<PAGE>
                                                                     EXHIBIT 4.7







              CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREEMENT


                                 BY AND BETWEEN


                    SOUTHERN COMMUNITY FINANCIAL CORPORATION


                                       AND


                            WILMINGTON TRUST COMPANY


                          DATED AS OF JANUARY    , 2002
                                              ---






<PAGE>



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                       Page No.
<S>                                                                                                    <C>
ARTICLE I DEFINITIONS AND INTERPRETATION .................................................................1
Section 1.1 Definitions and Interpretation ...............................................................1
ARTICLE II TRUST INDENTURE ACT............................................................................5
Section 2.1 Trust Indenture Act; Application..............................................................5
Section 2.2 Lists of Holders of Securities................................................................5
Section 2.3 Reports by the Guarantee Trustee..............................................................5
Section 2.4 Periodic Reports to Guarantee Trustee.........................................................5
Section 2.5 Evidence of Compliance with Conditions Precedent..............................................6
Section 2.6 Events of Default; Waiver.....................................................................6
Section 2.7 Event of Default; Notice .....................................................................6
Section 2.8 Conflicting Interests.........................................................................7
ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE................................................7
Section 3.1 Powers and Duties of the Guarantee Trustee....................................................7
Section 3.2 Certain Rights of Guarantee Trustee...........................................................8
Section 3.3 Not Responsible for Recitals or Issuance of Guarantee.........................................10
ARTICLE IV GUARANTEE TRUSTEE..............................................................................10
Section 4.1 Guarantee Trustee; Eligibility................................................................10
Section 4.2 Appointment, Removal and Resignation of Guarantee Trustee.....................................11
ARTICLE V GUARANTEE.......................................................................................11
Section 5.1 Guarantee.....................................................................................11
Section 5.2 Waiver of Notice and Demand...................................................................12
Section 5.3 Obligations not Affected......................................................................12
Section 5.4 Rights of Holders ............................................................................13
Section 5.5 Guarantee of Payment..........................................................................13
Section 5.6 Subrogation...................................................................................13
Section 5.7 Independent Obligations.......................................................................13
Section 5.8 Conversion....................................................................................14
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION......................................................14
Section 6.1 Limitation of Transactions....................................................................14
Section 6.2 Ranking.......................................................................................14
ARTICLE VII TERMINATION...................................................................................14
Section 7.1 Termination...................................................................................14
ARTICLE VIII INDEMNIFICATION..............................................................................15
Section 8.1 Exculpation...................................................................................15
Section 8.2 Indemnification...............................................................................15
ARTICLE IX MISCELLANEOUS..................................................................................15
Section 9.1 Successors and Assigns........................................................................15
Section 9.2 Amendments ...................................................................................16
Section 9.3 Notices.......................................................................................16
Section 9.4 Benefit.......................................................................................17
Section 9.5 Governing Law.................................................................................17
</TABLE>


<PAGE>

                              CROSS REFERENCE TABLE

<TABLE>
<CAPTION>
         Section of Trust Indenture Act of                           Section of Convertible Preferred Securities
                  1939, as amended                                               Guarantee Agreement
         <S>                                                         <C>
                       310(a)                                                          4.1(a)
                       310(b)                                                        4.1(c), 2.8
                       310(c)                                                      Not Applicable
                       311(a)                                                          2.2(b)
                       311(b)                                                          2.2(b)
                       311(c)                                                      Not Applicable
                       312(a)                                                          2.2(a)
                       312(b)                                                          2.2(b)
                        313                                                              2.3
                       314(a)                                                            2.4
                       314(b)                                                      Not Applicable
                       314(c)                                                            2.5
                       314(d)                                                      Not Applicable
                       314(e)                                                       1.1, 2.5, 3.2
                       314(f)                                                         2.1, 3.2
                       315(a)                                                          3.1(d)
                       315(b)                                                            2.7
                       315(c)                                                            3.1
                       315(d)                                                          3.1(d)
                       316(a)                                                       1.1, 2.6, 5.4
                       316(b)                                                            5.3
                       317(a)                                                            3.1
                       317(b)                                                      Not Applicable
                       318(a)                                                          2.1(a)
                       318(b)                                                            2.1
                       318(c)                                                          2.1(b)
</TABLE>




Note: This Cross-Reference Table does not constitute part of this Agreement and
     shall not affect the interpretation of any of its terms or provisions.



