Exhibit 4.1





 


Exhibit 4.1


UST Sequence No. 701 


THE SECURITIES
REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION
STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR
SUCH LAWS.  THIS INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER
AND OTHER PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN THE ISSUER OF
THESE SECURITIES AND THE INVESTOR REFERRED TO THEREIN, A COPY OF WHICH IS ON
FILE WITH THE ISSUER. THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SAID AGREEMENT.  ANY
SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT WILL BE VOID.


WARRANT


to purchase


330,554


Shares of
Common Stock


of Southern
First Bancshares, Inc.


Issue Date: February
27, 2009


1.         Definitions. Unless the context otherwise
requires, when used herein the following terms shall have the meanings
indicated.


“Affiliate” has the meaning ascribed to it in the
Purchase Agreement.

 


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“Appraisal Procedure” means a procedure whereby two
independent appraisers, one chosen by the Company and one by the Original
Warrantholder, shall mutually agree upon the determinations then the subject of
appraisal.  Each party shall deliver a notice to the other appointing its
appraiser within 15 days after the Appraisal Procedure is invoked.  If within
30 days after appointment of the two appraisers they are unable to agree upon
the amount in question, a third independent appraiser shall be chosen within 10
days thereafter by the mutual consent of such first two appraisers.  The
decision of the third appraiser so appointed and chosen shall be given within
30 days after the selection of such third appraiser.  If three appraisers shall
be appointed and the determination of one appraiser is disparate from the
middle determination by more than twice the amount by which the other
determination is disparate from the middle determination, then the
determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be binding and conclusive
upon the Company and the Original Warrantholder; otherwise, the average of all
three determinations shall be binding upon the Company and the Original
Warrantholder.  The costs of conducting any Appraisal Procedure shall be borne
by the Company.


“Board of Directors” means the board of directors of
the Company, including any duly authorized committee thereof.


“Business
Combination” means a merger, consolidation, statutory share exchange or
similar transaction that requires the approval of the Company’s stockholders.


“business day” means any day except Saturday, Sunday
and any day on which banking institutions in the State of New York generally
are authorized or required by law or other governmental actions to close.


“Capital Stock” means (A) with respect to any Person
that is a corporation or company, any and all shares, interests, participations
or other equivalents (however designated) of capital or capital stock of such
Person and (B) with respect to any Person that is not a corporation or company,
any and all partnership or other equity interests of such Person.


“Charter” means, with respect to any Person, its
certificate or articles of incorporation, articles of association, or similar
organizational document.


“Common Stock” has the meaning ascribed to it in the
Purchase Agreement.


“Company” means the Person whose name, corporate or
other organizational form and jurisdiction of organization is set forth in Item
1 of Schedule A hereto.


“conversion” has the meaning set forth in Section
13(B).


“convertible securities”
has the meaning set forth in Section 13(B).


“CPP” has the meaning ascribed to it in the Purchase
Agreement.


“Exchange
Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.


“Exercise Price” means the amount set forth in Item
2 of Schedule A hereto.


“Expiration Time” has the meaning set forth in
Section 3.




	
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“Fair Market Value” means, with respect to any
security or other property, the fair market value of such security or other
property as determined by the Board of Directors, acting in good faith or, with
respect to Section 14, as determined by the Original Warrantholder acting in
good faith. For so long as the Original Warrantholder holds this Warrant or any
portion thereof, it may object in writing to the Board of Director’s
calculation of fair market value within 10 days of receipt of written notice
thereof.  If the Original Warrantholder and the Company are unable to agree on
fair market value during the 10-day period following the delivery of the
Original Warrantholder’s objection, the Appraisal Procedure may be invoked by
either party to determine Fair Market Value by delivering written notification
thereof not later than the 30th day
after delivery of the Original Warrantholder’s objection.


“Governmental
Entities” has the meaning ascribed to it in the Purchase Agreement.


“Initial Number” has the meaning
set forth in Section 13(B).


“Issue
Date” means the date
set forth in Item 3 of Schedule A hereto.


