Indenture

Exhibit 4.4

SECURITY FEDERAL CORPORATION

TO

WILMINGTON TRUST COMPANY

as Trustee

Indenture

Dated as of _______________, 2009

8.0% Convertible Senior Debentures due 2029

 

 

 

 

Certain Sections of this Indenture relating to

Sections 310 through 318 of the

Trust Indenture Act of 1939:

Note:  This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.

 

 

 

TABLE OF CONTENTS

Definitions and Other Provisions

of General Application

 

 

ARTICLE TWO

Security Forms

 

 

ARTICLE THREE

The Securities

ARTICLE FOUR

Satisfaction and Discharge

ARTICLE FIVE

Remedies

ARTICLE SIX

The Trustee

ARTICLE SEVEN

Holders’ Lists and Reports

By Trustee and Company

ARTICLE EIGHT

Consolidation, Merger, Conveyance,

Transfer or Lease

ARTICLE NINE

Supplemental Indentures

 

 

ARTICLE TEN

Covenants

ARTICLE ELEVEN

Redemption of Securities

ARTICLE TWELVE

Defeasance

ARTICLE THIRTEEN

Conversion of Securities

 

 

ARTICLE FOURTEEN

Fundamental Changes and Repurchases Thereupon

 

 

 

 

 

THIS INDENTURE, dated as of ______________, 2009, between SECURITY FEDERAL CORPORATION (the “Company”), a South Carolina corporation having its principal office at 238 Richland Avenue West, Aiken, South Carolina 29801, and WILMINGTON TRUST COMPANY, a Delaware banking corporation, having its corporate trust office at 1100 North Market Street, Wilmington, Delaware 19890-1605 (the “Trustee”).

RECITALS OF THE COMPANY

The Company has duly authorized the creation of an issue of its 8.0% Convertible Senior Debentures due 2029 (herein called the "Securities") of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture.

All things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:

ARTICLE ONE

Definitions and Other Provisions

of General Application

SECTION 101.     Definitions .

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

“Act,” When used with respect to any Holder, has the meaning specified in Section 104.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

“Authenticating Agent” means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities.

“Bank” means Security Federal Bank and any successor thereto.

“Bankruptcy Law” has the meaning specified in Section 501.

“Board of Directors” means either the board of directors of the Company or any duly authorized committee of that board.

"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Business Day,” when used with respect to any Place of Payment or any other particular location referred to in this Indenture or in the Securities, means, any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in that Place of Payment or particular location are authorized or required by law, regulation or executive order to close.

“Capital Stock” means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock and, with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership.

“Closing Price” has the meaning specified in Section 1304(8).

“Commission” means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.

“Common Stock” means the shares of common stock, par value $0.01 per share, of the Company as they exist on the date of this Indenture or any other shares of common stock of the Company into which the Common Stock shall be reclassified or changed or, in the event of a merger, consolidation or other similar transaction involving the Company that is otherwise permitted hereunder in which the Company is not the surviving corporation, the common stock, common equity interests, ordinary shares or depositary shares or other certificates representing common equity interests of such surviving corporation or its direct or indirect parent corporation.

 

 

“Company” means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person.

“Company Request” or “Company Order” means, respectively, a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.

“Continuing Director” means a director who either was a member of the Company’s Board of Directors on ________________, 2009 or who becomes a member of the Company’s Board of Directors subsequent to that date and whose election, appointment or nomination for election by the Company’s shareholders, is duly approved by a majority of the Continuing Directors on our Board of Directors at the time of such approval, either by a specific vote or by approval of the proxy statement issued by the Company on behalf of the Company’s entire Board of Directors in which such individual is named as nominee for director.

“Conversion Agent” means the Trustee or such other office or agency designated by the Company where Securities may be presented for conversion.

“Conversion Price” has the meaning specified in Section 1301.

“Corporate Trust Office” means the office of the Trustee at which, at any particular time, its corporate trust business in Delaware shall be principally administered, which office at the date hereof is located at 1100 North Market Street, Wilmington, Delaware 19890-1605.

