Exhibit 10.3

 

SUBORDINATED NOTE PURCHASE AGREEMENT

  

Dated as of December 10, 2015

  

by and among

  

Bank of Commerce Holdings

  

and

  

THE PURCHASERS NAMED HEREIN

 

 

 
 

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This SUBORDINATED NOTE PURCHASE AGREEMENT, dated as of December 10, 2015 (this
“Agreement”), is by and among Bank of Commerce Holdings, a California
corporation (the “Company”), and each purchaser named on Schedule A (each, a
“Purchaser,” and together, “Purchasers”).

 

BACKGROUND

 

The Company intends to sell to Purchasers, and Purchasers intend to purchase
from the Company, Fixed-to-Floating Subordinated Notes due 2025 in the aggregate
principal amount of $10,000,000.00 in the form set forth on Exhibit A (the
“Notes”) evidencing unsecured subordinated debt of the Company.

 

NOW, THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements set forth herein, the parties agree as
follows:

 

Article I
PURCHASE; CLOSING

 

Section 1.1     Purchase. On the terms and subject to the conditions set forth
herein, and in consideration of each Purchaser’s payment of the Purchase Price
(as defined herein), each Purchaser will purchase from the Company, and the
Company will sell to Purchasers, in the aggregate, the Notes. The principal
amount of the Notes to be delivered to each Purchaser is set forth next to such
Purchaser’s name on Schedule A.

 

Section 1.2     Closing.

 

(a)     Subject to the satisfaction or waiver of the conditions set forth in
this Agreement, the closing of the purchase of the Notes by Purchasers pursuant
hereto (the “Closing”) shall occur at 10:00 a.m., Eastern time, on the third
business day after the satisfaction or waiver (by the party entitled to grant
such waiver) of the conditions to the Closing set forth in this Agreement (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to fulfillment or waiver at the Closing of those conditions), at the
offices of Bryan Cave LLP located at 1201 West Peachtree Street NW, 14th Floor,
Atlanta Georgia 30309, or remotely via the electronic or other exchange of
documents and signature pages, or such other date or location as agreed in
writing by the parties. The date of the Closing is referred to as the “Closing
Date.”

 

(b)     Subject to the satisfaction or waiver on the Closing Date of the
applicable conditions to the Closing in Section 1.2(c), at the Closing:

 

(i)     The Company will deliver to each Purchaser, in the denominations set
forth on Schedule A, a Note duly executed by the Company; and

 

(ii)     Each Purchaser will deliver the amount set forth next to its name and
designated as its “Purchase Price” on Schedule A to the Company by wire transfer
of immediately available funds to the account provided to such Purchaser by the
Company. The aggregate payments by Purchasers on the Closing Date shall equal
$10,000,000.00 (the “Purchase Price”).

 

 

 
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(c)     Closing Conditions.

 

(i)     The obligation of Purchasers, on the one hand, and the Company, on the
other hand, to effect the Closing is subject to the fulfillment or written
waiver by each Purchaser or the Company, as applicable, of the following
condition:

 

(1)     no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the Closing or shall prohibit or
restrict Purchasers or their Affiliates from owning any Notes in accordance with
the terms thereof and no lawsuit shall have been commenced by any court,
administrative agency or commission or other governmental authority or
instrumentality, whether federal, state, local or foreign, or any applicable
industry self-regulatory organization (each, a “Governmental Entity”) seeking
such prohibition or restriction.

 

(ii)     The obligation of Purchasers to consummate the purchase of the Notes to
be purchased by them at Closing is also subject to the fulfillment by the
Company or written waiver by each Purchaser prior to the Closing of each of the
following conditions:

 

(1)     the representations and warranties of the Company set forth in this
Agreement shall be true and correct in all respects on and as of the date of
this Agreement and on and as of the Closing Date as though made on and as of the
Closing Date, except where the failure to be true and correct (without regard to
any materiality or Material Adverse Effect qualifications contained therein),
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect (and except that (i) representations and warranties made
as of a specified date shall only be required to be true and correct as of such
date and (ii) the representations and warranties of the Company set forth in
Sections 2.2(b) (but only with respect to the last sentence thereof), 2.2(c) and
2.2(l)(4) shall be true and correct in all respects);

 

(2)     the Company shall have performed in all material respects all
obligations required to be performed by it at or prior to the Closing, as the
case may be, under this Agreement to be performed by it on or prior to the
Closing Date;

 

(3)     Purchasers shall have received a certificate signed on behalf of the
Company by a senior executive officer certifying to the effect that the
conditions set forth in Section 1.2(c)(ii)(1) and Section 1.2(c)(ii)(2) have
been satisfied;

 

(4)     any governmental and other consents, approvals, authorizations,
non-objections, applications, registrations and qualifications that are required
to be obtained in connection with or for the consummation of the transactions
contemplated by this Agreement and the performance of the Company’s obligations
thereunder (the “Required Approvals”) shall have been made or been obtained and
shall be in full force and effect as of the Closing Date; provided, that no such
Required Approval shall impose any Burdensome Condition;

 

 

 
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(5)     since the date hereof, no Material Adverse Effect shall have occurred;

 

(6)     at the Closing, the Company shall deliver to Purchasers a certificate of
the Secretary of the Company, in the form attached hereto as Exhibit B (the
“Secretary’s Certificate”), dated as of the Closing Date, (i) certifying the
resolutions adopted by the Board of Directors of the Company or a duly
authorized committee thereof approving the transactions contemplated by this
Agreement and the issuance of the Notes under this Agreement, (ii) certifying
the current versions of the Certificate of Incorporation, as amended, and
bylaws, as amended, of the Company, and (iii) certifying as to the signatures
and authority of persons signing this Agreement and related documents on behalf
of the Company;

 

(7)     since the date hereof, there shall not be any action taken, or any law,
rule or regulation enacted, entered, enforced or deemed applicable to the
Company or the Company Subsidiaries, Purchasers or the transactions contemplated
by this Agreement, by the Board of Governors of the Federal Reserve System (the
“Federal Reserve”) or any other Governmental Entity, whether in connection with
the Required Approvals or otherwise, which imposes any restriction or condition
which any Purchaser determines, in its reasonable good faith judgment, is
materially and unreasonably burdensome on the Company’s or such Purchaser’s
business or would materially reduce the economic benefits of the transactions
contemplated by this Agreement to such Purchaser to such a degree that such
Purchaser would not have entered into this Agreement had such condition or
restriction been known to it on the date hereof (any such condition or
restriction, a “Burdensome Condition”), and, for the avoidance of doubt, (i) any
requirements to disclose the identities of limited partners, shareholders or
members of such Purchaser or its Affiliates or its investment advisors, other
than the identities of Affiliates of such Purchaser, shall be deemed a
Burdensome Condition unless otherwise determined by such Purchaser in its sole
discretion and (ii) any restrictions or conditions imposed on such Purchaser in
any passivity commitments shall not be deemed a Burdensome Condition; provided,
that the Purchasers agree that (i) obtaining the consent of the Company’s senior
term loan lender, (ii) approval of the Federal Reserve Bank of San Francisco of
the Company’s redemption of Preferred Stock issued to the U.S. Treasury pursuant
to the Small Business Lending Fund, and (iii) confirmation from the Federal
Reserve Bank that the Notes constitute Tier 2 Capital shall not be considered a
Burdensome Condition; and

 

(8)     prior to, or contemporaneously with the Closing, each of the Purchasers
set forth on Schedule A shall have actually subscribed for the amounts set forth
opposite such Purchaser’s name on Schedule A.

