CAROLINA BANK HOLDINGS, INC.

(a North Carolina corporation)

16,000 Shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A

PLACEMENT AGENCY AGREEMENT

February 6, 2013

Sandler O'Neill & Partners, L.P.

Stifel, Nicolaus & Company, Incorporated

as Placement Agents

c/o Sandler O'Neill & Partners, L.P.

1251 Avenue of the Americas, 6th Floor

New York, New York 10020

and

Stifel, Nicolaus & Company, Incorporated

237 Park Ave, 8th Floor

New York, New York 10017

Ladies and Gentlemen:

Carolina Bank Holdings, Inc., a North Carolina corporation (the "Company"), Carolina

Bank, a North Carolina banking corporation (the "Bank"), and the United States Department of

the Treasury (the "Selling Shareholder") each confirms its agreement (this "Agreement") with

Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") and Stifel, Nicolaus & Company,

Incorporated ("Stifel," and collectively with Sandler O'Neill, the "Placement Agents") with

respect to the direct sale by the Selling Shareholder to one or more Winning Bidders (as defined

in Section 2(a) hereof) and the placement, as agent of the Selling Shareholder, by the Placement

Agents of 16,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, no par

value per share, of the Company (the "Securities").
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Offers in the auction for the Securities (the "Auction") will only be made to

potential investors who are (i) "qualified institutional buyers" (as defined in Rule 144A

under the Securities Act of 1933, as amended (the "1933 Act")) that are organized under

the laws of a state of the U.S. or the District of Columbia, (ii) institutions or other entities

that are "accredited investors" that meet the standards in Rule 501(a)(1), (2), (3) or (7)

under the 1933 Act and having total assets or assets under management of not less than

$25,000,000, that are organized under the laws of a state of the U.S. or the District of

Columbia or (iii) directors or executive officers of the Company who or which, in each case,

meet the suitability requirements set forth in the bidder letter provided by each bidder

(each, a "Bidder"), a form of which is attached hereto as Schedule A (each, a "Bidder

Letter") and are resident in the U.S., and such offers and the sale of the Securities to the

Winning Bidder(s) will be made without registration under the 1933 Act.

This Agreement, the Company's Articles of Incorporation, as amended by the Articles of

Amendment with respect to the Securities (collectively, the "Charter"), and the Company's ByLaws (the "By-Laws") are referred to herein, collectively, as the "Operative Documents."

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The Company represents and

warrants to the Winning Bidder(s), each Placement Agent and the Selling Shareholder, at the

date of execution of this Agreement, on the date (the "Pricing Date") and at the time that the

clearing price for the Securities is determined in accordance with Section 2(a) hereof (the

"Applicable Time") and the Closing Time (as defined below) (each, a "Representation Date"),

and agrees with the Winning Bidder(s), each Placement Agent and the Selling Shareholder, as

follows:

(i) Financial Statements. The financial statements of the Company and the

Bank, filed with their respective regulators and the Securities and Exchange Commission

(the "Commission") during the past five fiscal years and any interim periods since the

most recent fiscal year end present fairly the financial position of the Company and its

consolidated subsidiaries and the Bank at the dates and for the periods of such statements;

such financial statements have been prepared in conformity with the requirements of the

applicable regulator and with U.S. generally accepted accounting principles applied on a

consistent basis throughout the periods involved.

(ii) Public Filings. The documents filed by the Company (the "Public Filings")

with the Commission at the time they were filed with the Commission, complied in all

material respects with the requirements of the 1933 Act, the Securities Exchange Act of

1934, as amended (the "1934 Act"), and the rules and regulations promulgated thereunder,

as applicable. The Public Filings do not include any untrue statement of a material fact or

omit to state a material fact required to be stated therein or necessary to make the

statements therein not misleading.
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(iii) No Material Adverse Change. Since the date of the last filing of financial

statements by the Company or the Bank with the applicable regulator and the

Commission, (A) there has been no material adverse change in the condition, financial or

otherwise, or in the earnings, business affairs or business prospects of the Company and

its subsidiaries considered as one enterprise, whether or not arising in the ordinary course

of business (a "Material Adverse Change"), (B) there have been no transactions entered

into, or dividends or distributions declared, paid or made by the Company or any of its

subsidiaries, other than those in the ordinary course of business, which are material with

respect to the Company and its subsidiaries considered as one enterprise.

