svbi8k111808.htm
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
15, 2008
Severn Bancorp,
Inc.
(Exact
name of registrant as specified in its charter)
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Maryland
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0-49731
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52-1726127
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
Number)
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200
Westgate Circle, Suite 200, Annapolis,
Maryland
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21401
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(Address
of principal executive offices)
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(Zip
Code)
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410-260-2000
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(Registrant’s
telephone number, including area
code)
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(Former
name or former address, if change 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 (see General Instruction A.2. below):
[ ] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17
CFR 240.14d-2(b))
[ ] 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 15, 2008, Severn Bancorp, Inc. ("Bancorp") accepted
subscriptions to purchase a total of 70 units, at an offering price of $100,000
per unit, for gross proceeds of $7.0 million pursuant to its previously
announced private placement of units. Each unit consists
of 6,250 shares of Bancorp's Series A 8.0% Non-Cumulative Convertible Preferred
Stock ("Series A Preferred Stock") and Bancorp's Subordinated Note in
the original principal amount of $50,000. In the private placement,
Bancorp will issue a total of 437,500 shares of its Series A
Preferred Stock and $3.5 million aggregate principal amount of its Subordinated
Notes. Purchasers of the units entered into Subscription
Agreements with Bancorp, a copy of the form of which is attached hereto as
Exhibit 10.1.
Bancorp
intends to use the net proceeds from the sale of the units for general corporate
purposes, including one or more of the following:
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contribution
to its wholly-owned subsidiary, Severn Bank, (including investment in
equity or subordinated indebtedness of Severn Bank) to fund its operations
or provide additional capital for regulatory
purposes,
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possible
repayment of indebtedness of Severn Bank or Bancorp,
and
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other
general corporate purposes.
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The units
were sold without registration under the Securities Act of 1933, as amended (the
“Act”) in reliance upon the exemptions from registration provided under Section
4(2) of the Act and Regulation D promulgated under the Act (“Regulation D”).
Each of the investors represented in the Purchase Agreement, among other things,
that the investor was acquiring the units for investment for the investor's
account and that the investor was an “accredited investor” within the meaning of
Regulation D.
Subordinated
Notes
The
following summary of the material terms and provisions of the Subordinated Notes
is not intended to be complete and is qualified by reference to the form of
Subordinated Note, a copy of which is attached hereto as Exhibit 10.2. If
any specific information regarding the Subordinated Notes in this description is
inconsistent with the terms of the form of Subordinated Note, you should rely on
the information contained in the form of Subordinated Note.
Maturity Date. The
full principal amount of the Subordinated Notes is due and payable on December
31, 2018.
Sinking Fund. There
will be no sinking fund for the Subordinated Notes.
Interest. Interest
on the Subordinated Notes at an annual rate of 8.0% will be paid quarterly in
arrears on the last day of March, June, September and December commencing
December 31, 2008.
Option to Defer Interest Payment
Date. Generally, as long as Bancorp is not in default in the
payment of interest on the Subordinated Notes, Bancorp has the right, at any
time and from time to time during the term of the Subordinated Notes, to defer
payments of interest for a period not exceeding 20 consecutive quarters or
extending beyond the stated maturity of the Subordinated Notes (or any date of
redemption therefor), during which deferral period no interest will be due and
payable. At the end of the deferral period, Bancorp shall pay all
interest then accrued and unpaid, together with interest thereon compounded
quarterly at an annual rate of 8.0%.
Ranking. The
Subordinated Notes will be subordinated to all of Bancorp's senior indebtedness,
as defined in the Subordinated Notes.
Redemption. The
Subordinated Notes will be redeemable in whole or in part at the option of
Bancorp at any time beginning on December 31, 2009 until maturity.
Merger, Consolidation, Sale of Assets
and Other Transactions. Bancorp may consolidate with or merge
into any other person or convey, transfer or lease all or substantially all of
its properties to any person, and any person may consolidate with or merge into
Bancorp, provided that:
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Bancorp
is the surviving entity or in case Bancorp consolidates with or merges
into another person or conveys or transfers all or substantially all of
its properties to any person, the successor is organized under the laws of
any State of the United States or the District of
Columbia;
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the
successor expressly assumes the obligations under the Subordinated Notes;
and
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immediately
after giving effect to the transaction, no default or event of default
exists.
