Document:

Exhibit 10.4

 

AMENDED
AND RESTATED GUARANTY AGREEMENT

 

	
  Borrower:

  	
   

  	
  Bank:

  
	
   

  	
   

  	
   

  
	
  Fossil Partners, L.P.

  	
   

  	
  Wells Fargo Bank,
  National Association

  
	
  2280 N. Greenville
  Avenue

  	
   

  	
  1445 Ross Avenue, 3rd
  Floor

  
	
  Richardson, Texas
  75082-4412

  	
   

  	
  MAC T5303-031

  
	
  Attention: Mike L.
  Kovar

  	
   

  	
  Dallas, Texas 75202

  
	
  Fax: (972) 498-9448

  	
   

  	
  Attention:

  	
  Marguerite C. Burtzlaff

  
	
   

  	
   

  	
   

  	
  Vice President

  
	
   

  	
   

  	
  Fax: (214) 969-0370

  
	
   

  	
   

  	
   

  
	
  (herein called “Borrower”,
  whether one or more)

  	
   

  	
  (herein called “Bank”)

  

 

1.             FOR
VALUE RECEIVED, and in consideration of credit and financial accommodations
extended, to be extended, or continued to or for the account of Borrower, and
for other good and valuable considerations, the undersigned, jointly and
severally if more than one (hereinafter called “Guarantor” or “Guarantors”,
whether one or more), absolutely and unconditionally guarantees the prompt and
punctual payment and performance when due (whether at its stated maturity, by
acceleration or otherwise in accordance with the loan documents) of the
Guaranteed Obligations (hereinafter defined) of Borrower to Bank, as provided
herein.  This is a continuing guaranty
applicable to and guaranteeing any and all indebtedness, obligations and
liabilities of every kind and character of Borrower to Bank, whether now
existing or hereafter arising, whether due and owing or to become due and
owing, howsoever created or arising or evidenced, whether joint or several, or
joint and several, whether absolute or contingent, and all renewals,
extensions, and rearrangements of such indebtedness, obligations or
liabilities, including any and all amounts owing or which may hereafter become
owing thereon or in connection therewith, including, without limitation, any
and all amounts of principal, interest, attorneys’ fees, costs of collection and
other amounts owing thereunder (hereinafter called the “Guaranteed
Obligations”).  In addition to and
without limiting the generality of the foregoing, each Guarantor hereby
expressly acknowledges and agrees that the “Guaranteed Obligations”
shall include, without limitation, all loans and other indebtedness at any time
and from time to time owed or owing by Borrower to Bank under or in connection
with (a) that certain Loan Agreement dated as of September 23, 2004,
by and among Borrower, Guarantors, certain other entities affiliated with
Borrower and Bank, as such Loan Agreement has been amended and may be amended,
increased, modified, supplemented, renewed, extended, restated or replaced from
time to time (the “Loan Agreement”) and any other loan agreement, credit
agreement or other credit facility with Borrower at any time and from time to
time, and (b) that certain Fifth Amended and Restated Revolving Line of
Credit Note dated November 19, 2008, in the maximum original principal
amount of $140,000,000 made by Borrower payable to the order of Bank, as such
promissory note may be amended, increased, modified, supplemented, renewed,
extended, restated or replaced from time to time (the “Note”) and any
other promissory note executed by Borrower and payable to Bank at any time and
from time to time.

 

1

 

2.             Each
Guarantor hereby waives marshaling of assets and liabilities, sale in inverse
order of alienation, notice of acceptance of this Guaranty and of any indebtedness,
obligation or liability to which it applies or may apply, and waives
presentment and demand for payment thereof, notice of dishonor or nonpayment
thereof, notice of intention to accelerate, notice of acceleration, protest and
notice thereof and all other notices and demands, collection or instigation of
suit or any other action by Bank in collection thereof including any notice of
default in payment thereof or other notice to, or demand of payment therefor
on, any party.  Further, each Guarantor expressly
waives each and every right to which it may be entitled by virtue of the
suretyship law of the state of Texas, including without limitation, any rights
it may have pursuant to Rule 31, Texas Rules of Civil Procedure,
Articles 1986 and 1987, Revised Civil Statutes of Texas and Chapter 34 of the
Texas Business and Commerce Code.