“Market Price” means, with respect to a particular
security, on any given day, the last reported sale price regular way or, in
case no such reported sale takes place on such day, the average of the last
closing bid and ask prices regular way, in either case on the principal
national securities exchange on which the applicable securities are listed or
admitted to trading, or if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and ask prices as furnished
by two members of the Financial Industry Regulatory Authority, Inc. selected
from time to time by the Company for that purpose.  “Market Price” shall be
determined without reference to after hours or extended hours trading. If such
security is not listed and traded in a manner that the quotations referred to
above are available for the period required hereunder, the Market Price per
share of Common Stock shall be deemed to be (i) in the event that any portion
of the Warrant is held by the Original Warrantholder, the fair market value per
share of such security as determined in good faith by the Original
Warrantholder or (ii) in all other circumstances, the fair market value per
share of such security as determined in good faith by the Board of Directors in
reliance on an opinion of a nationally recognized independent investment
banking corporation retained by the Company for this purpose and certified in a
resolution to the Warrantholder.  For the purposes of determining the Market
Price of the Common Stock on the “trading day” preceding, on or following the
occurrence of an event, (i) that trading day shall be deemed to commence
immediately after the regular scheduled closing time of trading on the New York
Stock Exchange or, if trading is closed at an earlier time, such earlier time
and (ii) that trading day shall end at the next regular scheduled closing time,
or if trading is closed at an earlier time, such earlier time (for the
avoidance of doubt, and as an example, if the Market Price is to be determined
as of the last trading day preceding a specified event and the closing time of
trading on a particular day is 4:00 p.m. and the specified event occurs at 5:00
p.m. on that day, the Market Price would be determined by reference to such
4:00 p.m. closing price).


“Ordinary Cash
Dividends” means a regular quarterly cash dividend on shares of Common
Stock out of surplus or net profits legally available therefor (determined in
accordance with generally accepted accounting principles in effect from time to
time), provided that Ordinary Cash Dividends shall not include any cash
dividends paid subsequent to the Issue Date to the extent the aggregate per
share dividends paid on the outstanding Common Stock in any quarter exceed the
amount set forth in Item 4 of Schedule A hereto, as adjusted for any stock
split, stock dividend, reverse stock split, reclassification or similar
transaction.




	
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“Original Warrantholder” means the United States
Department of the Treasury.  Any actions specified to be taken by the Original
Warrantholder hereunder may only be taken by such Person and not by any other
Warrantholder.


“Permitted Transactions” has the meaning set forth
in Section 13(B).


“Person” has the meaning given to it in Section 3(a)(9) of
the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act.


“Per Share Fair Market Value” has the meaning set forth in
Section 13(C).


“Preferred Shares” means the perpetual preferred stock
issued to the Original Warrantholder on the Issue Date pursuant to the Purchase
Agreement.


“Pro Rata Repurchases” means any purchase of shares of
Common Stock by the Company or any Affiliate thereof pursuant to (A) any tender
offer or exchange offer subject to Section 13(e) or 14(e) of the Exchange Act
or Regulation 14E promulgated thereunder or (B) any other offer available to
substantially all holders of Common Stock, in the case of both (A) or (B),
whether for cash, shares of Capital Stock of the Company, other securities of
the Company, evidences of indebtedness of the Company or any other Person or
any other property (including, without limitation, shares of Capital Stock,
other securities or evidences of indebtedness of a subsidiary), or any
combination thereof, effected while this Warrant is outstanding.  The “Effective
Date” of a Pro Rata Repurchase shall mean the date of acceptance of shares
for purchase or exchange by the Company under any tender or exchange offer
which is a Pro Rata Repurchase or the date of purchase with respect to any Pro
Rata Repurchase that is not a tender or exchange offer.


“Purchase Agreement” means the Securities Purchase
Agreement – Standard Terms incorporated into the Letter Agreement, dated as of
the date set forth in Item 5 of Schedule A hereto, as amended from time to
time, between the Company and the United States Department of the Treasury (the
“Letter Agreement”), including all annexes and schedules thereto.


“Qualified Equity Offering” has the meaning ascribed
to it in the Purchase Agreement.


“Regulatory Approvals” with respect to the Warrantholder,
means, to the extent applicable and required to permit the Warrantholder to
exercise this Warrant for shares of Common Stock and to own such Common Stock
without the Warrantholder being in violation of applicable law, rule or
regulation, the receipt of any necessary approvals and authorizations of,
filings and registrations with, notifications to, or expiration or termination
of any applicable waiting period under, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.


“SEC” means the U.S. Securities and Exchange
Commission.


“Securities Act” means the Securities Act of 1933,
as amended, or any successor statute, and the rules and regulations promulgated
thereunder.


“Shares” has the meaning set forth in Section 2.




	
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“trading day”
means (A) if the shares of Common Stock are not traded on any national or
regional securities exchange or association or over-the-counter market, a
business day or (B) if the shares of Common Stock are traded on any national or
regional securities exchange or association or over-the-counter market, a
business day on which such relevant exchange or quotation system is scheduled
to be open for business and on which the shares of Common Stock (i) are not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market for any period or periods aggregating
one half hour or longer; and (ii) have traded at least once on the national or
regional securities exchange or association or over-the-counter market that is
the primary market for the trading of the shares of Common Stock.


“U.S. GAAP” means United States generally accepted
accounting principles.


“Warrantholder” has the meaning set forth in Section
2.


“Warrant” means this Warrant, issued pursuant to the
Purchase Agreement.