<PAGE>



              CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREEMENT

         THIS CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREEMENT (this
"Preferred Securities Guarantee"), dated as of January ___, 2002, is executed
and delivered by SOUTHERN COMMUNITY FINANCIAL CORPORATION, a North Carolina
corporation (the "Guarantor"), and WILMINGTON TRUST COMPANY, a Delaware banking
corporation organized under the laws of the State of Delaware, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of Southern
Community Capital Trust I, a Delaware statutory business trust (the "Trust").

                                    RECITALS

         WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of January ___, 2002, among the trustees of the
Trust named therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of the Trust, the Trust is
issuing, on the date hereof, up to 1,725,000 convertible preferred securities,
having an aggregate Liquidation Amount of up to $17,250,000 designated the
_____% Cumulative Convertible Trust Preferred Securities;

         WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.

                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1 DEFINITIONS AND INTERPRETATION.

         In this Preferred Securities Guarantee, unless the context otherwise
requires:

         (a) capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to them
in this Section 1.1;

<PAGE>

         (b) terms defined in the Trust Agreement as at the date of execution of
this Preferred Securities Guarantee have the same meaning when used in this
Preferred Securities Guarantee, unless otherwise defined in this Preferred
Securities Guarantee;

         (c) a term defined anywhere in this Preferred Securities Guarantee has
the same meaning throughout;

         (d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;

         (e) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;

         (f) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and

         (g) a reference to the singular includes the plural and vice versa.

         "Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.

         "Business Day" means any day other than a Saturday, Sunday, a day on
which federal or state banking institutions in Winton-Salem, North Carolina are
authorized or required by law, executive order or regulation to close or a day
on which the Corporate Trust Office of the Guarantee Trustee is closed for
business.

         "Corporate Trust Office" means the office of the Guarantee Trustee at
which the corporate trust business of the Guarantee Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Agreement is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.

         "Covered Person" means any Holder or beneficial owner of Preferred
Securities.

         "Debentures" means the ____% Convertible Deferrable Interest Junior
Subordinated Debentures due ________, 2032, of the Debenture Issuer held by the
Property Trustee of the Trust.

         "Debenture Issuer" means Southern Community Financial Corporation,
issuer of the Debentures under the Indenture.
<PAGE>

         "Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.

         "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Trust: (i) any accrued and unpaid Distributions that are
required to be paid on such Preferred Securities, to the extent the Trust shall
have funds available therefor, (ii) the redemption price, including all accrued
and unpaid Distributions to the date of redemption (the "Redemption Price"), to
the extent the Trust has funds available therefor, with respect to any Preferred
Securities called for redemption by the Trust, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of Debentures to the Holders in exchange for
Preferred Securities as provided in the Trust Agreement), the lesser of (a) the
aggregate of the Liquidation Amount and all accrued and unpaid Distributions on
the Preferred Securities to the date of payment, to the extent the Trust shall
have funds available therefor (the "Liquidation Distribution"), and (b) the
amount of assets of the Trust remaining available for distribution to Holders in
liquidation of the Trust.

         "Guarantee Trustee" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Preferred Securities Guarantee and thereafter means each
such Successor Guarantee Trustee.

         "Guarantor" means Southern Community Financial Corporation, a North
Carolina corporation.

         "Holder" shall mean any holder, as registered on the books and records
of the Trust, of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor, the Guarantee Trustee or any of their
respective Affiliates.

         "Indemnified Person" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Guarantee
Trustee.

         "Indenture" means the Indenture dated as of January __, 2002, among the
Debenture Issuer and Wilmington Trust Company, as trustee, and any indenture
supplemental thereto pursuant to which the Debentures are to be issued to the
Property Trustee of the Trust.

         "Liquidation Amount" means the stated value of $10 per Preferred
Security.

         "Liquidation Distribution" has the meaning provided therefor in the
definition of Guarantee Payments.


<PAGE>


         "Majority in Liquidation Amount of the Preferred Securities" means the
holders of more than 50% of the Liquidation Amount of all of the Preferred
Securities.

