EXHIBIT 10.2
THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER
OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO SEVERN BANCORP,
INC. OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, OR (C) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO SEVERN
BANCORP, INC.’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (C) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING BELOW IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRANSFER AGENT. THE HOLDER OF THIS SECURITY,
BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER
THAN A TRANSFER PURSUANT TO CLAUSE (B) ABOVE) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
Principal Amount: $ ____________
Dated:
______________________
Subordinated Note No:
_________
SEVERN BANCORP, INC.
8.0% SUBORDINATED NOTE
DUE DECEMBER 31, 2018
1.
General . Severn
Bancorp, Inc., a Maryland corporation (the
“Corporation”, which term includes any successor
Person), for value received, hereby promises to pay to
_____________________ (“Holder”) or registered assigns,
the principal sum of $_______________________ ($_______________) on
December 31, 2018 (the “Maturity Date”), unless
previously redeemed, and to pay interest on the outstanding
principal amount hereof from the date hereof, or from the most
recent interest payment date (each such date, an “Interest
Payment Date”) to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein)
in arrears on the last day of March, June, September and December
of each year, commencing December 31, 2008, at the rate of 8.0% per
annum until the principal hereof shall have become due and payable,
and on any overdue principal and (without duplication and to the
extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the same
rate per annum compounded quarterly. The amount of
interest payable on any Interest Payment Date shall be computed on
the basis of a 360-day year of twelve 30-day months and, for any
period shorter that a full quarterly period will be computed on the
basis of a 30-day month, and for any period less than a full
calendar month, the number of days elapsed in such
month. In the event that any date on which the principal
of or interest on this Subordinated Note is payable is not a
Business Day (as defined below), then the payment payable on such
date will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such
delay), except that if such next succeeding Business Day falls in
the next calendar year, then such payment shall be made on the
immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
The interest
installment so payable, and punctually paid or duly provided for,
on any Interest Payment Date will be paid to the Person in whose
name this Subordinated Note (or one or more predecessor
Subordinated Notes) is registered at the close of business on the
regular record date for such interest installment, which shall be
as of 5:00 p.m., New York City time, on the first day of the month,
whether or not a Business Day, in which the relevant Interest
Payment Date occurs (or would have occurred but for fact that the
Interest Payment Date was not a Business Day). Any such
interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the Holders on such regular record
date and shall be paid to the Person in whose name this
Subordinated Note (or one or more predecessor Subordinated Notes)
is registered at the close of business on a special record date to
be fixed by the Corporation for the payment of such defaulted
interest, notice whereof shall be given to the holders of
Subordinated Notes not less than 10 days prior to such special
record date, or may be paid at any time in any other lawful
manner.
The principal of and
interest on this Subordinated Note shall be payable at the office
or agency of the Paying Agent maintained for that purpose in any
coin or currency of the United States of America that at the time
of payment is legal tender for payment of public and private debts;
provided , however , that, payment of interest may be
made at the option of the Corporation by (i) check mailed to the
holder at such address as shall appear in the Subordinated Note
Register or (ii) by transfer to an account maintained by the Person
entitled thereto, provided that proper written transfer
instructions have been received by the relevant record date.
This Subordinated
Note is one of a series of Subordinated Notes of the Corporation in
an aggregate principal amount of up to $3,500,000 (herein sometimes
referred to as the “Subordinated Notes”).
The Subordinated
Notes are not entitled to the benefit of any sinking fund.
The term
“Business Day” shall mean any weekday that is not a
legal holiday in New York, New York and is not a day on which
banking institutions in New York, New York are authorized or
required by law or regulation to be closed.
The term
“Person” shall mean any legal person, including
individual, corporation, estate, partnership, joint venture,
association, joint-stock company, limited liability company or
trust.
2.
Extension of Interest Payment Period . So long as
the Corporation is not in Default in the payment of interest on the
Subordinated Notes, the Corporation shall have the right, at any
time and from time to time during the term of the Subordinated
Notes, to defer payments of interest by extending the interest
payment period of such Subordinated Notes for a period not
exceeding 20 consecutive quarterly periods, including the first
such quarterly period during such extension period (an
“Extended Interest Payment Period”), during which
Extended Interest Payment Period no interest shall be due and
payable; provided that no Extended Interest Payment
Period shall end on a date other than an Interest Payment Date or
extend beyond the Maturity Date or, with respect to any
Subordinated Notes called for redemption, the Redemption Date with
respect to such Subordinated Notes. At the end of any
Extended Interest Payment Period, the Corporation shall pay all
interest then accrued and unpaid (together with interest thereon at
an annual rate of 8.0% to the extent that payment of such interest
is enforceable under applicable law). Before the
termination of any such Extended Interest Payment Period, the
Corporation may further defer payments of interest by further
extending such Extended Interest Payment Period, provided
that such Extended Interest Payment Period, together with all such
previous and further extensions within such Extended Interest
Payment Period, (i) shall not exceed 20 consecutive quarterly
periods, including the first quarterly period during such Extended
Interest Payment Period, (ii) shall not end on any date other than
an Interest Payment Date, and (iii) shall not extend beyond the
Maturity Date of the Subordinated Notes or, with respect to any
Subordinated Notes called for redemption, the Redemption Date with
respect to such Subordinated Notes. Upon the termination
of any such Extended Interest Payment Period and the payment of all
accrued and unpaid interest and any additional amounts then due,
the Corporation may commence a new Extended Interest Payment
Period, subject to the foregoing requirements.