(iv) Good Standing of the Company. The Company has been duly organized

and is validly existing as a corporation in good standing under the laws of the State of

North Carolina and has all requisite corporate power and authority to own, lease and

operate its properties, to conduct its business and to enter into and perform its obligations

under, and to consummate the transactions contemplated in, the Operative Documents,

and the Securities. The Company is duly qualified as a foreign corporation to transact

business and is in good standing in each jurisdiction in which such qualification is

required, whether by reason of the ownership or leasing of property or the conduct of

business, except where the failure so to qualify or to be in good standing would not,

singly or in the aggregate, result in a material adverse effect (A) in the condition,

financial or otherwise, or in the earnings, business affairs or business prospects of the

Company and its subsidiaries considered as one enterprise, whether or not arising in the

ordinary course of business, or (B) on the ability of the Company to enter into and

perform its obligations under, or consummate the transactions contemplated in, the

Operative Documents (a "Material Adverse Effect"). The Company is duly registered as

a bank holding company under the Bank Holding Company Act of 1956, as amended.

No change to the Charter and By-Laws is contemplated or has been authorized or

approved by the Company or its stockholders.

(v) Good Standing of Subsidiaries. Each "significant subsidiary" of the

Company (as such term is defined in Rule 1-02 of Regulation S-X) (including the Bank)

(each, a "Significant Subsidiary" and, collectively, the "Significant Subsidiaries") has

been duly organized and is validly existing and in good standing under the laws of the

jurisdiction of its incorporation or other organization, has all requisite corporate power

and authority to own, lease and operate its properties, to conduct its business and, in the

case of the Bank, to enter into, and perform its obligations under, this Agreement and is

duly qualified to transact business and is in good standing in each jurisdiction in which

such qualification is required, whether by reason of the ownership or leasing of property

or the conduct of business, except where the failure to so qualify or to be in good

standing would not, singly or in the aggregate, result in a Material Adverse Effect. All of

the issued and outstanding shares of capital stock of or other equity interests in each

Significant Subsidiary have been duly authorized and validly issued, are fully paid and

non-assessable and are owned by the Company, directly or through subsidiaries, free and

clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity.

None of the outstanding shares of capital stock of or other equity interests in any
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Significant Subsidiary were issued in violation of the preemptive or similar rights of any

securityholder of such Significant Subsidiary or any other entity. The only subsidiaries

of the Company other than the Significant Subsidiaries are subsidiaries which, considered

in the aggregate as a single subsidiary, do not constitute a "significant subsidiary" within

the meaning of Rule 1-02 of Regulation S-X. The deposit accounts of each of the

Company's banking subsidiaries are insured up to the applicable limits by the Deposit

Insurance Fund of the Federal Deposit Insurance Corporation (the "FDIC") to the fullest

extent permitted by law and the rules and regulations of the FDIC, and no proceeding for

the revocation or termination of such insurance is pending or, to the knowledge of the

Company, threatened.

(vi) Regulatory Matters. Except as disclosed in Schedule B, neither the

Company nor any of its subsidiaries (including the Bank) is subject or is party to, or has

received any notice or advice from any Regulatory Agency (as defined below) that any of

them may become subject or party to any investigation with respect to, any corrective,

suspension or cease-and-desist order, agreement, consent agreement, memorandum of

understanding or other regulatory enforcement action, proceeding or order with or by, or

is a party to any commitment letter or similar undertaking to, or is subject to any directive

by, or has been a recipient of any supervisory letter from, or has adopted any board

resolutions at the request of, any Regulatory Agency that currently relates to or restricts

in any material respect the conduct of their business or that in any manner relates to their

capital adequacy, credit policies, management or business (each, a "Regulatory

Agreement"), nor has the Company or any of its subsidiaries been advised by any

Regulatory Agency that it is considering issuing or requesting any Regulatory Agreement.

