults in payment of the Redemption Price, on and after the Redemption Date, interest will cease to accrue on the Notes called for redemption hereunder.

 

(i)                                     The Notes shall not be subject to any sinking fund pursuant to Section 12.01 of the Base Indenture.

 

(j)                                    The Notes shall be issuable in denominations of $2,000 and integral multiples of $1,000 in excess thereof.

 

(k)                                 Holders of the Notes will not have the option to have the Notes repaid prior to the Stated Maturity other than in accordance with Article XIII of the Indenture.

 

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ARTICLE II
 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

 

Section 2.01.                          Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Article One of the Base Indenture shall be amended by adding the following defined terms to Section 1.01 in appropriate alphabetical sequence, as follows:

 

“Below Investment Grade Rating Event” means the Notes are downgraded below Investment Grade by both Rating Agencies on any date from the date of the public notice of an arrangement that results in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by either of the Rating Agencies); provided that a Below Investment Grade Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the Rating Agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the Trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating Event).

 

“Change of Control” means the occurrence of any of the following:

 

(1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation) in one or a series of related transactions, of all or substantially all of the assets of the Company and its Controlled Subsidiaries taken as a whole to any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act), other than to any Permitted Holders; provided that, for the avoidance of doubt, a pledge of assets pursuant to any secured debt instrument of the Company or its Controlled Subsidiaries shall not be deemed to be any such sale, lease, transfer, conveyance or disposition;

 

(2) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act) (other than any Permitted Holders) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the outstanding Voting Stock of the Company, measured by voting power rather than number of shares; or

 

(3) the approval by the Company’s stockholders of any plan or proposal relating to the liquidation or dissolution of the Company.

 

“Change of Control Repurchase Event” means the occurrence of a Change of Control and a Below Investment Grade Rating Event.

 

“Controlled Subsidiary” means any Subsidiary of the Company, 50% or more of the outstanding equity interests of which are owned by the Company and its direct or indirect Subsidiaries and of which the Company possesses, directly or indirectly, the power to direct or cause the direction of the management or policies, whether through the ownership of voting equity interests, by agreement or otherwise.

 

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“Depositary” means, with respect to each Note in global form, The Depository Trust Company, until a successor shall have been appointed and becomes such person, and thereafter, Depositary shall mean or include such successor.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any statute successor thereto, in each case as amended from time to time and the rules and regulations of the Commission promulgated thereunder.

 

“Fitch” means Fitch, Inc., also known as Fitch Ratings, or any successor thereto.

 

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the opinions and pronouncements of the Public Company Accounting Oversight Board and the statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession in the United States, which are in effect from time to time.

 

“Investment Company Act” means the Investment Company Act of 1940, as amended, and the rules, regulations and interpretations promulgated thereunder, to the extent applicable, and any statute successor thereto.

 

“Investment Grade” means a rating of BBB- or better by Fitch (or its equivalent under any successor rating categories of Fitch) and BBB- or better by S&P (or its equivalent under any successor rating categories of S&P) (or, in each case, if such Rating Agency ceases to rate the Notes for reasons outside of the Company’s control, the equivalent investment grade credit rating from any Rating Agency selected by the Company as a replacement Rating Agency).

 

“Permitted Holders” means (i) the Company, (ii) one or more of the Company’s Controlled Subsidiaries and (iii) Ares Capital Management LLC or any Affiliate of Ares Capital Management LLC that is organized under the laws of a jurisdiction located in the United States of America and in the business of managing or advising clients.

 

“Rating Agency” means (1) each of Fitch and S&P; and (2) if either of Fitch or S&P ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the Company’s control, a “nationally recognized statistical rating organization” as defined in Section 3(a)(62) of the Exchange Act selected by the Company as a replacement agency for Fitch or S&P, or both, as the case may be.

 

“S&P” means Standard & Poor’s Ratings Services, a division of McGraw-Hill, Inc., or any successor thereto.