2.         Number
of Shares; Exercise Price. This certifies that, for value received, the
United States Department of the Treasury or its permitted assigns (the “Warrantholder”)
is entitled, upon the terms and subject to the conditions hereinafter set
forth, to acquire from the Company, in whole or in part, after the receipt of
all applicable Regulatory Approvals, if any, up to an aggregate of the number
of fully paid and nonassessable shares of Common Stock set forth in Item 6 of Schedule
A hereto, at a purchase price per share of Common Stock equal to the Exercise
Price.  The number of shares of Common Stock (the “Shares”) and the
Exercise Price are subject to adjustment as provided herein, and all references
to “Common Stock,” “Shares” and “Exercise Price” herein shall be deemed to
include any such adjustment or series of adjustments.


3.         Exercise
of Warrant; Term. Subject to Section 2, to the extent permitted by
applicable laws and regulations, the right to purchase the Shares represented
by this Warrant is exercisable, in whole or in part by the Warrantholder, at
any time or from time to time after the execution and delivery of this Warrant
by the Company on the date hereof, but in no event later than 5:00 p.m., New
York City time on the tenth anniversary of the Issue Date (the “Expiration
Time”), by (A) the surrender of this Warrant and Notice of Exercise annexed
hereto, duly completed and executed on behalf of the Warrantholder, at the
principal executive office of the Company located at the address set forth in
Item 7 of Schedule A hereto (or such other office or agency of the Company in
the United States as it may designate by notice in writing to the Warrantholder
at the address of the Warrantholder appearing on the books of the Company), and
(B) payment of the Exercise Price for the Shares thereby purchased:


(i)         by
having the Company withhold, from the shares of Common Stock that would
otherwise be delivered to the Warrantholder upon such exercise, shares of
Common stock issuable upon exercise of the Warrant equal in value to the
aggregate Exercise Price as to which this Warrant is so exercised based on the
Market Price of the Common Stock on the trading day on which this Warrant is
exercised and the Notice of Exercise is delivered to the Company pursuant to
this Section 3, or




	
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(ii)        with
the consent of both the Company and the Warrantholder, by tendering in cash, by
certified or cashier’s check payable to the order of the Company, or by wire
transfer of immediately available funds to an account designated by the
Company.


If
the Warrantholder does not exercise this Warrant in its entirety, the
Warrantholder will be entitled to receive from the Company within a reasonable
time, and in any event not exceeding three business days, a new warrant in
substantially identical form for the purchase of that number of Shares equal to
the difference between the number of Shares subject to this Warrant and the
number of Shares as to which this Warrant is so exercised.  Notwithstanding
anything in this Warrant to the contrary, the Warrantholder hereby acknowledges
and agrees that its exercise of this Warrant for Shares is subject to the
condition that the Warrantholder will have first received any applicable
Regulatory Approvals.


4.         Issuance
of Shares; Authorization; Listing.  Certificates for Shares issued upon
exercise of this Warrant will be issued in such name or names as the
Warrantholder may designate and will be delivered to such named Person or
Persons within a reasonable time, not to exceed three business days after the
date on which this Warrant has been duly exercised in accordance with the terms
of this Warrant.  The Company hereby represents and warrants that any Shares
issued upon the exercise of this Warrant in accordance with the provisions of
Section 3 will be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges (other than liens or
charges created by the Warrantholder, income and franchise taxes incurred in
connection with the exercise of the Warrant or taxes in respect of any transfer
occurring contemporaneously therewith). The Company agrees that the Shares so
issued will be deemed to have been issued to the Warrantholder as of the close
of business on the date on which this Warrant and payment of the Exercise Price
are delivered to the Company in accordance with the terms of this Warrant,
notwithstanding that the stock transfer books of the Company may then be closed
or certificates representing such Shares may not be actually delivered on such
date.  The Company will at all times reserve and keep available, out of its
authorized but unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, the aggregate number of shares of Common Stock
then issuable upon exercise of this Warrant at any time.  The Company will (A)
procure, at its sole expense, the listing of the Shares issuable upon exercise
of this Warrant at any time, subject to issuance or notice of issuance, on all
principal stock exchanges on which the Common Stock is then listed or traded
and (B) maintain such listings of such Shares at all times after issuance.  The
Company will use reasonable best efforts to ensure that the Shares may be
issued without violation of any applicable law or regulation or of any
requirement of any securities exchange on which the Shares are listed or
traded.


5.         No
Fractional Shares or Scrip. No fractional Shares or scrip representing
fractional Shares shall be issued upon any exercise of this Warrant.  In lieu
of any fractional Share to which the Warrantholder would otherwise be entitled,
the Warrantholder shall be entitled to receive a cash payment equal to the
Market Price of the Common Stock on the last trading day preceding the date of
exercise less the pro-rated Exercise Price for such fractional share.




