Exhibit 10.1
FORM OF CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (the "Agreement") is made and entered
into as of this ___ day of ______________, 201_ (the "Commencement Date"), by
and between Security Federal Corporation (the "Company") and its wholly-owned
subsidiary, Security Federal Bank (the "Bank")) (which, together with any
successor thereto which executes and delivers the assumption agreement provided
for in Section 6(a) hereof or which otherwise becomes bound by all of the terms
and provisions of this Agreement by operation of law, is hereinafter sometimes
referred to as "Security Federal"), and ______________ (the "Employee").
WHEREAS, the Employee is currently serving as ______________ of the
______________: and
WHEREAS, the board of directors of the Company and the board of directors of the
Bank (collectively, the "Board of Directors", and separately the "Company Board
or Directors" and the "Bank Board of Directors", respectively) recognize the
possibility of a change in control of the Company or the Bank may occur and that
such possibility, and the uncertainty and questions which may arise among
management, may result in the departure or distraction of key management to the
detriment of the Bank, the Company and its shareholders;
WHEREAS, the Board of Directors believes it is in the best interests of Security
Federal to enter into this Agreement with the Employee in order to assure
continuity of management of the Bank and to reinforce and encourage the
continued attention and dedication of the Employee to the Employee's assigned
duties without distraction in the face of potentially disruptive circumstances
arising from the possibility of a change in control of the Company and/or the
Bank, although no such change is now contemplated; and
WHEREAS, the Board of Directors has approved and authorized the execution of
this Agreement with the Employee;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1.            Certain Definitions.
"Agreement Renewal Date" shall mean the January 1 next following the
Commencement Date and each anniversary thereof.
"Change in Control" means (1) an offeror other than the Company purchases shares
of stock of the Company or the Bank pursuant to a tender or exchange offer for
such shares; (2) an event of a nature that results in the acquisition of control
of the Company or the Bank within the meaning of the Bank Holding Company Act of
1956, as amended, under 12 U.S.C. Section 1841 (or any successor statute and
applicable regulation), or requires the filing of a change of control notice
with the Federal Reserve Board ("Federal Reserve") or the Federal Deposit
Insurance Corporation ("FDIC") under 12 U.S.C. 1817(j) (or any successor statute
or applicable regulation); (3) any person (as the term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 ("Exchange Act")) that is or
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act)
directly or indirectly of securities of the Company or the Bank representing 35%
or more of the combined voting power of the Company's or the Bank's outstanding
securities; (4) individuals who are members of the Company Board of Directors
immediately following the Commencement Date or who are members of the Bank Board
of Directors immediately following the Commencement Date (in each case, the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequently whose
election was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for election by the
Company's or the Bank's stockholders was approved by the nominating committee
serving under an Incumbent Board, shall be considered a member of the Incumbent
Board; or
 

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(5) consummation of a plan of reorganization, merger, acquisition,
consolidation, sale of all or substantially all of the assets of the Company or
a similar transaction in which the Company is not the resulting entity, provided
that the term "Change in Control" shall not include an acquisition of securities
by an employee benefit plan of the Bank or the Company.

"Code" means the Internal Revenue Code of 1986, as amended.
"Commencement Date" means the date of this Agreement.
"Consolidated Subsidiaries" means any subsidiary or subsidiaries of the Company
(or its successors) that are part of the affiliated group (as defined in Section
1504 of the Code, without regard to subsection (b) thereof) that includes the
Bank.
"Date of Termination" means the date upon which the Employee ceases to serve as
an employee of Security Federal.
"Involuntary Termination" means the termination of the employment of Employee
(i) by the Company or the Bank, without his express written consent; or (ii) by
the Employee by reason of a material diminution of or interference with his
duties, responsibilities or benefits, including (without limitation) any of the
following actions unless consented to in writing by the Employee: (1) a
requirement that the Employee be based at any place other than ______, South
Carolina, or within a radius of 30 miles, except for reasonable travel on
Company or Bank business; (2) a material demotion of the Employee; (3) a
material reduction in the number or seniority of personnel reporting to the
Employee or a material reduction in the frequency with which, or in the nature
of the matters with respect to which such personnel are to report to the
Employee, other than as part of a Bank- or Company-wide reduction in staff; (4)
a reduction in the Employee's salary other than as part of an overall program
applied uniformly and with equitable effect to all members of the senior
management of the Bank; (5) a material permanent increase in the required hours
of work or the workload of the Employee; or (6) any purported termination of the
Employee's employment, except for Termination for Cause, which purported
termination shall not be effective for purposes of this Agreement. The term
"Involuntary Termination" does not include Termination for Cause, retirement or
suspension or temporary or permanent prohibition from participation in the
conduct of the Bank's affairs under Section 8 of the Federal Deposit Insurance
Act ("FDIA").
"Restriction Period" shall mean the one-year period commencing on the date of
the Employee's Date of Termination.

