<PAGE>
EXHIBIT 10.11
PREFERRED SECURITIES GUARANTEE AGREEMENT
BY AND BETWEEN
SOUTHERN COMMUNITY FINANCIAL CORPORATION
AND
WILMINGTON TRUST COMPANY
DATED AS OF NOVEMBER 10, 2003
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S>
<C>
ARTICLE I DEFINITIONS AND INTERPRETATION
.................................................................
1
Section 1.1 Definitions and Interpretation
...............................................................
1
ARTICLE II TRUST INDENTURE
ACT............................................................................
5
Section 2.1 Trust Indenture Act;
Application..............................................................
5
Section 2.2 Lists of Holders of
Securities................................................................
5
Section 2.3 Reports by the Guarantee
Trustee..............................................................
5
Section 2.4 Periodic Reports to Guarantee
Trustee.........................................................
5
Section 2.5 Evidence of Compliance with
Conditions Precedent..............................................
6
Section 2.6 Events of Default;
Waiver.....................................................................
6
Section 2.7 Event of Default; Notice
.....................................................................
6
Section 2.8 Conflicting
Interests.........................................................................
7
ARTICLE III POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE................................................
7
Section 3.1 Powers and Duties of the
Guarantee
Trustee....................................................
7
Section 3.2 Certain Rights of Guarantee
Trustee...........................................................
8
Section 3.3 Not Responsible for Recitals or
Issuance of Guarantee.........................................
10
ARTICLE IV GUARANTEE
TRUSTEE..............................................................................
10
Section 4.1 Guarantee Trustee;
Eligibility................................................................
10
Section 4.2 Appointment, Removal and
Resignation of Guarantee
Trustee..................................... 11
ARTICLE V
GUARANTEE.......................................................................................
11
Section 5.1
Guarantee.....................................................................................
11
Section 5.2 Waiver of Notice and
Demand...................................................................
12
Section 5.3 Obligations not
Affected......................................................................
12
Section 5.4 Rights of Holders
............................................................................
13
Section 5.5 Guarantee of
Payment..........................................................................
13
Section 5.6
Subrogation...................................................................................
13
Section 5.7 Independent
Obligations.......................................................................
13
ARTICLE VI LIMITATION OF TRANSACTIONS;
SUBORDINATION......................................................
14
Section 6.1 Limitation of
Transactions....................................................................
14
Section 6.2
Ranking.......................................................................................
14
ARTICLE VII
TERMINATION...................................................................................
14
Section 7.1
Termination...................................................................................
14
ARTICLE VIII
INDEMNIFICATION..............................................................................
15
Section 8.1
Exculpation...................................................................................
15
Section 8.2
Indemnification...............................................................................
15
ARTICLE IX
MISCELLANEOUS..................................................................................
15
Section 9.1 Successors and
Assigns........................................................................
15
Section 9.2 Amendments
...................................................................................
16
Section 9.3
Notices.......................................................................................
16
Section 9.4
Benefit.......................................................................................
17
Section 9.5 Governing
Law.................................................................................
17
</TABLE>
2
<PAGE>
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
Section of Trust Indenture Act of
Section of Preferred Securities
1939, as amended
Guarantee Agreement
<S>
<C>
310(a)
4.1(a)
310(b)
4.1(c), 2.8
310(c)
Not
Applicable
311(a)
2.2(b)
311(b)
2.2(b)
311(c)
Not Applicable
312(a)
2.2(a)
312(b)
2.2(b)
313
2.3
314(a)
2.4
314(b)
Not Applicable
314(c)
2.5
314(d)
Not Applicable
314(e)
1.1, 2.5, 3.2
314(f)
2.1, 3.2
315(a)
3.1(d)
315(b)
2.7
315(c)
3.1
315(d)
3.1(d)
316(a)
1.1, 2.6, 5.4
316(b)
5.3
317(a)
3.1
317(b)
Not Applicable
318(a)
2.1(a)
318(b)
2.1
318(c)
2.1(b)
</TABLE>
Note: This Cross-Reference Table does not
constitute part of this Agreement and
shall not affect
the interpretation of any of its terms or provisions.
3
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED
SECURITIES GUARANTEE AGREEMENT (this "Preferred
Securities Guarantee"), dated as of
____________, 2003, is executed and
delivered by SOUTHERN COMMUNITY FINANCIAL
CORPORATION, a North Carolina
corporation (the "Guarantor"), and
WILMINGTON TRUST COMPANY, a Delaware banking
corporation organized under the laws of the
State of Delaware, as trustee (the
"Guarantee Trustee"), for the benefit of
the Holders (as defined herein) from
time to time of the Preferred Securities
(as defined herein) of Southern
Community Capital Trust II, a Delaware
statutory trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement
(the
"Trust Agreement"), dated as of _________,
2003, among the trustees of the Trust
named therein, the Guarantor, as sponsor,
and the holders from time to time of
undivided beneficial interests in the
assets of the Trust, the Trust is issuing,
on the date hereof, up to 3,450,000
preferred securities, having an aggregate
Liquidation Amount of up to $34,500,000
designated the ____% Cumulative Trust
Preferred Securities;
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires
irrevocably and unconditionally to agree, to
the extent set forth in this Preferred
Securities Guarantee, to pay to the
Holders of the Preferred Securities the
Guarantee Payments (as defined herein)
and to make certain other payments on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder
of
Preferred Securities, which purchase the
Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and
delivers this Preferred Securities
Guarantee for the benefit of the
Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND
INTERPRETATION.