 

“Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X under the Exchange Act, as such regulation is in effect on the date of this Indenture (but excluding any Subsidiary which is (a) a non-recourse or limited recourse Subsidiary, (b) a bankruptcy remote special purpose vehicle or (c) is not consolidated with the Company for purposes of GAAP).

 

“Voting Stock” as applied to stock of any Person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

 

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Section 2.02.                          Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Article One of the Base Indenture shall be amended by amending the definition of “Subsidiary” in Section 1.01 to add the following sentence at the end of such definition:

 

“In addition, for purposes of this definition, “Subsidiary” shall exclude any investments held by the Company in the ordinary course of business which are not, under GAAP, consolidated on the financial statements of the Company and its Subsidiaries.”

 

ARTICLE III
 SECURITIES FORMS

 

Section 3.01.                          Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Article Two of the Base Indenture shall be amended by adding the following new Section 2.04 thereto, as set forth below:

 

“Section 2.04.                    Certificated Notes. Notwithstanding anything to the contrary in the Indenture, Notes in physical, certificated form will be issued and delivered to each person that the Depositary identifies as a beneficial owner of the related Notes only if:

 

(a)                                 the Depositary notifies the Company at any time that it is unwilling or unable to continue as depositary for the Notes in global form and a successor depositary is not appointed within 90 days;

 

(b)                                 the Depositary ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days; or

 

(c)                                  an Event of Default with respect to the Notes has occurred and is continuing and such beneficial owner requests that its Notes be issued in physical, certificated form.”

 

ARTICLE IV
 REMEDIES

 

Section 4.01.                          Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Section 5.01 of the Base Indenture shall be amended by replacing clause (ii) thereof with the following:

 

“(ii)                            default in the payment of the principal of (or premium, if any) any Note when it becomes due and payable at its Maturity, including upon any Redemption Date or required repurchase date; or”

 

Section 4.02.                          Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Section 5.01 of the Base Indenture shall be amended by replacing (iv) thereof with the following:

 

“(iv)                        the Company’s failure for 60 consecutive days after written notice from the Trustee or the Holders of at least 25% in principal amount of the Notes then Outstanding has been received to comply with any of the Company’s other agreements contained in the Notes or this Indenture;”

 

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Section 4.03.         Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Section 5.01 of the Base Indenture shall be amended by adding the following language as clause (ix):

 

“(ix):                    default by the Company or any of its Significant Subsidiaries, with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of $75 million in the aggregate of the Company and/or any such Significant Subsidiary, whether such indebtedness now exists or shall hereafter be created (i) resulting in such indebtedness becoming or being declared due and payable or (ii) constituting a failure to pay the principal or interest of any such debt when due and payable at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise, unless, in either case, such indebtedness is discharged, or such acceleration is rescinded, stayed or annulled, within a period of 30 calendar days after written notice of such failure is given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes then Outstanding.”

 

Section 4.04.         Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Section 5.02 of the Base Indenture shall be amended by replacing the first paragraph of Section 5.02 with the following:

 

“If an Event of Default with respect to the Notes occurs and is continuing, then and in every such case (other than an Event of Default specified in Section 5.01(v) or 5.01(vi)), the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Notes may declare the principal of all the Outstanding Notes to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such declaration such principal shall become immediately due and payable; provided that 100% of the principal of, and accrued and unpaid interest on, the Notes will automatically become due and payable in the case of an Event of Default specified in Section 5.01(v) or 5.01(vi) hereof.

 

Section 4.05.         Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Section 5.12 of the Base Indenture shall be amended by replacing clause (iii) thereof with the following:

 

“the Trustee need not take any action that it determines in good faith may involve it in personal liability or be unjustly prejudicial to the Holders of Notes not consenting.”

 

ARTICLE V
 COVENANTS

 

Section 5.01.         Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Article Ten of the Base Indenture shall be amended by adding the following new Sections 10.08, and 10.09 thereto, each as set forth below:

 

8

 

“Section 10.08  Section 18(a)(1)(A) of the Investment Company Act.