The Corporation
shall give the holders of the Subordinated Notes written notice of
its selection of such Extended Interest Payment Period or its
extension of an Extended Interest Payment Period at least 10
Business Days before the Interest Payment Date for the first
quarter of such Extended Interest Payment Period. The
quarterly period in which any notice is given pursuant to this
paragraph shall be counted as one of the 20 quarterly periods
permitted in the maximum Extended Interest Payment Period permitted
under this paragraph.
3.
Redemption . The Corporation shall have the right
to redeem this Subordinated Note in whole or in part, on one or
more occasions at any time beginning on December 31, 2009 until
maturity, at an amount equal to 100% of the principal amount of
Subordinated Note to be redeemed plus accrued and unpaid interest
thereon to the date of such redemption (the “Redemption
Price”). The Redemption Price shall be paid prior
to 12:00 noon, New York, New York time, on the date of such
redemption or at such earlier time as the Corporation
determines. Any redemption pursuant to this paragraph
will be made upon not less than 20 days nor more than 60 days
notice. If the Subordinated Notes are only partially
redeemed by the Corporation pursuant to an optional redemption
described in the preceding paragraph, the particular Subordinated
Notes to be redeemed shall be selected on a pro rata basis not more
than 60 days prior to the date fixed for redemption from the
outstanding Subordinated Notes not previously called for
redemption.
In the event of
redemption of this Subordinated Note in part only, a new
Subordinated Note or Subordinated Notes for the portion hereof that
has not been redeemed will be issued in the name of the Holder
hereof upon the cancellation hereof.
Notwithstanding the
foregoing, any redemption of Subordinated Notes by the Corporation
shall be subject to the Corporation obtaining the prior approval of
the Corporation’s primary federal regulator, if required by
applicable law or regulation, and the receipt of any other required
regulatory approvals.
4.
Modification and Waiver . The Corporation may,
with the consent of the holders of a majority in aggregate
principal amount of the Subordinated Notes at the time outstanding,
modify or amend the Subordinated Notes for the purpose of adding
any provision to or changing in any manner or eliminating any of
the provisions of the Subordinated Notes or of modifying in any
manner the rights of the holders of the Subordinated Notes;
provided , however , that no such modification or
amendment shall, without the consent of each holder of Subordinated
Notes then outstanding and affected thereby: (i) change the
Maturity Date of any Subordinated Note, or reduce the principal
amount of, or any installment of principal of or interest on the
Subordinated Notes; (ii) reduce the rate or extend the time of
payment of interest; (iii) change any of the provisions of the
Subordinated Note relating to redemption; (iv) make the principal
of, or interest payment on, the Subordinated Notes payable in any
coin or currency other than that provided in the Subordinated
Notes; (v) impair or affect the right of any holder of Subordinated
Notes to institute suit for the payment of the Subordinated Notes
as provided in the Subordinated Notes; (vi) reduce the percentage
of the principal amount of the Subordinated Notes required to
consent to modify or amend the Subordinated Notes or for any waiver
of compliance with provisions of the Subordinated Notes as stated
in the Subordinated Notes or for waiver of Defaults as stated in
the Subordinated Notes; (vii) make any change adverse to a Holder
with respect to the subordination provisions; or (viii) modify any
of the foregoing provisions.
The holders of a majority in aggregate
principal amount of the Subordinated Notes at the time outstanding,
on behalf of all of the holders of the Subordinated Notes, prior to
any declaration accelerating the maturity of the Subordinated
Notes, may waive any past Default or Event of Default and its
consequences, except a Default in the payment of the principal of
or premium, if any, or interest on any of the Subordinated Notes or
a Default in respect of any covenant or provision under which the
Subordinated Notes cannot be modified or amended without the
consent of each holder of Subordinated Notes then
outstanding. Any such consent or waiver by the holder of
this Subordinated Note shall be conclusive and binding upon such
Holder and upon all future holders and owners of this Subordinated
Note and of any Subordinated Note issued in exchange herefor or in
place hereof (whether by registration of transfer or otherwise),
irrespective of whether or not any notation of such consent or
waiver is made upon this Subordinated Note.