 

3.             Each
Guarantor jointly and severally agrees to pay to Bank its collection costs,
including any additional amount for reasonable attorneys’ fees, but in no event
to exceed the maximum amount permitted by law, if the Guaranteed Obligations
are not paid by Guarantor upon demand when due as required herein or if this
Guaranty is enforced by suit or through probate or bankruptcy court or through
any judicial proceedings whatsoever, and, should it be necessary to reduce Bank’s
claim to judgment, such judgment shall bear interest at the maximum rate
allowed by applicable laws.

 

4.             This
is an absolute and unconditional guaranty of payment and not of collection, by
each Guarantor, jointly and severally in each and every particular, and each Guarantor
waives any right to require that any action be brought against Borrower or any
other person or entity.  Should Bank seek
to enforce the obligations of any Guarantor by action in any court, such Guarantor
waives any necessity, substantive or procedural, that a judgment previously be
rendered against Borrower or any other person or entity or that Borrower or any
other person or entity be joined in such cause or that a separate action be brought
against Borrower or any other person or entity; the obligations of each Guarantor
hereunder are several from those of Borrower or any other person or entity
(including any other surety for Borrower), and are primary obligations
concerning which such Guarantor is the principal obligor.  All waivers herein contained shall be without
prejudice to Bank at its option to proceed against Borrower or any other person
or entity, whether by separate action or by joinder.  All indebtedness of Borrower to each Guarantor,
whether now existing or hereafter arising (including indebtedness resulting
from this Guaranty) is hereby assigned to Bank to the extent of the amount of
this Guaranty as security for the payment of all obligations of Borrower to
Bank. To the extent such indebtedness of Borrower to any Guarantor (whether now
existing or hereafter arising) exceeds the amount of this Guaranty, such
indebtedness is hereby subordinated to all obligations of Borrower to
Bank.  Notwithstanding any payment or
payments made by any Guarantor hereunder or any set-off or application of funds
of any Guarantor by Bank, such Guarantor shall not be entitled to be subrogated
to any of the rights of Bank against Borrower or any collateral security of
rights of offset held by Bank for the payment of the Guaranteed Obligations.

 

2

 

5.             Bank
may, at its option, at any time, without the consent of or notice to any
Guarantor, without incurring responsibility to any Guarantor, without impairing
or releasing the obligations of any Guarantor under this Guaranty, upon or without
any terms or conditions and in whole or in part (a) change the manner,
place or terms of payment or change or extend the time of payment of or renew,
as often and for such periods as Bank may determine, or increase or otherwise alter
any of the Guaranteed Obligations of Borrower hereby guaranteed, or any
liabilities incurred directly or indirectly hereunder, and the guaranty herein
made shall apply to the obligations and liabilities of the Borrower changed,
extended, renewed, increased or altered in any manner, (b) sell, exchange,
release, surrender, realize upon or otherwise deal with in any manner and in
any order any property at any time pledged or mortgaged to secure or securing
the Guaranteed Obligations or any liabilities incurred directly or indirectly
hereunder or any offset against any said liabilities, (c) exercise or
refrain from exercising any rights against Borrower or others, or otherwise act
or refrain from acting, (d) settle or compromise any Guaranteed
Obligations or liabilities hereby incurred, and may subordinate the payment of
all or any part of such obligations or liabilities to the payment of any obligations
or liabilities which may be due to Bank or others, and (e) apply any sums
paid to any liability or liabilities of Borrower to Bank regardless of what
liability or liabilities of Borrower to Bank remain unpaid.  Bank may, at its option, without the consent
of or notice to any Guarantor, apply to the payment of the liability created by
this Guaranty, at any time after such liability becomes payable, any monies,
property, or balance on deposit belonging to any Guarantor.