	
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6.         No
Rights as Stockholders; Transfer Books. This Warrant does not entitle the
Warrantholder to any voting rights or other rights as a stockholder of the
Company prior to the date of exercise hereof. The Company will at no time close
its transfer books against transfer of this Warrant in any manner which
interferes with the timely exercise of this Warrant.


7.         Charges,
Taxes and Expenses. Issuance of certificates for Shares to the
Warrantholder upon the exercise of this Warrant shall be made without charge to
the Warrantholder for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificates, all of which taxes and expenses
shall be paid by the Company.


8.         Transfer/Assignment.


(A)       Subject
to compliance with clause (B) of this Section 8, this Warrant and all rights
hereunder are transferable, in whole or in part, upon the books of the Company
by the registered holder hereof in person or by duly authorized attorney, and a
new warrant shall be made and delivered by the Company, of the same tenor and
date as this Warrant but registered in the name of one or more transferees,
upon surrender of this Warrant, duly endorsed, to the office or agency of the
Company described in Section 3.  All expenses (other than stock transfer taxes)
and other charges payable in connection with the preparation, execution and
delivery of the new warrants pursuant to this Section 8 shall be paid by the
Company.


(B)       The
transfer of the Warrant and the Shares issued upon exercise of the Warrant are
subject to the restrictions set forth in Section 4.4 of the Purchase
Agreement.  If and for so long as required by the Purchase Agreement, this
Warrant shall contain the legends as set forth in Sections 4.2(a) and 4.2(b) of
the Purchase Agreement.


9.         Exchange
and Registry of Warrant. This Warrant is exchangeable, upon the surrender
hereof by the Warrantholder to the Company, for a new warrant or warrants of
like tenor and representing the right to purchase the same aggregate number of
Shares.  The Company shall maintain a registry showing the name and address of
the Warrantholder as the registered holder of this Warrant. This Warrant may be
surrendered for exchange or exercise in accordance with its terms, at the
office of the Company, and the Company shall be entitled to rely in all
respects, prior to written notice to the contrary, upon such registry.


10.       Loss,
Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and in the case of any such loss, theft or
destruction, upon receipt of a bond, indemnity or security reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company shall make and deliver,
in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of
like tenor and representing the right to purchase the same aggregate number of
Shares as provided for in such lost, stolen, destroyed or mutilated Warrant.


11.       Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall not be a
business day, then such action may be taken or such right may be exercised on
the next succeeding day that is a business day.




	
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12.       Rule
144 Information. The Company covenants that it will use its reasonable best
efforts to timely file all reports and other documents required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
promulgated by the SEC thereunder (or, if the Company is not required to file
such reports, it will, upon the request of any Warrantholder, make publicly
available such information as necessary to permit sales pursuant to Rule 144
under the Securities Act), and it will use reasonable best efforts to take such
further action as any Warrantholder may reasonably request, in each case to the
extent required from time to time to enable such holder to, if permitted by the
terms of this Warrant and the Purchase Agreement, sell this Warrant without
registration under the Securities Act within the limitation of the exemptions
provided by (A) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (B) any successor rule or regulation hereafter adopted by
the SEC. Upon the written request of any Warrantholder, the Company will
deliver to such Warrantholder a written statement that it has complied with
such requirements.


13.       Adjustments
and Other Rights. The Exercise Price and the number of Shares issuable upon
exercise of this Warrant shall be subject to adjustment from time to time as
follows; provided, that if more than one subsection of this Section 13
is applicable to a single event, the subsection shall be applied that produces
the largest adjustment and no single event shall cause an adjustment under more
than one subsection of this Section 13 so as to result in duplication:


(A)       Stock
Splits, Subdivisions, Reclassifications or Combinations. If the Company
shall (i) declare and pay a dividend or make a distribution on its Common Stock
in shares of Common Stock, (ii) subdivide or reclassify the outstanding shares
of Common Stock into a greater number of shares, or (iii) combine or reclassify
the outstanding shares of Common Stock into a smaller number of shares, the
number of Shares issuable upon exercise of this Warrant at the time of the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be proportionately adjusted
so that the Warrantholder after such date shall be entitled to purchase the
number of shares of Common Stock which such holder would have owned or been
entitled to receive in respect of the shares of Common Stock subject to this
Warrant after such date had this Warrant been exercised immediately prior to
such date.  In such event, the Exercise Price in effect at the time of the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be adjusted to the number
obtained by dividing (x) the product of (1) the number of Shares issuable upon
the exercise of this Warrant before such adjustment and (2) the Exercise Price
in effect immediately prior to the record or effective date, as the case may
be, for the dividend, distribution, subdivision, combination or
reclassification giving rise to this adjustment by (y) the new number of Shares
issuable upon exercise of the Warrant determined pursuant to the immediately
preceding sentence.