 

(iii)     The obligation of the Company to effect the Closing is subject to the
fulfillment or written waiver by the Company prior to the Closing of the
following additional conditions:

 

(1)     the representations and warranties of each Purchaser set forth in this
Agreement shall be true and correct in all respects on and as of the date of
this Agreement and on and as of the Closing Date as though made on and as of the
Closing Date, except where the failure to be true and correct (without regard to
any materiality or Material Adverse Effect qualifications contained therein)
would not materially adversely affect the ability of such Purchaser to perform
its obligations hereunder;

 

 

 
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(2)     each Purchaser shall have performed in all material respects all
obligations required to be performed by it at or prior to the Closing, as the
case may be, under this Agreement to be performed by it on or prior to the
Closing Date;

 

(3)     the Required Approvals shall have been made or been obtained and shall
be in full force and effect as of the Closing Date; provided, that no such
Required Approval shall impose any Burdensome Condition;

 

(4)     since the date hereof, there shall not be any action taken, or any law,
rule or regulation enacted, entered, enforced or deemed applicable to the
Company or the Company Subsidiaries, Purchasers or the transactions contemplated
by this Agreement, by the Federal Reserve or any other Governmental Entity,
whether in connection with the Required Approvals or otherwise, which imposes
any restriction or condition that is a Burdensome Condition; and

 

(5)     the Company shall have received a Certificate signed on behalf of each
Purchaser by a duly authorized person certifying to the effect that the
conditions set forth in Section 1.2(c)(iii)(1) and Section 1.2(c)(iii)(2) have
been satisfied.

 

Article II
REPRESENTATIONS AND WARRANTIES

 

Section 2.1     Disclosure.

 

(a)     On or prior to the date hereof, the Company delivered to Purchasers a
letter (a “Disclosure Letter”) setting forth, among other things, items the
disclosure of which is (i) required by an express disclosure requirement
contained in a provision hereof or (ii) necessary or appropriate to take
exception to one or more representations or warranties contained in Section 2.2
with respect to the Company or to one or more covenants contained in Article
III; provided, that if such information is disclosed in such a way as to make
its relevance or applicability to another provision of this Agreement reasonably
apparent on its face, such information shall be deemed to be responsive to such
other provision of this Agreement. Notwithstanding anything in this Agreement to
the contrary, the mere inclusion of an item in a Disclosure Letter shall not be
deemed an admission that such item represents a material exception or material
fact, event or circumstance or that such item has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(b)     As used in this Agreement, any reference to any fact, change,
circumstance or effect being “material” with respect to the Company means such
fact, change, circumstance or effect is material in relation to the business,
assets, results of operations or financial condition of the Company and the
Company Subsidiaries taken as a whole. As used in this Agreement, the term
“Material Adverse Effect” means any circumstance, event, change, development or
effect that, individually or in the aggregate, (1) is material and adverse to
the business, assets, results of operations or financial condition of the
Company and Company Subsidiaries taken as a whole or (2) would materially impair
the ability of the Company to perform its obligations under this Agreement or to
consummate the Closing; provided, that in determining whether a Material Adverse
Effect has occurred, there shall be excluded any effect to the extent resulting
from the following: (A) changes, after the date hereof, in U.S. generally
accepted accounting principles (“GAAP”) or regulatory accounting principles
generally applicable to banks, savings associations or their holding companies,
(B) changes, after the date hereof, in applicable laws, rules and regulations or
interpretations thereof by Governmental Entities, (C) actions or omissions of
the Company expressly required by the terms of this Agreement or taken with the
prior written consent of Purchasers, (D) changes in general economic, monetary
or financial conditions in the United States, (E) changes in global or national
political conditions, including the outbreak or escalation of war or acts of
terrorism, or (F) the public disclosure of this Agreement or the transactions
contemplated by this Agreement; provided, further, however, that if any event
described in clause (A), (B), (D) or (E) of this Section 2.1(b) occurs and such
event has a materially disproportionate effect on the Company relative to other
banks, savings associations and their holding companies in the United States,
only then such event will be deemed to have had a Material Adverse Effect.

 

 

 
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(c)     “Previously Disclosed” with regard to a party means information set
forth on its Disclosure Letter.

 

Section 2.2     Representations and Warranties of the Company. Except as
Previously Disclosed, the Company hereby represents and warrants to Purchasers,
as of the date of this Agreement and as of the Closing Date (except for the
representations and warranties that are as of a specific date, which shall be
made as of that date), that:

 

(a)     Organization and Authority. Each of the Company and the Company
Subsidiaries is a corporation, bank or other entity duly organized and validly
existing under the laws of the jurisdiction of its incorporation or
organization, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified except where any failure to be so
qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and has the corporate or other
organizational power and authority to own its properties and assets and to carry
on its business as it is now being conducted. The Company is duly registered as
a bank holding company under the Bank Holding Company Act of 1956, as amended,
and under applicable state Laws.

 

(b)     Company Subsidiaries. The Company has Previously Disclosed a true,
complete and correct list of all of its Subsidiaries as of the date of this
Agreement (each, a “Company Subsidiary” and, collectively, the “Company
Subsidiaries”). The Company owns, directly or indirectly, all of its interests
in each Company Subsidiary free and clear of any and all Liens. The deposit
accounts of Redding Bank of Commerce, a wholly owned subsidiary bank of the
Company (the “Bank”), are insured by the Federal Deposit Insurance Corporation
(“FDIC”) to the fullest extent permitted by the Federal Deposit Insurance Act,
as amended and the rules and regulations of the FDIC thereunder, and all
premiums and assessments required to be paid in connection therewith have been
paid when due (after giving effect to any applicable extensions). The Company
beneficially owns all of the outstanding capital securities and has sole control
of the Bank.

 

 

 
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(c)     Authorization; No Conflicts; No Defaults.

 

(i)     The Company has the corporate power and authority to execute and deliver
this Agreement and the Notes (collectively, the “Transaction Documents”) and to
perform its obligations hereunder and thereunder. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company. The Board of
Directors has duly approved the agreements and the transactions contemplated by
the Transaction Documents. No other corporate proceedings are necessary for the
execution and delivery by the Company of the Transaction Documents, the
performance by it of its obligations hereunder or thereunder or the consummation
by it of the transactions contemplated hereby or thereby. The Transaction
Documents have been, and when delivered at the Closing will be, duly and validly
executed and delivered by the Company and, assuming due authorization, execution
and delivery by Purchasers and the other parties thereto, are, or in the case of
documents executed after the date of this Agreement, will be, upon execution,
the valid and binding obligations of the Company enforceable against the Company
in accordance with their respective terms, except as enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors’ rights or by general equity principles (whether applied in equity or
at law).

 

(ii)     Neither the execution and delivery by the Company of the Transaction
Documents nor the consummation of the transactions contemplated hereby or
thereby, nor compliance by the Company with any of the provisions hereof or
thereof, will (A) violate, conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
result in the loss of any benefit or creation of any right on the part of any
third party under, or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the creation of any liens,
charges, adverse rights or claims, pledges, covenants, title defects, security
interests and other encumbrances of any kind (“Liens”) upon any of the
properties or assets of the Company or any Company Subsidiary, under any of the
terms, conditions or provisions of (i) the articles of incorporation or bylaws
(or similar governing documents) of the Company and each Company Subsidiary or
(ii) subject to receipt of any Requisite Governmental Consents, any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or any of the Company Subsidiaries
is a party or by which it may be bound, or to which the Company or any of the
Company Subsidiaries, or any of the properties or assets of the Company or any
of the Company Subsidiaries may be subject, or (B) subject to receipt of any
Requisite Governmental Consents, violate any Law applicable to the Company or
any of the Company Subsidiaries or any of their respective properties or assets
except in the case of clauses (A)(ii) and (B) of this paragraph for such
violations, conflicts and breaches as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

(iii)     None of the Company, the Bank or any other Subsidiary of the Company
is in default in the performance, observance or fulfillment of any of the terms,
obligations, covenants, conditions or provisions contained in any indenture or
other agreement creating, evidencing or securing Indebtedness of any kind or
pursuant to which any such Indebtedness is issued, or other agreement or
instrument to which Borrower, Bank or any other Subsidiary of Borrower is a
party or by which the Company, the Bank or any other Subsidiary of the Company
or their respective properties may be bound or affected, except, in each case,
only such defaults that would not reasonably be expected to have, singularly or
in the aggregate, a Material Adverse Effect on Borrower. For purposes of this
Agreement, “Indebtedness” shall mean and include: (a) all items arising from the
borrowing of money that, according to GAAP as in effect from time to time, would
be included in determining total liabilities as shown on the consolidated
balance sheet of the Company; and (b) all obligations secured by any lien in
Property owned by the Company whether or not such obligations shall have been
assumed; provided, however, Indebtedness shall not include deposits or other
indebtedness created, incurred or maintained in the ordinary course of the
Company’s or the Bank’s business (including, without limitation, federal funds
purchased, advances from any Federal Home Loan Bank, secured deposits of
municipalities and repurchase arrangements) and consistent with customary
banking practices and applicable laws and regulations.

