<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="margin-left: 0.25in; width: 7.2in; font-family: 'Times New Roman',Times,serif">
<DIV style="font-size: 10pt">
<DIV style="font-size: 1pt; width: 100%; border-bottom: black 2pt solid">&nbsp;</DIV>
<DIV style="font-size: 1pt; width: 100%; border-bottom: black 1pt solid">&nbsp;</DIV>

<P style="font-size: 14pt" align="center"><B>UNITED STATES<BR>
SECURITIES AND
EXCHANGE COMMISSION<BR>
<FONT style="font-size: 12pt">Washington, D.C. 20549
</FONT></B>

<P style="font-size: 18pt" align="center"><B>FORM 8-K</B>

<P style="font-size: 12pt" align="center"><B>CURRENT REPORT<BR>
Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934</B>

<P style="font-size: 10pt" align="center"><B>Date of Report (Date of earliest
event reported): November 20, 2008</B>

<P style="font-size: 24pt" align="center"><B>Severn Bancorp, Inc.<BR>
</B><FONT
style="font-size: 10pt">(Exact name of registrant as specified in its charter)
</FONT>
<TABLE style="font-size: 10pt; text-align: center" cellspacing="0"
cellpadding="0" width="100%" border="0">

 <TR>
  <TD width="32%">&nbsp;</TD>
  <TD width="1%">&nbsp;</TD>
  <TD width="33%">&nbsp;</TD>
  <TD width="1%">&nbsp;</TD>
  <TD width="32%">&nbsp;</TD>
 </TR>
 <TR valign="bottom">
  <TD style="border-bottom: #000000 1px solid"><B>Maryland</B></TD>
  <TD>&nbsp;</TD>
  <TD style="border-bottom: #000000 1px solid"><B>0-49731</B></TD>
  <TD>&nbsp;</TD>
  <TD style="border-bottom: #000000 1px solid"><B>52-1726127</B></TD>
 </TR>
 <TR valign="top">
  <TD>(State or other Jurisdiction of Incorporation)</TD>
  <TD>&nbsp;</TD>
  <TD>(Commission File Number)</TD>
  <TD>&nbsp;</TD>
  <TD>(IRS Employer Identification No.)</TD>
 </TR>

</TABLE>
<TABLE style="font-size: 10pt; text-align: center" cellspacing="0"
cellpadding="0" width="100%" border="0">

 <TR>
  <TD width="49%">&nbsp;</TD>
  <TD width="1%">&nbsp;</TD>
  <TD width="49%">&nbsp;</TD>
 </TR>
 <TR valign="bottom">
  <TD style="border-bottom: #000000 1px solid"><B>200 Westgate Circle, Suite
200, Annapolis, Maryland</B></TD>
  <TD>&nbsp;</TD>
  <TD style="border-bottom: #000000 1px solid"><B>21401</B></TD>
 </TR>
 <TR valign="top">
  <TD>(Address of Principal Executive Offices)</TD>
  <TD>&nbsp;</TD>
  <TD>(Zip Code)</TD>
 </TR>

</TABLE>


<P style="font-size: 10pt" align="center">Registrant&#8217;s telephone number,
including area code: <B>410-260-2000</B>
<TABLE style="font-size: 10pt; text-align: center" cellspacing="0"
cellpadding="0" width="30%" border="0">

 <TR>
  <TD width="100%">&nbsp;</TD>
 </TR>
 <TR>
  <TD style="border-bottom: #000000 1px solid" nowrap><B>&nbsp;</B></TD>
 </TR>
 <TR>
  <TD nowrap>(Former name or former address if changed since last report.)</TD>
 </TR>

</TABLE>


<P style="font-size: 10pt" align="left">Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions:

<P style="font-size: 10pt" align="left"><FONT face="Wingdings">o</FONT> Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)<BR>
<BR>
<FONT face="Wingdings">o</FONT> Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)<BR>
<BR>
<FONT
face="Wingdings">o</FONT> Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<BR>
<BR>
<FONT
face="Wingdings">o</FONT> Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<BR>