“Corporation” means a corporation, association, company, joint-stock company or business trust.

“Date of Issue” as to any Security means the date upon which such Security as originally issued by the Company to the initial purchaser thereof shall be dated, which shall be the date upon which such Security was originally sold to such initial purchaser or designated by the Company Order requesting authentication and delivery thereof.

“Default” means any event that upon notice or the passage of time or both would be an Event of Default.

“Defaulted Interest” has the meaning specified in Section 308.

“Disinterested Director” of any Person means, with respect to any transaction or series of related transactions, a member of the Board of Directors of such Person who does not have any material direct or indirect financial interest in or with respect to such transaction or series of related transactions.

“Event of Default” has the meaning specified in Section   501.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Expiration Time” has the meaning specified in Section 1304(6).

“FDIC” means the Federal Deposit Insurance Corporation or its successor.

 

 

“FRB” means the Board of Governors of the Federal Reserve System or its successor.

“Fundamental Change” means the occurrence of any of the following events at any time after the Securities are originally issued:

Notwithstanding the foregoing, a Fundamental Change as a result of clause (2) above shall not be deemed to have occurred if 90% of the consideration received or to be received by the holders of Common Stock, excluding cash payments for fractional shares and cash payments in respect of dissenters’ or appraisal rights, in the transaction or transactions otherwise constituting the Fundamental Change consists of Publicly Traded Securities and, as a result of such transaction or transactions, the Securities become convertible into such Publicly Traded Securities, excluding cash payments for fractional shares and cash payments in respect of dissenters’ or appraisal rights.

“Fundamental Change Company Notice” has the meaning specified in Section 1401(3).

“Fundamental Change Repurchase Date” has the meaning specified in Section 1401(1).

“Fundamental Change Repurchase Notice” has the meaning specified in Section 1401(2).

“Fundamental Change Repurchase Price” has the meaning specified in Section 1401(1).

“Holder” means a Person in whose name a Security is registered in the Security Register.

“Indebtedness” means any indebtedness, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements with respect thereto) as to which, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such indebtedness does not rank pari passu with, the Securities or representing the balance deferred and unpaid of the purchase price of any property (including pursuant to capital leases), except any such balance that constitutes an accrued expense or trade payable arising in the ordinary course of business (such accrued expenses or trade payables being pari passu in right of payment to the Securities), if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet prepared on a consolidated basis in accordance with GAAP (but does not include contingent liabilities which appear only in a footnote to a balance sheet), and shall also include, to the extent not otherwise included, the guaranty of items which would be included within this definition.

"Indebtedness for money borrowed," when used with respect to the Company, means any obligation of, or any obligation guaranteed by, the Company for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments.

“Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively.

“Insured Depositary Institution” means  means a financial institution with deposits insured by, and under the supervision of, the Federal Deposit Insurance Corporation, or any successor agency, as defined in 12 U.S.C. §1813(c)(2) or a similar definition under any succeeding federal law hereinafter enacted.

“Interest Payment Date” means the Stated Maturity of an installment of interest on the Securities.

“Junior Securities” means (1) shares of Common Stock, (2) shares of any other class or classes of capital stock of the Company, (3) any other non-debt securities of the Company (whether or not such other securities are convertible into Junior Securities of the Company), or (4) unsecured debt securities of the Company (other than the Securities) as to which, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such debt securities do not rank pari passu with, the Securities.

“Major Depository Institution Subsidiary” means a Subsidiary that is an Insured Depository Institution and that is or would be a direct or indirect major subsidiary (or other subsidiary deemed to be the equivalent of a major subsidiary) as such term is defined by the FRB from time to time; provided, however, that any Subsidiary that had consolidated quarterly average total assets that were less than 20% of the Company's consolidated quarterly average total assets for the most recently available quarter shall not be deemed to be a Major Depository Institution Subsidiary.

“Maturity,” when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.

 

 

“OTS” means the Office of Thrift Supervision of the U.S. Department of Treasury or any successor federal agency.

“Officers' Certificate” means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 1012 shall be the principal executive, financial or accounting officer of the Company.

