Document:

exhibit101.htm

    EXHIBIT
10.1

    

    THE
UNITS (AND UNDERLYING SECURITIES) WHICH ARE THE SUBJECT OF THIS SUBSCRIPTION
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS.  THE UNITS (AND UNDERLYING SECURITIES)
ACQUIRED BY INVESTORS MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND SUCH STATE LAWS AS MAY BE APPLICABLE, OR DELIVERY TO THE COMPANY OF AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

     

    AN
INVESTMENT IN THE UNITS IS SUBJECT TO CERTAIN RISKS.  SEE “RISK
FACTORS” IN THE CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM, DATED AUGUST 7,
2008.

     

    This
Subscription Agreement, the Confidential Private Placement Memorandum and the
Exhibits attached thereto are highly confidential.  This Subscription
Agreement does not constitute an offer to any person other than the subscriber
named below or to the public generally to subscribe for or otherwise acquire any
Units.  No one is permitted to distribute this Subscription Agreement,
the Confidential Private Placement Memorandum and the Exhibits attached thereto
to any person other than the subscriber and those persons, if any, retained to
advise such subscriber, and any disclosure of any of the contents hereof without
our prior written consent is prohibited.  Each prospective purchaser,
by accepting delivery of this Subscription Agreement, the Confidential Private
Placement Memorandum and the Exhibits attached thereto, agrees to the foregoing
and to make no photocopies of this Subscription Agreement or the Confidential
Private Placement Memorandum and the Exhibits attached thereto or any documents
delivered in connection herewith and if the subscriber does not purchase any
Units, or the offering is terminated, to return this Subscription Agreement and
the Confidential Private Placement Memorandum and the Exhibits attached thereto
and all such documents delivered herewith to us.

    

    Each
person receiving this Subscription Agreement and the Confidential Private
Placement and the Exhibits attached thereto, prior to delivery hereof, has
agreed, and its acceptance hereof constitutes its further agreement, that it
will hold the information contained or referred to herein and the transactions
contemplated hereby in confidence.

    

    FOR FLORIDA RESIDENTS ONLY: PURSUANT
TO SECTION 517.061(11)(A)(5) OF THE FLORIDA SECURITIES ACT, WHEN SALES ARE MADE
TO FIVE OR MORE PERSONS IN FLORIDA, ANY SALE IN THE STATE OF FLORIDA IS VOIDABLE
BY THE PURCHASER IN SUCH SALE EITHER WITHIN THREE (3) DAYS AFTER THE FIRST
TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE
ISSUER OR AN ESCROW AGENT OR WITHIN THREE (3) DAYS AFTER THE AVAILABILITY OF
THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS
LATER.  EACH FLORIDA RESIDENT WHO SUBSCRIBES FOR THE PURCHASE OF UNITS
HAS THE RIGHT, PURSUANT TO SECTION 517.061(11)(A)(5) OF THE FLORIDA SECURITIES
ACT, TO WITHDRAW HIS, HER OR ITS SUBSCRIPTION FOR THE PURCHASE AND RECEIVE A
FULL REFUND OF ALL MONIES PAID WITHIN THREE (3) BUSINESS DAYS AFTER THE
EXECUTION OF THE SUBSCRIPTION AGREEMENT OR PAYMENT FOR THE PURCHASE HAS BEEN
MADE, WHICHEVER IS LATER.  WITHDRAWAL WILL BE WITHOUT ANY FURTHER
LIABILITY TO ANY PERSON.  TO ACCOMPLISH THIS WITHDRAWAL, A
SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY C/O THOMAS
BEVIVINO, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, SEVERN BANCORP,
INC., 200 WESTGATE CIRCLE, SUITE 200, ANNAPOLIS, MARYLAND 21401, INDICATING HIS, HER OR ITS INTENTION TO WITHDRAW.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    SUCH
LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE
AFOREMENTIONED THIRD BUSINESS DAY.  IT IS ADVISABLE TO SEND SUCH
LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS
RECEIVED AND ALSO TO EVIDENCE THE TIME IT WAS MAILED.  IF THE REQUEST
IS MADE ORALLY, IN PERSON OR BY TELEPHONE TO AN OFFICER OF THE COMPANY, A
WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE
REQUESTED.

    

    SUBSCRIPTION
AGREEMENT

     

    Parties:             Severn
Bancorp, Inc.

    a
Maryland Corporation (the “Company”)

    200
Westgate Circle

    Annapolis,
MD 21401

    

    __________________________ (the “Subscriber”)

    (Print Name)

     

    __________________________

    (Street Address)

     

    __________________________

    (City, State, Zip Code)

    

    Date:                                       ,
2008

    

     

    BACKGROUND

     

    The
Company is offering to sell a minimum of 100 Units and a maximum of 250 Units in
a private placement (the “Offering”).  Each
Unit is being offered at a purchase price of $100,000 per Unit and consists of
6,250 shares of Series A Convertible Preferred Stock, par value $.01 per share,
of the Company (the “Preferred Stock”)
with an aggregate liquidation preference of $50,000, and a redeemable
Subordinated Note in the original principal amount of $50,000 (“Subordinated
Note”).  The Subscriber desires to purchase, and subject to
acceptance by the Company, the Company desires to sell, the number of Units
designated on the Signature Page of this Agreement, upon the terms and
conditions contained herein.

     

    NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
herein and for the other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:

     

    
      	
              1.  

            	
              SUBSCRIPTION

            

    

     

    Subject to the terms and conditions set
forth herein, the Subscriber hereby subscribes for and agrees to purchase the
number of Units designated on the Signature Page of this Agreement at the
purchase price per Unit of One Hundred Thousand Dollars ($100,000) for total
amount as set forth on the signature page of this Agreement (the “Subscription
Price”).  In payment of the Subscription Price, Subscriber
encloses herewith a check, bank draft or money order payable to the order of
“Severn Bancorp, Inc.” in the amount of the Subscription Price.

     

     

    
      
         

      

      
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              2.  

            	
              SUBSCRIPTION
      IRREVOCABLE BY SUBSCRIBER BUT SUBJECT TO ACCEPTANCE OR REJECTION BY THE
      COMPANY.