There is no unresolved violation, criticism or exception by any Regulatory Agency with

respect to any report or statement relating to any examinations of the Company or any of

its subsidiaries. The Company and its subsidiaries are in compliance in all material

respects with all laws administered by the Regulatory Agencies. As used herein, the term

"Regulatory Agency" means any federal or state agency charged with the supervision or

regulation of depositary institutions or holding companies of depositary institutions, or

engaged in the insurance of depositary institution deposits, or any court, administrative

agency or commission or other authority, body or agency having supervisory or

regulatory authority with respect to the Company or any of its subsidiaries.

(vii) Capitalization. The authorized, issued and outstanding shares of capital

stock of the Company are as set forth in the last filing of financial statements by the

Company with the applicable regulator and the Commission. The outstanding shares of

capital stock of the Company, including the Securities, have been duly authorized and

validly issued and are fully paid and non-assessable. None of the outstanding shares of

capital stock of the Company, including the Securities, were issued in violation of the

preemptive or other similar rights of any securityholder of the Company or any other

entity. The total equity of the Company, as set forth in the Company’s most recent

publicly available Reporting Form FR Y-9C under the line item “total equity capital”, has

not materially decreased.
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(viii) Authorization of Agreement. This Agreement has been duly authorized,

executed and delivered by each of the Company and the Bank.

(ix) Filing of Articles of Amendment; Form of Certificate. The Articles of

Amendment for the Securities have been duly filed with the Secretary of State of the

State of North Carolina. The form of certificate representing the Securities complies with

the requirements of North Carolina state law, the Charter and the By-Laws.

(x) Absence of Violations, Defaults and Conflicts. Except as otherwise

disclosed on Schedule B, neither the Company nor any of its subsidiaries (including the

Bank) is (A) in violation of its charter, by-laws or similar organizational document, (B) in

default in the performance or observance of any obligation, agreement, covenant or

condition contained in any contract, indenture, mortgage, deed of trust, loan or credit

agreement, note, lease or other agreement or instrument to which the Company or any of

its subsidiaries is a party or by which it or any of them may be bound or to which any of

the properties, assets or operations of the Company or any of its subsidiaries is subject

(collectively, "Agreements and Instruments"), except for such defaults that would not,

singly or in the aggregate, result in a Material Adverse Effect, or (C) in violation of any

law, statute, rule, regulation, judgment, order, writ or decree of any arbitrator, court,

governmental body, regulatory body, administrative agency (including, without limitation,

each applicable Regulatory Agency) or other authority, body or agency having

jurisdiction over the Company or any of its subsidiaries or any of their respective

properties, assets or operations (each, a "Governmental Entity"), except for such

violations that would not, singly or in the aggregate, result in a Material Adverse Effect.

The execution, delivery and performance of the Operative Documents and the

consummation of the transactions contemplated in this Agreement, and compliance by

the Company and the Bank with their respective obligations under the Operative

Documents have been duly authorized by the Company and the Bank, as the case may be,

by all requisite action and do not and will not, whether with or without the giving of

notice or passage of time or both, conflict with or constitute a breach of, or default or