 

The Company hereby agrees that for the period of time during which Notes are Outstanding, the Company will not violate, whether or not it is subject to, Section 18(a)(1)(A) as modified by Section 61(a)(1) of the Investment Company Act or any successor provisions thereto of the Investment Company Act, giving effect to any exemptive relief granted to the Company by the Commission.”

 

“Section 10.09  Commission Reports and Reports to Holders.

 

If, at any time, the Company is not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act to file any periodic reports with the Commission, the Company agrees to furnish to the Holders of Notes and the Trustee for the period of time during which the Notes are Outstanding: (i) within 90 days after the end of the each fiscal year of the Company, audited annual consolidated financial statements of the Company and (ii) within 45 days after the end of each fiscal quarter of the Company (other than the Company’s fourth fiscal quarter), unaudited interim consolidated financial statements of the Company. All such financial statements shall be prepared, in all material respects, in accordance with GAAP, as applicable.”

 

ARTICLE VI
 SUCCESSOR COMPANIES

 

Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Article Eight of the Base Indenture shall be amended by replacing Section 8.01 with the following:

 

“Section 8.01  Merger, Consolidation or Sale of Assets.

 

The Company shall not merge or consolidate with or into any other Person (other than a merger of a wholly owned Subsidiary of the Company into the Company) or sell, transfer, lease, convey or otherwise dispose of all or substantially all of its property (provided that, for the avoidance of doubt, a pledge of assets pursuant to any secured debt instrument of the Company or its Controlled Subsidiaries shall not be deemed to be any such sale, transfer, lease, conveyance or disposition) in one transaction or series of related transactions unless:

 

(a)           the Company shall be the surviving Person (the “Surviving Person”) or the Surviving Person (if other than the Company) formed by such merger or consolidation or to which such sale, transfer, lease, conveyance or disposition is made shall be a corporation or limited liability company organized and existing under the laws of the United States of America or any state or territory thereof;

 

(b)           the Surviving Person (if other than the Company) expressly assumes, by supplemental indenture in form reasonably satisfactory to the Trustee, executed and delivered to the Trustee by such Surviving Person, the due and punctual payment of the principal of, and premium, if any, and interest on, all the Notes Outstanding, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed by the Company;

 

(c)           immediately before and immediately after giving effect to such transaction or series of related transactions, no Default or Event of Default shall have occurred and be continuing; and

 

(d)           the Company shall deliver, or cause to be delivered, to the Trustee, an Officers’ Certificate and an Opinion of Counsel, each stating that such transaction and the supplemental indenture, if any, in respect thereto comply with this Section 8.01 and that all conditions precedent in this Indenture relating to such transaction have been complied with.

 

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For the purposes of this Section 8.01, the sale, transfer, lease, conveyance or other disposition of all the property of one or more Subsidiaries of the Company, which property, if held by the Company instead of such Subsidiaries, would constitute all or substantially all the property of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all the property of the Company.”

 

ARTICLE VII
 OFFER TO REPURCHASE UPON A CHANGE OF CONTROL REPURCHASE EVENT

 

Except as may be provided in a Future Supplemental Indenture, for the benefit of the Holders of the Notes but no other series of Securities under the Indenture, whether now or hereafter issued and Outstanding, Article Thirteen of the Base Indenture shall be amended by replacing Sections 13.01 to 13.05 with the following:

 

“Section 13.01     Change of Control.

 

If a Change of Control Repurchase Event occurs, unless the Company shall have exercised its right to redeem the Notes in full, the Company shall make an offer to each Holder of the Notes to repurchase all or any part (in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof) of that Holder’s Notes at a repurchase price in cash equal to 100% of the aggregate principal amount of Notes repurchased plus any accrued and unpaid interest on the Notes repurchased to the date of purchase. Within 30 days following any Change of Control Repurchase Event or, at the Company’s option, prior to any Change of Control, but after the public announcement of the Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute or may constitute the Change of Control Repurchase Event and offering to repurchase Notes on the payment date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed. The notice shall, if mailed prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Repurchase Event occurring on or prior to the payment date specified in the notice. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control Repurchase Event.