            

    

     

    (a) Except as
to Florida subscribers as  described above, this Subscription
Agreement is not, and shall not be, revocable by Subscriber.

     

    (b) The
Subscriber understands and agrees that: (i) this subscription shall not be
binding upon the Company until accepted by the Company, (ii) the Company
reserves the right to reject the Subscriber’s subscription for any reason or no
reason, (iii) the Company may accept this subscription in whole or in part and
(iv) the Company reserves the right, in its sole discretion, to accept
subscriptions for a partial Unit from any subscriber in the
Offering.  The Subscriber shall not have any recourse against the
Company if the subscription is rejected in whole or in part.  If the
subscription is rejected, the Company will promptly return to Subscriber,
without deduction or interest, the rejected Subscription Price.

     

    
      	
              3.  

            	
              SUBSCRIBER’S
      REPRESENTATIONS AND
WARRANTIES.

            

    

     

    Subscriber
hereby represents and warrants that:

     

    (a) Subscriber
has received, has carefully read and understands the Confidential Private
Placement Memorandum, dated August 7, 2008 and the Exhibits attached
thereto  (the “Memorandum”), including without limitation the Form of
Subordinated Note attached as Exhibit H to the Memorandum (“Form of Subordinated
Note”) and Form of Articles of Amendment attached as Exhibit J to the Memorandum
(“Form of Articles of Amendment”).  Subscriber has based his, her or
its decision to invest on the information contained in the Memorandum, has not
been furnished with any other offering literature or prospectus and has not
received any representations or warranties from the Company, the officers or
directors of the Company or any agent of any of the foregoing other than as set
forth herein or in the Memorandum.

     

    (b) Subscriber
has such knowledge and experience in financial and business matters and that
Subscriber is fully capable of evaluating the merits and risks of the investment
in the Company;

     

    (c) Subscriber
is acquiring the Units (and underlying securities) for Subscriber’s own account,
not for the account of any other person or entity, and for investment and not
with a view to resale or distribution and no other person or entity has a direct
or indirect beneficial ownership interest in the Units (and underlying
securities);

     

    (d) Subscriber
can bear the economic risk of losing Subscriber’s entire
investment;

     

    (e) By reason
of Subscriber’s business or financial experience, Subscriber has the capacity
and has taken all steps necessary to protect the Subscriber’s own interests in
connection with an investment in the Units (and underlying
securities);

     

    (f) Subscriber
has not paid or given any commission or other remuneration in connection with
the purchase of the Units (and underlying securities);

     

    (g) The Units
(and underlying securities) were not offered to the Subscriber by means of any
general solicitation or general advertising by the Company or any person acting
on its behalf, including, but not limited to: (i) any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio; or (ii) any seminar or meeting to
which the Subscriber was invited by any general solicitation or general
advertising;

     

     

    
      
         

      

      
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    (h) Subscriber
(i) is at least twenty one (21) years of age (if the Subscriber is a natural
person, (ii) maintains his, her or its residence or principal place of business
(as applicable) (and is not a transient or temporary resident) at the address
shown on page 2 hereto and has no present intention of becoming a resident or
changing its principal place of business to another state or jurisdiction, (iii)
has adequate means of providing for his or her current needs and personal
contingencies (if the Subscriber is a natural person), (iv) has no need for
liquidity in the investment in the Units (and underlying securities), (v) has
investments in and commitments to non liquid investments which are, and after
the purchase of the Units (and underlying securities) will be, reasonable in
relation to his, her or its net worth and current needs, and (vi) is able to
bear the economic risk of losing his, her or its entire investment in the Units
(and underlying securities).  The Subscriber acknowledges and agrees
that no offer of the Units was made to the Subscriber in any state other than
such state of residence or principal place of business;

     

    (i) Subscriber’s
overall commitment to investments which are not readily marketable is not
disproportionate to Subscriber’s net worth, Subscriber’s investment in the Units
(and underlying securities) will not cause such overall commitment to become
excessive, and the investment is suitable for Subscriber when viewed in light of
Subscriber’s other securities holdings and Subscriber’s financial situation and
needs;

     

    (j) Subscriber
has adequate means of providing for Subscriber’s current needs and
contingencies;

     

    (k) Subscriber
has evaluated all the risks of investment in the Company, including without
limitation those set forth under “Risk Factors” in the Memorandum, in Part I,
Item 1.A "Risk Factors" in the Company's Annual Report on Form 10-K included as
Exhibit A to the Memorandum and in Part II, Item 1.A "Risk Factors" in the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008
included as Exhibit C to the Memorandum;

     

    (l) Subscriber
has experience in evaluating and making investment decisions of this
kind;

     

    (m) Subscriber
has a reasonable understanding of the business in which the Company is
engaged;

     

    (n) Subscriber
is an “accredited investor” as defined in Rule 501 of Regulation D under the
Securities Act of 1933, as amended (the “Securities Act”) as
indicated on the signature page hereto;

     

    (o) Subscriber
otherwise meets any special suitability standards applicable to the Subscriber’s
state of residence or principal place of business (as applicable);

     

    (p) Subscriber
has been furnished with all additional documents and information which
Subscriber has requested;

     

    (q) Subscriber
has had the opportunity to ask questions of and received answers from the
Company concerning the Company and the Units (and underlying securities) and to
obtain any additional information necessary to verify the accuracy of the
information furnished;

     

    (r) Subscriber
has relied only on the information contained herein and in the Memorandum and
the documents attached thereto as exhibits in determining to make this
subscription;

     

    (s) Subscriber
has not construed the contents of this Subscription Agreement (or the Memorandum
and any attachments thereto) or any prior or subsequent communication from the
Company or any of its directors, officers, employees, financial advisors,
attorneys, accountants or other agents as investment, legal or tax
advice.  The Subscriber has been advised to consult with the
Subscriber’s own financial advisor, attorneys, and other professional advisors
as to investment, legal, tax, or other related matters concerning the proposed
investment;

     

     

    
      
         

      