(B)       Certain
Issuances of Common Shares or Convertible Securities. Until the earlier of
(i) the date on which the Original Warrantholder no longer holds this Warrant
or any portion thereof and (ii) the third anniversary of the Issue Date, if the
Company shall issue shares of Common Stock (or rights or warrants or other
securities exercisable or convertible into or exchangeable (collectively, a “conversion”)
for shares of Common Stock) (collectively, “convertible securities”)
(other than in Permitted Transactions (as defined below) or a transaction to
which subsection (A) of this Section 13 is applicable) without consideration or
at a consideration per share (or having a conversion price per share) that is
less than 90% of the Market Price on the last trading day preceding the date of
the agreement on pricing such shares (or such convertible securities) then, in
such event:




	
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(A) the number of Shares issuable upon
the exercise of this Warrant immediately prior to the date of the agreement on
pricing of such shares (or of such convertible securities) (the “Initial
Number”) shall be increased to the number obtained by multiplying the
Initial Number by a fraction (A) the numerator of which shall be the sum of (x)
the number of shares of Common Stock of the Company outstanding on such date
and (y) the number of additional shares of Common Stock issued (or into which
convertible securities may be exercised or convert) and (B) the denominator of
which shall be the sum of (I) the number of shares of Common Stock outstanding
on such date and (II) the number of shares of Common Stock which the aggregate
consideration receivable by the Company for the total number of shares of
Common Stock so issued (or into which convertible securities may be exercised
or convert) would purchase at the Market Price on the last trading day
preceding the date of the agreement on pricing such shares (or such convertible
securities); and


(B) the Exercise Price payable upon
exercise of the Warrant shall be adjusted by multiplying such Exercise Price in
effect immediately prior to the date of the agreement on pricing of such shares
(or of such convertible securities) by a fraction, the numerator of which shall
be the number of shares of Common Stock issuable upon exercise of this Warrant
prior to such date and the denominator of which shall be the number of shares
of Common Stock issuable upon exercise of this Warrant immediately after the
adjustment described in clause (A) above.


For purposes of the foregoing, the aggregate consideration
receivable by the Company in connection with the issuance of such shares of
Common Stock or convertible securities shall be deemed to be equal to the sum
of the net offering price (including the Fair Market Value of any non-cash
consideration and after deduction of any related expenses payable to third
parties) of all such securities plus the minimum aggregate amount, if any,
payable upon exercise or conversion of any such convertible securities into
shares of Common Stock; and “Permitted Transactions” shall mean
issuances (i) as consideration for or to fund the acquisition of businesses
and/or related assets, (ii) in connection with employee benefit plans and
compensation related arrangements in the ordinary course and consistent with
past practice approved by the Board of Directors, (iii) in connection with a
public or broadly marketed offering and sale of Common Stock or convertible
securities for cash conducted by the Company or its affiliates pursuant to
registration under the Securities Act or Rule 144A thereunder on a basis
consistent with capital raising transactions by comparable financial
institutions and (iv) in connection with the exercise of preemptive rights on
terms existing as of the Issue Date.  Any adjustment made pursuant to this
Section 13(B) shall become effective immediately upon the date of such
issuance.




	
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(C)       Other
Distributions. In case the Company shall fix a record date for the making
of a distribution to all holders of shares of its Common Stock of securities,
evidences of indebtedness, assets, cash, rights or warrants (excluding Ordinary
Cash Dividends, dividends of its Common Stock and other dividends or
distributions referred to in Section 13(A)), in each such case, the Exercise
Price in effect prior to such record date shall be reduced immediately
thereafter to the price determined by multiplying the Exercise Price in effect
immediately prior to the reduction by the quotient of (x) the Market Price of
the Common Stock on the last trading day preceding the first date on which the
Common Stock trades regular way on the principal national securities exchange
on which the Common Stock is listed or admitted to trading without the right to
receive such distribution, minus the amount of cash and/or the Fair Market
Value of the securities, evidences of indebtedness, assets, rights or warrants
to be so distributed in respect of one share of Common Stock (such amount
and/or Fair Market Value, the “Per Share Fair Market Value”) divided by
(y) such Market Price on such date specified in clause (x); such adjustment
shall be made successively whenever such a record date is fixed.  In such
event, the number of Shares issuable upon the exercise of this Warrant shall be
increased to the number obtained by dividing (x) the product of (1) the number
of Shares issuable upon the exercise of this Warrant before such adjustment,
and (2) the Exercise Price in effect immediately prior to the distribution
giving rise to this adjustment by (y) the new Exercise Price determined in
accordance with the immediately preceding sentence.  In the case of adjustment
for a cash dividend that is, or is coincident with, a regular quarterly cash
dividend, the Per Share Fair Market Value would be reduced by the per share
amount of the portion of the cash dividend that would constitute an Ordinary
Cash Dividend. In the event that such distribution is not so made, the Exercise
Price and the number of Shares issuable upon exercise of this Warrant then in
effect shall be readjusted, effective as of the date when the Board of
Directors determines not to distribute such shares, evidences of indebtedness,
assets, rights, cash or warrants, as the case may be, to the Exercise Price
that would then be in effect and the number of Shares that would then be
issuable upon exercise of this Warrant if such record date had not been fixed.