         "Officers' Certificate" means, with respect to any Person, a
certificate signed by two authorized officers of such Person, at least one of
whom shall be the principal executive officer, principal financial officer,
principal accounting officer, treasurer or any vice president of such Person.
Any Officers' Certificate delivered with respect to compliance with a condition
or covenant provided for in this Preferred Securities Guarantee shall include:

         (a)      a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definition relating
thereto;

         (b)      a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate;

         (c)      a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and

         (d)      a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

         "Preferred Securities" means the _____% Cumulative Convertible Trust
Preferred Securities representing undivided beneficial interests in the assets
of the Trust which rank pari passu with Common Securities issued by the Trust;
provided, however, that upon the occurrence of an Event of Default, the rights
of holders of Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise are subordinated to the
Rights of holders of Preferred Securities.

         "Redemption Price" has the meaning provided therefor in the definition
of Guarantee Payments.

         "Responsible Officer" means, with respect to the Guarantee Trustee, any
officer within the Corporate Trust Office of the Guarantee Trustee with direct
responsibility for the administration of this Preferred Securities Guarantee,
including any vice-president, any assistant vice-president, any assistant
secretary or other officer or assistant officer of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.


<PAGE>


         "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.


                                   ARTICLE II
                               TRUST INDENTURE ACT

SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.

         (a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions.

         (b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.

SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.

         (a) In the event the Guarantee Trustee is not also acting in the
capacity of the Property Trustee under the Trust Agreement, the Guarantor shall
cause to be provided to the Guarantee Trustee with a list, in such form as the
Guarantee Trustee may reasonably require, of the names and addresses of the
Holders of the Preferred Securities ("List of Holders") as of the date (i)
within one Business Day after March 15, June 15, September 15 and December 15,
and (ii) at any other time within 30 days of receipt by the Guarantor of a
written request for a List of Holders as of a date no more than 15 days before
such List of Holders is given to the Guarantee Trustee; provided, that the
Guarantor shall not be obligated to provide such List of Holders at any time the
List of Holders does not differ from the most recent List of Holders caused to
have been given to the Guarantee Trustee by the Guarantor. The Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.

         (b) The Guarantee Trustee shall comply with its obligations under
Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.

SECTION 2.3 REPORTS BY THE GUARANTEE TRUSTEE.

<PAGE>

         On or before July 31 of each year, commencing July 31, 2002, the
Guarantee Trustee shall provide to the Holders of the Preferred Securities such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.

            The Guarantee Trustee shall also comply with the requirements of
Section 313(d) of the Trust Indenture Act.

SECTION 2.4 PERIODIC REPORTS TO GUARANTEE TRUSTEE.

         The Guarantor shall provide to the Guarantee Trustee such documents,
reports and information as required by Section 314 (if any) and the compliance
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
Delivery of such reports, information and documents to the Preferred Guarantee
Trustee is for informational purposes only and the Preferred Guarantee Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained herein, including
the Guarantor's compliance with any of its covenants hereunder (as to which the
Preferred Guarantee Trustee is entitled to rely exclusively on Officers'
Certificates). The Guarantor also shall transmit to the Holders of the Preferred
Securities, in the manner and to the extent provided in Section 313(c) of the
Trust Indenture Act, such summaries of the foregoing documents, reports and
information as may be required by rules and regulations prescribed by the
Commission.

SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

         The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with any conditions precedent, if any, provided for in this Preferred
Securities Guarantee that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.

SECTION 2.6 EVENTS OF DEFAULT; WAIVER.

         The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such Event
of Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this Preferred
Securities Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.

SECTION 2.7 EVENT OF DEFAULT; NOTICE.

         (a) The Guarantee Trustee shall, within 90 days after the occurrence of
an Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Preferred Securities, notices of


<PAGE>


all Events of Default actually known to a Responsible Officer of the Guarantee
Trustee, unless such defaults have been cured before the giving of such notice;
provided, that, except in the case of a default by Guarantor on any of its
payment obligations, the Guarantee Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Guarantee Trustee in
good faith determines that the withholding of such notice is in the interests of
the Holders of the Preferred Securities.

         (b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or of which a Responsible Officer of the Guarantee Trustee charged with
the administration of the Trust Agreement shall have obtained actual knowledge.

SECTION 2.8 CONFLICTING INTERESTS.

         The Trust Agreement shall be deemed to be specifically described in
this Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.

                                   ARTICLE III
                 POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE

SECTION 3.1 POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.