“Opinion of Counsel” means a written opinion of counsel delivered to the Trustee, who may be counsel for the Company, and who shall be acceptable to the Trustee.

“Outstanding,” when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:

provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor.

“Paying Agent” means any Person authorized by the Company to pay the principal of (and premium, if any) or interest or the Fundamental Change Repurchase Price on any Securities on behalf of the Company. Initially the Paying Agent shall be the Trustee.

“Predecessor Security” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 307 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.

“Publicly Traded Securities” means shares of common equity that are traded or quoted on a U.S. national securities exchange or, with respect to a transaction described in the definition of “Fundamental Change”, that will be so traded or quoted when issued or exchanged in connection with such event.

“Responsible Officer” means any vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Indenture, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

“Stated Maturity” when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable.

“Subsidiary” means a corporation or other entity more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock or equity interests" means stock which ordinarily has voting power for the election of directors (or equivalent persons), whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

“Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended.

“Vice President,” when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president."

“Wholly Owned Subsidiary” means any Subsidiary all of whose outstanding Capital Stock (other than directors’ qualifying shares) shall at the time be owned by the Company and/or one or more of its Wholly Owned Subsidiaries.

SECTION 102.     Compliance Certificates and Opinions .

SECTION 103.     Form of Documents Delivered to Trustee.

Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

SECTION 106.     Notice to Holders; Waiver .

Where this Indenture provides for notice of any event to Holders of Securities by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders of Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Securities given as provided herein. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.

If by reason of the suspension of or irregularities in regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification to Holders of  

 

 

 

Securities as shall be made with the approval of the Trustee shall constitute a sufficient notification to such Holders for every purpose hereunder.

Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

SECTION 107.     Conflict with Trust Indenture Act .

If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be.

SECTION 108.     Effect of Headings and Table of Contents .

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 109.     Successors and Assigns .

All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.

SECTION 110.     Separability Clause .

In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 111.     Benefits of Indenture .

Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture.

SECTION 112.     Governing Law .

This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws.

SECTION 113.     Legal Holidays .

In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security or the last date on which a Holder has the right to convert his Securities shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) or conversion of the Securities need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, or on such last day for conversion, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.

 

 

SECTION 114.     Calculations in Respect of Securities .

Except as otherwise provided in this Indenture, the Company shall be responsible for making all calculations called for under the Securities. The Company shall make all such calculations in good faith and, absent manifest error, its calculations shall be final and binding on Holders. The Company upon request will provide a schedule of its calculations to each of the Trustee and the Conversion Agent, if different, and each of the Trustee and Conversion Agent is entitled to rely conclusively and exclusively upon the accuracy of the Company’s calculations without independent verification. The Trustee will deliver a copy of such schedule to any Holder upon the written request of such Holder.

ARTICLE TWO

Security Forms

SECTION 201.     Forms Generally .

The Securities, the conversion notice and the Trustee’s certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities.

The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities.

SECTION 202.     Form of Face of Security .

THIS SECURITY IS NOT A DEPOSIT OR SAVINGS ACCOUNT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

SECURITY FEDERAL CORPORATION

8.0% Convertible Senior Debentures Due 2029

No. _____                                                                                           CUSIP NO. ___________                                                                U.S. $____________

Security Federal Corporation, a corporation duly organized and validly existing under the laws of the State of South Carolina (herein called the “ Company ”), which term includes any successor corporation under the Indenture referred to on the reverse hereof, for value received hereby promises to pay to ______, or registered assigns, the principal sum of United States Dollars ($_________) on December 1, 2029. Payment of the principal of, and premium if any, and interest on this Security shall be made at the Place of Payment or at the option of the Company, by check mailed to the address of the Holder of this Security specified in the Security Register, or by wire transfer in immediately available funds, in such lawful money of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.

The issue date of this Security is _____, 2009.