 

 

 
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(d)     Governmental Consents. Other than with respect to any Required Approvals
or any approval required under the securities or blue sky laws of the various
states (collectively, the “Requisite Governmental Consents”), no governmental
consents are necessary for the execution and delivery of the Transaction
Documents or for the consummation by the Company of the transactions
contemplated hereby and thereby.

 

(e)     Litigation and Other Proceedings. Except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
there is no pending or, to the Knowledge of the Company, threatened claim,
action, suit, arbitration, complaint, charge or investigation or proceeding
(each an “Action”) against the Company or any Company Subsidiary or any of its
assets, rights or properties, nor is the Company or any Company Subsidiary a
party or named as subject to the provisions of any order, writ, injunction,
settlement, judgment or decree of any court, arbitrator or government agency, or
instrumentality. The Company is in compliance in all material respects with all
existing decisions, orders, and agreements of or with Governmental Entities to
which it is subject or bound.

 

(f)     Financial Statements. Each of the audited consolidated balance sheets of
the Company and the Company Subsidiaries and the related audited consolidated
statements of income (loss), statements of shareholders’ equity and
comprehensive income (loss) and cash flows, together with the notes thereto, for
the last three years, and the unaudited consolidated balance sheets of the
Company and the Company Subsidiaries and the related unaudited consolidated
statements of income (loss), statements of shareholders’ equity and
comprehensive income (loss) and cash flows, together with the notes thereto, as
of and for the quarter ended September 30, 2015, all of which have been
previously provided or made available to Purchasers (collectively, the “Company
Financial Statements”), (1) have been prepared from, and are in accordance with,
the books and records of the Company and the Company Subsidiaries, (2) complied,
as of their respective date of such filing, in all material respects with
applicable accounting requirements, (3) have been prepared in accordance with
GAAP applied on a consistent basis and in accordance with the financial
statement requirements of the United States Securities and Exchange Commission’s
Regulation S-X, and (4) present fairly in all material respects the consolidated
financial position of the Company and the Company Subsidiaries at the dates and
the consolidated results of operations, changes in shareholders’ equity and cash
flows of the Company and the Company Subsidiaries for the periods stated
therein. As of September 30, 2015, the Bank’s allowance for loan losses was in
compliance in all material respects with (A) the Bank’s methodology for
determining the adequacy of its allowance for loan losses and (B) the standards
established by applicable Governmental Entities and the Financial Accounting
Standards Board.

 

 

 
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(g)     Reports. Since December 31, 2011, the Company and each Company
Subsidiary have filed all material reports, registrations, documents, filings,
statements and submissions, together with any required amendments thereto, that
it was required to file with any Governmental Entity (the foregoing,
collectively, the “Company Reports”) and have paid all material fees and
assessments due and payable in connection therewith. As of their respective
filing dates, the Company Reports complied in all material respects with all
statutes and applicable rules and regulations of the applicable Governmental
Entities, as the case may be.

 

(h)     Books and Records; Internal Accounting and Disclosure Controls. The
books and records of the Company and the Company Subsidiaries are complete and
correct in all material respects. No written or, to the Knowledge of the
Company, oral notice or allegation of any material inaccuracies or discrepancies
in such books and records has been received by the Company. The records,
systems, controls, data and information of the Company and the Company
Subsidiaries are recorded, stored, maintained and operated under means
(including any electronic, mechanical or photographic process, whether
computerized or not) that are under the exclusive ownership and direct control
of the Company or the Company Subsidiaries or accountants (including all means
of access thereto and therefrom), except for any non-exclusive ownership and
non-direct control that would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.

 

(i)     Off Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company or any of the Company Subsidiaries and an
unconsolidated or other affiliated entity that is not reflected on the Company
Financial Statements.

 

(j)     Risk Management Instruments. All material derivative instruments,
including swaps, caps, floors and option agreements entered into for the
Company’s or any of the Company Subsidiaries’ own account were entered into (1)
only in the ordinary course of business, (2) in accordance with prudent
practices and in all material respects with all applicable Laws and (3) with
counterparties believed to be financially responsible at the time; and each of
them constitutes the valid and legally binding obligation of the Company or any
Company Subsidiary, as applicable, enforceable in accordance with its terms.
Neither the Company nor, to the Knowledge of the Company, any other parties
thereto is in breach of any of its material obligations under any such agreement
or arrangement.

 

(k)     No Undisclosed Liabilities. There are no liabilities of the Company or
any of the Company Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, except for (1)
liabilities adequately reflected or reserved against in accordance with GAAP in
the Company Financial Statements, (2) liabilities that have arisen in the
ordinary and usual course of business since September 30, 2015 and that have not
or would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect and (3) liabilities entered into by the Company in
connection with the issuance of Trust Preferred Securities in July, 2005
(“TRUPS”).

 

 

 
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(l)     Absence of Certain Changes. Since January 1, 2015, except as disclosed
in the Company Financial Statements, (1) the Company and the Company
Subsidiaries have conducted their respective businesses in all material respects
in the ordinary and usual course of business materially consistent with past
practices, except that upon approval of its primary regulators, the Company
expects to acquire five (5) retail branches from Bank of America, N.A. pursuant
to a purchase transaction in the first quarter of 2016 (such transaction, the
“BofA Transaction”), (2) none of the Company or any Company Subsidiary has
incurred any material liability or obligation, direct or contingent, for
borrowed money, except borrowings in the ordinary course of business (including
entering into a Senior Term Loan Agreement with NexBank SSB, dated December 10,
2015), (3) the Company has not made or declared any distribution in cash or in
kind to its shareholders or issued or repurchased any shares of its capital
stock (except for the payment of dividends when due on the Company’s Small
Business Lending Fund preferred stock and the redemption of the preferred stock
at Closing with the proceeds of the Notes as contemplated by the Transaction
Documents), (4) through (and including) the date of this Agreement, no fact,
event, change, condition, development, circumstance or effect has occurred that
has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and (5) no material default (or event
which, with notice or lapse of time, or both, would constitute a material
default) exists on the part of the Company or any Company Subsidiary or, to the
Knowledge of the Company, on the part of any other party, in the due performance
and observance of any term, covenant or condition of any agreement to which the
Company or any Company Subsidiary is a party and which would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(m)     Compliance with Laws. The Company and each Company Subsidiary have all
permits, licenses, franchises, authorizations, orders and approvals of, and have
made all filings, applications and registrations with, Governmental Entities
that are required in order to permit them to own or lease their properties and
assets and to carry on their business as presently conducted and that are
material to the business of the Company and each Company Subsidiary, except
where the failure to have such permits, licenses, franchises, authorizations,
orders and approvals, or to have made such filings, applications and
registrations, would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. The Company and each Company Subsidiary
have complied in all material respects and (1) are not in default or violation
in any respect of, (2) to the Company’s Knowledge, are not under investigation
with respect to, and (3) to the Company’s Knowledge, have not been threatened to
be charged with or given notice of any material violation of, any applicable
material domestic (federal, state or local) or foreign law, statute, ordinance,
license, rule, regulation, policy or guideline, order, demand, writ, injunction,
decree or judgment of any Governmental Entity (each, a “Law”), other than such
noncompliance, defaults or violations that would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. Except for
statutory or regulatory restrictions of general application, no Governmental
Entity has placed any material restriction on the business or properties of the
Company or any of the Company Subsidiaries. As of the date hereof, the Bank has
a Community Reinvestment Act rating of “satisfactory” or better.