<DIV style="margin-top: 10pt; font-size: 1pt; width: 100%; border-bottom: black 1pt solid">&nbsp;</DIV>
<DIV style="font-size: 1pt; width: 100%; border-bottom: black 2pt solid">&nbsp;</DIV>
</DIV>

<P style="font-size: 10pt" align="center">&nbsp;

<P style="display: none; font-size: 10pt" align="center">1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV
style="margin-left: 0.25in; width: 7.2in; font-family: 'Times New Roman',Times,serif">

<P style="font-size: 10pt" align="left"><B>Item&nbsp;1.01. Entry into a
Material Definitive Agreement.</B>

<P style="font-size: 10pt; text-indent: 4%" align="left">On November&nbsp;21,
2008, Severn Bancorp, Inc. (the &#8220;Bancorp&#8221;) entered into a Letter
Agreement (the &#8220;Purchase Agreement&#8221;) with the United States
Department of the Treasury (&#8220;Treasury&#8221;), pursuant to which Bancorp
agreed to issue and sell (i)&nbsp;23,393 shares of its Fixed Rate Cumulative
Perpetual Preferred Stock, Series&nbsp;B, par value $0.01 per share and
liquidation preference $1,000 per share, (the &#8220;Series&nbsp;B Preferred
Stock&#8221;) and (ii)&nbsp;a warrant (the &#8220;Warrant&#8221;) to purchase
556,976 shares of Bancorp&#8217;s common stock, par value $0.01 per share (the
&#8220;Common Stock&#8221;), for an aggregate purchase price of $ 23,393,000 in
cash. Closing of the sale occurred on November&nbsp;21, 2008.

<P style="font-size: 10pt; text-indent: 4%" align="left">The following summary
of the material terms and provisions of the Purchase Agreement, the
Series&nbsp;B Preferred Stock and the Warrant is not intended to be complete
and is qualified by reference to the (i)&nbsp;Purchase Agreement, a copy of
which is attached hereto as Exhibit&nbsp;10.1 and is incorporated herein by
reference, (ii)&nbsp;Articles Supplementary to the Articles of Incorporation of
Bancorp (the &#8220;Articles of Amendment&#8221;), a copy of which is attached
hereto as Exhibit&nbsp;3.1 and is incorporated herein by reference, and
(iii)Warrant, a copy of which is attached hereto as Exhibit&nbsp;4.1 and is
incorporated herein by reference.

<P style="font-size: 10pt; text-indent: 4%" align="left">The Series&nbsp;B
Preferred Stock will qualify as Tier 1 capital and will pay cumulative
compounding dividends at a rate of 5% per annum for the first five years, and
9% per annum thereafter. The Series&nbsp;B Preferred Stock may be redeemed by
Bancorp after three years. Prior to the end of three years, the Series&nbsp;B
Preferred Stock may not be redeemed by Bancorp except with proceeds from one or
more Qualified Equity Offerings (as defined in the Purchase Agreement). The
restrictions on redemption are set forth in the Articles of Amendment. The
Series&nbsp;B Preferred Stock has no maturity date and ranks <I>pari passu
</I>with Bancorp&#8217;s existing Series&nbsp;A 8.0% Non-Cumulative Convertible
Preferred Stock, in terms of dividend payments and distributions upon
liquidation, dissolution and winding up of Bancorp.

<P style="font-size: 10pt; text-indent: 4%" align="left">The Series&nbsp;B
Preferred Stock is non-voting, other than class voting rights on certain
matters that could adversely affect the Series&nbsp;B Preferred Stock. If
dividends on the Series&nbsp;B Preferred Stock have not been paid for an
aggregate of six quarterly dividend periods or more, whether consecutive or
not, Bancorp&#8217;s authorized number of directors will be automatically
increased by two and the holders of the Series&nbsp;B Preferred Stock, voting
together with holders of any then outstanding voting parity stock, will have
the right to elect those directors at Bancorp&#8217;s next annual meeting of
stockholders or at a special meeting of stockholders called for that purpose.
These preferred share directors will be elected annually and serve until all
accrued and unpaid dividends on the Series&nbsp;B Preferred Stock have been
paid.