      
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    (t) All
documents, records and books pertaining to Subscriber’s investment have been
made available for inspection by Subscriber and by Subscriber’s attorney, and/or
Subscriber’s accountant and/or Subscriber’s representative, during reasonable
business hours at the Company’s principal place of business;

     

    (u) Subscriber
recognizes and understands that an investment in the Units (and underlying
securities) involves substantial risks and that the Subscriber may lose all of
the Subscriber’s investment.  Subscriber is fully aware of and
understands all of the risk factors relating the purchase thereof, including,
but not limited to, those set forth under “Risk Factors” in the
Memorandum,  in Item 1.A "Risk Factors" in the Company's Annual Report
on Form 10-K included as Exhibit A to the Memorandum and in Part II, Item 1.A
"Risk Factors" in the Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2008 included as Exhibit C to the Memorandum;

     

    (v) Subscriber
understands that the terms of the Offering (and the underlying securities),
including the purchase price per Unit, have been arbitrarily determined by the
Company and that no assurances have been given about the increase in value, if
any, of the Units (and underlying securities);

     

    (w) Subscriber
understands that the Units (and underlying securities) are being offered and
sold in reliance on specific exemptions from the registration requirements of
federal and state securities laws and that the Company and controlling persons
thereof are relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings set forth herein to
determine the applicability of such exemptions and the suitability of the
Subscriber to acquire the Units (and underlying securities), and also to confirm
that the Company is not required to register as an investment company under the
Investment Company Act of 1940;

     

    (x) Subscriber
understands that the offer and sale of the Units (and underlying securities)
have not been submitted to, reviewed by, nor have the merits of this investment
been endorsed or approved by any state or federal agency, commission, authority
or self-regulatory organization;

     

    (y) The
written information pertaining to Subscriber which Subscriber has heretofore
furnished to the Company, and all information pertaining to Subscriber which is
set forth in this Subscription Agreement (including in the signature page
hereto), is true and correct as of the date hereof and, if there should be any
material change in such information hereafter, Subscriber shall promptly furnish
such revised or corrected information to the Company;

     

    (z) Subscriber
has full right, power (and capacity, if the Subscriber is a natural person) and
authority to execute and deliver this Subscription Agreement and to perform his,
her or its other obligations hereunder, and if the Subscriber is an entity, the
person signing this Subscription Agreement on behalf of such entity has been
duly authorized by such entity to do so, and this Subscription Agreement shall
be enforceable against Subscriber in accordance with its terms;

     

    (aa) Subscriber
understands, acknowledges and agrees that the Company is relying solely upon the
representations and warranties made herein in determining to sell Subscriber the
Units (and underlying securities); and

     

     

    
      
         

      

      
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    (bb) Subscriber
understands the meaning and legal consequences of the foregoing representations
and warranties and certifies that each of the foregoing representations and
warranties is true and correct as of the date hereof and shall survive the
execution hereof and the purchase of the Units (and underlying
securities).

     

    
      	
              4.  

            	
              TRANSFER
      RESTRICTIONS.

            

    

     

    (a) Subscriber
represents that Subscriber understands that the sale or transfer of the Units
(and underlying securities) are severely restricted and that:

     

    (i) The Units
(and underlying securities) have not been registered under the Securities Act or
the laws of any state or other jurisdiction.  The Units (and
underlying securities) can not be sold, transferred or otherwise disposed of by
Subscriber unless the Units (and underlying securities) are subsequently
registered under applicable law or an exemption from registration is
available.  The Company is not required to register the Units (and
underlying securities) or to make any exemption from registration available, and
therefore, the Subscriber may be precluded from selling, transferring or
otherwise disposing of the Units (and underlying securities) or any portion
thereof and may have to bear the economic risk of Subscriber’s investment for an
indefinite period of time; and

     

    (ii) There is
no public market and there will probably not be a public market for the Units
(and underlying Subordinated Note and Preferred Stock) and Subscriber may not be
able to sell the Units (and underlying Subordinated Note and Preferred Stock) at
prices equal to or greater than the price paid for them or at
all.  Accordingly, the Subscriber may have to bear the economic risk
of Subscriber’s investment for an indefinite period of time.

     

    (b) Subscriber
agrees that Subscriber will not sell, offer to sell, transfer or otherwise
dispose of the Units (and underlying securities) or any part thereof or interest
therein without registration under the Securities Act and applicable state
securities laws or an exemption from such registration, other than a sale or
transfer to the Company at an agreed upon price.

     

    (c) Restrictive Legend and Stop
Transfer Order.  The Subscriber acknowledges that:

     

    (i) any
certificates representing the securities underlying the Units will bear a legend
similar to the following:

     

    The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended, or the securities laws of any
state.  The securities may not be offered, sold, transferred, pledged
or otherwise disposed of unless (i) there is an effective registration statement
under the Securities Act of 1933, as amended, and under any applicable state
securities laws,  or (ii)  the Company has received an
opinion of counsel satisfactory to the Company and its counsel that the proposed
transaction will be exempt from such registration; and

     

    (ii) the
Company reserves the right to place a stop order against any securities
underlying the Units and to refuse to effect any transfers thereof in the
absence of an effective registration statement with respect to thereto or in the
absence of an opinion of counsel to the Company that such transfer is exempt
from registration under the Securities Act and under applicable state securities
laws.

     

     

    
      
         

      

      
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              5.  

            	
              INDEMNIFICATION AND
      HOLD HARMLESS.

            

    

     

    Subscriber
agrees that if Subscriber breaches any agreement, representation or warranty
Subscriber has made in this Subscription Agreement, Subscriber agrees to
indemnify and hold harmless the Company, including its directors, officers,
employees and shareholders, against any claim, liability, loss, damage or
expense (including attorneys’ fees and other costs of investigating and
litigating claims) caused, directly or indirectly, by Subscriber’s
breach.

     

    
      	
              6.  

            	
              CONFIDENTIAL
      INFORMATION; NON-DISCLOSURE.