         (a) This Preferred Securities Guarantee shall be held by the Guarantee
Trustee for the benefit of the Holders of the Preferred Securities, and the
Guarantee Trustee shall not transfer this Preferred Securities Guarantee to any
Person except a Holder of Preferred Securities exercising his or her rights
pursuant to Section 5.4(b) or to a Successor Guarantee Trustee on acceptance by
such Successor Guarantee Trustee of its appointment to act as Successor
Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.

         (b) If an Event of Default actually known to a Responsible Officer of
the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee
shall enforce this Preferred Securities Guarantee for the benefit of the Holders
of the Preferred Securities.

         (c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Guarantee Trustee. In case an
Event of Default has occurred (that has not been cured or waived pursuant to
Section 2.6) and is actually known to a Responsible Officer of the Guarantee
Trustee, the Guarantee Trustee shall exercise such of the rights and powers
vested in it by this Preferred Securities Guarantee,



<PAGE>


and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.

         (d)      No provision of this Preferred Securities Guarantee shall be
construed to relieve the Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:

                  (i)      prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may have
occurred:

                           (A)      the duties and obligations of the Guarantee
                  Trustee shall be determined solely by the express provisions
                  of this Preferred Securities Guarantee, and the Guarantee
                  Trustee shall not be Liable except for the performance of such
                  duties and obligations as are specifically set forth in this
                  Preferred Securities Guarantee, and no implied covenants or
                  obligations shall be read into this Preferred Securities
                  Guarantee against the Guarantee Trustee; and

                           (B)      in the absence of bad faith on the part of
                  the Guarantee Trustee, the Guarantee Trustee may conclusively
                  rely, as to the truth of the statements and the correctness of
                  the opinions expressed therein, upon any certificates or
                  opinions furnished to the Guarantee Trustee and conforming to
                  the requirements of this Preferred Securities Guarantee; but
                  in the case of any such certificates or opinions that by any
                  provision hereof are specifically required to be furnished to
                  the Guarantee Trustee, the Guarantee Trustee shall be under a
                  duty to examine the same to determine whether or not they
                  conform to the requirements of this Preferred Securities
                  Guarantee.

                  (ii)     the Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was made;

                  (iii)    the Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority in
Liquidation Amount of the Preferred Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee, or exercising any trust or power conferred upon the Guarantee Trustee
under this Preferred Securities Guarantee; and

                  (iv)     no provision of this Preferred Securities Guarantee
shall require the Guarantee Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if the Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or liability


<PAGE>


is not reasonably assured to it under the terms of this Preferred Securities
Guarantee or indemnity, reasonably satisfactory to the Guarantee Trustee,
against such risk or liability is not reasonably assured to it.

SECTION 3.2 CERTAIN RIGHTS OF GUARANTEE TRUSTEE.

         (a)      Subject to the provisions of Section 3.1:

                  (i)      the Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties;

                  (ii)     Any direction or act of the Guarantor contemplated by
this Preferred Securities shall be sufficiently evidenced by an Officers'
Certificate;

                  (iii)    whenever, in the administration of this Preferred
Securities Guarantee, the Guarantee Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or omitting any action
hereunder, the Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Guarantor;

                  (iv)     the Guarantee Trustee shall have no duty to see to
any recording, filing or registration of any instrument (or any rerecording,
refiling or registration thereof);

                  (v)      the Guarantee Trustee may consult with counsel, and
the written advice or opinion of such counsel with respect to legal matters
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance with
such advice or opinion. Such counsel may be counsel to the Guarantor or any of
its Affiliates and may include any of its employees. The Guarantee Trustee shall
have the right at any time to seek instructions concerning the administration of
this Preferred Securities Guarantee from any court of competent jurisdiction;

                  (vi)     the Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Preferred Securities
Guarantee at the request or direction of any Holder, unless such Holder shall
have provided to the Guarantee Trustee such security and indemnity, reasonably
satisfactory to the Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the Guarantee Trustee's agents,
nominees or custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable advances as
may be requested by the Guarantee Trustee; provided that, nothing contained in
this Section 3.2(a)(vi) shall be taken to relieve the


<PAGE>

Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this Preferred Securities
Guarantee;

                  (vii)    the Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit;

                  (viii)   the Guarantee Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or by or
through agents, nominees, custodians or attorneys, and the Guarantee Trustee
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder;

                  (ix)     no third party shall be required to inquire as to the
authority of the Guarantee Trustee to so act or as to its compliance with any of
the terms and provisions of this Preferred Securities Guarantee, both of which
shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking
such action;

                  (x)      whenever in the administration of this Preferred
Securities Guarantee the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking any other
action hereunder, the Guarantee Trustee (i) may request instructions from the
Holders of a Majority in Liquidation Amount of the Preferred Securities, (ii)
may refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such instructions.