 

 

Reference is made to the further provisions of this Security set forth on the reverse hereof, including, without limitation, provisions giving the Holder the right to convert this Security into Common Stock of the Company and to require the Company to repurchase this Security upon certain events, in each case, on the terms and subject to the limitations referred to on the reverse hereof and as more fully specified in the Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place. Capitalized terms used but not defined herein shall have such meanings as are ascribed to such terms in the Indenture.

This Security shall be deemed to be a contract made under the laws of the State of Delaware, and for all purposes shall be construed in accordance with and governed by the laws of said State without regard to principles of conflicts of law.

This Security shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee or a duly authorized authenticating agent under the Indenture.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Dated ________________________________________

                 SECURITY FEDERAL CORPORATION

                 By:  ______________________________________

                 Authorized Signatory

Dated ________________________________________

                                                                      Authorized Signatory

 

 

 

SECURITY FEDERAL CORPORATION

8.0% Convertible Senior Debentures Due 2029

This Security is one of a duly authorized issue of securities of the Company, designated as its 8.0% Convertible Senior Debentures due 2029 (the “Securities”), all issued or to be issued under and pursuant to an Indenture dated as of ______, 2009, ( the “Indenture”), between the Company and Wilmington Trust Company (the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities.

Interest . The Securities will bear interest at a rate of 8.0% per year. The Company will pay interest semi-annually in arrears on June  1 and December 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”). Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that the first Interest Payment Date shall be December 1, 2009.

Interest will be paid to the person in whose name a Security is registered at the close of business on the May 15 or November 15, as the case may be, immediately preceding the relevant Interest Payment Date. Interest on the Notes will be computed on the basis of a 360-day year composed of twelve 30-day months.

Ranking . The Securities rank equally in right of payment with all the Company’s existing and future unsecured senior Indebtedness and are senior in right of payment to all of the Company’s existing and future subordinated Indebtedness, if any. The Securities are effectively subordinated to all debt and other liabilities, including deposits, trade payables and lease obligations, if any, of the Company’s subsidiaries.

Redemption at the Option of the Company . Subject to the terms and conditions of the Indenture, the Company may redeem all or a portion of the Securities at its option prior to maturity, at any time on or after December 1, 2019, at 100% of the principal amount plus accrued and unpaid interest, including Defaulted Interest, if any, to, but excluding, the Redemption Date, which amount will be paid in cash.  Unless the Company defaults in the payment of the Redemption Price, interest will cease to accrue on the Securities or portions thereof called for redemption on the applicable Redemption Date.

Repurchase by the Company at the Option of the Holder Upon a Fundamental Change . Except as set forth in the next sentence, the Company is not required to make mandatory redemption or sinking fund payments with respect to the Securities. Subject to the terms and conditions of the Indenture, the Company shall become obligated, at the option of the Holder, to repurchase all or a portion (which is $1,000 or an integral multiple thereof) of the Securities if a Fundamental Change occurs at any time prior to the Stated Maturity at 101% of the principal amount plus accrued and unpaid interest, including Defaulted Interest, if any, to, but excluding, the Fundamental Change Repurchase Date, which amount will be paid in cash.

Withdrawal of Fundamental Change Repurchase Notice . Holders have the right to withdraw, in whole or in part, any Fundamental Change Repurchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture.

 

 

Payment of Fundamental Change Repurchase Price . If cash sufficient to pay the Fundamental Change Repurchase Price of all Securities or portions thereof to be repurchased on a Fundamental Change Repurchase Date is deposited with the Paying Agent on the Fundamental Change Repurchase Date, such Securities will cease to be outstanding and interest will cease to accrue on such Securities (or portions thereof) immediately after such Fundamental Change Repurchase Date, and the Holder thereof shall have no other rights as such (other than the right to receive the Fundamental Change Repurchase Price upon surrender of such Security).