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Events of
Default. An “event of default” will occur upon:
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Bancorp’s
failure for 30 days to pay any interest on the Subordinated Notes when
due, whether or not such payment is prohibited by the subordination
provisions of the Subordinated Notes or other indebtedness of Bancorp;
provided, however, that a valid deferral of the interest payment period
does not constitute a default in the payment of
interest;
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Bancorp’s
failure to pay any principal on the Subordinated Notes when due, whether
at maturity, upon redemption, by declaration of acceleration or otherwise,
whether or not such payment is prohibited by the subordination provisions
of the Subordinated Notes or other indebtedness of
Bancorp;
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Bancorp’s
default in the performance, or breach, of a covenant contained in the
Subordinated Notes for 90 days after written notice to Bancorp from the
holders of at least 25% in aggregate outstanding principal amount of the
Subordinated Notes;
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certain
events related to Bancorp's bankruptcy, insolvency or reorganization;
or
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the
voluntary or involuntary dissolution, winding-up, or termination of
Bancorp, except in connection with mergers, consolidations, sale of assets
or certain other transactions in accordance with the terms and conditions
set forth in the form of Subordinated
Note.
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The
holders of not less than 25% in aggregate outstanding principal amount of the
Subordinated Notes may declare the principal due and payable immediately if an
event of default occurs and is continuing. In certain circumstances,
the holders of a majority in aggregate outstanding principal amount of the
Subordinated Notes may waive past events of default or annul a declaration that
the principal of the Subordinated Notes is immediately due.
No Public
Market. The Subordinated Notes will not be listed on any
securities exchange or included in any automated quotation system.
Series
A Preferred Stock
The
following summary of the material terms and provisions of the Series A Preferred
Stock is not intended to be complete and is qualified by reference to the
Articles of Amendment to the Articles of Incorporation of Bancorp, a copy of
which is attached hereto as Exhibit 3.1. If any specific information
regarding the Series A Preferred Stock in this description is inconsistent with
the terms of the Articles of Amendment to the Articles of Incorporation, you
should rely on the information contained in the Articles of Amendment to the
Articles of Incorporation.
Ranking. The Series
A Preferred Stock will rank senior to Bancorp common stock and any other stock
that is expressly made junior to the Series A Preferred Stock as to the payment
of dividends and the distribution of assets upon liquidation, dissolution or
winding up of Bancorp.
Dividends. If
declared by Bancorp's board of directors, cash dividends at an annual rate of
8.0% will be paid quarterly in arrears on the last day of March, June, September
and December commencing December 31, 2008. Dividends will not be paid on Bancorp
common stock in any quarter until the dividend on the Series A Preferred Stock
has been paid for such quarter; however, there is no requirement that Bancorp's
board of directors declare any dividends on the Series A Preferred Stock and any
unpaid dividends shall not be cumulative.
Voting
Rights Holders of Series A Preferred Stock are not entitled to
any voting rights except as specifically required by Maryland law.
Liquidation
Preference. The liquidation preference is $8.00 per
share. Holders of Series A Preferred Stock will not be entitled to
any further distribution on the Series A Preferred Stock.
Optional
Conversion. Each share of Series A Preferred Stock is
convertible at the option of the holder into one share of Bancorp common stock,
subject to adjustment upon certain corporate events. The initial conversion rate
is equivalent to an initial conversion price of $8.00 per share of Bancorp
common stock.
Mandatory
Conversion. At the option of Bancorp, on and after December
31, 2013, at any time and from time to time, some or all of the Series A
Preferred Stock may be converted into shares of Bancorp common stock at the
then-applicable conversion rate.
Reorganization
Events. Generally, in the event of:
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any
consolidation or merger of Bancorp with or into another person (other than
a merger or consolidation in which Bancorp is the continuing corporation
and in which the shares of Bancorp common stock outstanding immediately
prior to the merger or consolidation are not exchanged for cash,
securities or other property of Bancorp or another
corporation);
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any
sale, transfer, lease or conveyance to another person of all or
substantially all of the property and assets of Bancorp;
or
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any
statutory exchange of securities of Bancorp with another person (other
than in connection with a merger or acquisition) or any binding share
exchange which reclassifies or changes Bancorp’s outstanding common
stock;
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each
share of the Series A Preferred Stock outstanding immediately prior to such
reorganization event will, without the consent of the holders of the Series A
Preferred Stock, become convertible into the kind and amount of securities, cash
and other property receivable in such reorganization event (without any interest
thereon, and without any right to dividends or distribution thereon which have a
record date that is prior to the applicable conversion date) per share of
Bancorp common stock by a holder of Bancorp common stock.