         (b)      No provision of this Preferred Securities Guarantee shall be
deemed to impose any duty or obligation on the Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Guarantee Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts or to exercise any such right,
power, duty or obligation. No permissive power or authority available to the
Guarantee Trustee shall be construed to be a duty.

SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.

         The Recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Preferred Securities
Guarantee.


<PAGE>


                                   ARTICLE IV
                                GUARANTEE TRUSTEE

SECTION 4.1 GUARANTEE TRUSTEE; ELIGIBILITY.

         (a)      There shall at all times be a Guarantee Trustee which shall:

                  (i)      not be an Affiliate of the Guarantor; and

                  (ii)     be a corporation organized and doing business under
the laws of the United States of America or any state or territory thereof or of
the District of Columbia, or a corporation or Person permitted by the Securities
and Exchange Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by federal, state, territorial or District of
Columbia authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the supervising or examining
authority referred to above, then, for the purposes of this Section 4.1(a)(ii),
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published.

         (b)      If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.2(c).

         (c)      If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.

SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE TRUSTEE.

         (a)      Subject to Section 4.2(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.

         (b)      The Guarantee Trustee shall not be removed in accordance with
Section 4.2(a) until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.

         (c)      The Guarantee Trustee appointed to office shall hold office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.


<PAGE>


         (d)      If no Successor Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.

         (e)      No Guarantee Trustee shall be liable for the acts or omissions
to act of any Successor Guarantee Trustee.

         (f)      Upon termination of this Preferred Securities Guarantee or
removal or resignation of the Guarantee Trustee pursuant to this Section 4.2,
the Guarantor shall pay to the Guarantee Trustee all fees and expenses accrued
to the date of such termination, removal or resignation.

                                    ARTICLE V
                                    GUARANTEE

SECTION 5.1 GUARANTEE.

         The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Trust), as and when due, regardless of any defense, right of set-off
or counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Trust to pay such
amounts to the Holders.

SECTION 5.2 WAIVER OF NOTICE AND DEMAND.

         The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Trust or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.

SECTION 5.3 OBLIGATIONS NOT AFFECTED.

         The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:

         (a)      the release or waiver, by operation of law or otherwise, of
the performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;

         (b)      the extension of time for the payment by the Trust of all or
any portion of the Distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other




<PAGE>

obligation under, arising out of, or in connection with, the Preferred
Securities (other than an extension of time for payment of Distributions,
Redemption Price, Liquidation Distribution or other sum payable that results
from the extension of any interest payment period on the Debentures or any
extension of the maturity date of the Debentures permitted by the Indenture);

         (c)      any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Trust granting indulgence or
extension of any kind;

         (d)      the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the benefit
of creditors, reorganization, arrangement, composition or readjustment of debt
of, or other similar proceedings affecting, the Trust or any of the assets of
the Trust;

         (e)      any invalidity of, or defect or deficiency in, the Preferred
Securities;

         (f)      any failure or omission to receive any regulatory approval or
consent required in connection with the Preferred Securities (or the common
equity securities issued by the Trust), including the failure to receive any
approval of the Board of Governors of the Federal Reserve System required for
the redemption of the Preferred Securities;

         (g)      the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or

         (h)      any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.

         There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 5.4 RIGHTS OF HOLDERS.

         (a)      Subject to Section 5.4(b), the Holders of a Majority in
liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting of any proceeding for any remedy available
to the Guarantee Trustee in respect of this Preferred Securities Guarantee or
exercising any trust or power conferred upon the Guarantee Trustee under this
Preferred Securities Guarantee.

         (b)      Any Holder of Preferred Securities may institute and prosecute
a legal proceeding directly against the Guarantor to enforce its rights under
this Preferred Securities Guarantee, without first instituting a legal
proceeding against the Trust, the Guarantee Trustee or any other Person.


<PAGE>


SECTION 5.5 GUARANTEE OF PAYMENT.

         This Preferred Securities Guarantee creates a guarantee of payment and
not of collection.

SECTION 5.6  SUBROGATION.