 

6.             It
is the intention of the parties hereto to comply with applicable usury laws;
accordingly, it is agreed that, notwithstanding any provision to the contrary
in the Guaranteed Obligations or in this Guaranty, in any note or other
instrument, or in any documents securing payment thereof or hereof, or
otherwise relating thereto or hereto, no such provision shall require the
payment or permit the collection of interest in excess of the maximum permitted
by such laws.  If any excess of interest
in such respect is provided for, or shall be adjudged to be so provided for,
then in such event (a) the provisions of this Section shall govern
and control, (b) neither any Guarantor nor any Guarantor’s heirs,
successors or assigns or any other party liable for the payment hereof shall be
obligated to pay the amount of such interest to the extent that it is the
excess of the maximum amount permitted by such laws, (c) any such excess
which may have been collected shall be, at Bank’s option, either applied as a
credit against the then unpaid principal amount owing on the Guaranteed
Obligations or refunded, and (d) the effective rate of interest covered by
this Guaranty shall be automatically subject to reduction to the maximum lawful
rate allowed under applicable usury laws.

 

7.             Each
Guarantor agrees that suit may be brought against such Guarantor, jointly and
severally, and against one or more of Guarantors, less than all, without
impairing the rights of the Bank, its successors or assigns, against the other
Guarantors; nor shall Bank be required to join Borrower or any other Guarantor
or liable party in a suit against a particular Guarantor; and the Bank may
release one or more Guarantors or settle with such persons as Bank deems fit
without releasing or impairing the rights of Bank to demand and collect the
balance of such indebtedness from the other remaining Guarantors not so
released.  It is agreed among each
Guarantor, however, that such settlement and release shall in nowise impair the
rights of the Guarantors as among themselves.

 

3

 

8.             This
Guaranty is for the benefit of the Bank, and for such other persons as may from
time to time become or be the holders of any Guaranteed Obligations; and this
Guaranty shall be transferable and negotiable, with the same force and effect
and to the same extent as the Guaranteed Obligations may be transferable, it
being understood that upon the assignment or transfer by Bank of any Guaranteed
Obligations, the legal holder of such Guaranteed Obligations shall have all of
the rights granted to Bank under this Guaranty.

 

9.             Guarantor
agrees that the Bank, its successors and assigns shall not be liable for
failure to use diligence in the collection of any Guaranteed Obligations or any
security therefor, in creating or preserving the liability of any person liable
on the Guaranteed Obligations, or in creating, perfecting or preserving any
security, if any, for the Guaranteed Obligations, and Guarantor hereby waives
presentment and demand for payment, notice of dishonor or nonpayment, notice of
intention to accelerate, notice of acceleration, protest, and notice thereof,
collection, and diligence in or the bringing of suit against any person liable
for any Guaranteed Obligations or against any security therefor.  Payment of all amounts hereunder shall be
made at the offices of Bank.

 

10.           As
security for payment of the Guaranteed Obligations and other amounts now or
hereafter owing hereunder, each Guarantor hereby grants to Bank a security
interest in, and a contractual pledge and assignment of, any and all money,
property, accounts, securities, documents, chattel paper, claims, demands,
instruments, items or deposits of Guarantors, and each of them, or to which any
of them is a party, now held or hereafter coming within Bank’s custody or
control, including by way of example and not of limitation all certificates of
deposit and other depository accounts, whether such have matured or the
exercise of Bank’s rights results in loss of interest or other penalty on such
deposits, but excluding deposits subject to tax penalties if assigned.  Without prior notice to or demand upon any Guarantor,
Bank may exercise its rights granted above, as well as other rights and
remedies at law and equity (all of which are cumulative), at any time when a
default has occurred or Bank deems itself insecure.  In addition, Bank shall have the right to file
this Guaranty as a Uniform Commercial Code financing statement naming Guarantors,
or each of them, as debtor and the Bank as secured party, and indicating
therein the types, or describing the items, of security herein specified.  Bank shall have all the rights and remedies
of a secured party under the Uniform Commercial Code and shall have the right
after ten (10) days notice, which the parties agree is reasonable, to
sell, at a private or public sale, any of the collateral or other property held
by Bank pursuant hereto or otherwise to enforce the obligations of any Guarantor
hereunder.  Bank’s rights and remedies
hereunder shall be in addition to and cumulative of any other rights and
remedies at law and equity, including, without limitation, any rights of set-off
to which Bank may be entitled.