            

    

     

    (a) Confidential
Information.  Subscriber recognizes and acknowledges that this
Subscription Agreement creates a confidential relationship between Subscriber
and the Company and that any and all information provided in connection with
this offering, including but not limited to, finances, business strategies,
marketing and marketing strategies, products, policies, financial information,
documentation, and other such information, whether written, oral or otherwise,
is confidential in nature (hereinafter collectively referred to as “Company Confidential
Information”).  Company Confidential Information shall not
include information that: (x) is in the public domain through no breach of the
obligation of non-disclosure set forth below; (y) is independently communicated
to Subscriber by a third party free of any obligation of confidentiality; or (z)
is developed by Subscriber independently of and without reference to any Company
Confidential Information.  All Company Confidential Information
supplied to Subscriber hereunder is and shall remain the sole and exclusive
property of the Company.

     

    (b) Non-Disclosure.  Subscriber
agrees that, except as expressly authorized in writing by the Company,
Subscriber will not at any time disclose any Company Confidential Information to
any person whatsoever or use any Company Confidential Information for any
purpose other than in his, her or its role as an investor in the
Company.  Notwithstanding the foregoing, Subscriber may disclose such
Company Confidential Information to Subscriber’s personal advisors provided that
such advisors agree to be bound by the foregoing confidentiality and
non-disclosure provisions.

     

    
      	
              7.  

            	
              MISCELLANEOUS.

            

    

     

    (a) Additional
Information.  The Company may request from Subscriber such
additional information as it may deem necessary to evaluate the eligibility of
Subscriber to acquire Units (and underlying securities), and may request from
time to time such information as it may deem necessary to determine the
eligibility of Subscriber to hold the Units (and underlying securities) or to
enable the Company to determine the Company’s compliance with applicable
regulatory requirements, and the Subscriber agrees to provide such information
as may reasonably be requested.

     

    (b) Acceptance or Rejection of
Subscription. This Subscription Agreement shall not be binding on the
Company until it shall be accepted by the Company, such acceptance to be
indicated by the execution of this Subscription Agreement by the
Company.  The Company may reject this Subscription Agreement in whole
or in part, for any reason or no reason, in its sole and absolute
discretion.

     

    (c) Entire
Understanding.  This Subscription Agreement states the entire
understanding between the parties with respect to the subject matter hereof, and
supersedes all prior oral and written communications and agreements, and all
contemporaneous oral communications and agreements, with respect to the subject
matter hereof.

     

    (d) Parties in
Interest.  This Subscription Agreement, upon acceptance by the
Company, shall bind, benefit, and be enforceable by and against each party
hereto and his, her or its successor, assigns, heirs administrators and
executors.

     

     

     

    
      
         

      

      
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    (e) Severability.  If
any provision of this Subscription Agreement is construed to be invalid, illegal
or unenforceable, then the remaining provisions hereof shall not be affected
thereby and shall be enforceable without regard thereto.

     

    (f) Section
Headings.  Article and section headings in this Subscription
Agreement are for convenience of reference only, do not constitute a part of
this Subscription Agreement, and shall not affect its
interpretation.

     

    (g) References.  All
words used in this Subscription Agreement shall be construed to be of such
number and gender as the context requires or permits.  Unless a
particular context clearly provides otherwise, the words “hereof” and
“hereunder” and similar references refer to this Subscription Agreement in its
entirety and not to any specific Section or subsection.

     

    (h) Controlling
Law.  THIS SUBSCRIPTION AGREEMENT IS MADE UNDER, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

     

    [Remainder
of page intentionally left blank.]

     

    
      
         

      

      
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    ALL
SUBSCRIBERS MUST COMPLETE AND SIGN BELOW

     

    The
Subscriber, by executing this Signature Page, hereby agrees to all the terms,
conditions, representations and warranties of this Subscription Agreement and
agrees to purchase the number of Units set forth below.

     

    Number
of Units subscribed for:  _____ Units

    

    Subscription
Price (number of Unit(s) subscribed for x
$100,000):   $_______________

    

    Further,
the Subscriber hereby represents and warrants that the Subscriber is an
"accredited investor" as defined in Regulation D under the Securities Act of
1933 as indicated below:

    

    
      	
              Please
      check and complete all applicable responses:

            
	 
      
	
              If
      the Subscriber is an individual:

            
	 
      
	
               ̈  My
      individual net worth, or joint net worth with my spouse, currently exceeds
      $1,000,000.  If this box is checked, please provide estimated
      net worth (may include joint net worth with
      spouse):  $________________.

            
	
               ̈  I
      had an individual income in excess of $200,000 in each of 2006 and 2007 or
      joint income with my spouse in excess of $300,000 in each of those years
      and I have a reasonable expectation of reaching the same income level in
      2008.  If this box is checked, please provide income amounts for
      you and your spouse as follows:

               

              2006
      (actual)                                           your
      income:
      $___________                                                      spouse’s
      income: $___________

              2007
      (actual)                                           your
      income:
      $___________                                                      spouse’s
      income: $___________

              2008
      (estimated)                                your
      income:
      $___________                                                      spouse’s
      income: $___________

               

            
	
               ̈  I
      am a director or executive officer of Severn Bancorp,
  Inc.

            
	 
      
	
              If
      the Subscriber is an entity:

            
	 
      
	
               ̈  The entity is
      a bank as defined in Section 3(a)(2) of the Securities Act of 1933, as
      amended (the "Securities Act") or savings and loan association or other
      institution as defined in Section 3(a)(5)(A) of the Securities
      Act.

            
	
               ̈  The entity is
      a broker or dealer registered pursuant to section 15 of the Securities
      Exchange Act of 1934, as amended.

            
	
               ̈  The entity is
      an insurance company as defined in Section 2(13) of the Securities
      Act.

            
	
               ̈ The entity is an
      investment company registered under the Investment Company Act of 1940, as
      amended (the “1940 Act”) or a business development company as defined in
      Section 2(a)(48) of the 1940 Act.

            
	
               ̈ The entity is a
      small business investment company licensed by the U.S. Small Business
      Administration under Section 301(c) or (d) of the Small Business
      Investment Act of 1958, as amended.

            
	
               ̈ The entity is a
      plan established and maintained by a state, its political subdivisions, or
      any agency or instrumentality of a state or its political subdivisions,
      for the benefit of its employees with total assets in excess of
      $5,000,000.

            
	
              Please
      continue on the following page.