 

Conversion . Subject to and in compliance with the provisions of the Indenture (including without limitation the conditions of conversion of this Security set forth in Article Thirteen thereof), the Holder hereof has the right, at its option, to convert the principal amount hereof or any portion of such principal which is $1,000 or an integral multiple thereof, into cash and shares of Common Stock, if any, in each case at the Conversion Price. The initial Conversion Price is equal to $20.00 aggregate principal amount of Securities for each share of Common Stock, subject to adjustment in certain events described in the Indenture. No fractional shares will be issued upon any conversion, but an adjustment and payment in cash will be made, as provided in the Indenture, in respect of any fraction of a share which would otherwise be issuable upon the surrender of any Securities for conversion. Securities in respect of which a Holder is exercising its right to require repurchase on a Fundamental Change Repurchase Date may be converted only if such Holder withdraws its election to exercise such right in accordance with the terms of the Indenture.

Defeasance Prior to Maturity .  The Indenture contains provisions for defeasance of (i) the entire indebtedness of the Securities or (ii) certain covenants and Events of Default with respect to the Securities, subject to the terms and conditions of the Indenture.

Restrictive Covenants. The Indenture imposes certain limitations on the Company, including limitations on the Company’s ability to create or incur Indebtedness senior to the Securities or issue, transfer, sell or create a lien on the capital stock of the Bank and on the Company’s ability to engage in mergers or consolidations or the conveyance, transfer or lease of all or substantially all of its properties and assets. These limitations are subject to a number of important qualifications and exceptions and reference is made to the Indenture for a more complete description thereof.

If an Event of Default shall occur and be continuing, the principal plus interest, including Defaulted Interest, if any, through such date on all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a 66-2/3% in aggregate principal amount of the Outstanding Securities. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Outstanding Securities, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of any provision of or applicable to this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

 

 

As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Security, the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity satisfactory to it, the Trustee shall not have received from the Holders of a majority in principal amount of Outstanding Securities a direction inconsistent with such request, and the Trustee shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of the principal amount, Redemption Price or Fundamental Change Repurchase Price hereof on or after the respective due dates expressed herein.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal amount or Redemption Price or Fundamental Change Repurchase Price of, and interest, including Defaulted Interest, if any, on, this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the City of Wilmington, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities are issuable only in registered form without coupons in denominations of $5,000 and any integral multiple of $1,000 above that amount, as provided in the Indenture and subject to certain limitations therein set forth. Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Company and the Security Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and the Note Registrar and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

A director, officer, employee or stockholder of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities

 

 

This Security will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

Each Holder of a Security covenants and agrees by his or her acceptance thereof to comply with and be bound by the foregoing provisions and by the terms of the Indenture.

This Security is unsecured by any collateral, including the assets of the Company or any of its Subsidiaries or other Affiliates.

All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

Dated ___________________

SECTION 205.     Form of Conversion Notice .

To: SECURITY FEDERAL CORPORATION

The undersigned registered owner of this Security hereby exercises the option to convert this Security, or the portion hereof (which is $1,000 principal amount or an integral multiple thereof) below designated, into cash and shares of Common Stock, if any, in accordance with the terms of the Indenture referred to in this Security, and directs that the check in payment of the cash deliverable upon such conversion for fractional shares, and any Securities representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares or any portion of this Security not converted are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto.

Any amount required to be paid to the undersigned on account of interest accompanies this Security.

Dated ________________________________________

____________________________________

NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatever.

 

 

Fill in for registration of shares if to be issued, and Notes if to be delivered, other than to and in the name of the registered holder:

____________________________

Name

____________________________

Street Address

____________________________

City, State and Zip Code

(please print name and address)

____________________________

Social Security or other Taxpayer

Identification Number

SECTION 206.     Form of Fundamental Change Repurchase Notice .

To: SECURITY FEDERAL CORPORATION

The undersigned registered owner of this Security hereby acknowledges receipt of a notice from Security Federal Corporation (the “Company”) as to the occurrence of a Fundamental Change with respect to the Company and requests and instructs the Company to repay the entire principal amount of this Security, or the portion thereof (which is $1,000 principal amount or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Security, to the registered holder hereof.

Dated ________________________________________

__________________________________

Social Security or other Taxpayer

Identification Number

 

 

NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatever.

 

Section 207.   Form of Assignment and Transfer

For value received              hereby sell(s), assign(s) and transfer(s) unto              (Please insert social security or Taxpayer Identification Number of assignee) the within Security, and hereby irrevocably constitutes and appoints                attorney to transfer the said Security on the books of the Company, with full power of substitution in the premises.