<P style="font-size: 10pt; text-indent: 4%" align="left">The Warrant has a
10-year term and is immediately exercisable at an exercise price of $6.30 per
share of Common Stock. The exercise price and number of shares subject to the
Warrant are both subject to anti-dilution adjustments. If Bancorp receives
aggregate gross cash proceeds of not less than $23,393,000 from Qualified
Equity Offerings on or prior to December&nbsp;31, 2009, the number of shares of
Common Stock issuable pursuant to Treasury&#8217;s exercise of the Warrant will
be reduced by one half of the original number of shares, taking into account
all adjustments, underlying the Warrant. Pursuant to the Purchase Agreement,
Treasury has agreed not to exercise voting power with respect to any shares of Common Stock issued upon exercise of the Warrant.

<P style="font-size: 10pt; text-indent: 4%" align="center">&nbsp;

<P style="font-size: 10pt" align="center">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV
style="margin-left: 0.25in; width: 7.2in; font-family: 'Times New Roman',Times,serif">

<P style="font-size: 10pt; text-indent: 4%" align="left">During the term of the
Warrant, if at any time the shares of Common Stock are no longer listed or
admitted to trading on a national securities exchange (other than in connection
with certain business combinations), the Treasury may cause Bancorp to exchange
all or a portion of the Warrant for another economic interest of Bancorp
(determined by the Treasury in consultation with Bancorp) classified as
permanent equity under U.S. GAAP with an equivalent fair market value.

<P style="font-size: 10pt; text-indent: 4%" align="left">The Series&nbsp;B
Preferred Stock and the Warrant were issued in a private placement exempt from
registration pursuant to Section&nbsp;4(2) of the Securities Act of 1933, as
amended. Bancorp has granted Treasury and other future holders of the
Series&nbsp;B Preferred Stock, the Warrant or the shares of Common Stock
underlying the Warrant (the &#8220;Warrant Shares&#8221;) certain registration
rights with respect to the securities. Neither the Series&nbsp;B Preferred
Stock nor the Warrant will be subject to any contractual restrictions on
transfer, except that Treasury may only transfer or exercise an aggregate of
one-half of the Warrant Shares prior to the earlier of (i)&nbsp;the date on
which Bancorp has received aggregate gross proceeds of not less than
$23,393,000 from one or more Qualified Equity Offerings and
(ii)&nbsp;December&nbsp;31, 2009.

<P style="font-size: 10pt; text-indent: 4%" align="left">In the Purchase
Agreement, Bancorp agreed that, until such time as Treasury ceases to own any
debt or equity securities of Bancorp acquired pursuant to the Purchase
Agreement or Warrant, Bancorp will take all necessary action to ensure that its
benefit plans with respect to its senior executive officers comply with Section
111(b) of the Emergency Economic Stabilization Act of 2008 (the
&#8220;EESA&#8221;) as implemented by any guidance or regulation under the EESA
that has been issued and is in effect as of the date of issuance of the
Series&nbsp;B Preferred Stock and the Warrant, and has agreed to not adopt any
benefit plans with respect to, or which covers, its senior executive officers
that do not comply with the EESA, and the applicable executives have consented
to the foregoing.

<P style="font-size: 10pt" align="left"><B>Item&nbsp;3.02. Unregistered Sales
of Equity Securities.</B>

<P style="font-size: 10pt; text-indent: 4%" align="left">The information set
forth under &#8220;Item&nbsp;1.01. Entry into a Material Definitive
Agreement&#8221; is incorporated by reference into this Item&nbsp;3.02.

<P style="font-size: 10pt" align="left"><B>Item&nbsp;3.03 Material Modification
to Rights of Security Holders.</B>

<P style="font-size: 10pt; text-indent: 4%" align="left">The information set
forth under &#8220;Item&nbsp;1.01. Entry into a Material Definitive
Agreement&#8221; is incorporated by reference into this Item&nbsp;3.03.