            

    

     

     

    
      
         

      

      
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                                      Please
      check and complete all applicable
  responses:

            
	
               ̈ The
      entity is an employee benefit plan within the meaning of the Employee
      Retirement Income Security Act of 1974, as amended (“Employee Benefit
      Plan”) and the investment decision is made by a plan fiduciary which is
      either a bank, savings and loan association, insurance company or
      registered investment advisor.

            
	
               ̈  The entity is
      an Employee Benefit Plan with assets in excess of
    $5,000,000.

            
	
               ̈  The entity is
      a self-directed Employee Benefit Plan where the investment decisions are
      made solely by persons that are accredited investors.

            
	
               ̈  The entity is
      a private business development company as defined in Section 202(a)(22) of
      the 1940 Act.

            
	
               ̈  The entity is
      an organization described in section 501(c)(3) of the Internal Revenue
      Code, corporation, Massachusetts or similar business trust, or
      partnership, not formed for the specific purpose of acquiring the Units
      offered, with total assets in excess of $5,000,000.

            
	
               ̈ The entity is a
      trust, with total assets in excess of $5,000,000, not formed for the
      specific purpose of acquiring the securities offered, whose purchase is
      directed by an accredited investor that has such knowledge and experience
      in financial and business matters that he or she is capable of evaluating
      the merits and risks of the prospective investment.

            
	
               ̈  All of the equity owners of the
      entity are accredited investors.  If this is the only box
      checked, each of the owners must separately complete and sign pages 8 and
      9.

            
	
              The
      total assets of the entity as of a recent date are: $_______ as of
      ___________, 2008 (date)

            

    

     

            IN WITNESS
WHEREOF, the Subscriber has executed and delivered this Subscription Agreement
on the date first above written.

     

    
      	
              INDIVIDUAL
      SUBSCRIBERS

            	
              ENTITY
      SUBSCRIBERS

            
	 
      	 
      
	
              _________________________________

            	
              _____________________________

            
	
              Signature

            	
              Print
      Name of Entity

            
	 
      	 
      
	
              _________________________________

            	
              ______________________________

            
	
              Print
      Name

            	
              By:
      ___________________________

              Authorized
      Signature

            
	 
      	 
      
	
              _________________________________

            	
              _______________________________

            
	
              Signature
      of the Joint Subscriber (if any)

              (if
      shares to be held in joint name)

            	
              Print
      Name and Title of Authorized Signer

            
	 
      	 
      
	
              _________________________________

            	 
      
	
              Print
      Name of Joint Subscriber

            	 
      
	 
      	 
      
	
              Residence
      Address: ______________________

            	
              Principal
      Business Address: ________________

            
	
              ______________________________________

            	
              _______________________________________

            
	
              Telephone:
      _____________________________

            	
              Telephone:
      ______________________________

            
	 
      	 
      
	
              Social
      Security No:  __________________

            	
              Tax
      I.D. Number:   __________________

            
	
              Joint
      Subscriber

              Social
      Security No:  __________________

            	 
      

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    ACCEPTED
AND APPROVED AS TO ___UNITS:

     

    SEVERN
BANCORP, INC.

     

    

     

    By:                                                               
      

            
Name:

            
Title:

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    [Company
signature page to the Subscription Agreement]

     

    

     

    
      
         

      

      
        11exhibit102.htm

    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

        
          

        

      

      
         

      

    

     

    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.

     

     

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    
 

    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):

     

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    
 

    (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.

     

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    
 

    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 holders of the Subordinated Notes, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in the Subordinated Notes or otherwise
established with respect to the Subordinated Notes, and no delay or omission of
any holder of any of the Subordinated Notes to exercise any right or power
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
Default or an acquiescence therein; and, subject to the provisions of this
paragraph, every power and remedy given by this paragraph or by law to the
holders may be exercised from time to time, and as often as shall be deemed
expedient, by the holders.

     

    
 

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    The holders of a majority in aggregate
principal amount of the Subordinated Notes at the time outstanding shall have
the right to direct the time, method, and place of conducting any proceeding for
any remedy available, or exercising any trust or power conferred on the
holders.  Prior to any declaration accelerating the maturity of the
Subordinated Notes, the holders of a majority in aggregate principal amount of
the Subordinated Notes at the time outstanding may on behalf of the holders of
all of the Subordinated Notes waive any past Default or Event of Default and its
consequences except a Default or Event of Default (a) in the payment of
principal of or interest on any of the Subordinated Notes (unless such Default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Paying Agent) or (b) in respect of covenants or provisions hereof which cannot
be modified or amended without the consent of the holder of each Subordinated
Note affected.  Upon any such waiver, the Default covered thereby
shall be deemed to be cured for all purposes and the Corporation and the holders
of the Subordinated Notes shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.  Whenever any
Default or Event of Default hereunder shall have been waived as permitted by
this paragraph, said Default or Event of Default shall for all purposes of the
Subordinated Notes be deemed to have been cured and to be not
continuing.

    

    6.           Merger, Consolidation, Sale
of Assets and Other Transactions.  Nothing contained in this
Subordinated Note shall prevent any consolidation or merger of the Corporation
with or into any other Person (whether or not affiliated with the Corporation,
as the case may be), or successive consolidations or mergers in which the
Corporation or its successor or successors, as the case may be, shall be a party
or parties, or shall prevent any sale, conveyance, transfer or lease of all or
substantially all the property of the Corporation, or its successor or
successors as the case may be, to any other Person (whether or not affiliated
with the Corporation, or its successor or successors, as the case may be)
authorized to acquire and operate the same; provided, that (a) the Corporation
is the surviving Person, or the Person formed by or surviving any such
consolidation or merger (if other than the Corporation) or to which such sale,
conveyance, transfer or lease of property is made is a Person organized and
existing under the laws of the United States or any State thereof or the
District of Columbia, and (b) upon any such consolidation, merger, sale,
conveyance, transfer or lease, the due and punctual payment of the principal of
and interest on the Subordinated Notes according to their tenor and the due and
punctual performance and observance of all the covenants and conditions of this
Subordinated Note to be kept or performed by the Corporation shall be expressly
assumed by the Person formed by such consolidation, or into which the
Corporation shall have been merged, or by the Person which shall have acquired
such property, as the case may be, and (c) immediately after giving effect to
such consolidation, merger, sale, conveyance, transfer or lease, no Default or
Event of Default shall exist.