(D)       Certain
Repurchases of Common Stock. In case the Company effects a Pro Rata
Repurchase of Common Stock, then the Exercise Price shall be reduced to the
price determined by multiplying the Exercise Price in effect immediately prior
to the Effective Date of such Pro Rata Repurchase by a fraction of which the
numerator shall be (i) the product of (x) the number of shares of Common Stock
outstanding immediately before such Pro Rata Repurchase and (y) the Market
Price of a share of Common Stock on the trading day immediately preceding the
first public announcement by the Company or any of its Affiliates of the intent
to effect such Pro Rata Repurchase, minus (ii) the aggregate purchase price of
the Pro Rata Repurchase, and of which the denominator shall be the product of
(i) the number of shares of Common Stock outstanding immediately prior to such
Pro Rata Repurchase minus the number of shares of Common Stock so repurchased
and (ii) the Market Price per share of Common Stock on the trading day
immediately preceding the first public announcement by the Company or any of
its Affiliates of the intent to effect such Pro Rata Repurchase.  In such event,
the number of shares of Common Stock issuable upon the exercise of this Warrant
shall be increased to the number obtained by dividing (x) the product of (1)
the number of Shares issuable upon the exercise of this Warrant before such
adjustment, and (2) the Exercise Price in effect immediately prior to the Pro
Rata Repurchase giving rise to this adjustment by (y) the new Exercise Price
determined in accordance with the immediately preceding sentence.  For the
avoidance of doubt, no increase to the Exercise Price or decrease in the number
of Shares issuable upon exercise of this Warrant shall be made pursuant to this
Section 13(D).




	
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(E)       Business
Combinations. In case of any Business Combination or reclassification of
Common Stock (other than a reclassification of Common Stock referred to in
Section 13(A)), the Warrantholder’s right to receive Shares upon exercise of
this Warrant shall be converted into the right to exercise this Warrant to
acquire the number of shares of stock or other securities or property (including
cash) which the Common Stock issuable (at the time of such Business Combination
or reclassification) upon exercise of this Warrant immediately prior to such
Business Combination or reclassification would have been entitled to receive
upon consummation of such Business Combination or reclassification; and in any
such case, if necessary, the provisions set forth herein with respect to the
rights and interests thereafter of the Warrantholder shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to the
Warrantholder’s right to exercise this Warrant in exchange for any shares of
stock or other securities or property pursuant to this paragraph.  In
determining the kind and amount of stock, securities or the property receivable
upon exercise of this Warrant following the consummation of such Business
Combination, if the holders of Common Stock have the right to elect the kind or
amount of consideration receivable upon consummation of such Business
Combination, then the consideration that the Warrantholder shall be entitled to
receive upon exercise shall be deemed to be the types and amounts of
consideration received by the majority of all holders of the shares of common
stock that affirmatively make an election (or of all such holders if none make
an election).


(F)       Rounding
of Calculations; Minimum Adjustments. All calculations under this Section
13 shall be made to the nearest one-tenth (1/10th) of a cent or to the nearest
one-hundredth (1/100th) of a share, as the case may be.  Any provision of this
Section 13 to the contrary notwithstanding, no adjustment in the Exercise Price
or the number of Shares into which this Warrant is exercisable shall be made if
the amount of such adjustment would be less than $0.01 or one-tenth (1/10th) of
a share of Common Stock, but any such amount shall be carried forward and an
adjustment with respect thereto shall be made at the time of and together with
any subsequent adjustment which, together with such amount and any other amount
or amounts so carried forward, shall aggregate $0.01 or 1/10th of a share of
Common Stock, or more.


(G)       Timing
of Issuance of Additional Common Stock Upon Certain Adjustments. In any
case in which the provisions of this Section 13 shall require that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
Warrantholder of this Warrant exercised after such record date and before the
occurrence of such event the additional shares of Common Stock issuable upon
such exercise by reason of the adjustment required by such event over and above
the shares of Common Stock issuable upon such exercise before giving effect to
such adjustment and (ii) paying to such Warrantholder any amount of cash in
lieu of a fractional share of Common Stock; provided, however,
that the Company upon request shall deliver to such Warrantholder a due bill or
other appropriate instrument evidencing such Warrantholder’s right to receive
such additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.