<P style="font-size: 10pt; text-indent: 4%" align="left">Prior to
November&nbsp;21, 2011 unless Bancorp has redeemed the Series&nbsp;B Preferred
Stock or the Treasury has transferred the Series&nbsp;B Preferred Stock to a
third party, Bancorp may not, without the consent of the Treasury (1) declare
or pay any dividend or make any distribution on its Common Stock (other than
regular quarterly cash dividends of not more than $0.06 per share) or
(2)&nbsp;redeem, purchase or acquire any shares of its Common Stock or other
equity or capital securities, other than in connection with benefit plans
consistent with past practice and certain other circumstances specified in the
Purchase Agreement. The redemption, purchase or other acquisition of trust
preferred securities of Bancorp or its affiliates will also be subject to
restrictions set forth in the Purchase Agreement.

<P style="font-size: 10pt; text-indent: 4%" align="center">&nbsp;

<P style="font-size: 10pt" align="center">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV
style="margin-left: 0.25in; width: 7.2in; font-family: 'Times New Roman',Times,serif">

<P style="font-size: 10pt; text-indent: 6%" align="left">In addition, under the
Articles of Amendment, Bancorp&#8217;s ability to declare or pay dividends or
repurchase its Common Stock or other equity securities will be subject to
restrictions in the event that Bancorp fails to declare and pay (or set aside
for payment) full dividends on the Series&nbsp;B Preferred Stock.

<P style="font-size: 10pt" align="left"><B>Item&nbsp;5.02. Departure of
Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.</B>

<P style="font-size: 10pt; text-indent: 4%" align="left">The information
concerning executive compensation set forth under &#8220;Item&nbsp;1.01 Entry
into a Material Definitive Agreement&#8221; is incorporated by reference into
this Item&nbsp;5.02.

<P style="font-size: 10pt" align="left"><B>Item&nbsp;5.03 Amendment to Articles
of Incorporation or Bylaws; Change in Fiscal Year.</B>

<P style="font-size: 10pt; text-indent: 4%" align="left">On November&nbsp;20,
2008, Bancorp filed the Articles of Amendment with the Secretary of State of
the State of Maryland designating 23,393 shares of preferred stock as
Series&nbsp;B Preferred Stock. A copy of the Articles of Amendment is attached
hereto as Exhibit&nbsp;3.1.

<P style="font-size: 10pt" align="left"><B>Item&nbsp;9.01 Financial Statements
and Exhibits.</B>

<P style="font-size: 10pt" align="left">(d)&nbsp;Exhibits
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" cellpadding="0" width="100%"
border="0">
<!-- Begin Table Head -->

 <TR valign="bottom">
  <TD width="8%">&nbsp;</TD>
  <TD width="5%">&nbsp;</TD>
  <TD width="87%">&nbsp;</TD>
 </TR>
 <TR style="font-size: 10pt" valign="bottom">
  <TD nowrap align="left"><B>Item No.</B></TD>
  <TD>&nbsp;</TD>
  <TD nowrap align="left"><B>Description</B></TD>
 </TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
 <TR valign="bottom">
  <TD valign="top">
<DIV style="margin-left: 0px; text-indent: 0px">3.1 </DIV>
</TD>
  <TD>&nbsp;</TD>
  <TD valign="top" align="left">Articles Supplementary to the Articles of
Incorporation of Bancorp</TD>
 </TR>
 <TR valign="bottom">
  <TD valign="top">
<DIV style="margin-left: 0px; text-indent: 0px">4.1 </DIV>
</TD>
  <TD>&nbsp;</TD>
  <TD valign="top" align="left">Warrant for Purchase of Shares of Common
Stock</TD>
 </TR>
 <TR valign="bottom">
  <TD valign="top">
<DIV style="margin-left: 0px; text-indent: 0px">10.1 </DIV>
</TD>
  <TD>&nbsp;</TD>
  <TD valign="top" align="left">Purchase Agreement, dated November&nbsp;21,
2008, between Bancorp and the United States Department of the Treasury</TD>
 </TR>
<!-- End Table Body -->

</TABLE>
</DIV>

<P style="font-size: 10pt" align="center">&nbsp;