In this Preferred Securities Guarantee, unless the context
otherwise
requires:
(a) capitalized terms used in this Preferred Securities Guarantee
but
not defined in the preamble above have the
respective meanings assigned to them
in this Section 1.1;
(b) terms defined in the Trust Agreement as at the date of
execution of
this Preferred Securities Guarantee have
the same meaning when used in this
Preferred Securities Guarantee, unless
otherwise defined in this Preferred
Securities Guarantee;
1
<PAGE>
(c) a term defined anywhere in this Preferred Securities Guarantee
has
the same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or
"this
Preferred Securities Guarantee" are to this
Preferred Securities Guarantee as
modified, supplemented or amended from time
to time;
(e) all references in this Preferred Securities Guarantee to
Articles
and Sections are to Articles and Sections
of this Preferred Securities
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning
when
used in this Preferred Securities
Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless
the context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405
of
the Securities Act of 1933, as amended, or
any successor rule thereunder.
"Business Day" means any day other than a Saturday, Sunday, a day
on
which federal or state banking institutions
in New York, New York are authorized
or required by law, executive order or
regulation to close or a day on which the
Corporate Trust Office of the Guarantee
Trustee is closed for business.
"Corporate Trust Office" means the office of the Guarantee Trustee
at
which the corporate trust business of the
Guarantee Trustee shall, at any
particular time, be principally
administered, which office at the date of
execution of this Agreement is located at
Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust
Administration.
"Covered Person" means any Holder or beneficial owner of
Preferred
Securities.
"Debentures" means the ____% Deferrable Interest Junior
Subordinated
Debentures due December 31, 2033, of the
Debenture Issuer held by the Property
Trustee of the Trust.
"Debenture Issuer" means Southern Community Financial
Corporation,
issuer of the Debentures under the
Indenture.
"Event of Default" means a default by the Guarantor on any of
its
payment or other obligations under this
Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or
distributions,
without duplication, with respect to the
Preferred Securities, to the extent not
paid or made by the Trust: (i) any accrued
and unpaid Distributions that are
required to be paid on such Preferred
Securities, to the extent the Trust shall
have funds available therefor, (ii) the
redemption price, including all accrued
and unpaid Distributions to the date of
redemption (the "Redemption Price"), to
the
2
<PAGE>
extent the Trust has funds available
therefor, with respect to any Preferred
Securities called for redemption by the
Trust, and (iii) upon a voluntary or
involuntary dissolution, winding-up or
termination of the Trust (other than in
connection with the distribution of
Debentures to the Holders in exchange for
Preferred Securities as provided in the
Trust Agreement), the lesser of (a) the
aggregate of the Liquidation Amount and all
accrued and unpaid Distributions on
the Preferred Securities to the date of
payment, to the extent the Trust shall
have funds available therefor (the
"Liquidation Distribution"), and (b) the
amount of assets of the Trust remaining
available for distribution to Holders in
liquidation of the Trust.
"Guarantee Trustee" means Wilmington Trust Company, until a
Successor
Guarantee Trustee has been appointed and
has accepted such appointment pursuant
to the terms of this Preferred Securities
Guarantee and thereafter means each
such Successor Guarantee Trustee.
"Guarantor" means Southern Community Financial Corporation, a
North
Carolina corporation.
"Holder" shall mean any holder, as registered on the books and
records
of the Trust, of any Preferred Securities;
provided, however, that, in
determining whether the holders of the
requisite percentage of Preferred
Securities have given any request, notice,
consent or waiver hereunder, "Holder"
shall not include the Guarantor, the
Guarantee Trustee or any of their
respective Affiliates.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of
the
Guarantee Trustee, or any officers,
directors, shareholders, members, partners,
employees, representatives, nominees,
custodians or agents of the Guarantee
Trustee.
"Indenture" means the Indenture dated as of ________, 2003, among
the
Debenture Issuer and Wilmington Trust
Company, as trustee, and any indenture
supplemental thereto pursuant to which the
Debentures are to be issued to the
Property Trustee of the Trust.
"Liquidation Amount" means the stated value of Ten Dollars ($10)
per
Preferred Security.
"Liquidation Distribution" has the meaning provided therefor in
the
definition of Guarantee Payments.
"Majority in Liquidation Amount of the Preferred Securities" means
the
holders of more than 50% of the Liquidation
Amount of all of the Preferred
Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two authorized
officers of such Person, at least one of
whom shall be the principal executive
officer, principal financial officer,
principal accounting officer, treasurer or
any vice president of such Person.