     

     

    
 

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    In case of any such consolidation,
merger, conveyance or transfer and upon the assumption by the successor
corporation of the obligation of due and punctual payment of the principal of
(and premium, if any, on) and interest on all of the Subordinated Notes and the
due and punctual performance and observance of all of the covenants and
conditions of the Subordinated Notes to be performed or observed by the
Corporation, such successor Person shall succeed to and be substituted for the
Corporation, with the same effect as if it had been named herein as the party of
the first part, and the Corporation thereupon shall be relieved of any further
liability or obligation hereunder or upon the Subordinated
Notes.  Such successor Person thereupon may cause to be signed, and
may issue either in its own name or in the name of Severn Bancorp, Inc., any or
all of the Subordinated Notes.  All the Subordinated Notes so issued
shall in all respects have the same legal rank and benefit under this
Subordinated Notes theretofore or thereafter issued as though all of such
Subordinated Notes had been issued at the date of the execution
hereof.

    

    7.           Agreement to Subordinate;
Subordination.       The Corporation
covenants and agrees, and by acceptance hereof each holder of this Subordinated
Note likewise covenants and agrees, that the Subordinated Notes shall be issued
subject to the provisions of this Section 7; and each holder of a Subordinated
Note, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions.

    

    The payment by the Corporation of the
principal of and interest on all Subordinated Notes issued hereunder shall, to
the extent and in the manner hereinafter set forth, be subordinated and junior
in right of payment to all Senior Indebtedness, whether outstanding at the date
of this Subordinated Note or thereafter incurred.  No provision of
this Section 7 shall prevent the occurrence of any Default or Event of Default
hereunder.

    

    In the event and during the
continuation of any Default by the Corporation in the payment of principal,
interest or any other payment due on any Senior Indebtedness, or in the event
that the maturity of any Senior Indebtedness has been accelerated because of an
Event of Default, or if any judicial proceeding shall be pending with respect to
any such Default, then, in any such case, no payment shall be made by the
Corporation with respect to the principal (including redemption payments) of or
interest on the Subordinated Notes or any other amounts which may be due on the
Subordinated Notes pursuant to the terms hereof or otherwise.

    In the
event of the acceleration of the maturity of the Subordinated Notes, then no
payment shall be made by the Corporation with respect to the principal
(including redemption payments) or interest on the Subordinated Notes or any
other amounts which may be due on the Subordinated Notes pursuant to the terms
hereof or otherwise until the holders of all Senior Indebtedness outstanding at
the time of such acceleration shall receive payment in full of such Senior
Indebtedness (including any amounts due upon acceleration).

     

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    
 

    In the event that, notwithstanding the
foregoing, any payment shall be received by the Holder when such payment is
prohibited by the preceding paragraphs of this Section 7, such payment shall be
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the extent that the holders of the Senior Indebtedness (or their
representative or representatives or a trustee) notify the Holder and the
Corporation in writing within 90 days of such payment of the amounts then due
and owing on such Senior Indebtedness, and only the amounts specified in such
notice shall be paid to the holders of such Senior Indebtedness.

    

    Upon any payment by the Corporation or
distribution of assets of the Corporation of any kind or character, whether in
cash, property or securities, to creditors upon the Corporation’s liquidation,
dissolution, winding up, reorganization, assignment for the benefit of its
creditors, marshaling of its assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding involving the Corporation, all Senior Indebtedness of the
Corporation shall first be paid in full, or payment thereof provided for in
money in accordance with its terms, before any payment is made by the
Corporation on account of the principal of or interest on the Subordinated Notes
or any other amounts which may be due on the Subordinated Notes pursuant to the
terms hereof or otherwise; and upon any such event, any payment by the
Corporation, or distribution of assets of the Corporation of any kind or
character, whether in cash, property or securities, which the holders of the
Subordinated Notes would be entitled to receive from the Corporation, except for
the provisions of this Section 7, shall be paid by the Corporation or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the holders of the Subordinated Notes
if received by them, directly to the holders of Senior Indebtedness of the
Corporation (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, as calculated by the Corporation) or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay all such Senior Indebtedness in full, in money or money’s
worth, after giving effect to any concurrent payment or distribution to or for
the holders of such Senior Indebtedness, before any payment or distribution is
made to the holders of the Subordinated Notes

    

    In the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Corporation of any kind
or character prohibited by the foregoing, whether in cash, property or
securities, shall be received by the holders of the Subordinated Notes before
all Senior Indebtedness is paid in full, or provision is made for such payment
in money in accordance with its terms, such payment or distribution shall be
held in trust for the benefit of and shall be paid over or delivered to the
holders of such Senior Indebtedness or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing such Senior Indebtedness may have been issued, as their
respective interests may appear, as calculated by the Corporation, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all such Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of such Senior
Indebtedness.  For
purposes of this Section 7, the words “cash, property or securities” shall not
be deemed to include shares of stock of the Corporation as reorganized or
readjusted, or securities of the Corporation or any other corporation provided
for by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Section 7 with respect to
the Subordinated Notes to the payment of Senior Indebtedness that may at the
time be outstanding, provided that (i) such Senior Indebtedness is assumed by
the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment.  The consolidation of the Corporation with, or the
merger of the Corporation into, another Person or the liquidation or dissolution
of the Corporation following the sale, conveyance, transfer or lease of its
property as an entirety, or substantially as an entirety, to another Person upon
the terms and conditions provided for in Section 6 of this Subordinated Note
shall not be deemed a dissolution, winding up, liquidation or reorganization for
the purposes of this Section 7 if such other Person shall, as a part of such
consolidation, merger, sale, conveyance, transfer or lease, comply with the
conditions stated in Section 6 of this Subordinated Note.