<P style="font-size: 10pt" align="center">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV
style="margin-left: 0.25in; width: 7.2in; font-family: 'Times New Roman',Times,serif">

<P style="font-size: 10pt" align="center"><B>Signatures</B>

<P style="font-size: 10pt" align="left">Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized.
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" cellpadding="0" width="100%"
border="0">
<!-- Begin Table Head -->
<TR valign="bottom">
  <TD width="50%">&nbsp;</TD>
  <TD width="3%">&nbsp;</TD>
  <TD width="47%">&nbsp;</TD>
</TR><!-- End Table Head --><!-- Begin Table Body -->
<TR valign="bottom">
  <TD valign="top">&nbsp;</TD>
  <TD colspan="2" valign="top" align="left">Severn Bancorp, Inc.</TD>
</TR>
<TR valign="bottom">
  <TD valign="top">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD valign="top" align="left">&nbsp;</TD>
 </TR>

 <TR valign="bottom">
  <TD valign="top">Dated: November&nbsp;24, 2008</TD>
  <TD align="left">By:&nbsp;</TD>
  <TD valign="top" align="left" style="border-bottom: 1px solid #000000">/s/ Alan J. Hyatt</TD>
 </TR>

 <TR valign="bottom">
  <TD valign="top">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD valign="top" align="left">Alan J. Hyatt, President</TD>
 </TR>
<!-- End Table Body -->

</TABLE>
</DIV>

<P style="font-size: 10pt" align="center">&nbsp;

<P style="font-size: 10pt" align="center">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV
style="margin-left: 0.25in; width: 7.2in; font-family: 'Times New Roman',Times,serif">

<P style="font-size: 10pt" align="left"><B>Exhibit&nbsp;Index</B>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" cellpadding="0" width="100%"
border="0">
<!-- Begin Table Head -->

 <TR valign="bottom">
  <TD width="8%">&nbsp;</TD>
  <TD width="5%">&nbsp;</TD>
  <TD width="87%">&nbsp;</TD>
 </TR>
 <TR style="font-size: 10pt" valign="bottom">
  <TD nowrap align="left"><B>Item No.</B></TD>
  <TD>&nbsp;</TD>
  <TD nowrap align="left"><B>Description</B></TD>
 </TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
 <TR valign="bottom">
  <TD valign="top">
<DIV style="margin-left: 0px; text-indent: 0px">3.1 </DIV>
</TD>
  <TD>&nbsp;</TD>
  <TD valign="top" align="left">Articles Supplementary to the Articles of
Incorporation of Bancorp</TD>
 </TR>
 <TR valign="bottom">
  <TD valign="top">
<DIV style="margin-left: 0px; text-indent: 0px">4.1 </DIV>
</TD>
  <TD>&nbsp;</TD>
  <TD valign="top" align="left">Warrant for Purchase of Shares of Common
Stock</TD>
 </TR>
 <TR valign="bottom">
  <TD valign="top">
<DIV style="margin-left: 0px; text-indent: 0px">10.1 </DIV>
</TD>
  <TD>&nbsp;</TD>
  <TD valign="top" align="left">Purchase Agreement, dated November&nbsp;21,
2008, between Bancorp and the United States Department of the Treasury</TD>
 </TR>
<!-- End Table Body -->

</TABLE>
</DIV>

<P style="font-size: 10pt" align="center">&nbsp;