 

 

 
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(n)     Agreements with Regulatory Agencies. Neither the Company nor any Company
Subsidiary (A) is subject to any cease-and-desist or other similar order or
enforcement action issued by, (B) is a party to any written agreement, consent
agreement or memorandum of understanding with, (C) is a party to any commitment
letter or similar undertaking to, or (D) is subject to any capital directive by,
and since December 31, 2011, neither of the Company nor any Company Subsidiary
has adopted any board resolutions at the request of, any Governmental Entity
that currently restricts in any material respect the conduct of its business or
that in any material manner relates to its capital adequacy, its liquidity and
funding policies and practices, its ability to pay dividends (except that
Redding Bank of Commerce, a wholly owned subsidiary Bank of the Company, is
required pursuant to Section 1133 of the California Financial Code, to seek
approval of the California Department of Business Oversight prior to paying
dividends to the Bank Holding Company), its credit, risk management or
compliance policies, its internal controls, its management or its operations or
business (each item in this sentence, a “Regulatory Agreement”), nor has the
Company nor any of the Company Subsidiaries been advised since December 31, 2011
by any Governmental Entity that it is considering issuing, initiating, ordering,
or requesting any such Regulatory Agreement.

 

(o)     Brokers and Finders. The Company has engaged Raymond James & Associates,
Inc. (the “Placement Agent”), a registered broker-dealer subject to the rules
and regulations of the Financial Industry Regulatory Authority (“FINRA”), in
connection with the offer and sale of the Notes as contemplated by the
Transaction Documents, and the BofA Transaction. Except for such engagement,
neither the Company nor any of its officers, directors, employees or agents has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder’s fees, and no broker or
finder has acted directly or indirectly for the Company in connection with the
Transaction Documents or the transactions contemplated hereby or thereby.

 

(p)     Tax Matters. The Company and each of the Company Subsidiaries has (i)
filed all material foreign, U.S. federal, state and local tax returns,
information returns and similar reports that are required to be filed, and all
such tax returns are true, correct and complete in all material respects, and
(ii) paid all material taxes required to be paid by it and any other material
assessment, fine or penalty levied against it other than taxes (x) currently
payable without penalty or interest, or (y) being contested in good faith by
appropriate proceedings.

 

(q)     Offering of Securities. Neither the Company nor any Person acting on its
behalf has taken any action which would subject the offering, issuance or sale
of the Notes to the registration requirements of the Securities Act of 1933, as
amended (the “Securities Act”). Neither the Company nor any Person acting on its
behalf has engaged or will engage in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with any offer or sale of the Notes pursuant to the transactions
contemplated by the Transaction Documents. Assuming the accuracy of Purchasers’
representations and warranties set forth in this Agreement, no registration
under the Securities Act is required for the offer and sale of the Notes by the
Company to Purchasers.

 

 

 
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(r)     Investment Company Status. The Company is not, and upon consummation of
the transactions contemplated by the Transaction Documents will not be, an
“investment company,” a company controlled by an “investment company” or an
“affiliated Person” of, or “promoter” or “principal underwriter” of, an
“investment company,” as such terms are defined in the Investment Company Act of
1940, as amended.

 

Section 2.3     Representations and Warranties of Purchasers. Each Purchaser,
severally, but not jointly, hereby represents and warrants to the Company, as of
the date of this Agreement and as of the Closing Date (except to the extent made
only as of a specified date, in which case as of such date), that:

 

(a)     Organization and Authority. Such Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and where failure to be so qualified
would be reasonably expected to materially and adversely affect such Purchaser’s
ability to perform its obligations under this Agreement or consummate the
transactions contemplated by this Agreement on a timely basis, and such
Purchaser has the corporate or other power and authority and governmental
authorizations to own its properties and assets and to carry on its business as
it is now being conducted.

 

(b)     Authorization.

 

(i)     Such Purchaser has the corporate or other power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement by such Purchaser and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by such Purchaser’s board of directors, general partner or managing
members, as the case may be (if such authorization is required), and no further
approval or authorization by any of its partners or other equity owners, as the
case may be, is required. This Agreement has been duly and validly executed and
delivered by such Purchaser and assuming due authorization, execution and
delivery by the Company, is a valid and binding obligation of such Purchaser
enforceable against such Purchaser in accordance with its terms (except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general applicability
relating to or affecting creditors’ rights or by general equity principles).

 

(ii)     Neither the execution, delivery and performance by such Purchaser of
this Agreement, nor the consummation of the transactions contemplated by this
Agreement, nor compliance by such Purchaser with any of the provisions hereof,
will (A) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration of, or result in the creation of any Lien upon any of the
properties or assets of such Purchaser under any of the terms, conditions or
provisions of (i) its certificate of limited partnership, certificate of
formation, operating agreement or partnership agreement or similar governing
documents or (ii) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which such Purchaser is a
party or by which it may be bound, or to which such Purchaser or any of the
properties or assets of such Purchaser may be subject, or (B) subject to
compliance with the statutes and regulations referred to in the next paragraph,
violate any law, statute, ordinance, rule or regulation, permit, concession,
grant, franchise or any judgment, ruling, order, writ, injunction or decree
applicable to such Purchaser or any of its properties or assets except in the
case of clauses (A) (ii) and (B) for such violations, conflicts and breaches as
would not reasonably be expected to materially and adversely affect such
Purchaser’s ability to perform its respective obligations under this Agreement
or consummate the transactions contemplated by this Agreement on a timely basis.

 

 

 
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(iii)     No notice to, registration, declaration or filing with, exemption or
review by, or authorization, order, consent or approval of, any Governmental
Entity, nor expiration or termination of any statutory waiting period, is
necessary for the consummation by such Purchaser of the transactions
contemplated by this Agreement.

 

(c)     Purchase for Investment. Such Purchaser acknowledges that the Notes have
not been registered under the Securities Act or under any state securities laws.
Such Purchaser (1) is acquiring the Notes pursuant to an exemption from
registration under the Securities Act solely for investment with no present
intention to distribute any of the Notes to any person, (2) will not sell or
otherwise dispose of any of the Notes, except in compliance with the
registration requirements or exemption provisions of the Securities Act and any
other applicable securities laws, (3) has such knowledge and experience in
financial and business matters and in investments of this type that it is
capable of evaluating the merits and risks of its investment in the Notes and of
making an informed investment decision, (4) is an “accredited investor” (as that
term is defined by Rule 501 of the Securities Act) and (5) became aware of the
offering of the Notes, and the Notes were offered to Purchaser, solely by direct
contact between such Purchaser and the Company or the Placement Agent, and not
by any other means, including any form of “general solicitation” or “general
advertising” (as such terms are used in Regulation D under the Securities Act).

 

(d)     Qualified Institutional Buyer. Each Purchaser is and will be on the
Closing Date a “qualified institutional buyer” as such term is defined in Rule
144A promulgated under the Securities Act (“QIB”).

 

(e)     Financial Capability. At the Closing, such Purchaser shall have
available funds necessary to consummate the Closing on the terms and conditions
contemplated by this Agreement.

 

(f)     Knowledge as to Conditions. As of the date of this Agreement, such
Purchaser does not know of any reason why any Required Approvals and, to the
extent necessary, any other approvals, authorizations, filings, registrations,
and notices required or otherwise a condition to the consummation by it of the
transactions contemplated by this Agreement will not be obtained.

 

(g)     Brokers and Finders. Neither such Purchaser nor its Affiliates, any of
their respective officers, directors, employees or agents has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder’s fees, and no broker or finder has acted
directly or indirectly for such Purchaser, in connection with this Agreement or
the transactions contemplated by this Agreement, in each case, whose fees the
Company would be required to pay (other than the reimbursement of transaction
expenses as provided in Section 6.2).

 

 

 
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(h)     Investment Decision. Such Purchaser, or the duly appointed investment
manager of such Purchaser (the “Investment Manager”), if applicable, has (1)
reached its decision to invest in the Company independently from any other
Person, (2) except with respect to other Purchasers, has not entered into any
agreement or understanding with any other Person to act in concert for the
purpose of exercising a controlling influence over the Company or any Company
Subsidiary, including any agreements or understandings regarding the voting or
transfer of shares of the Company, (3) except with respect to other Purchasers,
has not shared with any other Person proprietary due diligence materials
prepared by such Purchaser or its Investment Manager or any of its other
advisors or representatives (acting in their capacity as such) and used by its
investment committee as the basis for purposes of making its investment decision
with respect to the Company or any Company Subsidiary, (4) has not been induced
by any other Person to enter into the transactions contemplated by this
Agreement, and (5) except with respect to other Purchasers, has not entered into
any agreement with any other Person with respect to the transactions
contemplated by this Agreement. Such Purchaser understands that nothing in this
Agreement or any other materials presented by or on behalf of the Company to
such Purchaser in connection with the purchase of the Notes constitutes legal,
tax or investment advice. Such Purchaser has consulted such accounting, legal,
tax and investment advisors as it has deemed necessary or appropriate in
connection with its purchase of the Notes.