"Restrictive Covenants" shall mean the covenants and restrictions described in
Section 4.

"Section 409A" shall mean Section 409A of the Code and the regulations and
guidance of general applicability issued thereunder.
"Termination for Cause" and "Terminated for Cause" mean termination of the
employment of the Employee because of the Employee's personal dishonesty,
willful misconduct, breach of a fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or (except as provided below) material breach of any
provision of this Agreement. No act or failure to act by the Employee shall be
considered willful unless the Employee acted or failed to act with an absence of
good faith and without a reasonable belief that his action or failure to act was
in the best interest of the Company or the Bank. The Employee shall not be
deemed to have been Terminated for Cause unless and until there shall have been
delivered to the Employee a copy of a resolution, duly adopted by the
affirmative vote of
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not less than a majority of the entire membership of the Board of Directors at a
meeting of the Board of Directors duly called and held for such purpose (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), stating that in the
good faith opinion of the Board of Directors the Employee has engaged in conduct
described in the preceding sentence and specifying the particulars thereof in
detail.
2.            Term. This Agreement shall commence as of ________________, and
shall continue until December 31, 2018, provided, however, on each Agreement
Renewal Date the term of the Agreement shall automatically be extended for one
additional year unless at least 30 days prior to any Agreement Renewal Date the
Board should have given notice to the Employee that it does not wish to extend
the Agreement; and provided, further, that notwithstanding any such notice by
the Board not to extend, this Agreement shall continue in effect for a period of
24 months beyond the term provided herein if a Change in Control shall have
occurred during such term.

3.            Severance Benefits.
(a)            If within the period commencing six months before, or twenty-four
months after, a Change in Control, the Employee experiences an Involuntary
Termination, the Bank shall (i) pay the Employee his salary, including the pro
rata portion of any incentive award, through the Date of Termination; and (ii)
pay to the Employee a cash lump sum equal to 2.4 times the Employee's annual
base salary in effect at the time of his Date of Termination.  Payments shall be
subject to customary tax and other withholdings.  No payment shall be made under
this Section 3 unless the Employee timely executes a release satisfactory to the
Bank. Payments under this Section 3 are subject to the restrictions and
conditions set forth in this Agreement.
(b)            The Employee shall not be required to mitigate the amount of any
payment or benefit provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Agreement be reduced by any compensation earned by the Employee as the result of
employment by another employer, by retirement benefits paid after the Date of
Termination, or otherwise. This Agreement does not constitute a contract of
employment or impose on the Company or the Bank any obligation to retain the
Employee, to change the status of the Employee's employment, or to change the
Company's or the Bank's policies regarding termination of employment.
(c)            Temporary Suspension or Prohibition.  If the Employee is
suspended and/or temporarily prohibited from participating in the conduct of the
Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA,
12 U.S.C. Section 1818(e)(3) and (g)(1), the Bank's obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings.  If the charges in the notice are dismissed, the Bank
may in its discretion (i) pay the Employee all or part of the compensation
withheld while its obligations under this Agreement were suspended, and (ii)
reinstate in whole or in part any of its obligations which were suspended, all
in a manner that does not violate Section 409A.

