EXHIBIT 4.2
SOUTHERN COMMUNITY FINANCIAL CORPORATION
_____% CONVERTIBLE DEFERRABLE INTEREST
JUNIOR SUBORDINATED DEBENTURE
DUE ___________, 2032
Southern Community Financial Corporation, a North Carolina corporation
(the "Corporation," which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to, Wilmington Trust Company, as Property Trustee for Southern Community Capital
Trust I or registered assigns, the principal sum of _________________________
($___________) on _________, 2032, (the "Stated Maturity"), and to pay interest
on said principal sum from _________, 2002, or from the most recent interest
payment date (each such date, an "Interest Payment Date") to which interest has
been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on the last day of March, June, September and December of
each year commencing March 31, 2002, at the rate of _____% per annum until the
principal hereof shall have become due and payable, and on any overdue principal
and (without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
same rate per annum compounded quarterly. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of a 360-day year of twelve
30-day months. The amount of interest for any partial period shall be computed
on the basis of the number of days elapsed in a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on this
Debenture is not a business day, then payment of interest payable on such date
shall be made on the next succeeding day that is a business day (and without any
interest or other payment in respect of any such delay) except that, if such
business day is in the next succeeding calendar year, payment of such interest
will be made on the immediately preceding business day, in each case, with the
same force and effect as if made on such date. The interest installment so
payable, and punctually paid or duly provided for, on any Interest Payment Date
shall, as provided in the Indenture, be paid to the person in whose name this
Debenture (or one or more Predecessor Debentures, as defined in said Indenture)
is registered at 5:00 p.m., New York, New York time on the regular record date
for such interest installment, which shall be 5:00 p.m., New York, New York time
on the business day next preceding such Interest Payment Date unless otherwise
provided in the Indenture. Any such interest installment not punctually paid or
duly provided for shall forthwith cease to be payable to the registered holders
on such regular record date and may be paid to the Person in whose name this
Debenture (or one or more Predecessor Debentures) is registered at 5:00 p.m.,
New York, New York time on a special record date to be fixed by the Trustee for
the payment of such defaulted interest, notice thereof shall be fixed by the
Trustee for the payment of such defaulted interest, notice thereof shall be
given to the registered holders of the Debentures not less than 10 days prior to
such special record date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange or quotation
system on or in which the Debentures may be listed or quoted, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture. The principal of and the interest on this Debenture shall be payable
at the office or agency of the Trustee
maintained for that purpose in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Corporation by check mailed to the registered holder at such
address as shall appear in the Debenture Register. Notwithstanding the
foregoing, so long as the holder of this Debenture is the Property Trustee, the
payment of the principal of and interest on this Debenture shall be made at such
place and to such account as may be designated by the Trustee.
The Stated Maturity may be shortened at any time by the Corporation to
any date not earlier than _______, 200__, subject to the Corporation having
received prior approval of the Federal Reserve if then required under applicable
capital guidelines, policies or regulations of the Federal Reserve.
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Debenture is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions; (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided; and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are as set forth below:
This Debenture is one of the subordinated debentures of the
Corporation (herein sometimes referred to as the "Debentures"), all issued or to
be issued under and pursuant to an Indenture dated as of January ___, 2002, (the
"Indenture") duly executed and delivered between the Corporation and Wilmington
Trust Company, as Trustee (the "Trustee"), to which Indenture reference is
hereby made for a description of the rights, limitations of rights, obligations,
duties and immunities thereunder of the Trustee, the Corporation and the holders
of the Debentures. The Debentures are limited in aggregate principal amount as
specified in the Indenture.