 

(i)     Ability to Bear Economic Risk of Investment. Such Purchaser recognizes
that an investment in the Notes involves substantial risk, and has the ability
to bear the economic risk of the prospective investment in the Notes, including
the ability to hold the Notes indefinitely, and further including the ability to
bear a complete loss of all of its investment in Borrower.

 

(j)     Information. Such Purchaser acknowledges that: (i) it is not being
provided with the disclosures that would be required if the offer and sale of
the Notes were registered under the Securities Act, nor is it being provided
with any offering circular or prospectus prepared in connection with the offer
and sale of the Notes; (ii) it has conducted its own examination of the Company
and the terms of the Notes to the extent it deems necessary to make its decision
to invest in the Notes; and (iii) it has availed itself of public access to
financial and other information concerning the Company to the extent it deems
necessary to make its decision to purchase the Notes. It has reviewed the
information set forth in the exhibits hereto. It acknowledges that it and its
advisors have been furnished with all materials relating to the business,
finances and operations of the Company that have been requested of it or its
advisors and have been given the opportunity to ask questions of, and to receive
answers from, persons acting on behalf of the Company concerning terms and
conditions of the transactions contemplated by this Agreement in order to make
an informed and voluntary decision to enter into this Agreement.

 

(k)     Placement Agent. Such Purchaser will purchase the Note directly from the
Company and not from the Placement Agent, is not relying on the Placement Agent
in any manner with respect to its decision to purchase the Note, and understands
that neither the Placement Agent nor any other broker or dealer has any
obligation to make a market in the Notes.

 

 

 
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(l)     Restricted Securities. Such Purchaser understands that the Notes are
characterized as “restricted securities” under the Securities Act inasmuch as
they are being acquired from the Company in a transaction not involving a public
offering and that under the Securities Act and the rules and regulations
thereunder, such securities may be resold without registration under the
Securities Act only in limited circumstances. Such Purchaser represents that it
understands the resale limitations imposed by Rule 144 promulgated under the
Securities Act and by the Securities Act on the Notes.

 

(m)     Accuracy of Representations. Such Purchaser understands that each of the
Placement Agent and the Company will rely upon the truth and accuracy of the
foregoing representations, acknowledgements and agreements in connection with
the transactions contemplated by this Agreement, and agrees that if any of the
representations or acknowledgements made by it are no longer accurate as of the
Closing Date, or if any of the agreements made by it are breached on or prior to
the Closing Date, it shall promptly notify the Placement Agent and the Company.

 

(n)     Subsequent Transfers. Such Purchaser acknowledges and agrees that the
Company is not conducting any offering other than the sale to Purchasers set
forth in this Agreement and any subsequent resale of the Notes in the secondary
market, including a securitization, shall not result in any additional costs or
liability to the Company, except as contemplated by Section 4.3.

 

Article III
COVENANTS

 

Section 3.1     Filings; Other Actions.

 

(a)     Each Purchaser, on the one hand, and the Company, on the other hand,
will cooperate and consult with the other and use commercially reasonable
efforts to prepare and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents, and to obtain all
necessary permits, consents, orders, approvals and authorizations of, or any
exemption by, all third parties and Governmental Entities, and the expiration or
termination of any applicable waiting period, necessary or advisable to
consummate the transactions contemplated by this Agreement, to perform the
covenants contemplated by this Agreement, to satisfy all of the conditions
precedent to the obligations of such party thereto and defend any claim, action,
suit, investigation or proceeding, whether judicial or administrative,
challenging this Agreement or the performance of the obligations hereunder;
provided, that nothing in this Agreement shall obligate such Purchaser to
disclose the identities of limited partners, shareholders or members of such
Purchaser or its Affiliates or investment advisors or other confidential
proprietary information of such Purchaser or any of its Affiliates
(collectively, “Proprietary Information”). All parties shall execute and deliver
both before and after the Closing such further certificates, agreements and
other documents and take such other actions as the other parties may reasonably
request to consummate or implement such transactions or to evidence such events
or matters. Each Purchaser and the Company will have the right to review in
advance, and to the extent practicable each will consult with the other, in each
case subject to applicable Laws relating to the exchange of information, all the
information (other than Proprietary Information) relating to such other parties,
and any of their respective Affiliates, which appears in any filing made with,
or written materials submitted to, any third party or any Governmental Entity in
connection with the transactions to which it will be party contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. All parties hereto agrees to
keep the other parties apprised of the status of matters referred to in this
Section 3.1(a). Each Purchaser shall promptly furnish the Company, and the
Company shall promptly furnish each Purchaser, to the extent permitted by
applicable Law, with copies of written communications received by it or its
Subsidiaries from, or delivered by any of the foregoing to, any Governmental
Entity in respect of the transactions contemplated by this Agreement that are
not confidential and/or subject to regulatory restrictions on disclosure.
Notwithstanding the foregoing, in no event shall any Purchaser be required to
become a bank holding company, accept any Burdensome Condition in connection
with the transactions contemplated by this Agreement, or be required to agree to
provide capital to the Company or any Company Subsidiary thereof other than the
Purchase Price to be paid for the Notes to be purchased by it pursuant to the
terms of, subject to the conditions set forth in, this Agreement.

 

 

 
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(b)     Each Purchaser, on the one hand, agrees to furnish the Company, and the
Company, on the other hand, agrees, upon request, to furnish to such Purchaser,
in each case to the extent legally permissible and not in contravention of any
applicable Law, regulatory restriction on disclosure, confidentiality
obligation, or contractual obligation, all information concerning itself, its
Affiliates, directors, officers, partners and shareholders and such other
matters as may be reasonably necessary in connection with any statement, filing,
notice or application made by or on behalf of such other parties or any of its
Subsidiaries to any Governmental Entity in connection with the Closing and the
other transactions contemplated by this Agreement; provided, that the Company
and each such Purchaser shall only be required to provide information only to
the extent typically provided by the Company or such Purchaser to such
Governmental Entities under such Company’s policies or Purchaser’s policies
consistently applied and subject to such confidentiality requests as the Company
or such Purchaser shall reasonably seek.

 

 

 
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Section 3.2     Access, Information and Confidentiality.

 

(a)     From the date hereof until the Closing Date, the Company will furnish to
Purchasers and their Affiliates (and their financial and professional advisors
and representatives), and permit Purchasers, their Affiliates and their
representatives access during the Company’s normal business hours, to such
information and materials relating to the financial, business and legal
condition of the Company as may be reasonably necessary or advisable to allow
Purchasers to become and remain familiar with the Company and to confirm the
accuracy of the representations and warranties of the Company in this Agreement
and the compliance with the covenants and agreements by the Company in this
Agreement; provided that such information and materials are not restricted by
applicable Law, contractual obligations, regulatory restrictions or other
confidentiality obligations.

 

(b)     All parties hereto will hold, and will cause its respective Affiliates
and its and their respective directors, officers, employees, agents, consultants
and advisors to hold, in strict confidence, unless disclosure to a Governmental
Entity is reasonably necessary or desirable in connection with any Required
Approvals, examination or inspection or unless disclosure is required by
judicial or administrative process or, by other requirement of Law or the
applicable requirements of any Governmental Entity or relevant stock exchange
(in which case, the party disclosing such information shall provide the other
parties with prior written notice of such permitted disclosure), all non-public
records, books, contracts, instruments, computer data and other data and
information (collectively, “Information”) concerning the other parties hereto
furnished to it by or on behalf of such other parties or its representatives
pursuant to this Agreement (except to the extent that such information can be
shown to have been (1) previously known by such party on a non-confidential
basis, (2) publicly available through no fault of such party or (3) later
lawfully acquired from other sources by such party), and no party hereto shall
release or disclose such Information to any other person, except its auditors,
attorneys, financial advisors, other consultants and advisors, provided, that
Purchasers shall be permitted to disclose Information to any of their limited
partners who are subject to obligations to keep such Information confidential in
accordance with this Section 3.2.