(d)            Permanent Suspension or Prohibition.  If the Employee is removed
and/or permanently prohibited from participating in the conduct of the Bank's
affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDIA, 12
U.S.C. Section 1818(e)(4) and (g)(1), all obligations of the Bank under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.

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(e)            Default of the Bank.  If the Bank is in default (as defined in
Section 3(x)(1) of the FDIA), all obligations under this Agreement shall
terminate as of the date of default, but this provision shall not affect any
vested rights of the contracting parties.

(f)            Termination by Regulators.  All obligations under this Agreement
shall be terminated, except to the extent determined that continuation of this
Agreement is necessary for the continued operation of the Bank: (1) at the time
the FDIC enters into an agreement to provide assistance to or on behalf of the
Bank under the authority contained in Section 13(c) of the FDIA; or (2) by the
FDIC, at the time it approves a supervisory merger to resolve problems related
to operation of the Bank or when the Bank is determined by the Director of the
FDIC to be in an unsafe or unsound condition.  Any rights of the parties that
have already vested, however, shall not be affected by any such action.

(g)            Reductions of Benefits. Notwithstanding any other provision of
this Agreement, if payments and the value of benefits received or to be received
under this Agreement, together with any other amounts and the value of benefits
received or to be received by the Employee, would cause any amount to be
nondeductible by the Company or any of the Consolidated Subsidiaries for federal
income tax purposes pursuant to or by reason of Code Section 280G, then payments
and benefits under this Agreement shall be reduced (not less than zero) to the
extent necessary so as to maximize the economic present value of benefits to be
received by the Employee, as determined by the Company Board of Directors as of
the date of the Change in Control using the discount rate required by Code
Section 280G(d)(4), without causing any amount to become nondeductible pursuant
to or by reason of Code Section 280G.

(h)            Further Reductions; Clawback.  Any payments made to the Employee
pursuant to this Agreement, or otherwise, are subject to and conditioned upon
their compliance with 12 U.S.C. Section 1828(k) and FDIC regulation 12 C.F.R.
Part 359, Golden Parachute and Indemnification Payments.  Any payments made to
the Employee pursuant to this Agreement also are subject to the Employee
complying with the requirements of Section 4.  If those requirements are not
met, then amounts payable under this Section 3 are subject to reduction,
elimination or reimbursement as provided for in Section 4. All amounts payable
to the Employee under this Agreement shall be subject to such clawback
(recovery) as may be required to be made pursuant to law, rule, regulation or
stock exchange listing requirement or any policy of the Company or the Bank
adopted pursuant to any such law, rule, regulation or stock exchange listing
requirement.

4.            Restrictive Covenants.

(a)            Nonsolicitation of Customers.  During the Restriction Period, the
Employee shall not solicit any Customers for services or products then provided
by the Company, the Bank or the Consolidated Subsidiaries.  For purpose of this
Section, "Customers" are defined as (1) all customers serviced by the Company,
the Bank, or any of the Consolidated Subsidiaries as of the Employee's Date of
Termination, (2) all potential customers whom the Company, the Bank or any of
the Consolidated Subsidiaries actively solicited at any time during the 12-month
period ending on the Employee's Date of Termination, and (3) all successors,
owners, directors, partners and management personnel of the Customers described
in (1) or (2).
(b)            Nonsolicitation of Employees.  The Employee recognizes that the
workforce of the Company and the Bank is a vital part of their businesses;
therefore, during the Restriction Period, the Employee shall not directly or
indirectly recruit or solicit any Employee (as defined below) to leave his or
her employment with the Company, the Bank or any of the Consolidated
Subsidiaries. Without limiting the foregoing, this includes that the Employee
shall not (1) disclose to any third party the names, backgrounds,
 