No Public
Market. The Series A Preferred Stock will not be listed on any
securities exchange or included in any automated quotation system.
Item 2.03 Creation of a Direct
Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of
a Registrant.
The
information set forth under “Item 1.01. Entry into a Material Definitive
Agreement” is incorporated by reference into this Item 2.03.
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.
So long
as any share of Series A Preferred Stock remains outstanding, unless as to a
dividend payment date full dividends on all outstanding shares of the Series A
Preferred Stock have been declared and paid or declared and a sum sufficient for
the payment of those dividends has been set aside for the dividend period then
ending, Bancorp will not, during the same dividend period, declare or pay any
dividend on, make any distributions relating to, or redeem, purchase, acquire or
make a liquidation payment relating to, any of Bancorp’s junior stock, including
Bancorp common stock, or make any guarantee payment with respect thereto, other
than:
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purchases,
redemptions or other acquisitions of shares of junior stock of Bancorp in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers, directors or
consultants;
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purchases
of shares of Bancorp common stock pursuant to a contractually binding
requirement to buy stock existing prior to the commencement of the
then-current dividend period, including under a contractually binding
stock repurchase plan;
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as
a result of an exchange or conversion of any class or series of Bancorp’s
junior stock for any other class or series of Bancorp’s junior
stock; or
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the
purchase of fractional interests in shares of Bancorp’s junior stock
pursuant to the conversion or exchange provisions of such junior stock or
the security being converted or
exchanged.
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“Junior
stock” means Bancorp common stock and any other class or series of stock of
Bancorp now existing or hereafter authorized over which Series A Preferred Stock
has preference or priority in the payment of dividends or in the distribution of
assets on any voluntary or involuntary liquidation, dissolution or winding up of
Bancorp.
Upon the
voluntary or involuntary liquidation, dissolution or winding up of Bancorp, the
holders of the Series A Preferred Stock are entitled to receive, out of assets
legally available for distribution to stockholders, before any distribution of
assets is made to holders of Bancorp common stock or any other shares of stock
ranking junior to the Series A Preferred Stock as to distributions upon the
liquidation, dissolution or winding up of Bancorp, a liquidating distribution in
the amount of $8.00 per share, plus any accrued dividends thereon from the last
dividend payment date to, but excluding, the date of the liquidation,
dissolution or winding up if and to the extent declared.
Item
5.03 Amendment to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On
November 18, 2008, Bancorp filed Articles of Amendment to the Articles of
Incorporation with the Secretary of State of the State of Maryland designating
437,500 shares of preferred stock as Series A Preferred Stock. A copy
of the Articles of Amendment to the Articles of Incorporation of Bancorp is
attached hereto as Exhibit 3.1.
Item
7.01 Regulation FD Disclosure.
On
November 18, 2008, Bancorp issued a press release concerning the
completion of the private placement referred to in Item 1.01 and also announcing
that its application to participate in the U.S. Treasury Capital Purchase
Program had been approved. This press release is furnished in this report as
Exhibit 99.1 and is incorporated herein by reference.
This
information shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set forth by specific
reference in such a filing.
Item
9.01 Financial Statements and Exhibits.
(d) Exhibits
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Item
No.
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Description
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3.1
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Articles
of Amendment to the Articles of Incorporation of
Bancorp
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10.1
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Form
of Subscription Agreement
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10.2
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Form
of Subordinated Note
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99.1
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Press
Release dated November 18, 2008
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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.
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Severn
Bancorp, Inc.
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Dated:
November 18, 2008
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By: _Alan J.
Hyatt___________________
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Alan
J. Hyatt, President
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Exhibit
Index
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Item
No.
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Description
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3.1
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Articles
of Amendment to the Articles of Incorporation of
Bancorp
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10.1
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Form
of Subscription Agreement
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10.2
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Form
of Subordinated Note
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99.1
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Press
Release dated November 18, 2008
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