     

     

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    
 

    Subject to the payment in full of all
Senior Indebtedness, the rights of the holders of the Subordinated Notes shall
be subrogated to the rights of the holders of such Senior Indebtedness to
receive payments or distributions of cash, property or securities of the
Corporation, as the case may be, applicable to such Senior Indebtedness until
the principal of  and interest on the Subordinated Notes shall be paid
in full; and, for the purposes of such subrogation, no payments or distributions
to the holders of such Senior Indebtedness of any cash, property or securities
to which the holders of the Subordinated Notes would be entitled except for the
provisions of this Section 7, and no payment over pursuant to the provisions of
this Section 7 to or for the benefit of the holders of such Senior Indebtedness
by holders of the Subordinated Notes shall, as between the Corporation, its
creditors other than holders of Senior Indebtedness of the Corporation, and the
holders of the Subordinated Notes, be deemed to be a payment by the Corporation
to or on account of such Senior Indebtedness.  It is understood that
the provisions of this Section 7 are and are intended solely for the purposes of
defining the relative rights of the holders of the Subordinated Notes, on the
one hand, and the holders of such Senior Indebtedness on the other
hand.

    

    Nothing contained in this Section 7 or
elsewhere in this Subordinated Note is intended to or shall impair, as between
the Corporation, its creditors other than the holders of Senior Indebtedness of
the Corporation, and the holders of the Subordinated Notes, the obligation of
the Corporation, which is absolute and unconditional, to pay to the holders of
the Subordinated Notes the principal of and interest on the Subordinated Notes
as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the holders of
the Subordinated Notes and creditors of the Corporation, as the case may be,
other than the holders of Senior Indebtedness of the Corporation, as the case
may be, nor shall anything herein or therein prevent the holder of any
Subordinated Note from exercising all remedies otherwise permitted by applicable
law upon Default under the Subordinated Note, subject to the rights, if any,
under this Section 7 of the holders of such Senior Indebtedness in respect of
cash, property or securities of the Corporation, as the case may be, received
upon the exercise of any such remedy.

    Upon any
payment or distribution of assets of the Corporation referred to in this Section
7, the holders of the Subordinated Notes shall be entitled to conclusively rely
upon any order or decree made by any court of competent jurisdiction in which
such dissolution, winding up, liquidation or reorganization proceedings are
pending, or a certificate of the receiver, trustee in bankruptcy, liquidation
trustee, agent or other Person making such payment or distribution, delivered to
the holders of the Subordinated Notes, for the purposes of ascertaining the
Persons entitled to participate in such distribution, the holders of Senior
Indebtedness and other indebtedness of the Corporation, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Section 7.

     

    
 

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    Each holder of the Subordinated Notes
by such holder’s acceptance thereof authorizes and directs the Corporation on
such holder’s behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Section 7 and appoints the
Corporation such holder’s attorney in fact for any and all such
purposes.

    

    Upon any payment or distribution of
assets of the Corporation referred to in this Section 7, the holders of the
Subordinated Notes shall be entitled to conclusively rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, liquidating trustee, custodian, receiver, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to the holders of the Subordinated Notes, for the purpose of
ascertaining the persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Corporation, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Section
7.

    

    No right of any present or future
holder of any Senior Indebtedness of the Corporation to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Corporation, as the case may be, or by
any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Corporation, as the case may be, with the terms, provisions
and covenants of the Subordinated Notes, regardless of any knowledge thereof
that any such holder may have or otherwise be charged with.

    

    Without in any way limiting the
generality of the foregoing paragraph, the holders of Senior Indebtedness of the
Corporation may, at any time and from time to time, without the consent of or
notice to the holders of the Subordinated Notes, without incurring
responsibility to the holders of the Subordinated Notes and without impairing or
releasing the subordination provided in this Section 7 or the obligations
hereunder of the holders of the Subordinated Notes to the holders of such Senior
Indebtedness, do any one or more of the following:  (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, such Senior Indebtedness, or otherwise amend or supplement in any manner
such Senior Indebtedness or any instrument evidencing the same or any agreement
under which such Senior Indebtedness is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing such Senior Indebtedness; (iii) release any Person liable in any manner
for the collection of such Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Corporation, as the case may be, and any
other Person.

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    
 

    “Indebtedness” shall mean, whether
recourse is to all or a portion of the assets of the Corporation and whether or
not contingent, (i) every obligation of the Corporation for money borrowed; (ii)
every obligation of the Corporation evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (iii) every reimbursement
obligation of the Corporation with respect to letters of credit, banker’s
acceptances or similar facilities issued for the account of the Corporation;
(iv) every obligation of the Corporation issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (v) every
capital lease obligation of the Corporation; (vi) all indebtedness of the
Corporation whether incurred on or prior to the date of the Subordinated Note or
thereafter incurred, for claims in respect of derivative products, including
interest rate, foreign exchange rate and commodity forward contracts, options
and swaps and similar arrangements; and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, the Corporation has
guaranteed or is responsible or liable for, directly or indirectly, as obligor
or otherwise.

    

    “Indebtedness Ranking on a Parity with
the Subordinated Notes” shall mean (i) Indebtedness, whether outstanding on the
date of execution of this Subordinated Note or hereafter created, assumed or
incurred, to the extent such Indebtedness by its terms ranks equally with and
not prior or senior to the Subordinated Notes in the right of payment upon the
happening of the dissolution, winding-up, liquidation or reorganization of the
Corporation, and (ii) all other debt securities, and guarantees in respect of
those debt securities, issued to any trust, or a trustee of such trust,
partnership or other entity affiliated with the Corporation, that is a financing
vehicle of the Corporation (a “financing entity”) in connection with the
issuance by such financing entity of equity securities or other securities
guaranteed by the Corporation pursuant to an instrument that ranks pari passu in
right of payment to the Subordinated Notes.  It is the intention of
the Board of Directors that the Corporation’s Junior Subordinated Debt
Securities Due 2035 be treated as Indebtedness Ranking on a Parity with the
Subordinated Notes.  The securing of any
Indebtedness, otherwise constituting Indebtedness Ranking on a Parity with the
Subordinated Notes, shall not be deemed to prevent such Indebtedness from
constituting Indebtedness Ranking on a Parity with the Subordinated
Notes.