 

Section 3.3     Conduct of the Business. Prior to the earlier of the Closing
Date and the termination of this Agreement pursuant to Section 5.1 (the
“Pre-Closing Period”), the Company shall, and shall cause each Company
Subsidiary to, use commercially reasonable efforts to carry on its business in
the ordinary course of business and use commercially reasonable efforts to
maintain and preserve its and such Company Subsidiary’s business (including its
organization, assets, properties, goodwill and insurance coverage) and preserve
its business relationships with customers, strategic partners, suppliers,
distributors and others having business dealings with it; provided, that nothing
in this sentence shall limit or require any actions that the Board of Directors
or the Company’s senior management may, in good faith, determine to be
inconsistent with their duties or the Company’s obligations under applicable
Law.

 

 

 
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Article IV
ADDITIONAL AGREEMENTS

 

Section 4.1     No Control. No Purchaser shall, without the prior consent of the
Company, contribute capital to the Company or acquire an amount of voting
securities of the Company that in either case would cause such Purchaser to be
deemed to control the Company for purposes of the Bank Holding Company Act of
1956, as amended, or the Change in Bank Control Act of 1978, as amended.

 

Section 4.2     Legend.

 

(a)     Purchasers agree that all certificates or other instruments, if any,
representing the Notes subject to this Agreement will bear a legend
substantially to the following effect:

 

THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY
AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE
CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF GENERAL AND
SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE
COMPANY OR ANY OF ITS SUBSIDIARIES AND IS UNSECURED.

 

THIS SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM
DENOMINATIONS OF $10,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY
ATTEMPTED TRANSFER OF SUCH NOTES IN A DENOMINATION OF LESS THAN $10,000 AND
MULTIPLES OF $10,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE
THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO,
THE RECEIPT OF PAYMENTS ON SUCH SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL
BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.

 

THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS. NEITHER THIS SUBORDINATED NOTE NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SUBORDINATED NOTE BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SUBORDINATED
NOTE ONLY (A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
(“RULE 144A”), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A “QUALIFIED
INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO A “NON U.S.
PERSON” IN AN “OFFSHORE TRANSACTION” PURSUANT TO REGULATION S UNDER THE
SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF
SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THIS SUBORDINATED NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN “ACCREDITED INVESTOR,” FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO,
OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE SECURITIES PURCHASE
AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS
SUBORDINATED NOTE BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.

 

 

 
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THE HOLDER OF THIS SUBORDINATED NOTE BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS
AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS
SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT OR
AN APPLICABLE EXEMPTION THEREFROM.

 

IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SUBORDINATED NOTE WILL
DELIVER TO THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE COMPANY TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.

 

(b)     Subject to Section 4.2(a), the restrictive legend set forth in Section
4.2(a), above shall be removed and the Company shall issue a certificate without
such restrictive legend to the holder of the applicable Notes upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at the Depository Trust Company (“DTC”), as applicable, if (1) such
Notes are registered for resale under the Securities Act, (2) such Notes are
sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate
of the Company), or (3) such Notes are eligible for sale under Rule 144, without
the requirement for the Company to be in compliance with the current public
information required under Rule 144 as to such securities and without volume
restrictions. Following the earlier of (A) the sale of the Notes pursuant to an
effective registration statement or pursuant to Rule 144 or (B) Rule 144
becoming available for the resale of Notes, without the requirement for the
Company to be in compliance with the current public information required under
Rule 144 as to the Notes and without volume restrictions, upon receipt by the
Company of an opinion of counsel to any Purchaser regarding the removal of such
legend set forth in Section 4.2(a), the Company shall instruct its transfer
agent to remove such legend above from the Notes. Any fees associated with the
removal of such legend (other than with respect to a Purchaser’s counsel) shall
be borne by the Company. If a legend is no longer required pursuant to the
foregoing, the Company will no later than three business days following the
delivery by Purchasers to the Company or the transfer agent (with notice to the
Company) of a legended certificate or instrument representing such Notes
(endorsed or with stock powers attached, signatures guaranteed, and otherwise in
form necessary to affect the reissuance and/or transfer, an opinion of counsel
to such Purchasers) and a representation letter to the extent required, deliver
or cause to be delivered to Purchasers a certificate or instrument (as the case
may be) representing such Notes that is free from the restrictive legend set
forth in Section 4.2(a). Notes free from all restrictive legends may be
transmitted by the transfer agent to Purchasers by crediting the account of
Purchasers’ prime broker with DTC as directed by such Purchasers, provided that
the Notes are DTC eligible at such time. Purchasers acknowledge that the Notes
have not been registered under the Securities Act or under any state securities
laws and agrees that they will not sell or otherwise dispose of any of the
Notes, except in compliance with the registration requirements or exemption
provisions of the Securities Act and any other applicable securities laws and
this Agreement.

 

 

 
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Section 4.3     Secondary Market Transactions. Each Purchaser shall have the
right at any time and from time to time to securitize the Note owned by such
Purchaser or any portion thereof in a single asset securitization or a pooled
loan securitization of rated single or multi-class securities secured by or
evidencing ownership interests in the Notes (each such securitization is
referred to herein as a “Secondary Market Transaction”). In connection with any
such Secondary Market Transaction, the Company shall be given a reasonable
opportunity to review and comment on any disclosure or legal agreement required
to be provided by the Company relating to such Secondary Market Transaction
pertaining to the Company or its affiliates at the Company’s sole expense, it
being the expectation of the Purchaser that the Company will not be required to
sign any documents or provide any disclosure in connection with such Secondary
Market Transaction. The Company will use commercially reasonable efforts to
cooperate in good faith with Purchasers and otherwise assist Purchasers in
satisfying the market standards to which Purchasers customarily adhere or which
may be reasonably required in the marketplace or by applicable rating agencies
in connection with any such Secondary Market Transactions. All information
regarding the Company may be furnished, without liability to any Purchaser, to
any Person deemed necessary by Purchaser in connection with such Secondary
Market Transaction, provided, that the Company shall be given reasonable notice
prior to furnishing such information. All documents, financial statements,
appraisals and other data relevant to the Company or the Notes may be exhibited
to and retained by any such Person.

 

Section 4.4     Transfer Taxes. On the Closing Date, all transfer or other
similar taxes which are required to be paid in connection with the sale and
transfer of the Notes to be sold to the Purchasers hereunder will be, or will
have been, fully paid or provided for by the Company, and all Laws imposing such
taxes will be or will have been complied with in all material respects.

 

Section 4.5     Rule 144A Information. While any Notes remain “restricted
securities” within the meaning of the Securities Act, the Company will make
available, upon reasonable request, to any seller of such Notes the information
specified in Rule 144A(d)(4) under the Securities Act, unless the Company is
then subject to Section 13 or 15(d) of the Exchange Act (as defined below).

 

 

 
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Section 4.6     Bloomberg. Within 30 days after Closing, the Company will
utilize its commercially reasonable efforts to have the Subordinated Notes
quoted on Bloomberg.

 

Section 4.7     Failure to Register or Have Quoted. If within 60 days after
Closing the Company has not secured a quotation on Bloomberg for the Notes or
the Notes are not registered in the name of The Depository Trust Company as
contemplated by Section 4(a) of the Note, the Company shall pay Purchasers an
amount equal to $5,000 per month (pro rated for any partial month) for each
months such obligation to secure quotation has not been satisfied (a “Delinquent
Month”), with such payment due on the tenth day of the month following each
Delinquent Month.

 

Section 4.8     Tier 2 Capital. If all or any portion of the Notes ceases to be
deemed to be Tier 2 Capital, other than due to the limitation imposed on the
capital treatment of subordinated debt during the five years immediately
preceding the maturity date of the Notes, the Company will immediately notify
the Purchasers, and thereafter the Company and the Purchasers will work together
in good faith to execute and deliver all agreements as reasonably necessary in
order to restructure the applicable portions of the obligations evidenced by the
Notes to qualify as Tier 2 Capital.