         The Guarantor shall be subrogated to all (if any) rights of the Holders
of Preferred Securities against the Trust in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Preferred Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.

SECTION 5.7 INDEPENDENT OBLIGATIONS.

         The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (h), inclusive, of Section 5.3 hereof.


SECTION 5.8 CONVERSION.

         The Guarantor acknowledges and agrees to honor and perform all of its
obligations to issue and deliver the common stock of the Guarantor upon the
conversion of the Preferred Securities as provided in Article IV of the
Indenture.

                                   ARTICLE VI
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.1 LIMITATION OF TRANSACTIONS.

         So long as any Preferred Securities remain outstanding, if there shall
have occurred an Event of Default under this Preferred Securities Guarantee, an
event of default under the Trust Agreement or during an Extended Interest
Payment Period (as defined in the Indenture), then (a) the Guarantor shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock (other than as a result of a reclassification of its capital
stock for another class of its capital stock)



<PAGE>

and (b) the Guarantor shall not make any payment of interest or principal on or
repay, repurchase or redeem any debt securities issued by the Guarantor which
rank pari passu with or junior to the Debentures, other than payments under this
Preferred Securities Guarantee.

SECTION 6.2 RANKING.

         This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank subordinate and junior in right of
payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations,
as defined in the Indenture, of the Guarantor, to the extent and in the manner
set forth in the Indenture, and the applicable provisions of the Indenture will
apply, in all relevant respects, to the obligations of the Guarantor hereunder.

                                   ARTICLE VII
                                   TERMINATION

SECTION 7.1 TERMINATION.

         This Preferred Securities Guarantee shall terminate upon (i) full
payment of the Redemption Price of all Preferred Securities, (ii) upon full
payment of the amounts payable in accordance with the Trust Agreement upon
liquidation of the Trust, or (iii) upon distribution of the Debentures to the
Holders of the Preferred Securities. Notwithstanding the foregoing, this
Preferred Securities Guarantee shall continue to be effective or shall be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.


                                  ARTICLE VIII
                                 INDEMNIFICATION

SECTION 8.1 EXCULPATION.

         (a)      No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Preferred Securities Guarantee or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.


<PAGE>


         (b)      An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of Preferred Securities
might properly be paid.

SECTION 8.2 INDEMNIFICATION.

         The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee.

                                   ARTICLE IX
                                  MISCELLANEOUS

SECTION 9.1 SUCCESSORS AND ASSIGNS.

         All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding.

SECTION 9.2 AMENDMENTS.

         Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Preferred Securities Guarantee may only be amended with the
prior approval of the Holders of at least a Majority in Liquidation Amount of
the Preferred Securities. The provisions of Article VI of the Trust Agreement
with respect to meetings of Holders of the Preferred Securities apply to the
giving of such approval.


<PAGE>


SECTION 9.3 NOTICES.

         All notices provided for in this Preferred Securities Guarantee shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:

         (a)      If given to the Guarantee Trustee, at the Guarantee Trustee's
mailing address set forth below (or such other address as the Guarantee Trustee
may give notice of to the Holders of the Preferred Securities):

                           Wilmington Trust Company
                           Rodney Square North
                           1100 North Market Street
                           Wilmington, Delaware  19890-0001
                           Attention: Corporate Trust Administration
                           Facsimile: (302) 651-8882

         (b)      If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Preferred Securities):

                           Southern Community Financial Corporation
                           4701 Country Club Road
                           Winston-Salem, NC 27104
                           Attention: F. Scott Bauer
                           Facsimile: (336) 768-2552

         (c)      If given to any Holder of Preferred Securities, at the address
set forth on the books and records of the Trust.

         All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

SECTION 9.4 BENEFIT.

         This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.


<PAGE>

SECTION 9.5 GOVERNING LAW.

         THIS PREFERRED SECURITIES GUARANTEE AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH
CAROLINA.

         This Preferred Securities Guarantee is executed as of the day and year
first above written.


                                  SOUTHERN COMMUNITY FINANCIAL CORPORATION,
                                  As Guarantor


                                  ----------------------------------


                                  By:
                                     -------------------------------

                               Title:
                                     -------------------------------


                                  WILMINGTON TRUST COMPANY,
                                  As Guarantee Trustee


                                     -------------------------------


                                 By:
                                     -------------------------------

                              Title:
                                     -------------------------------