 

To the extent that the provisions of any securities laws or regulations conflict with this Section 13.01, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 13.01 by virtue of such conflict.

 

On the Change of Control Repurchase Event payment date, subject to extension if necessary to comply with the provisions of the Investment Company Act, the Company shall, to the extent lawful:

 

(1)           accept for payment all Notes or portions of Notes properly tendered pursuant to its offer;

 

(2)           deposit with the Paying Agent an amount equal to the aggregate purchase price in respect of all Notes or portions of Notes properly tendered; and

 

(3)           deliver or cause to be delivered to the Trustee the Notes properly accepted, together with an Officers’ Certificate stating the aggregate principal amount of Notes being purchased by the Company.

 

The Paying Agent will promptly remit to each Holder of Notes properly tendered the purchase price for the Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by

 

10

 

book-entry) to each Holder a new Note equal in principal amount to any unpurchased portion of any Notes surrendered; provided that each new Note will be in a minimum principal amount of $2,000 or an integral multiple of $1,000 in excess thereof.

 

If any Repayment Date upon a Change of Control Repurchase Event falls on a day that is not a Business Day, then the required payment will be made on the next succeeding Business Day and no additional interest will accrue as a result of such delayed payment.

 

The Company will not be required to make an offer to repurchase the Notes upon a Change of Control Repurchase Event if a third party makes an offer in respect of the Notes in the manner, at the time and otherwise in compliance with the requirements for an offer made by the Company and such third party purchases all Notes properly tendered and not withdrawn under its offer.”

 

ARTICLE VIII
 MISCELLANEOUS

 

Section 8.01.         This Sixth Supplemental Indenture and the Notes shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of laws that would cause the application of laws of another jurisdiction. This Sixth 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 the Indenture limits, qualifies or conflicts with the duties imposed by Section 318(c) of the Trust Indenture Act, the imposed duties will control.

 

Section 8.02.         In case any provision in this Sixth 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 thereby.

 

Section 8.03.         This Sixth Supplemental Indenture may be executed in any number of counterparts, each of which will be an original, but such counterparts will together constitute but one and the same Sixth Supplemental Indenture. The exchange of copies of this Sixth Supplemental Indenture and of signature pages by facsimile, .pdf transmission, email or other electronic means shall constitute effective execution and delivery of this Sixth Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile, .pdf transmission, email or other electronic means shall be deemed to be their original signatures for all purposes.

 

Section 8.04.         The Base Indenture, as supplemented and amended by this Sixth Supplemental Indenture, is in all respects ratified and confirmed, and the Base Indenture and this Sixth Supplemental Indenture shall be read, taken and construed as one and the same instrument with respect to the Notes. All provisions included in this Sixth Supplemental Indenture supersede any conflicting provisions included in the Base Indenture with respect to the Notes, unless not permitted by law. The Trustee accepts the trusts created by the Indenture, as supplemented by this Sixth Supplemental Indenture, and agrees to perform the same upon the terms and conditions of the Indenture, as supplemented by this Sixth Supplemental Indenture.

 

Section 8.05.         The provisions of this Sixth Supplemental Indenture shall become effective as of the date hereof.

 

Section 8.06.         Notwithstanding anything else to the contrary herein, the terms and provisions of this Sixth Supplemental Indenture shall apply only to the Notes and shall not apply to any other series of Securities under the Indenture and this Sixth Supplemental Indenture shall not and does not otherwise

 

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affect, modify, alter, supplement or change the terms and provisions of any other series of Securities under the Indenture, whether now or hereafter issued and Outstanding.

 

Section 8.07.         The recitals contained herein and in the Notes shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Sixth Supplemental Indenture, the Notes or any Additional Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Sixth Supplemental Indenture, authenticate the Notes and any Additional Notes and perform its obligations hereunder. The Trustee shall not be accountable for the use or application by the Company of the Notes or any Additional Notes or the proceeds thereof.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Sixth Supplemental Indenture to be duly executed as of the date first above written.

