Exhibit 4.1


 


WARRANT TO PURCHASE COMMON STOCK


 


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


215,983


Shares of Common Stock


 


of FIRST FINANCIAL SERVICE CORPORATION


 


Issue Date: January 9, 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


 


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unable
to agree on fair market value during the 10-day period following the delivery
of the Original Warrantholder’s objection, the Appraisal Procedure may be
invoked by either party to determine Fair Market Value by delivering written
notification thereof not later than the 30th day after delivery of the Original
Warrantholder’s objection.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4

















 


“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:


 


5

















 


(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.


 


6
















 


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


 


7

















 


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,


 


8

















 


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 


 


9

















 


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


 


10

















 


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


 


11

















 


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


 


12

















 


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


 


13

















 


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]


 


14

















 


[Form of Notice of Exercise]


 


	
  Date:

  	
   

  	
   

  



 


 


TO:                            First Financial
Service Corporation


 


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:

  	
   

  
						



 


15

















 


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


 


Dated:
January 9, 2009


 


	
   

  	
  COMPANY: FIRST
  FINANCIAL SERVICE 

  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  

  	
  Greg
  Schreacke

  
	
   

  	
   

  	
  Name:
  Greg Schreacke

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  
	
   

  	
  Attest:

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  

  	
  K.
  Janelle Poppe

  
	
   

  	
   

  	
  Name:
  K. Janelle Poppe

  
	
   

  	
   

  	
  Title:
  Corporate Secretary & Treasurer

  



 


[Signature Page to Warrant]


 


16

















 


SCHEDULE A


 


 


Item
1


	
  Name:

  	
  First
  Financial Service Corporation

  
	
  Corporate
  or other organizational form:

  	
  Corporation

  
	
  Jurisdiction
  of organization:

  	
  Kentucky

  



 


Item
2


Exercise
Price:(1)  $13.89 per share


 


Item
3


Issue
Date:  January 9, 2009


 


Item
4


Amount
of last dividend declared prior to the Issue Date:  $0.19 per share


 


Item
5


Date
of Letter Agreement between the Company and the United States Department of the
Treasury:  January 9, 2009


 


Item
6


Number
of shares of Common Stock:  215,983 shares


 


Item
7


	
  Company’s
  address:

  	
  2323
  Ring Road

  
	
   

  	
  Elizabethtown,
  Kentucky 42701

  



 


Item
8


	
  Notice information:

  	
  First
  Financial Service Corporation

  
	
   

  	
  2323
  Ring Road

  
	
   

  	
  Elizabethtown,
  Kentucky 42701

  
	
   

  	
  Attn:
  B. Keith Johnson

  



 






	
  (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.