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or qualifications of any of the Employees or otherwise identify them as
potential candidates for employment, or (2) personally or through any other
person approach, recruit, interview or otherwise solicit Employees to work for
any other employer.  For purposes of this Section, "Employees" means all
employees working for the Company, the Bank or any of the Consolidated
Subsidiaries at the time of the Employee's Date of Termination.
(c)            Nondisclosure.  In the course of employment, the Employee may
have access to confidential information and trade secrets relating to the
business of Security Federal. Except as required in the course of employment by
the Bank, the Employee shall not, without the prior written consent of the Board
of Directors, directly or indirectly disclose to anyone any confidential
information relating to the Security Federal or any financial information, trade
secrets or "know-how" that is germane to the Security Federal's business and
operations. The Employee recognizes and acknowledges that any financial
information concerning any of the customers of Security Federal, as may exist
from time to time, is strictly confidential and is a valuable, special and
unique asset of their businesses.  The Employee shall not, either before or
after termination of this Agreement, disclose to anyone said financial
information, or any part thereof, for any reason or purposes whatsoever.

NOTICE:  Notwithstanding the foregoing nondisclosure obligations, pursuant to 18
USC Section 1833(b), the Employee shall not be held criminally or civilly liable
under any federal or state trade secret law for the disclosure of a trade secret
that is made: (1) in confidence to a federal, state, or local government
official, either directly or indirectly, or to an attorney, and solely for the
purpose of reporting or investigating a suspected violation of law; or (2) in a
complaint or other document filed in a lawsuit or other proceeding, if such
filing is made under seal.  Additionally, an individual who files a lawsuit for
retaliation by an employer for reporting a suspected violation of law may
disclose the trade secret to the attorney of the individual and use the trade
secret information in the court proceeding, if the individual: (a) files any
document containing the trade secret under seal; and (b) does not disclose the
trade secret, except pursuant to court order. 

(d)            Non-Defamation.  The Employee shall not, during the course of the
Employee's employment with the Company or the Bank, nor at any time thereafter,
directly or indirectly, in public or private, in any manner or in any medium
whatsoever, deprecate, impugn or otherwise make any comments, writings, remarks
or other expressions that would, or could be construed to, defame the Company,
the Bank or either of their reputations.  Nor shall the Employee assist any
other person, firm or company in so doing.

(e)            Sanctions; Remedial Actions.

(1)            Cessation of Remaining Payments and Compensation; Right to
Recover Previous Payments.  In the event any of the Restrictive Covenants are
violated, any remaining payments or compensation, of any nature, due to the
Employee under Section 3 shall immediately cease, and the Company or the Bank
shall have the right to recover, at any time and in its sole discretion, all
payments and other compensation (of whatever nature) paid to the Employee (or
the equivalent value thereof, in the case of insurance or other non-monetary
payments) after such violation occurred.
(2)            Injunctive Relief.  The Employee acknowledges that it is
impossible to measure in money the damages that will accrue to Security Federal
if the Employee fails to observe and comply with the Restrictive Covenants;
therefore, the Restrictive Covenants may be enforced by an action at law for
damages and by an injunction or other equitable remedies to prohibit the
restricted activity.  The
 
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Employee hereby waives the claim or defense that an adequate remedy at law is
available to Security Federal.  Nothing set forth herein shall prohibit Security
Federal from pursuing all remedies available to them.
(f)            Reasonableness.  The parties agree that this Agreement in its
entirety, and in particular the Restrictive Covenants, are reasonable both as to
time and scope.  The parties additionally agree (1) that the Restrictive
Covenants are necessary for the protection of Security Federal's business and
goodwill; (2) that the Restrictive Covenants are not any greater than are
reasonably necessary to secure the Security Federal's business and goodwill; and
(3) that the degree of injury to the public due to the loss of the service and
skill of the Employee or the restrictions placed upon the Employee's opportunity
to make a living with the Employee's skills upon enforcement of said restraints,
does not and will not warrant non-enforcement of said restraints. The parties
agree that if the scope of the Restrictive Covenants is adjudged too broad to be
capable of enforcement, then the parties authorize said court or arbitrator to
narrow the Restrictive Covenants so as to make them capable of enforcement,
given all relevant circumstances, and to enforce the same.
(g)            Survival. This Section 4 shall survive the termination of this
Agreement.
5.            Attorneys' Fees. If the Employee is purportedly Terminated for
Cause and the Bank denies payments and/or benefits under Section 3(a) of this
Agreement on the basis that the Employee experienced Termination for Cause, but
it is determined by a court of competent jurisdiction or by an arbitrator
pursuant to Section 12 that "cause" as contemplated by this Agreement did not
exist for termination of the Employee's employment, or if in any event it is
determined by any such court or arbitrator that the Bank has failed to make
timely payment of any amounts or provision of any benefits owed to the Employee
under this Agreement, the Employee shall be entitled to reimbursement for all
reasonable costs, including attorneys' fees, incurred in challenging such
termination of employment or collecting such amounts or benefits. Such
reimbursement shall be in addition to all rights to which the Employee is
otherwise entitled under this Agreement.