 

	
 
    	
ARES   CAPITAL CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   R. Kipp deVeer
    
	
 
    	
Name:   R. Kipp deVeer
    
	
 
    	
Title:   Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
U.S.   BANK NATIONAL ASSOCIATION, as Trustee
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Karen Beard
    
	
 
    	
Name:   Karen Beard
    
	
 
    	
Title:   Vice President
    

 

[Signature Page to Sixth Supplemental Indenture]

 

 

Exhibit A — Form of Global Note

 

This Security is a Global Note within the meaning of the Indenture hereinafter referred to and is registered in the name of The Depository Trust Company or a nominee thereof. This Security may not be exchanged in whole or in part for a Security registered, and no transfer of this Security in whole or in part may be registered, in the name of any Person other than The Depository Trust Company or a nominee thereof, except in the limited circumstances described in the Indenture.

 

Unless this certificate is presented by an authorized representative of The Depository Trust Company to the issuer or its agent for registration of transfer, exchange or payment and such certificate issued in exchange for this certificate is registered in the name of Cede & Co., or such other name as requested by an authorized representative of The Depository Trust Company, any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful, as the registered owner hereof, Cede & Co., has an interest herein.

 

Ares Capital Corporation

 

	
No.
    	
$
    
	
 
    	
CUSIP No. 04010L   AR4
    
	
 
    	
 
    
	
 
    	
ISIN   No. US04010LAR42
    

 

3.625% Notes due 2022

 

Ares Capital Corporation, a corporation duly organized and existing under the laws of Maryland (herein called the “Company”, which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of                  (U.S. $   ) on January 19, 2022, and to pay interest thereon from September 19, 2016 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on January 19 and July 19 in each year, commencing January 19, 2017, at the rate of 3.625% per annum, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security is registered at the close of business on the Regular Record Date for such interest, which shall be January 5 and July 5 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. This Security may be issued as part of a series.

 

Payment of the principal of (and premium, if any) and any such interest on this Security will be made at the Corporate Trust Office of the Trustee in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register.

 

 

Reference is hereby made to the further provisions of this Security 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 signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

2

 

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

 

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARES CAPITAL   CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
						

 

3

 

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

 

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
U.S. BANK NATIONAL   ASSOCIATION,
    
	
 
    	
as Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Authorized Signatory
    

 

4

 

Ares Capital Corporation

3.625% Notes due 2022

 

This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of October 21, 2010 (herein called the “Base Indenture”, which term shall have the meaning assigned to it in such instrument), between the Company and U.S. Bank National Association, as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Base Indenture), and reference is hereby made to the Base Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered, as supplemented by the Sixth Supplemental Indenture, relating to the Securities, dated as of September 19, 2016, by and between the Company and the Trustee (herein called the “Sixth Supplemental Indenture”; and the Sixth Supplemental Indenture and the Base Indenture together are herein called the “Indenture”).  In the event of any conflict between the Base Indenture and the Sixth Supplemental Indenture, the Sixth Supplemental Indenture shall govern and control.

 

This Security is one of the series designated on the face hereof, initially limited in aggregate principal amount to $          .  Under a Board Resolution, Officers’ Certificate pursuant to Board Resolutions or an indenture supplement, the Company may from time to time, without the consent of the Holders of Securities, issue additional Securities of this series (in any such case “Additional Securities”) having the same ranking and the same interest rate, maturity, CUSIP number and other terms as the Securities, provided that such Additional Securities must be part of the same issue as the Securities for U.S. federal income tax purposes.  Any Additional Securities and the existing Securities will constitute a single series under the Indenture and all references to the relevant Securities herein shall include the Additional Securities unless the context otherwise requires.  The aggregate amount of Outstanding Securities represented hereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions.