5.
Events of Default . One or more
of the following events of default shall constitute an Event of
Default hereunder (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(a) default
in the payment of any interest on the Subordinated Notes, whether
or not such payment is prohibited by the subordination provisions
of the Subordinated Notes, or any other Indebtedness of the
Corporation, when due, and continuance of such default for a period
of 30 days; provided, however, that a valid extension of an
interest payment period by the Corporation in accordance with the
terms hereof shall not constitute a default in the payment of
interest for this purpose; or
(b) default
in the payment of any principal of the Subordinated Notes (whether
or not such payment is prohibited by the subordination provisions
of the Subordinated Notes or any other Indebtedness of the
Corporation) when due whether at maturity, upon redemption, by
declaration of acceleration of maturity or otherwise; or
(c) default
in the performance, or breach, of any covenant of the Corporation
in the Subordinated Notes (other than a covenant a default in whose
performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach
for a period of 90 days after there has been given, by registered
or certified mail, to the Corporation by the holders of at least
25% in aggregate principal amount of the outstanding Subordinated
Notes a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a
“Notice of Default” hereunder; or
(d) a
court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Corporation in an involuntary
case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Corporation or for any substantial part of its
property, or ordering the winding-up or liquidation of its affairs
and such decree or order shall remain unstayed and in effect for a
period of 90 consecutive days; or
(e) the
Corporation shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar
official) of the Corporation or of any substantial part of its
property, or shall make any general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become
due; or
(f) the
voluntary or involuntary dissolution, winding-up, or termination of
the Corporation, except in connection with mergers, consolidations,
sale of assets or certain other transactions set forth in paragraph
6 below.
If an Event of Default with respect to
Subordinated Notes at the time outstanding occurs and is
continuing, then in every such case the holders of not less than
25% in aggregate principal amount of the Subordinated Notes then
outstanding may declare the principal amount of all Subordinated
Notes to be due and payable immediately, by a notice in writing to
the Corporation, and upon any such declaration the same shall
become immediately due and payable.
The foregoing provisions, however, are subject
to the condition that if, at any time after the principal of the
Subordinated Notes shall have been so declared due and payable, and
before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, (i)
the Corporation shall pay or shall deposit with the Paying Agent a
sum sufficient to pay all matured installments of
interest upon all the Subordinated Notes and the principal of any
and all Subordinated Notes which shall have become due otherwise
than by acceleration (with interest upon such principal and, to the
extent that payment of such interest is enforceable under
applicable law, on overdue installments of interest, at an annual
rate of 8.0% to the date of such payment or deposit), and (ii) any
and all Events of Default hereunder, other than the non-payment of
the principal of the Subordinated Notes which shall have become due
solely by such declaration of acceleration, shall have been cured,
waived or otherwise remedied as provided herein, then, in every
such case, the holders of a majority in aggregate principal amount
of the Subordinated Notes then outstanding, by written notice to
the Corporation, may rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall
extend to or shall affect any subsequent Default or shall impair
any right consequent thereon.
In case the holders shall have proceeded to
enforce any right under the Subordinated Notes and such proceedings
shall have been discontinued or abandoned because of such
rescission or annulment or for any other reason or shall have been
determined adversely to the holders, then and in every such case
the Corporation and the holders of the Subordinated Notes shall be
restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Corporation
and the holders of the Subordinated Notes shall continue as though
no such proceeding had been taken.
No holder of any Subordinated Note shall have
any right by virtue of or by availing of any provision of the
Subordinated Notes to institute any suit, action or proceeding in
equity or at law or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless such holder previously
shall have given to the Corporation written notice of an Event of
Default and of the continuance thereof with respect to the
Subordinated Notes specifying such Event of Default, as
hereinbefore provided, and unless also the holders of not less than
25% in aggregate principal amount of the Subordinated Notes then
outstanding join in such action, suit or proceeding, it being
understood and intended, and being expressly covenanted by the
taker and holder of every Subordinated Note with every other taker
and holder, that no one or more holders of Subordinated Notes shall
have any right in any manner whatever by virtue of or by availing
of any provision of the Subordinated Notes to affect, disturb or
prejudice the rights of any other holder of Subordinated Notes, or
to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under the Subordinated
Notes, except in the manner herein provided and for the equal,
ratable and common benefit of all holders of Subordinated
Notes.
All powers and remedies given by this
paragraph to the holders of the Subordinated Notes shall, to the
extent permitted by law, be deemed cumulative and not exclusive of
any other powers and remedies available to the hol