 

11.           If,
at any time, there be Other Indebtedness, (a) Bank, without in any manner
impairing its rights hereunder, may, at its option, exercise rights of offset
by applying, first, to the Other Indebtedness, any deposit balances to the
credit of Borrower and (b) except as stated in the immediately following
sentence of this Section, Bank may apply, first, to the Other Indebtedness all
amounts realized by Bank from collateral or security held by Bank of the
payment of Borrower’s indebtedness.  If a
particular security instrument expressly requires an application different from
that permitted under the preceding sentence, proceeds realized by Bank from
such security instrument shall be applied as provided in such instrument.

 

4

 

The term “Other
Indebtedness” as used herein means all indebtedness, if any, of Borrower to
Bank which Bank may have separately agreed from time to time is not a part of
the Guaranteed Obligations.

 

12.           All
notices required or permitted hereunder shall be in writing and shall be deemed
to have been given or made as follows:  (a) if
sent by hand delivery, upon delivery; (b) if sent by registered or certified
mail, return receipt requested, upon receipt (as indicated on the return
receipt); and (c) if sent by facsimile, upon receipt (which shall be
confirmed by a confirmation report from the sender’s facsimile machine),
addressed to the parties at their respective addresses designated herein or
such other address as such party may from time to time designate by written
notice to the other.

 

13.           This
Guaranty shall not be wholly or partially satisfied or extinguished by any
Guarantor’s payment of any amount hereunder, including payment of all amounts
due as of any specified date, but shall continue in full force and effect as
against each Guarantor for the full amount, except as otherwise specified
herein, as to all Guaranteed Obligations created, incurred or arising prior to
the time when notice of termination is given by the respective Guarantor to the
Bank as specified herein, and until payment in full thereof.  Any and all extensions of credit and
financial accommodations concurrently herewith or hereafter made by Bank to
Borrower shall be conclusively presumed to have been made in acceptance hereof.

 

14.           Anything
contained in this Guaranty to the contrary notwithstanding, the obligations of
each Guarantor hereunder shall be limited to a maximum aggregate amount equal
to the greatest amount that would not cause such Guarantor’s obligations
hereunder to be avoided as a fraudulent transfer or conveyance under Section 548
of Title 11 of the United States Code or any provisions of applicable
state law or similar laws of other jurisdictions (the “Fraudulent Transfer
Law”), after giving effect to all other liabilities of such Guarantor,
contingent or otherwise, that are relevant under the Fraudulent Transfer Law
and after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Law) of any rights to
subrogation, contribution, reimbursement, indemnity or similar rights of such
Guarantor pursuant to (i) applicable law or (ii) Section 15
hereof or any other agreement providing for an equitable allocation among such
Guarantor and other affiliates of Borrower of obligations arising under
guaranties by such parties.

 

15.           Each
Guarantor (a “Contributing Guarantor”) agrees, subject to the other
provisions in this Section, that, in the event a payment shall be made by any
other Guarantor hereunder or assets of any other Guarantor shall be sold
pursuant to any security agreement, mortgage, deed of trust or other security
document to satisfy a claim of Bank hereunder and such other Guarantor (a “Claiming
Guarantor”) shall not have been fully indemnified by Borrower, the
Contributing Guarantor shall indemnify the Claiming Guarantor in an amount
equal to the amount of such payment or the greater of the book value or the
fair market value of such assets, as the case may be, in each case multiplied
by a fraction of which the numerator shall be the net worth of the Contributing
Guarantor on the date hereof and the denominator shall be the net worth of all
the Guarantors on the date hereof. 
Notwithstanding the foregoing, all rights of the Guarantors under this Section and
all other rights of indemnity, contribution and subrogation under applicable
law or otherwise shall be fully subordinated to the indefeasible payment in
full in cash of the Guaranteed Obligations.

 

5

 

No failure on the
part of any Guarantor to make the payments required by this Section (or
any other payments required under applicable law or otherwise) shall in any
respect limit the obligations and liabilities of any other Guarantor with
respect to its obligations hereunder, and each Guarantor shall remain liable
for the full amount of the obligations of such Guarantor hereunder.

 

16.           This
Guaranty shall be binding upon each Guarantor and its respective successors and
assigns and shall inure to the benefit of, and be enforceable by, Bank and its
successors and assigns and each and every other person who shall from time to
time be or become the owner or holder of any of the Guaranteed Obligations, and
each and every reference herein to “Bank” shall also include each and
every successor or holder.  Each Guarantor
agrees that it shall not assign any of its obligations hereunder without the
prior written consent of Bank.