6.            No Assignments.
(a)            This Agreement is personal to each of the parties hereto, and
neither party may assign or delegate any of its rights or obligations hereunder
without first obtaining the written consent of the other party; provided,
however, that the Company and the Bank shall require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation, operation of
law or otherwise) to all or substantially all of the business and/or assets of
the Company and the Bank, by an assumption agreement, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company and the Bank would be required to perform it if no such succession
or assignment had taken place. Failure of the Company and the Bank to obtain
such an assumption agreement prior to the effectiveness of any such succession
or assignment shall be a breach of this Agreement and shall entitle the Employee
to compensation and benefits in the same amount and on the same terms that
Employee would be entitled to hereunder under this Agreement if an event of
Involuntary Termination occurred. For purposes of implementing the provisions of
this Section 6(a), the date on which any such succession becomes effective shall
be deemed to be the Date of Termination.
(b)            This Agreement and all rights of the Employee hereunder shall
inure to the benefit of and be enforceable by the Employee's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. In the event of the death of the Employee, unless
otherwise provided herein, all amounts payable hereunder shall be paid to the
Employee's devisee, legatee, or other designee or, if there be no such designee,
to the Employee's estate.
 
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7.            Delivery of Notices. For the purposes of this Agreement, all
notices and other communications to any party hereto shall be in writing and
shall be deemed to have been duly given when delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee:                                      At the address last
appearing
                                                                                                  on
the personnel records of
                                                                                                  the
Employee
If to Security Federal:                     Security Federal Corporation
                                                                                                  238
Richland Avenue Northwest
                                                                                                  Aiken,
South Carolina 29801
                                                                                                  Attention:
Corporate Secretary
or to such other address as such party may have furnished to the other in
writing in accordance herewith, except that a notice of change of address shall
be effective only upon receipt.
8.            Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided or as necessary to avoid a violation of Section 409A, in which case the
amendment may be made by the Bank or its delegate.
9.            Headings. The headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
10.            Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
11.            Governing Law. This Agreement shall be governed by the laws of
the State of South Carolina to the extent that federal law does not govern.
12.            Arbitration.  Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by binding
arbitration, conducted before a panel of three arbitrators in a location
selected by the Employee within 50 miles of such Employee's job location with
the Bank, in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrators' award in any court
having jurisdiction.
13.            Knowing and Voluntary Agreement.  Employee represents and agrees
that the Employee has read this Agreement, understands its terms, and that the
Employee has the right to consult counsel of choice and has either done so or
knowingly waives the right to do so. Employee also represents that the Employee
has had ample time to read and understand the Agreement before executing it and
that the Employee enters into this Agreement without duress or coercion from any
source.

14.            Obligations Joint and Several; No Duplicative Benefits.  The
obligations to the Employee under this Agreement are joint and several between
the Company and the Bank. Nothing, however, shall entitle the Employee to
duplicative benefits on account of this joint and several liability.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
Attest:
 
SECURITY FEDERAL CORPORATION
 
 
 
 
 
 
 
 
 
 
By:   
 
 
 
Its:   
 
 
 
 
 
 
 
Attest:
 
SECURITY FEDERAL BANK
 
 
 
 
 
 
 
 
 
 
 
 
By:   
 
    Its:                   
 
 
      EMPLOYEE       
 
 
 
       
 
 
Name:
 
 

                                                                                    
 
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