 

The Securities of this series are subject to redemption in whole or in part at any time or from time to time, at the option of the Company, at a Redemption Price equal to the greater of the following amounts, plus, in each case, accrued and unpaid interest to the Redemption Date:

 

(a)                                 100% of the principal amount of the Securities to be redeemed, or

 

(b)                                 the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of accrued and unpaid interest to the Redemption Date) on the Securities to be redeemed, discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) using the applicable Treasury Rate plus 40 basis points;

 

provided, however, that if the Company redeems any Securities on or after December 19, 2021, the Redemption Price for the Securities will be equal to 100% of the principal amount of the Securities to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the Redemption Date.

 

For purposes of calculating the Redemption Price in connection with the redemption of the Securities, on any Redemption Date, the following terms have the meanings set forth below:

 

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“Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the semi-annual equivalent yield-to-maturity of the Comparable Treasury Issue (computed as of the third Business Day immediately preceding the redemption), assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.  The Redemption Price and the Treasury Rate will be determined by the Company.

 

“Comparable Treasury Issue” means the United States Treasury security selected by the Reference Treasury Dealer as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financing practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities being redeemed.

 

“Comparable Treasury Price” means (1) the average of the remaining Reference Treasury Dealer Quotations for the Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if the Quotation Agent obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

 

“Quotation Agent” means a Reference Treasury Dealer selected by the Company.

 

“Reference Treasury Dealer” means each of (1) Merrill Lynch, Pierce, Fenner & Smith Incorporated, (2) Wells Fargo Securities, LLC, (3) J.P. Morgan Securities LLC and (4) a Primary Treasury Dealer (as defined below) selected by SunTrust Robinson Humphrey, Inc., or their affiliates which are primary U.S. government securities dealers and their respective successors; provided, however, that if any of the foregoing or their affiliates shall cease to be a primary U.S. government securities dealer in the United States (a “Primary Treasury Dealer”), the Company shall select another Primary Treasury Dealer.

 

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 3:30 p.m. New York time on the third Business Day preceding such Redemption Date.

 

All determinations made by any Reference Treasury Dealer, including the Quotation Agent, with respect to determining the Redemption Price will be final and binding absent manifest error.

 

Notice of redemption shall be given in writing and mailed, first-class postage prepaid or by overnight courier guaranteeing next-day delivery, to each Holder of the Securities to be redeemed, not less than thirty (30) nor more than sixty (60) days prior to the Redemption Date, at the Holder’s address appearing in the Security Register.  All notices of redemption shall contain the information set forth in Section 11.04 of the Base Indenture.

 

Any exercise of the Company’s option to redeem the Securities will be done in compliance with the Investment Company Act, to the extent applicable.

 

If the Company elects to redeem only a portion of the Securities, the particular Securities to be redeemed will be selected in accordance with the applicable procedures of the Trustee and, so long as the Securities are registered to the Depositary or its nominee, the Depositary. In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof; provided,

 

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however, that no such partial redemption shall reduce the portion of the principal amount of a Security not redeemed to less than $2,000.

 

Unless the Company defaults in payment of the Redemption Price, on and after the Redemption Date, interest will cease to accrue on the Securities called for redemption.

 

Holders will have the right to require the Company to repurchase their Securities upon the occurrence of a Change of Control Repurchase Event as set forth in the Indenture.

 

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security or certain restrictive covenants and Events of Default with respect to this Security, in each case upon compliance with certain conditions set forth in the Indenture.

 

If an Event of Default with respect to Securities of this series shall occur and be continuing (other than Events of Default related to certain events of bankruptcy, insolvency or reorganization as set forth in the Indenture), the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. In the case of certain events of bankruptcy, insolvency or reorganization described in the Indenture, 100% of the principal of and accrued and unpaid interest on the Securities will automatically become due and payable.

 

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 of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.  Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security 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 Security.

 

As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for sixty (60) days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.

 

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 any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

 

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As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security 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 Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

 

The Securities of this series are issuable only in registered form without coupons in denominations of $2,000 and any integral multiples of $1,000 in excess thereof.  As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

 

No service charge shall be made for any such registration of transfer or exchange, but the Company or Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

 

All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

To the extent any provision of this Security conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

 

The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of laws.

 

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