 

17.           The
release by Bank of any one or more Guarantors under this Guaranty shall not
affect the remaining Guarantors hereunder, who shall remain fully liable in
accordance with the terms of this Guaranty.

 

18.           Subject
to Section 29 below, this Guaranty shall be in addition to and
cumulative of, and not in substitution, novation or discharge of, any and all
prior or contemporaneous guaranty agreements by Guarantors, or any of them, in
favor of Bank or assigned to Bank by others.

 

19.           If
this Guaranty is given by a corporation or other entity, then the undersigned
guaranteeing corporation or entity does hereby acknowledge that it has
investigated fully the benefits and advantages which will be derived by the
undersigned from execution of this Guaranty, and the board of directors or
other governing body of the undersigned corporation or entity has reasonably
determined that, and the undersigned corporation or entity does hereby
acknowledge, warrant and represent that, a direct or an indirect benefit will
accrue to the undersigned by reason of execution of this Guaranty.

 

20.           This Guaranty is being executed and delivered, and
is intended to be performed in, the State of Texas.  Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall govern the validity, construction, enforcement and
interpretation of this Guaranty.  In the
event of a dispute involving this Guaranty or any other instruments executed in
connection herewith, the undersigned irrevocably agrees that venue for such
dispute shall lie in any court of competent jurisdiction in Dallas County,
Texas to the extent such dispute is not resolved by binding arbitration
pursuant to the Bank’s current Arbitration Program described in Section 28
below.

 

21.           Each
Guarantor shall furnish to Bank all such financial statements and other
information relating to the financial condition, properties and affairs of
Guarantor as Bank may from time to time request.

 

6

 

22.           Each
Guarantor will not change its address, name or identity without notifying Bank
of such change in writing at least thirty (30) days prior to the effective date
of such change.

 

23.           No
delay on the part of Bank in exercising any right hereunder or failure to
exercise the same shall operate as a waiver of such right, nor shall any single
or partial exercise of any right, power or privilege bar any further or
subsequent exercise of the same or any other right, power or privilege.

 

24.           This
Guaranty shall not be changed orally, but shall be changed only by agreement in
writing signed by the person against whom enforcement of such change is sought.

 

25.           The
masculine and neuter genders used herein shall each include the masculine,
feminine and neuter genders and the singular number used herein shall include
the plural number. The words “person” and “entity” shall include
individuals, corporations, partnerships, joint ventures, limited liability
companies, associations, joint stock companies, trusts, unincorporated
organizations, and governments and any agency or political subdivision thereof.

 

26.           This
Guaranty may be executed in multiple counterparts, and each counterpart
executed by any party shall be deemed an original and shall be binding upon the
person or entity executing the same, irrespective of whether any other
Guarantor has executed that or any other counterpart of this Guaranty.  Production of any counterpart other than the
one to be enforced shall not be required.

 

27.           This
Guaranty is executed in connection with the Loan Agreement and the Note, and
the holder hereof is entitled to all the benefits provided therein and in the
other agreements, documents, instruments and certificates entered into in
connection with the Loan Agreement and the Note.

 

28.           AGREEMENT FOR BINDING ARBITRATION.  The parties agree to be bound by the terms
and provisions of the Bank’s current Arbitration Program which is incorporated
by reference herein and is acknowledged as received by the parties pursuant to
which any and all disputes shall be resolved by mandatory binding arbitration
upon the request of any party.

 

29.           Amendment
and Restatement.  This Guaranty
constitutes an amendment and restatement of, but does not extinguish, release
or limit in any way any obligation of any Guarantor under, that certain
Guaranty Agreement dated as of September 23, 2004, executed by certain of
the Guarantors (and certain other entities which are no longer in existence) to
and in favor of Bank (the “Prior Guaranty Agreement”), all of which
obligations under the Prior Guaranty Agreement are hereby ratified and
confirmed by each Guarantor and acknowledged and agreed by each Guarantor as
being and continuing in full force and effect and valid, binding and
enforceable in accordance with their terms.