<P style="font-size: 10pt" align="center">6
</DIV>
</BODY>
</HTML>
[{"type": "8-K", "sequence": "1", "filename": "c77690e8vk.htm", "description": "FORM 8-K", "secsgml_size_bytes": 18869}]
{"company-data": {"conformed-name": "SEVERN BANCORP INC", "cik": "0000868271", "assigned-sic": "6021", "irs-number": "521726127", "state-of-incorporation": "MD", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-49731", "film-number": "081211001"}, "business-address": {"street1": "1919A WEST ST", "city": "ANNAPOLIS", "state": "MD", "zip": "21404", "phone": "3012684554"}, "mail-address": {"street1": "1919A WEST STREET", "city": "ANNAPOLIS", "state": "MD", "zip": "21401"}}
Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported): November 20, 2008
Severn Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Maryland
0-49731
52-1726127
(State or other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)
200 Westgate Circle, Suite
200, Annapolis, Maryland
21401
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number,
including area code:
410-260-2000
(Former name or former address if changed since last report.)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions:
o
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a
Material Definitive Agreement.
On November 21,
2008, Severn Bancorp, Inc. (the "Bancorp") entered into a Letter
Agreement (the "Purchase Agreement") with the United States
Department of the Treasury ("Treasury"), pursuant to which Bancorp
agreed to issue and sell (i) 23,393 shares of its Fixed Rate Cumulative
Perpetual Preferred Stock, Series B, par value $0.01 per share and
liquidation preference $1,000 per share, (the "Series B Preferred
Stock") and (ii) a warrant (the "Warrant") to purchase
556,976 shares of Bancorp's common stock, par value $0.01 per share (the
"Common Stock"), for an aggregate purchase price of $ 23,393,000 in
cash. Closing of the sale occurred on November 21, 2008.
The following summary
of the material terms and provisions of the Purchase Agreement, the
Series B Preferred Stock and the Warrant is not intended to be complete
and is qualified by reference to the (i) Purchase Agreement, a copy of
which is attached hereto as Exhibit 10.1 and is incorporated herein by
reference, (ii) Articles Supplementary to the Articles of Incorporation of
Bancorp (the "Articles of Amendment"), a copy of which is attached
hereto as Exhibit 3.1 and is incorporated herein by reference, and
(iii)Warrant, a copy of which is attached hereto as Exhibit 4.1 and is
incorporated herein by reference.
The Series B
Preferred Stock will qualify as Tier 1 capital and will pay cumulative
compounding dividends at a rate of 5% per annum for the first five years, and
9% per annum thereafter. The Series B Preferred Stock may be redeemed by
Bancorp after three years. Prior to the end of three years, the Series B
Preferred Stock may not be redeemed by Bancorp except with proceeds from one or
more Qualified Equity Offerings (as defined in the Purchase Agreement). The
restrictions on redemption are set forth in the Articles of Amendment. The
Series B Preferred Stock has no maturity date and ranks
pari passu
with Bancorp's existing Series A 8.0% Non-Cumulative Convertible
Preferred Stock, in terms of dividend payments and distributions upon
liquidation, dissolution and winding up of Bancorp.
The Series B
Preferred Stock is non-voting, other than class voting rights on certain
matters that could adversely affect the Series B Preferred Stock. If
dividends on the Series B Preferred Stock have not been paid for an
aggregate of six quarterly dividend periods or more, whether consecutive or
not, Bancorp's authorized number of directors will be automatically
increased by two and the holders of the Series B Preferred Stock, voting
together with holders of any then outstanding voting parity stock, will have
the right to elect those directors at Bancorp's next annual meeting of
stockholders or at a special meeting of stockholders called for that purpose.
These preferred share directors will be elected annually and serve until all
accrued and unpaid dividends on the Series B Preferred Stock have been
paid.
The Warrant has a
10-year term and is immediately exercisable at an exercise price of $6.30 per
share of Common Stock. The exercise price and number of shares subject to the
Warrant are both subject to anti-dilution adjustments. If Bancorp receives
aggregate gross cash proceeds of not less than $23,393,000 from Qualified
Equity Offerings on or prior to December 31, 2009, the number of shares of
Common Stock issuable pursuant to Treasury's exercise of the Warrant will
be reduced by one half of the original number of shares, taking into account
all adjustments, underlying the Warrant. Pursuant to the Purchase Agreement,
Treasury has agreed not to exercise voting power with respect to any shares of Common Stock issued upon exercise of the Warrant.