 

Section 4.9     Restrictions on Transfer. Such Purchaser agrees with the Company
(as to itself only) that until the first anniversary of the Closing (unless such
Purchaser avails itself of another applicable exemption under the Securities
Act) it will solicit offers for the Notes only from, and will offer the Notes
only to, (A) in the case of offers inside the United States, persons whom such
Purchaser reasonably believe to be QIBs or, if any such person is buying for one
or more institutional accounts for which such person is acting as fiduciary or
agent, only when such person has represented to such Purchaser that each such
account is a QIB, to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A, and, in each case, in transactions under
Rule 144A and (B) in the case of offers outside the United States, to persons
other than U.S. persons (which shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for non-U.S.
beneficial owners (other than an estate or trust)).

 

Article V
TERMINATION

 

Section 5.1     Termination. This Agreement may be terminated prior to the
Closing:

 

(a)     by mutual written agreement of the Company and Purchasers;

 

(b)     by the Company or Purchasers, upon written notice to the other parties,
in the event that the Closing does not occur on or before December 31, 2015;
provided, that the right to terminate this Agreement pursuant to this Section
5.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur on or prior to such date;

 

 

 
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(c)     by the Company or Purchasers, upon written notice to the other parties,
in the event that any Governmental Entity shall have issued any order, decree or
injunction or taken any other action restraining, enjoining or prohibiting any
of the transactions contemplated by this Agreement, and such order, decree,
injunction or other action shall have become final and nonappealable;

 

(d)     by Purchasers, upon written notice to the Company, if there has been a
breach of any representation, warranty, covenant or agreement made by the
Company in this Agreement, or any such representation or warranty shall have
become untrue after the date of this Agreement, in each case such that a closing
condition in Section 1.2(c)(ii)(1) or Section 1.2(c)(ii)(2) would not be
satisfied and such breach or condition is not curable or, if curable, is not
cured by the date set forth in Section 5.1(b); or

 

(e)     by the Company, upon written notice to Purchasers, if there has been a
breach of any representation, warranty, covenant or agreement made by any
Purchaser in this Agreement, or any such representation or warranty shall have
become untrue after the date of this Agreement, in each case such that a closing
condition in Section 1.2(c)(iii)(1) or Section 1.2(c)(iii)(2) would not be
satisfied and such breach or condition is not curable or, if curable, is not
cured by the date set forth in Section 5.1(b).

 

Section 5.2     Effects of Termination. In the event of any termination of this
Agreement as provided in Section 5.1, this Agreement (other than Section 3.2(c),
this Article V and Article VI, which shall remain in full force and effect)
shall forthwith become wholly void and of no further force and effect; provided,
however, that nothing herein shall relieve any party from liability for an
intentional breach of this Agreement.

 

Article VI
MISCELLANEOUS

 

Section 6.1     Survival. Each of the representations and warranties set forth
in this Agreement shall survive the Closing under this Agreement. Except as
otherwise provided herein, all covenants and agreements contained herein shall
survive until, by their respective terms, they are no longer operative, other
than those which by their terms are to be performed in whole or in part prior to
or on the Closing Date, which shall terminate as of the Closing Date.

 

Section 6.2     Expenses. Except as otherwise provided in this Section 6.2, each
of the parties will bear and pay all other costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated pursuant to this
Agreement; except that at the Closing the Company shall bear, and upon request
by Purchasers, reimburse each Purchaser (or group of Affiliated Purchasers) that
purchases a Note with an initial principal amount of at least $6,000,000 for all
reasonable out-of-pocket fees and expenses of attorneys incurred by each
Purchaser and their Affiliates in connection with the negotiation and
preparation of this Agreement and undertaking of the transactions contemplated
pursuant to this Agreement for a flat fee of $10,000.

 

Section 6.3     Amendment; Waiver. No amendment or waiver of any provision of
this Agreement will be effective with respect to any party unless made in
writing and signed by an officer of a duly authorized representative of such
party. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The conditions to each party’s
obligation to consummate the Closing are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable Law. No waiver of any party to this Agreement will be effective
unless it is in a writing signed by a duly authorized officer of the waiving
party that makes express reference to the provision or provisions subject to
such waiver. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.

 

 

 
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Section 6.4     Counterparts and Facsimile. For the convenience of the parties
hereto, this Agreement may be executed in any number of separate counterparts,
each such counterpart being deemed to be an original instrument, and all such
counterparts will together constitute the same agreement. Executed signature
pages to this Agreement may be delivered by facsimile transmission or by e-mail
delivery of a “pdf” format data file and such signature pages will be deemed as
sufficient as if actual signature pages had been delivered.

 

Section 6.5     Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State. The parties hereby
irrevocably and unconditionally consent to submit to the exclusive jurisdiction
of the state and federal courts located in the City of New York, New York for
any actions, suits or proceedings arising out of or relating to this Agreement
and the transactions contemplated by this Agreement. The parties hereby
irrevocably and unconditionally consent to the jurisdiction of such courts (and
of the appropriate appellate courts therefrom) in any such action, suit or
proceeding and irrevocably waive, to the fullest extent permitted by law, any
objection that they may now or hereafter have to the laying of the venue of any
such action, suit or proceeding in any such court or that any such action, suit
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such action, suit or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 6.7 shall be deemed
effective service of process on such party.

 

Section 6.6     WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE RELATIONSHIP OF THE PARTIES.

 

Section 6.7     Notices. Any notice, request, service of process, instruction or
other document to be given hereunder by any party to the other will be in
writing and will be deemed to have been duly given (a) on the date of delivery
if delivered personally or by facsimile, upon confirmation of receipt, (b) on
the first business day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third business day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice.

 

 

 
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(i)

If to Purchasers, as indicated on each such Purchaser’s signature page hereto.

 

 

(ii)

If to the Company:

    Bank of Commerce Holdings

 

1901 Churn Creek Road

Redding, California 96002

Attention: Sam Jimenez

Telephone: 530-722-3952

Facsimile: 530-722-3946

 

 

with a copy to (which copy alone shall not constitute notice):

 

Miller Nash Graham & Dunn LLP

2801 Alaskan Way, Suite 300

Seattle, Washington 98121

Attention: Faye Ricci

Telephone: 206-777-7547

Facsimile: 206-340-9599

Section 6.8     Entire Agreement, Etc. (a) This Agreement (including the
Exhibits hereto) constitutes the entire agreement, and supersedes all other
prior agreements, understandings, representations and warranties, both written
and oral, among the parties, with respect to the subject matter hereof; and (b)
this Agreement will not be assignable by the Company by operation of law or
otherwise (any attempted assignment in contravention hereof being null and
void), except to the extent that there is a merger or consolidation of the
Company in which case the successor shall be a party to this Agreement without
the consent of the Purchasers.

 

Section 6.9     Other Agreements. In the event that (i) the Company shall
directly or indirectly, enter into or otherwise consent to any other agreements
concerning the incurrence of Indebtedness on parity with, or junior to, the
Subordinated Notes, which other agreement (a) gives or grants to any Person (i)
covenants (excluding covenants of the Company to pay a specific rate of interest
on such other Indebtedness, but including, without limitation, all other
covenants such as financial covenants or financial covenant levels) which are
more restrictive or more favorable to the Person which is a party to such other
agreement or (ii) additional or greater rights or remedies (including, without
limitation, more stringent or shorter periods of time that must elapse prior to
such Person’s right to exercise remedies under such other agreement upon the
occurrence of a default or event of default thereunder) or (b) waives the rights
that the Company may assert in any action to enforce the other agreement (such
more favorable covenants or greater rights or remedies or waivers in the
foregoing clauses (a) and (b) and (ii) the Company’s primary regulator has
adopted regulatory guidance or statutory interpretations that provide that such
provisions will still permit the Indebtedness to qualify as Tier 2 Capital ,
each a “Tier 2 More Favorable Provision”), in each case than are given or
granted to the Purchasers hereunder, then simultaneously with the execution of
such other agreement(s), the Company shall provide the Purchasers a copy of such
other agreement(s), and the Tier 2 More Favorable Provision(s) therein shall
automatically be incorporated into this Section 6.9, without further action by
any party to this Agreement, for so long as such other agreement remains in
effect. Upon receipt by the Purchasers of a copy of such other agreement(s), the
Purchasers may elect, upon written consent of the Purchasers holding at least
67% of the principal amount of Subordinated Notes at such time outstanding, that
any Tier 2 More Favorable Provision therein shall not be incorporated into this
Section 6.9 and, upon such determination, any incorporation of such More
Favorable Provision into this Section 6.9 shall be deemed to be void ab initio
and of no force and effect.