	
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(H)       Completion
of Qualified Equity Offering. In the event the Company (or any successor by
Business Combination) completes one or more Qualified Equity Offerings on or prior
to December 31, 2009 that result in the Company (or any such successor )
receiving aggregate gross proceeds of not less than 100% of the aggregate
liquidation preference of the Preferred Shares (and any preferred stock issued
by any such successor to the Original Warrantholder under the CPP), the number
of shares of Common Stock underlying the portion of this Warrant then held by
the Original Warrantholder shall be thereafter reduced by a number of shares of
Common Stock equal to the product of (i) 0.5 and (ii) the number of shares
underlying the Warrant on the Issue Date (adjusted to take into account all
other theretofore made adjustments pursuant to this Section 13).


(I)        Other
Events. For so long as the Original Warrantholder holds this Warrant or any
portion thereof, if any event occurs as to which the provisions of this Section
13 are not strictly applicable or, if strictly applicable, would not, in the
good faith judgment of the Board of Directors of the Company, fairly and
adequately protect the purchase rights of the Warrants in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of the Board of Directors, to protect such
purchase rights as aforesaid.  The Exercise Price or the number of Shares into
which this Warrant is exercisable shall not be adjusted in the event of a
change in the par value of the Common Stock or a change in the jurisdiction of
incorporation of the Company.


(J)        Statement
Regarding Adjustments. Whenever the Exercise Price or the number of Shares
into which this Warrant is exercisable shall be adjusted as provided in Section
13, the Company shall forthwith file at the principal office of the Company a
statement showing in reasonable detail the facts requiring such adjustment and
the Exercise Price that shall be in effect and the number of Shares into which
this Warrant shall be exercisable after such adjustment, and the Company shall
also cause a copy of such statement to be sent by mail, first class postage
prepaid, to each Warrantholder at the address appearing in the Company’s
records.


(K)       Notice
of Adjustment Event. In the event that the Company shall propose to take
any action of the type described in this Section 13 (but only if the action of
the type described in this Section 13 would result in an adjustment in the
Exercise Price or the number of Shares into which this Warrant is exercisable
or a change in the type of securities or property to be delivered upon exercise
of this Warrant), the Company shall give notice to the Warrantholder, in the
manner set forth in Section 13(J), which notice shall specify the record date,
if any, with respect to any such action and the approximate date on which such
action is to take place.  Such notice shall also set forth the facts with
respect thereto as shall be reasonably necessary to indicate the effect on the
Exercise Price and the number, kind or class of shares or other securities or
property which shall be deliverable upon exercise of this Warrant.  In the case
of any action which would require the fixing of a record date, such notice
shall be given at least 10 days prior to the date so fixed, and in case of all
other action, such notice shall be given at least 15 days prior to the taking
of such proposed action. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of any such action.


(L)       Proceedings
Prior to Any Action Requiring Adjustment. As a condition precedent to the
taking of any action which would require an adjustment pursuant to this Section
13, the Company shall take any action which may be necessary, including
obtaining regulatory, New York Stock Exchange, NASDAQ Stock Market or other
applicable national securities exchange or stockholder approvals or exemptions,
in order that the Company may thereafter validly and legally issue as fully
paid and nonassessable all shares of Common Stock that the Warrantholder is
entitled to receive upon exercise of this Warrant pursuant to this Section 13.




	
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(M)      Adjustment
Rules. Any adjustments pursuant to this Section 13 shall be made
successively whenever an event referred to herein shall occur.  If an
adjustment in Exercise Price made hereunder would reduce the Exercise Price to
an amount below par value of the Common Stock, then such adjustment in Exercise
Price made hereunder shall reduce the Exercise Price to the par value of the
Common Stock.


14.       Exchange.
At any time following the date on which the shares of Common Stock of the
Company are no longer listed or admitted to trading on a national securities
exchange (other than in connection with any Business Combination), the Original
Warrantholder may cause the Company to exchange all or a portion of this
Warrant for an economic interest (to be determined by the Original
Warrantholder after consultation with the Company) of the Company classified as
permanent equity under U.S. GAAP having a value equal to the Fair Market Value
of the portion of the Warrant so exchanged.  The Original Warrantholder shall
calculate any Fair Market Value required to be calculated pursuant to this
Section 14, which shall not be subject to the Appraisal Procedure.


15.       No
Impairment. The Company will not, by amendment of its Charter or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Warrant and in taking of all
such action as may be necessary or appropriate in order to protect the rights
of the Warrantholder.