    

    “Indebtedness Ranking Junior to the
Subordinated Notes” shall mean any Indebtedness, whether outstanding on the date
of execution of this Subordinated Note or hereafter created, assumed or
incurred, to the extent such Indebtedness by its terms ranks junior to and not
equally with or prior to the Subordinated Notes (and any other Indebtedness
Ranking on a Parity with the Subordinated Notes) in right of payment upon the
happening of the dissolution, winding-up, liquidation or reorganization of the
Corporation.  The securing of any Indebtedness, otherwise constituting
Indebtedness Ranking Junior to the Subordinated Notes, shall not be deemed to
prevent such Indebtedness from constituting Indebtedness Ranking Junior to the
Subordinated Notes.

    

    “Senior Indebtedness” shall mean the
principal of (and premium, if any) and interest, if any, on all Indebtedness,
whether outstanding on the date of execution of this Subordinated Note or
hereafter created, assumed or incurred, except Indebtedness Ranking on a Parity
with the Subordinated Notes or Indebtedness Ranking Junior to the Subordinated
Notes, and any deferrals, renewals or extensions of such Senior
Indebtedness.

     

    
 

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    8.           Denominations, Transfer and
Exchange.  The Subordinated Notes are issuable only in
registered form without coupons in minimum denominations of $1,000 and any
integral multiple thereof.  This Subordinated Note is transferable by
the holder hereof on the Subordinated Note Register of the Corporation, upon
surrender of this Subordinated Note for registration of transfer at the office
or agency of the Corporation in Annapolis, Maryland accompanied by a written
instrument or instruments of transfer in form satisfactory to the Corporation
duly executed by the holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Subordinated Notes of authorized denominations and
for the same aggregate principal amount and series will be issued to the
designated transferee or transferees. No service charge will be made for any
such registration of transfer, but the Corporation may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.

    

    9.           Persons Deemed
Owners.  Prior to due presentment for registration of transfer
of this Subordinated Note, the Corporation, any authenticating agent, any paying
agent, any transfer agent and the registrar may deem and treat the holder hereof
as the absolute owner hereof (whether or not this Subordinated Note shall be
overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the security registrar for the Subordinated Notes) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and neither
the Corporation nor any authenticating agent nor any paying agent nor any
transfer agent nor any registrar shall be affected by any notice to the
contrary.

    

    10.           No Recourse Against
Others.  No recourse shall be had for the payment of the
principal of or premium, if any, or interest on this Subordinated Note, or for
any claim based hereon, or otherwise in respect hereof, or based on or in
respect of the Indenture, against any incorporator, stockholder, officer or
director, past, present or future, as such, of the Corporation or of any
predecessor or successor Person, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by the acceptance hereof and as part of the
consideration for the issuance hereof, expressly waived and
released.

    

    11.           Governing
Law.  THE SUBORDINATED NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND.

    

    12.           Paying Agent and
Registrar.  The Corporation shall act as the paying agent and
registrar for the Subordinated Notes.

    

     

    IN
WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed
and sealed this ___ day of ______, 2008.

    

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

    SEVERN
BANCORP, INC.

    

    By:
____________________________

          Name:

          Title:

    

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    

     

    

    ASSIGNMENT

    

    FOR VALUE
RECEIVED, the undersigned assigns and transfers $_________ principal amount of
this Subordinated Note to:

     

    
      

    

     

      
        

      

    
b

    (Insert
assignee’s social security or tax identification number)

    

    

    
      

    

     

    b

      
        

      

    

    (Insert
address and zip code of assignee)

    

    

    and
irrevocably
appoints_______________________________________________________________________________________________________________________________________

    _______________________________________________________________________________________________________________________________________________
agent to transfer this Subordinated Note on the books of the
Registrar.  The agent may substitute another to act for him or
her.

    

    

    Date:
_______________________

    

    Signature:
__________________

    (Sign
exactly as your name appears on the other side of this Certificate)

    

    Signature
Guarantee*:  ___________________________________

    

    

    *(Signature
must be guaranteed by an "eligible guarantor institution" that is, a bank,
stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Subordinated Notes Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Subordinated Notes Exchange Act of 1934, as amended).

     

    

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    CERTIFICATE
TO BE DELIVERED UPON EXCHANGE OR

     

    REGISTRATION
OF RESTRICTED SECURITIES

     

    This
certificate relates to $_____________ principal amount of Subordinated Notes
held in  definitive form by the undersigned.

     

    
      	
               
      

            	
              (A)

            	
              The
      undersigned has requested the Registrar by written order to exchange or
      register the transfer of Subordinated
Notes.

            

    

    

    (B)        The
undersigned confirms that such Subordinated Notes are being (check one box
below):

    

     

    
      	
               
      

            	
              (1)

            	 r	
              transferred
      to Severn Bancorp, Inc. or a Subsidiary thereof;
  or

            

    
      	
               
      

            	
              (2)

            	 r	
              transferred
      pursuant to an available exemption from the registration requirements of
      the Securities Act of 1933, as amended (the “Securities Act”);
      or

            

    

    

    
      	
               
      

            	
              (3)

            	 r	
              transferred
      pursuant to an effective registration statement under the Securities
      Act.

            

    

    

    Unless
the box below is checked, the undersigned confirms that such Subordinated Notes
are not being transferred to an “affiliate” of the Severn Bancorp, Inc. as
defined in Rule 144 under the Securities Act (an “Affiliate”):

     

    
      	
               
      

            	
              (4)

            	 r	
                    
                The
      transferee is an Affiliate of Severn Bancorp,
      Inc.

              

            

    

     

    

    Unless
one of the boxes in (B) above is checked, the Registrar will refuse to register
any of the Subordinated Notes evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if box
(2) is checked, the Trustee may require, prior to registering any such transfer
of the Subordinated Notes such legal opinions, certifications and other
information as the Registrar has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act, such as the
exemption provided by Rule 144 under such Act.

     

    _______________________________________
Signature

    

    Signature
Guarantee:*

    *(Signature
must be guaranteed by an "eligible guarantor institution" that is, a bank,
stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Subordinated Notes Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.)

    

    
      
         

      

      
        16

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