Dated ________________________________________

____________________________________

NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatever.

 

The principal of (and premium, if any) and interest on the Securities shall be payable at the Corporate Trust Office and at any other office or agency maintained by the Company for such purpose; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register, or upon application by a Holder to the Security Registrar not later than the relevant Record Date for such interest payment, by wire transfer in immediately available funds to such Holder’s account within the United States, which application shall remain in effect until the Holder notifies the Security Registrar to the contrary in writing.

Neither the Company nor the Security Registrar shall not be required (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities selected for redemption under Section 1104 and ending at the close of business on the day of such mailing, (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part, (iii) exchange or register a transfer of any Security (a) that has been surrendered for conversion or (b) as to which a Fundamental Change Repurchase Notice has been delivered and not withdrawn, except that where such Fundamental Change Repurchase Notice provides that such Security is to be purchased only in part, the Company and the Security Registrar shall be required to exchange or register a transfer of the portion thereof not to be purchased.

SECTION 307.     Mutilated, Destroyed, Lost and Stolen Securities .

If any mutilated Security is surrendered to the Trustee, the Company shall execute, and upon Company Order the Trustee shall authenticate and deliver in exchange therefore a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding.

If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and upon Company Order the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security.

Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

SECTION 308.     Payment of Interest; Interest Rights Preserved .

Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more

 

 

 

Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.

Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below:

Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.

In the case of any Security which is converted after any Regular Record Date and on or prior to the next succeeding Interest Payment Date (other than any Security whose Maturity is prior to such Interest Payment Date), interest whose Stated Maturity is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on such Regular Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any

 

 

 

Security which is converted, interest whose Stated Maturity is after the date of conversion of such Security shall not be payable.

SECTION 309.     Persons Deemed Owners .

Prior due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 308) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

SECTION 310.     Cancellation .

All Securities surrendered for payment, redemption, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of in accordance with its procedures (subject to the record retention requirements of the Exchange Act).

SECTION 311.     Computation of Interest .

Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months.

SECTION 312.     Authentication and Delivery of Original Issue .

Forthwith upon the execution and delivery of this Indenture, or from time to time thereafter, Securities up to the aggregate principal amount of $15,000,000 may be executed by the Company and delivered to the Trustee for authentication, and shall thereupon by authenticated and delivered by the Trustee upon Company Order, without any further action by the Company.

ARTICLE FOUR

Satisfaction and Discharge

SECTION 401.     Discharge of Indenture .

When (a) the Company shall deliver to the Trustee for cancellation all Securities theretofore authenticated (other than any Securities that have been destroyed, lost or stolen and in lieu of or in substitution for which other Securities shall have been authenticated and delivered) and not theretofore canceled, or (b) all the Securities not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds sufficient

 

 

 

to pay at maturity or upon redemption of all of the Securities (other than any Securities that shall have been mutilated, destroyed, lost or stolen and in lieu of or in substitution for which other Securities shall have been authenticated and delivered) not theretofore canceled or delivered to the Trustee for cancellation, including principal and interest, including Defaulted Interest, if any, due or to become due to such date of maturity or redemption date, as the case may be, accompanied by a verification report, as to the sufficiency of the deposited amount, from an independent certified accountant or other financial professional satisfactory to the Trustee, and if the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect (except as to (i) remaining rights of registration of transfer, substitution and exchange and conversion of Securities, (ii) rights hereunder of Holders of Securities to receive payments of principal of and interest, including Defaulted Interest, if any, on, the Securities and the other rights, duties and obligations of Holders of Securities, as beneficiaries hereof with respect to the amounts, if any, so deposited with the Trustee and (iii) the rights, obligations and immunities of the Trustee hereunder), and the Trustee, on written demand of the Company accompanied by an Officers’ Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with (upon which the Trustee shall be entitled to conclusively and exclusively rely) and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; the Company, however, hereby agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Securities.

Upon the satisfaction and discharge of this Indenture, all monie