16.       Governing
Law. This Warrant will be governed by and construed in accordance with
the federal law of the United States if and to the extent such law is
applicable, and otherwise in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such State.
Each of the Company and the Warrantholder agrees (a) to submit to the exclusive
jurisdiction and venue of the United States District Court for the District of
Columbia for any civil action, suit or proceeding arising out of or relating to
this Warrant or the transactions contemplated hereby, and (b) that notice may
be served upon the Company at the address in Section 20 below and upon the
Warrantholder at the address for the Warrantholder set forth in the registry
maintained by the Company pursuant to Section 9 hereof.  To the extent
permitted by applicable law, each of the Company and the Warrantholder hereby
unconditionally waives trial by jury in any civil legal action or proceeding
relating to the Warrant or the transactions contemplated hereby or thereby.


17.       Binding
Effect. This Warrant shall be binding upon any successors or assigns of the
Company.


18.       Amendments.
This Warrant may be amended and the observance of any term of this Warrant may
be waived only with the written consent of the Company and the Warrantholder.




	
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19.       Prohibited Actions. The Company agrees
that it will not take any action which would entitle the Warrantholder to an
adjustment of the Exercise Price if the total number of shares of Common Stock
issuable after such action upon exercise of this Warrant, together with all
shares of Common Stock then outstanding and all shares of Common Stock then
issuable upon the exercise of all outstanding options, warrants, conversion and
other rights, would exceed the total number of shares of Common Stock then
authorized by its Charter.


20.       Notices.
Any notice, request, instruction or other document to be given hereunder by any
party to the other will be in writing and will be deemed to have been duly
given (a) on the date of delivery if delivered personally, or by facsimile,
upon confirmation of receipt, or (b) on the second business day following the
date of dispatch if delivered by a recognized next day courier service. All
notices hereunder shall be delivered as set forth in Item 8 of Schedule A
hereto, or pursuant to such other instructions as may be designated in writing
by the party to receive such notice.


21.       Entire
Agreement. This Warrant, the forms attached hereto and Schedule A hereto
(the terms of which are incorporated by reference herein), and the Letter
Agreement (including all documents incorporated therein), contain the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or undertakings with
respect thereto.


[Remainder of page intentionally left
blank]

 




	
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[Form of Notice of Exercise]

 

Date: _________


TO:      Southern
First Bancshares, Inc.


RE:      Election
to Purchase Common Stock


The
undersigned, pursuant to the provisions set forth in the attached Warrant,
hereby agrees to subscribe for and purchase the number of shares of the Common
Stock set forth below covered by such Warrant.  The undersigned, in accordance
with Section 3 of the Warrant, hereby agrees to pay the aggregate Exercise
Price for such shares of Common Stock in the manner set forth below. A new
warrant evidencing the remaining shares of Common Stock covered by such
Warrant, but not yet subscribed for and purchased, if any, should be issued in
the name set forth below.


Number of Shares of Common Stock                                                             


Method
of Payment of Exercise Price (note if cashless exercise pursuant to Section
3(i) of the Warrant or cash exercise pursuant to Section 3(ii) of the Warrant,
with consent of the Company and the Warrantholder)                                                               


Aggregate Exercise Price:                                                                               


Holder:                                                            


By:                                                                  


Name:                                                              


Title:
                                                               




	
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IN WITNESS
WHEREOF, the Company has caused this Warrant to be duly executed by a duly
authorized officer. 


 


Dated: February 27, 2009 


 


                COMPANY:  SOUTHERN
FIRST BANCSHARES, INC.


 


 


      By:      /s/ James M.
Austin, III                       


      Name: James M. Austin, III


      Title:   Chief Financial
Officer


 


 


 


    Attest:


 


 


        By:      /s/ Julie
Fairchild                                 


        Name: Julie Fairchild


        Title:   Controller

 

[Signature Page to Warrant]

 




	
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Warrant - SCHEDULE A


 


Item
1 


Name:
Southern First Bancshares, Inc.


Corporate
or other organizational form: Corporation


Jurisdiction
of organization: South Carolina


 


Item
2


Exercise
Price: $7.85


 


Item
3 


Issue
Date: February 27, 2009


 


Item
4


Amount
of last dividend declared prior to the Issue Date: Southern First has not
declared cash dividends to its shareholders. 


 


Item
5


 


Date
of Letter Agreement between the Company and the United States Department of the
Treasury: February 27, 2009


 


Item
6


Number
of shares of Common Stock: 330,554


 


Item
7


Company’s
address:    100 Verdae Boulevard, Suite 100


Greenville, South Carolina 29607


 


Item 8


Notice
information:       James M. Austin, III


                                    Chief
Financial Officer


                                    Southern
First Bancshares, Inc.


                                    100
Verdae Boulevard, Suite 100


Greenville, South Carolina 29607


(864) 679-9070


 


With a Copy to:


 


John M. Jennings


Nelson Mullins Riley & Scarborough
LLP


104 South Main Street, Suite 900


Greenville, South Carolina 29601


(864) 250-2207



	
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