ex4_2.htm


    
      
        

      

       

      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

      2,207,143

      Shares
of Common Stock

      


      of
FNB United Corp.

      


      Issue
Date:  February 13, 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.

      


      “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.

      


      “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


      
        
           


        

        
          2

          
            

          

        

        
           


        

      


      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.


      
        
           


        

        
          3

          
            

          

        

        
           


        

      

      


      “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.


      
        
           


        

        
          4

          
            

          

        

        
           


        

      


      “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.

      


      “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


      
        
           


        

        
          5

          
            

          

        

        
           


        

      


      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

      


      (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


      
        
           


        

        
          6

          
            

          

        

        
           


        

      


      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.

      


      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


      
        
           


        

        
          7

          
            

          

        

        
           


        

      


      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.

      


      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


      
        
           


        

        
          8

          
            

          

        

        
           


        

      


      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:

      


      (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


      
        
           


        

        
          9

          
            

          

        

        
           


        

      


      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.

      


      (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


      
        
           


        

        
          10

          
            

          

        

        
           


        

      


      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).

      


      (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


      
        
           


        

        
          11

          
            

          

        

        
           


        

      


      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.

      


      (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).


      
        
           


        

        
          12

          
            

          

        

        
           


        

      


      (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.


      
        
           


        

        
          13

          
            

          

        

        
           


        

      


      (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.


      
        
           


        

        
          14

          
            

          

        

        
           


        

      


      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.

      


      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]



      
        
           


        

        
          15

          
            

          

        

        
           


        

      


      [Form
of Notice of Exercise]

      Date:
___________

      


      TO:         
FNB United Corp.

      150 South Fayetteville
Street

      Asheboro, North Carolina
27203

      Attention:  Michael C.
Miller, President

      


      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:

                  	
                     _______________________

                  


          

        

      


      
        
           


        

        
          16

          
            

          

        

        
           


        

      


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

      


      Dated:  February
13, 2009

      


      
        
          
            
              	 	FNB
      UNITED CORP.
	 	 
      	 
      
	 	 
      	 
      
	 	
                      By:

                    	
                      /s/ Michael C. Miller

                    
	 	 
      	
                      Name:  Michael
      C. Miller

                    
	 	 
      	
                      Title:  President

                    


            

          

        

      

       

       

      
        
          
            
              
                	 	Attest:
	 	 
      	 
      
	 	 
      	 
      
	 	
                        By:

                      	
                        /s/ R. Larry Campbell

                      
	 	 
      	
                        Name:   R.
      Larry Campbell

                      
	 	 
      	
                        Title:  Executive
      Vice President and Secretary

                      


              

               

            

          

        

      

      


      [Signature
Page to Warrant]

       

      
        
           


        

        
          17

          
            

          

        

        
           


        

      


      SCHEDULE
A

      


      Item 1

      Name:  FNB
United Corp.

      Corporate
or other organizational form:  Corporation

      Jurisdiction
of organization:  North Carolina

      


      Item 2

      Exercise
Price:   $3.50

      


      Item 3

      Issue
Date:  February 13, 2009

      


      Item 4

      Amount of
last dividend declared prior to the Issue Date:  $0.10

      


      Item 5

      Date of
Letter Agreement between the Company and the United States Department of
the

      Treasury:  February
13, 2009

      


      Item 6

      Number of
shares of Common Stock:  2,207,143

      


      Item 7

      Company’s
address:  150 South Fayetteville Street, Asheboro, North Carolina
27203

      


      Item 8

      
        
          
            	
                    Notice
      information: 

                  	
                    FNB
      United Corp.

                    150
      South Fayetteville Street 

                    Asheboro,
      North Carolina 27203 

                    Attention:  Michael
      C. Miller, President 

                    Telecopier:  (336)
      625-2452