 

[The remainder of
this page intentionally left blank]

 

7

 

EXECUTED as of November 19,
2008.

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  FOSSIL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike L. Kovar

  
	
   

  	
  Name:

  	
  Mike L. Kovar

  
	
   

  	
  Title:

  	
  Executive Vice President, Chief Financial

  
	
   

  	
   

  	
  Officer and Treasurer

  
	
   

  	
   

  
	
   

  	
  FOSSIL INTERMEDIATE,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike L. Kovar

  
	
   

  	
  Name:

  	
  Mike L. Kovar

  
	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
  FOSSIL TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael W.
  Barnes

  
	
   

  	
  Name:

  	
  Michael W.
  Barnes

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tom
  Kartsotis

  
	
   

  	
  Name:

  	
  Tom Kartsotis

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike L.
  Kovar

  
	
   

  	
  Name:

  	
  Mike L. Kovar

  
	
   

  	
  Title:

  	
  Treasurer

  

 

8

 

	
   

  	
  FOSSIL STORES I, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike L.
  Kovar

  
	
   

  	
  Name:

  	
  Mike L. Kovar

  
	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARROW
  MERCHANDISING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike L.
  Kovar

  
	
   

  	
  Name:

  	
  Mike L. Kovar

  
	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FOSSIL HOLDINGS,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike L.
  Kovar

  
	
   

  	
  Name:

  	
  Mike L. Kovar

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FOSSIL INTERNATIONAL
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael W.
  Barnes

  
	
   

  	
  Name:

  	
  Michael W.
  Barnes

  
	
   

  	
  Title:

  	
  President

  

 

9Exhibit 4.1

 

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

 

195,915

 

Shares
of Common Stock

 

of
First Community Corporation

 

Issue Date: November 21,
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

 

2

 

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

 

3

 

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.

 

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:

 

(i)            by
having the Company withhold, from the shares of Common Stock

 

5

 

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

 

6

 

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

 

7

 

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

 

8

 

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

 

9

 

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

 

10

 

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

 

11

 

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

 

12

 

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.

 

13

 

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]

 

14

 

[Form of Notice of Exercise]

Date:          

 

TO:                          First Community 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:
November 21, 2008

 

	
   

  	
  COMPANY: FIRST COMMUNITY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael C. Crapps

  
	
   

  	
  Name: 

  	
  Michael C. Crapps

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David K. Proctor

  
	
   

  	
  Name: 

  	
  David K. Proctor

  
	
   

  	
  Title:

  	
  Senior Vice President

  

 

[Signature Page to
Warrant]

 

16

 

Warrant -
SCHEDULE A

 

Item 1

 

Name:
First Community Corporation

Corporate
or other organizational form: Corporation

Jurisdiction
of organization: South Carolina

 

Item 2

 

Exercise
Price: 8.69

 

Item 3

 

Issue
Date: November 21, 2008

 

Item 4

 

Amount
of last dividend declared prior to the Issue Date:  $.08 per share dividend to holders of common
stock

 

Item 5

 

Date
of Letter Agreement between the Company and the United States Department of the
Treasury: November 21, 2008

 

Item 6

 

Number
of shares of Common Stock: 195,915

 

Item 7

 

	
  Company’s address:

  	
  5455 Sunset Boulevard

  
	
   

  	
  Lexington, South Carolina 29072

  

 

Item 8

 

	
  Notice information:

  	
  Michael C. Crapps

  
	
   

  	
  President and Chief Executive Officer

  
	
   

  	
  First Community Corporation

  
	
   

  	
  5455 Sunset Boulevard

  
	
   

  	
  Lexington, South Carolina 29072

  
	
   

  	
  (803) 951-2265

  
	
   

  	
   

  
	
   

  	
  With a Copy to:

  
	
   

  	
   

  
	
   

  	
  Neil E. Grayson

  
	
   

  	
  John M. Jennings

  
	
   

  	
  Nelson Mullins Riley & Scarborough LLP

  
	
   

  	
  104 South Main Street, Suite 900

  
	
   

  	
  Greenville, South Carolina 29601

  
	
   

  	
  (864) 250-2235

  

 

17

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