Any Officers' Certificate delivered with
respect to compliance with a condition
or covenant provided for in this Preferred
Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate
has
read the covenant or condition and the
definition relating thereto;
3
<PAGE>
(b) a brief statement of the nature and scope of the examination
or
investigation undertaken by each officer in
rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination
or
investigation as, in such officer's
opinion, is necessary to enable such officer
to express an informed opinion as to
whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer,
such condition or covenant has been
complied with.
"Person" means a legal person, including any individual,
corporation,
estate, partnership, joint venture,
association, joint stock company, limited
liability company, trust, unincorporated
association, or government or any
agency or political subdivision thereof, or
any other entity of whatever nature.
"Preferred Securities" means the ____% Cumulative Trust
Preferred
Securities representing undivided
beneficial interests in the assets of the
Trust which rank pari passu with Common
Securities issued by the Trust;
provided, however, that upon the occurrence
of an Event of Default, the rights
of holders of Common Securities to payment
in respect of distributions and
payments upon liquidation, redemption and
otherwise are subordinated to the
Rights of holders of Preferred
Securities.
"Redemption Price" has the meaning provided therefor in the
definition
of Guarantee Payments.
"Responsible Officer" means, with respect to the Guarantee Trustee,
any
officer within the Corporate Trust Office
of the Guarantee Trustee with direct
responsibility for the administration of
this Preferred Securities Guarantee,
including any vice-president, any assistant
vice-president, any assistant
secretary or other officer or assistant
officer of the Guarantee Trustee
customarily performing functions similar to
those performed by any of the above
designated officers and also means, with
respect to a particular corporate trust
matter, any other officer to whom such
matter is referred because of that
officer's knowledge of and familiarity with
the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee
Trustee
possessing the qualifications to act as
Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
4
<PAGE>
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT;
APPLICATION.
(a) This Preferred Securities Guarantee is subject to the
provisions of
the Trust Indenture Act that are required
to be part of this Preferred
Securities Guarantee and shall, to the
extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or
conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust
Indenture Act, such imposed duties
shall control.
SECTION 2.2 LISTS OF HOLDERS OF
SECURITIES.
(a) In the event the Guarantee Trustee is not also acting in
the
capacity of the Property Trustee under the
Trust Agreement, the Guarantor shall
cause to be provided to the Guarantee
Trustee a list, in such form as the
Guarantee Trustee may reasonably require,
of the names and addresses of the
Holders of the Preferred Securities ("List
of Holders") as of the date (i)
within one Business Day after March 15,
June 15, September 15 and December 15,
and (ii) at any other time within 30 days
of receipt by the Guarantor of a
written request for a List of Holders as of
a date no more than 15 days before
such List of Holders is given to the
Guarantee Trustee; provided, that the
Guarantor shall not be obligated to provide
such List of Holders at any time the
List of Holders does not differ from the
most recent List of Holders caused to
have been given to the Guarantee Trustee by
the Guarantor. The Guarantee Trustee
may destroy any List of Holders previously
given to it on receipt of a new List
of Holders.
(b) The Guarantee Trustee shall comply with its obligations
under
Sections 311(a), 311(b) and Section 312(b)
of the Trust Indenture Act.
SECTION 2.3 REPORTS BY THE GUARANTEE
TRUSTEE.
On or before July 31 of each year, commencing July 31, 2004,
the
Guarantee Trustee shall provide to the
Holders of the Preferred Securities such
reports as are required by Section 313 of
the Trust Indenture Act, if any, in
the form and in the manner provided by
Section 313 of the Trust Indenture Act.
The Guarantee Trustee shall also comply with the requirements
of
Section 313(d) of the Trust Indenture
Act.
SECTION 2.4 PERIODIC REPORTS TO GUARANTEE
TRUSTEE.
The Guarantor shall provide to the Guarantee Trustee such
documents,
reports and information as required by
Section 314 (if any) and the compliance
certificate required by
5
<PAGE>
Section 314 of the Trust Indenture Act in
the form, in the manner and at the
times required by Section 314 of the Trust
Indenture Act. Delivery of such
reports, information and documents to the
Preferred Guarantee Trustee is for
informational purposes only and the
Preferred Guarantee Trustee's receipt of
such shall not constitute constructive
notice of any information contained
therein or determinable from information
contained herein, including the
Guarantor's compliance with any of its
covenants hereunder (as to which the
Preferred Guarantee Trustee is entitled to
rely exclusively on Officers'
Certificates). The Guarantor also shall
transmit to the Holders of the Preferred
Securities, in the manner and to the extent
provided in Section 313(c) of the
Trust Indenture Act, such summaries of the
foregoing documents, reports and
information as may be required by rules and
regulations prescribed by the
Commission.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH
CONDITIONS PRECEDENT.
The Guarantor shall provide to the Guarantee Trustee such evidence
of
compliance with any conditions precedent,
if any, provided for in this Preferred
Securities Guarantee that relate to any of
the matters set forth in Section
314(c) of the Trust Indenture Act. Any
certificate or opinion required to be
given by an officer pursuant to Section
314(c)(1) may be given in the form of an
Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
The Holders of