2
During the term of the
Warrant, if at any time the shares of Common Stock are no longer listed or
admitted to trading on a national securities exchange (other than in connection
with certain business combinations), the Treasury may cause Bancorp to exchange
all or a portion of the Warrant for another economic interest of Bancorp
(determined by the Treasury in consultation with Bancorp) classified as
permanent equity under U.S. GAAP with an equivalent fair market value.
The Series B
Preferred Stock and the Warrant were issued in a private placement exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended. Bancorp has granted Treasury and other future holders of the
Series B Preferred Stock, the Warrant or the shares of Common Stock
underlying the Warrant (the "Warrant Shares") certain registration
rights with respect to the securities. Neither the Series B Preferred
Stock nor the Warrant will be subject to any contractual restrictions on
transfer, except that Treasury may only transfer or exercise an aggregate of
one-half of the Warrant Shares prior to the earlier of (i) the date on
which Bancorp has received aggregate gross proceeds of not less than
$23,393,000 from one or more Qualified Equity Offerings and
(ii) December 31, 2009.
In the Purchase
Agreement, Bancorp agreed that, until such time as Treasury ceases to own any
debt or equity securities of Bancorp acquired pursuant to the Purchase
Agreement or Warrant, Bancorp will take all necessary action to ensure that its
benefit plans with respect to its senior executive officers comply with Section
111(b) of the Emergency Economic Stabilization Act of 2008 (the
"EESA") as implemented by any guidance or regulation under the EESA
that has been issued and is in effect as of the date of issuance of the
Series B Preferred Stock and the Warrant, and has agreed to not adopt any
benefit plans with respect to, or which covers, its senior executive officers
that do not comply with the EESA, and the applicable executives have consented
to the foregoing.
Item 3.02. Unregistered Sales
of Equity Securities.
The information set
forth under "Item 1.01. Entry into a Material Definitive
Agreement" is incorporated by reference into this Item 3.02.
Item 3.03 Material Modification
to Rights of Security Holders.
The information set
forth under "Item 1.01. Entry into a Material Definitive
Agreement" is incorporated by reference into this Item 3.03.
Prior to
November 21, 2011 unless Bancorp has redeemed the Series B Preferred
Stock or the Treasury has transferred the Series B Preferred Stock to a
third party, Bancorp may not, without the consent of the Treasury (1) declare
or pay any dividend or make any distribution on its Common Stock (other than
regular quarterly cash dividends of not more than $0.06 per share) or
(2) redeem, purchase or acquire any shares of its Common Stock or other
equity or capital securities, other than in connection with benefit plans
consistent with past practice and certain other circumstances specified in the
Purchase Agreement. The redemption, purchase or other acquisition of trust
preferred securities of Bancorp or its affiliates will also be subject to
restrictions set forth in the Purchase Agreement.
3
In addition, under the
Articles of Amendment, Bancorp's ability to declare or pay dividends or
repurchase its Common Stock or other equity securities will be subject to
restrictions in the event that Bancorp fails to declare and pay (or set aside
for payment) full dividends on the Series B Preferred Stock.
Item 5.02. Departure of
Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
The information
concerning executive compensation set forth under "Item 1.01 Entry
into a Material Definitive Agreement" is incorporated by reference into
this Item 5.02.
Item 5.03 Amendment to Articles
of Incorporation or Bylaws; Change in Fiscal Year.
On November 20,
2008, Bancorp filed the Articles of Amendment with the Secretary of State of
the State of Maryland designating 23,393 shares of preferred stock as
Series B Preferred Stock. A copy of the Articles of Amendment is attached
hereto as Exhibit 3.1.
Item 9.01 Financial Statements
and Exhibits.
(d) Exhibits
Item No.
Description
3.1
Articles Supplementary to the Articles of
Incorporation of Bancorp
4.1
Warrant for Purchase of Shares of Common
Stock
10.1
Purchase Agreement, dated November 21,
2008, between Bancorp and the United States Department of the Treasury
4
Signatures
Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized.
Severn Bancorp, Inc.
Dated: November 24, 2008
By:
/s/ Alan J. Hyatt
Alan J. Hyatt, President
5
Exhibit Index
Item No.
Description
3.1
Articles Supplementary to the Articles of
Incorporation of Bancorp
4.1
Warrant for Purchase of Shares of Common
Stock
10.1
Purchase Agreement, dated November 21,
2008, between Bancorp and the United States Department of the Treasury
6