On November 14, 2008, as part of the Troubled Asset Relief Program ("TARP") Capital Purchase Program, Provident Bankshares Corporation ("Provident") entered into a Letter Agreement and Securities Purchase Agreement (collectively, the "Purchase Agreement") with the United States Department of the Treasury ("Treasury"), pursuant to which Provident sold (i) 151,500 shares of Provident's Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the "Series B Preferred Stock") and (ii) a warrant (the "Warrant") to purchase 2,374,608 shares of Provident's common stock, par value $1.00 per share (the "Common Stock"), for an aggregate purchase price of $151.5 million in cash. The Purchase Agreement is attached as Exhibit 10.1 hereto and is incorporated herein by reference.

The Series B Preferred Stock will qualify as Tier 1 capital and will pay cumulative dividends at a rate of 5% per annum for the first five years, and 9% per annum thereafter. The Series B Preferred Stock may be redeemed by Provident after three years. Prior to the end of three years, the Series B Preferred Stock may be redeemed by Provident only with proceeds from the sale of qualifying equity securities of Provident (a "Qualified Equity Offering"). The restrictions on redemption are set forth in the Articles Supplementary to the Provident Bankshares Corporation Articles of Incorporation (the "Articles Supplementary") described in Item 5.03 below.

The Warrant has a 10-year term and is immediately exercisable upon its issuance, with an exercise price, subject to anti-dilution adjustments, equal to $9.57 per share of the Common Stock. The Warrant is attached as Exhibit 4.2 hereto and is incorporated herein by reference. Treasury has agreed not to exercise voting power with respect to any shares of Common Stock issued upon exercise of the Warrant.

The Series B Preferred Stock and the Warrant were issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. Upon the request of Treasury at any time, Provident has agreed to promptly enter into a deposit arrangement pursuant to which the Series B Preferred Stock may be deposited and depositary shares ("Depositary Shares"), representing fractional shares of Series B Preferred Stock, may be issued. Provident has agreed to register the Series B Preferred Stock, the Warrant, the shares of Common Stock underlying the Warrant (the "Warrant Shares") and Depositary Shares, if any, as soon as practicable after the date of the issuance of the Series B Preferred Stock and the Warrant. Neither the Series B Preferred Stock nor the Warrant will be subject to any contractual restrictions on transfer, except that Treasury may only transfer or exercise an aggregate of one-half of the Warrant Shares prior to the earlier of the redemption of 100% of the shares of Series B Preferred Stock and December 31, 2009.

The Purchase Agreement also subjects Provident to certain of the executive compensation limitations included in the Emergency Economic Stabilization Act of 2008 (the "EESA"). In this connection, as a condition to the closing of the transaction, each of Messrs. Gary N. Geisel, Dennis A. Starliper, Kevin G. Byrnes and Robert H. Newton, Jr., and Mrs. Jeanne M. Uphouse, Provident's Senior Executive Officers (as defined in the Purchase Agreement) (the "Senior Executive Officers"), (i) executed a waiver (the "Waiver") voluntarily waiving any claim against the Treasury or Provident for any changes to such Senior Executive Officer's compensation or

The information set forth under "Item 1.01 Entry into a Material Definitive Agreement" is incorporated by reference into this Item 3.02.

Pursuant to the terms of the Purchase Agreement, the ability of Provident to declare or pay dividends or distributions on, or purchase, redeem or otherwise acquire for consideration, shares of its Junior Stock (as defined below) and Parity Stock (as defined below) will be subject to restrictions, including a restriction against increasing dividends from the last quarterly cash dividend per share ($0.11) declared on the Common Stock prior to November 14, 2008. The redemption, purchase or other acquisition of trust preferred securities of Provident or its affiliates also will be restricted. These restrictions will terminate on the earlier of (a) the third anniversary of the date of issuance of the Series B Preferred Stock and (b) the date on which the Series B Preferred Stock has been redeemed in whole or Treasury has transferred all of the Series B Preferred Stock to third parties. The restrictions described in this paragraph are set forth in the Purchase Agreement.

In addition, pursuant to the Articles Supplementary, the ability of Provident to declare or pay dividends or distributions on, or repurchase, redeem or otherwise acquire for consideration, shares of its Junior Stock and Parity Stock will be subject to restrictions in the event that Provident fails to declare and pay full dividends (or declare and set aside a sum sufficient for payment thereof) on its Series B Preferred Stock. These restrictions are set forth in the Articles Supplementary described in Item 5.03.

"Junior Stock" means the Common Stock and any other class or series of stock of Provident the terms of which expressly provide that it ranks junior to the Series B Preferred Stock as to dividend rights and/or rights on liquidation, dissolution or winding up of Provident. "Parity Stock" means any class or series of stock of Provident the terms of which do not expressly provide that such class or series will rank senior or junior to the Series B Preferred Stock as to dividend rights and/or rights on liquidation, dissolution or winding up of Provident (in each case without regard to whether dividends accrue cumulatively or non-cumulatively).

The information concerning executive compensation set forth under "Item 1.01 Entry into a Material Definitive Agreement" is incorporated by reference into this Item 5.02.

On November 12, 2008, Provident filed Articles Supplementary with the Maryland State Department of Assessments and Taxation for the purpose of amending its Articles of Incorporation to fix the designations, preferences, limitations and relative rights of the Series B Preferred Stock. The Series B Preferred Stock has a liquidation preference of $1,000 per share. The Articles Supplementary are attached hereto as Exhibit 3.1 and is incorporated by reference herein.

On November 17, 2008, Provident issued a press release announcing the sale of $151.5 million of Series B Preferred Stock to Treasury pursuant to the Purchase Agreement. The press release is furnished as Exhibit 99.1 and incorporated by reference herein.

(d) Exhibits.

The following exhibits are filed herewith:

Exhibit No.       Description of Exhibit

    3.1           Articles Supplementary for the Series B Preferred Stock

    4.1           Form of Certificate for the Series B Preferred Stock

    4.2           Warrant for Purchase of Shares of Common Stock

   10.1           Letter Agreement, dated November 14, 2008, between Provident
                  Bankshares Corporation and United States Department of the
                  Treasury, with respect to the issuance and sale of the Series B
                  Preferred Stock and the Warrant

   10.2           Form of Waiver, executed by each of Messrs. Gary N. Geisel,
                  Dennis A. Starliper, Kevin G. Byrnes and Robert H. Newton, Jr.,
                  and Mrs. Jeanne M. Uphouse

   99.1           November 17, 2008 Press Release