 

 

 
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Section 6.10     Interpretation; Other Definitions. Wherever required by the
context of this Agreement, the singular shall include the plural and vice versa,
and the masculine gender shall include the feminine and neuter genders and vice
versa, and references to any agreement, document or instrument shall be deemed
to refer to such agreement, document or instrument as amended, supplemented or
modified from time to time. All article, section, paragraph or clause references
not attributed to a particular document shall be references to such parts of
this Agreement, and all exhibit, annex, letter and schedule references not
attributed to a particular document shall be references to such exhibits,
annexes, letters and schedules to this Agreement. In addition, the following
terms are ascribed the following meanings:

 

(a)     the term “Affiliate” means, with respect to any person, any person
directly or indirectly controlling, controlled by or under common control with,
such other person. For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control with”)
when used with respect to any person, means the possession, directly or
indirectly, of the power to cause the direction of management or policies of
such person, whether through the ownership of voting securities by contract or
otherwise;

 

(b)     “business day” means any day that is not Saturday or Sunday and that, in
New York, New York, is not a day on which banking institutions generally are
authorized or obligated by law or executive order to be closed;

 

(c)     the terms “herein,” “hereof” and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular section,
paragraph or subdivision;

 

(d)     the words “including,” “includes,” “included” and “include” are deemed
to be followed by the words “without limitation”;

 

(e)     to the “Knowledge of the Company” or “Company’s Knowledge” means the
actual knowledge after due inquiry of the “officers” (as such term is defined in
Rule 3b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), but excluding any Vice President or Secretary) of the Company;

 

 

 
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(f)     the term “Person” has the meaning given to it in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act;

 

(g)     the term “Subsidiary” means any entity in which the Company, directly or
indirectly, owns sufficient capital stock or holds a sufficient equity or
similar interest such that it is consolidated with the Company in the financial
statements of the Company; and

 

(h)     the term “Tier 2 Capital” has the meaning given to the term “Tier 2
capital” in 12 C.F.R. Part 208 and 12 C.F.R. Part 250, as amended, modified and
supplemented and in effect from time to time or any replacement thereof.

 

Section 6.11     Captions. The article, section, paragraph and clause captions
herein are for convenience of reference only, do not constitute part of this
Agreement and will not be deemed to limit or otherwise affect any of the
provisions hereof.

 

Section 6.12     Severability. If any provision of this Agreement or the
application thereof to any person (including the officers and directors of the
parties hereto) or circumstance is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
hereof, or the application of such provision to persons or circumstances other
than those as to which it has been held invalid or unenforceable, will remain in
full force and effect and shall in no way be affected, impaired or invalidated
thereby, so long as the economic or legal substance of the transactions
contemplated by this Agreement is not affected in any manner materially adverse
to any party. Upon such determination, the parties shall negotiate in good faith
in an effort to agree upon a suitable and equitable substitute provision to
effect the original intent of the parties.

 

Section 6.13     No Third Party Beneficiaries. Nothing contained in this
Agreement, expressed or implied, is intended to confer upon any person other
than the parties hereto, any benefit right or remedies; provided, however, that
the Placement Agent shall be a third party beneficiary hereto and may rely on
the representations and warranties contained herein to the same extent as if it
were a party to the Agreement.

 

Section 6.14     Time of Essence. Time is of the essence in the performance of
each and every term of this Agreement.

 

Section 6.15     Public Announcements. Subject to each party’s disclosure
obligations imposed by Law, each of the parties hereto will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement and any of the
transactions contemplated by this Agreement, and except as otherwise permitted
in the next sentence, neither the Company nor Purchasers will make any such news
release or public disclosure that identifies the other party without first
consulting with the other, and, in each case, also receiving the other’s consent
(which shall not be unreasonably withheld or delayed) and all parties shall
coordinate with the party whose consent is required with respect to any such
news release or public disclosure. In the event a party hereto is advised by its
outside legal counsel that a particular disclosure is required by Law, such
party shall be permitted to make such disclosure but shall be obligated to use
its commercially reasonable efforts to consult with the other parties hereto and
take their comments into account with respect to the content of such disclosure
before issuing such disclosure.

 

 

 
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Section 6.16     Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to seek specific performance of the terms hereof,
this being in addition to any other remedies to which they are entitled at law
or equity.

 

 

 
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of the parties hereto on the date first written above.

  

  COMPANY:        

 

Bank of Commerce Holdings

 

 

 

 

 

 

 

 

 

 

By:

/s/ Samuel D. Jimenez

 

 

Name:

Samuel D. Jimenez

 

 

Title:

Executive Vice President and Chief Operating Officer

 

 

 

[Signatures Continued on Following Page]

 

 

[Signature Page of Purchase Agreement] 

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  PURCHASERS:           ANGEL OAK MULTI-STRATEGY INCOME FUND        

 

By: Angel Oak Capital Advisors, LLC, solely as investment advisor and not in its
individual capacity

 

 

 

 

 

 

 

 

 

 

By:

/s/ Linda H. Singer

 

 

Name:

Linda H. Singer

 

 

Title:

Managing Director, Operations

 

 

 

Address for notices:

 

c/o Angel Oak Capital Advisors, LLC

One Buckhead Plaza

3060 Peachtree Rd., NW, Suite 500

Atlanta, Georgia 30306

 

Attention: Linda Singer

Telephone: (404) 953-4726

Fax: (404) 953-4988

Email: linda.singer@angeloakcapital.com

 

with a copy to (which copy alone shall not constitute notice):

 

Bryan Cave, LLP

1201 West Peachtree Street, NW, 14th Fl.

Atlanta, GA 30309

Attention: Todd Wade

Telephone: (404) 572 6694

Fax: (404) 420-0694

Email: todd.wade@BryanCave.com

 

 

[Signature Page of Purchase Agreement] 

--------------------------------------------------------------------------------

 

   

  PURCHASERS:           ANGEL OAK FLEXIBLE INCOME FUND        

 

By: Angel Oak Capital Advisors, LLC, solely as investment advisor and not in its
individual capacity

 

 

 

 

 

 

 

 

 

 

By:

/s/ Linda H. Singer

 

 

Name:

Linda H. Singer

 

 

Title: 

Managing Director, Operations

 

 

 

Address for notices:

 

c/o Angel Oak Capital Advisors, LLC

One Buckhead Plaza

3060 Peachtree Rd., NW, Suite 500

Atlanta, Georgia 30306

 

Attention: Linda Singer

Telephone: (404) 953-4726

Fax: (404) 953-4988

Email: linda.singer@angeloakcapital.com

 

with a copy to (which copy alone shall not constitute notice):

 

Bryan Cave, LLP

1201 West Peachtree Street, NW, 14th Fl.

Atlanta, GA 30309

Attention: Todd Wade

Telephone: (404) 572 6694

Fax: (404) 420-0694

Email: todd.wade@BryanCave.com

 

 

[Signature Page of Purchase Agreement]  

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SCHEDULE A

 

Schedule of Purchasers

 

Name of Purchaser

Principal Amount of Notes To Be Purchased

Purchase Price

ANGEL OAK MULTI-STRATEGY INCOME FUND

$7,000,000.00

$1,000

ANGEL OAK FLEXIBLE INCOME FUND

$3,000,000.00

$1,000

                             

 

 

 

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EXHIBIT A

 

FORM OF SUBORDINATED NOTE

 

 

 

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EXHIBIT B

 

FORM OF SECRETARY’S CERTIFICATE