EXHIBIT 4.2


 


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


461,538


 


Shares of Common Stock


 


of Tennessee Commerce Bancorp, Inc.


 


                 
     Issue Date: December 19,
2008


 


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 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.


 


“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.


 


 “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


 


(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.


 


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.


 


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:


 


(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.


 
















 


(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).


 


(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.


 


(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.


 


(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.


 


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]


 

















 


	
  [Form of
  Notice of Exercise]

  
	
   

  	
  Date:

  	
   

  	
   

  



 


TO: [Company]


 


 


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:

  	
   

  
						



 

















 


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


 


Dated: December 19, 2008


 


	
   

  	
  COMPANY: TENNESSEE COMMERCE BANCORP,

  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Arthur F. Helf

  
	
   

  	
  Name:

  	
  Arthur F. Helf

  
	
   

  	
  Title:

  	
  Chairman

  
	
   

  	
   

  
	
   

  	
  Attest:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frank Perez

  
	
   

  	
  Name:

  	
  Frank Perez

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
					



 


[Signature Page to Warrant]


 

















 


SCHEDULE A


 


Item 1


 


	
  Name:

  	
   

  	
  Tennessee Commerce Bancorp, Inc.

  
	
  Corporate or other organizational form:

  	
  Corporation

  
	
  Jurisdiction of organization:

  	
  Tennessee

  
	
   

  	
   

  	
   

  
	
  Item 2

  	
   

  	
   

  
	
  Exercise Price: (1)

  	
  $9.75

  
	
   

  	
   

  	
   

  
	
  Item 3

  	
   

  	
   

  
	
  Issue Date:

  	
   

  	
  December 19, 2008

  
	
   

  	
   

  	
   

  
	
  Item 4

  	
   

  	
   

  
	
  Amount of last dividend declared prior to the
  Issue Date:

  	
  $0.00 (dividends have never been declared)

  
	
   

  	
   

  	
   

  
	
  Item 5

  	
   

  	
   

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

  
	
  Treasury:

  	
   

  	
  December 19, 2008

  
	
   

  	
   

  	
   

  
	
  Item 6

  	
   

  	
   

  
	
  Number of shares of Common Stock:

  	
  461,538

  
	
   

  	
   

  	
   

  
	
  Item 7

  	
   

  	
   

  
	
  Company’s address:

  	
  Tennessee Commerce Bancorp, Inc.

  
	
   

  	
   

  	
  381 Mallory Station Road, Suite 207

  
	
   

  	
   

  	
  Franklin, TN 37067

  
	
  Item 8

  	
   

  	
   

  
	
  Notice information:

  	
   

  
	
   

  	
   

  	
   

  
	
  If to the Company:

  	
   

  
	
   

  	
   

  
	
  Tennessee Commerce Bancorp, Inc.

  	
   

  
	
  381 Mallory Station Road, Suite 207

  	
   

  
	
  Franklin, TN 37067

  	
   

  
	
  Attention: Frank Perez

  	
   

  
	
  Facsimile: (615) 807-3206

  	
   

  
								



 






(1)           Initial exercise price
to be calculated based on the average of closing prices of the Common Stock on
the 20 trading days ending on the last trading day prior to the date the
Company’s application for participation in the Capital Purchase Program was
approved by the United States Department of the Treasury.


 

















 


With a copy to:


 


Waller Lansden Dortch &
Davis, LLP


511 Union Street, Suite 2700


Nashville, Tennessee 37219


Attention: E. Marlee Mitchell, Esq.


Facsimile: (615) 244-6804


 


If to the Warrantholder:


 


United States Department of the Treasury


1500 Pennsylvania Avenue, NW, Room 2312


Washington, D.C. 20220


Attention: Assistant General Counsel (Banking and Finance)


Facsimile: (202) 622-1974