Because of the occurrence and continuation of a Special Event (as
defined in the Indenture), in certain circumstances, this Debenture may become
due and payable at the principal amount together with any interest accrued
thereon (the "Redemption Price"). The Redemption Price shall be paid prior to
12:00 noon, New York, New York Time, on the redemption or at such earlier time
as the Corporation determines. The Corporation shall have the right, as set
forth in the Indenture, to redeem this Debenture at the option of the
Corporation, as set forth in the Indenture, in whole or in part (i) at any time
on or after ___________, 2002 until____________, 2007, at a Redemption Price
equal to ____% of the principal amount so redeemed, plus accrued but unpaid
interest hereon to the date of redemption ("Early Redemption"); provided,
however, the Corporation shall have no right to Early Redemption unless the
stock price for the Corporation's common stock has been at least 125% of the
Conversion Price for a period of twenty (20) consecutive business days ending
within five (5) days of the date of notice of redemption; (ii) at any time on or
after _________, 2007 at a Redemption Price equal to 100% of the principal
amount so redeemed plus any accrued but unpaid interest hereon to the date of
redemption ("Optional Redemption"); or (iii) at any time in certain
circumstances upon the occurrence of a Special Event, at a Redemption Price
equal to 100% of the principal amount hereof plus any accrued but unpaid
interest hereon, to the date of such
redemption. Any redemption pursuant to this paragraph shall be made upon not
less than 30 days nor more than 60 days notice, at the Redemption Price. The
Redemption Price shall be paid at the time and in the manner provided therefore
in the Indenture. If the Debentures are only partially redeemed by the
Corporation pursuant to an Early Redemption or an Optional Redemption, the
Debentures shall be redeemed pro rata or by lot or by any other method utilized
by the Trustee as described in the Indenture.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures for the unredeemed portion hereof shall be issued in the
name of the holder hereof upon the cancellation hereof.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Corporation and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time Outstanding (as defined
in the Indenture) to execute supplemental indentures for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the Indenture or of any supplemental indenture or of modifying in any manner
the rights of the holders of the Debentures; provided, however, that no such
supplemental indenture shall (i) extend the fixed maturity of the Debentures
except as provided in the Indenture, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, without the
consent of the holder of each Debenture so affected; or (ii) reduce the
aforesaid percentage of Debentures, the holders of which are required to consent
to any such supplemental indenture, without the consent of the holders of each
Debenture then Outstanding and affected thereby. The Indenture also contains
provisions permitting the holders of a majority in aggregate principal amount of
the Debentures at the time Outstanding, on behalf of all of the holders of the
Debentures, to waive any past default in the performance of any of the covenants
contained in the Indenture, or established pursuant to the Indenture, and its
consequences, except a default in the payment of the principal of or interest on
any of the Debentures. Any such consent or waiver by the registered holder of
this Debenture (unless revoked as provided in the Indenture) shall be conclusive
and binding upon such holder and upon all future holders and owners of this
Debenture and of any Debenture issued in exchange herefor or in place hereof
(whether by registration of transfer or otherwise), irrespective of whether or
not any notation of such consent or waiver is made upon this Debenture.
Any Debentureholder has the right, exercisable at any time after
__________, 2002 and on or before 5:00 p.m., New York, New York time on the
Business Day immediately preceding the date of repayment of the Debentures,
whether at maturity or upon redemption (either at the option of the Corporation
or pursuant to a Special Event), to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $10) into fully paid and
nonassessable shares of Common Stock of the Corporation at an initial conversion
ratio of _____ shares of Common Stock for each $10 in aggregate principal amount
of Debentures (equal to an initial conversion price of $_____ per share of
Common Stock), subject to adjustment under certain circumstances (the
"Conversion Ratio"). The number of shares issuable upon conversion of a
principal amount of Debentures shall be determined by dividing such principal
amount by 10 and multiplying the quotient so obtained by the Conversion Ratio in
effect on the Conversion Date. No fractional shares of Common Stock shall be
issued upon conversion and, in lieu thereof, a cash payment shall be made for
any fractional interest. The outstanding principal amount of any Debenture shall
be reduced by the portion of the principal amount thereof converted into shares
of Common Stock.
To convert a Debenture, a Debentureholder must (i) complete and sign a
Conversion Request substantially in the form attached hereto, (ii) surrender the
Debenture to the Conversion Agent, (iii) furnish appropriate endorsements or
transfer documents if required by the Debenture Registrar or Conversion Agent,
and (iv) pay any transfer or similar tax, if required. If a Conversion Request
is delivered on or after the regular record date and prior to the subsequent
Interest Payment Date, the Debentureholder shall be required to pay to the
Corporation the interest payment to be made on the subsequent Interest Payment
Date, and shall be entitled to receive the interest payable on the subsequent
Interest Payment Date, on the portion of Debentures to be converted
notwithstanding the conversion thereof prior to such Interest Payment Date.
Notwithstanding the foregoing, if, during an Extended Interest Payment Period, a
notice of redemption is mailed pursuant to Section 3.4 of the Indenture and a
Debenture is converted after such mailing but prior to the relevant redemption
date, all accrued but unpaid interest (including Additional Payments, if any)
through the date of conversion shall be paid to the Debentureholder of such
Debenture on the redemption date. Except as otherwise provided in the
immediately preceding two sentences, in the case of any Debenture which is
converted, interest with a Stated Maturity which is after the date of conversion
of such
Debenture shall not be payable, and the Corporation shall not make or be
required to make any other payment, adjustment or allowance with respect to
accrued but unpaid interest (including Additional Payments, if any) on the
Debentures being converted, which shall be deemed to be paid in full. If any
Debenture called for redemption is converted, any money deposited with the
Trustee or with any Paying Agent or so segregated and held in trust for the
redemption of such Debenture shall be paid to the Corporation upon Corporation
request or, if then held by the Corporation, shall be discharged from such
trust.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Corporation,
which is absolute and unconditional, to pay the principal and interest on this
Debenture at the time and place and at the rate and in the money herein
prescribed.
Provided certain conditions are met, the Corporation shall have the
right at any time during the term of the Debentures and from time to time to
extend the interest payment period of such Debentures for up to 20 consecutive
quarters (each, an "Extended Interest Payment Period"), at the end of which
period the Corporation shall pay all interest then accrued and unpaid (together
with interest thereon at the rate specified for the Debentures to the extent
that payment of such interest is enforceable under applicable law). Before the
termination of any such Extended Interest Payment Period, so long as no Event of
Default shall have occurred and be continuing, the Corporation may further
extend such Extended Interest Payment Period, provided that such Extended
Interest Payment Period together with all such further extensions thereof shall
not exceed 20 consecutive quarters, extend beyond the Stated Maturity or end on
a date other than an Interest Payment Date. At the termination of any such
Extended Interest Payment Period and upon the payment of all accrued and unpaid
interest and any additional amounts then due and subject to the foregoing
conditions, the Corporation may commence a new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Debenture is transferable by the registered holder hereof on the
Debenture Register of the Corporation, upon surrender of this Debenture for
registration of transfer at the office or agency of the Trustee accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Corporation or the Trustee duly executed by the registered holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Debentures of
authorized denominations and for the same aggregate principal amount shall be
issued to the designated transferee or transferees. No service charge shall be
made for any such transfer, but the Corporation may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Corporation, the Trustee, any paying agent and the Debenture
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other than the Debenture
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and interest due hereon and for all other purposes, and neither
the Corporation nor the Trustee nor any paying agent nor any Debenture Registrar
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Corporation or of any predecessor or successor corporation, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issuance hereof,
expressly waived and released.
The Debentures are issuable only in registered form without coupons in
denominations of $10 and any integral multiple thereof.
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
executed.
Dated January ________, 2002.
SOUTHERN COMMUNITY FINANCIAL CORPORATION
By:
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▇. ▇▇▇▇▇ ▇▇▇▇▇
President and Chief Executive Officer
Attest:
By:
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Name:
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Title:
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CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-mentioned Indenture.
Dated: January ___, 2002
WILMINGTON TRUST COMPANY, AS TRUSTEE or AUTHENTICATION AGENT
By: By:
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Authorized Signatory