Repayment Event (as defined below) under, or result in the creation or imposition of any

lien, charge or encumbrance upon any properties, assets or operations of the Company or

any of its subsidiaries pursuant to, the Agreements and Instruments (except for such

conflicts, breaches, defaults or Repayment Events or liens, charges or encumbrances that

would not, singly or in the aggregate, result in a Material Adverse Effect), nor will such

action result in any violation of the provisions of the charter, by-laws or similar

organizational document of the Company or any of its subsidiaries or any law, statute,

rule, regulation, judgment, order, writ or decree of any Governmental Entity. As used

herein, a "Repayment Event" means any event or condition which gives the holder of any

note, debenture or other financing instrument (or any person acting on such holder's

behalf) the right to require the repurchase, redemption or repayment of all or a portion of

the related financing by the Company or any of its subsidiaries.
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(xi) Absence of Proceedings. There is no action, suit, proceeding, inquiry or

investigation before or brought by any Governmental Entity now pending, or, to the

knowledge of the Company, threatened, against or affecting the Company or any of its

subsidiaries, which could, singly or in the aggregate, result in a Material Adverse Effect.

(xii) Absence of Further Requirements. Assuming the accuracy of the

representations, warranties and covenants of the Winning Bidder(s) set forth in Section 1

of the Bidder Letter(s), no filing with, or authorization, approval, consent, license, order,

registration, qualification or decree of, any Governmental Entity is necessary or required

for the Company or the Bank to enter into, or perform their respective obligations under,

the Operative Documents or the consummation of the transactions contemplated in this

Agreement, except such as have been already obtained, including, without limitation, the

registration under the 1933 Act of the offer, sale and delivery of the Securities by the

Selling Shareholder through the Placement Agents to the Winning Bidder(s) in

accordance with this Agreement and the Bidder Letter(s). If any directors or executive

officers of the Company are intending to bid in the Auction, the Company has delivered

to the Selling Shareholder and the Placement Agents, prior to the date hereof, evidence

sufficient to the Selling Shareholder and the Placement Agents that such directors and/or

executive officers of the Company have complied and will comply with the requirements

under applicable state securities law.

(xiii) Environmental Laws. Except as would not, singly or in the aggregate,

result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is

in violation of any applicable law, rule, regulation or policy relating to pollution or

protection of human health and safety, the environment or hazardous or toxic substances

or wastes, pollutants or contaminants (collectively, "Environmental Laws"), (B) the

Company and its subsidiaries have all permits, authorizations and approvals required

under any applicable Environmental Laws to conduct their respective businesses, (C)

there are no pending or threatened administrative, regulatory or judicial actions,

investigation or proceedings relating to any Environmental Law against the Company or

any of its subsidiaries and (D) there are no events or circumstances that would reasonably

be expected to form the basis of an order for clean-up or remediation, or an action, suit or

proceeding by any private party or Governmental Entity, against or affecting the

Company or any of its subsidiaries relating to any Environmental Laws.

(xiv) Payment of Taxes. All United States federal income tax returns of the

Company and its subsidiaries required by law to be filed have been filed and all taxes

shown by such returns or otherwise assessed, which are due and payable, have been paid,

except assessments against which appeals have been or will be promptly taken and as to

which adequate reserves have been provided. The Company and its subsidiaries have

filed all other tax returns that are required to have been filed by them pursuant to

applicable foreign, state, local or other law except insofar as the failure to file such

returns would not, singly or in the aggregate, result in a Material Adverse Effect, and has

paid all taxes due pursuant to such returns or pursuant to any assessment received by the
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Company or any of its subsidiaries, except for such taxes, if any, as are being contested in

good faith and as to which adequate reserves have been established by the Company.

(xv) Investment Company Act. Neither the Company nor the Bank is required,

or upon the consummation of the transactions contemplated in this Agreement will be

required, to register as an "investment company" under the Investment Company Act of

1940, as amended (the "1940 Act").

(xvi) Foreign Corrupt Practices Act. None of the Company, any of its

subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee,

affiliate or other person acting on behalf of the Company or any of its subsidiaries is

aware of or has taken any action, directly or indirectly, that would result in a violation by

such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and

regulations thereunder (the "FCPA"), including, without limitation, making use of the

mails or any means or instrumentality of interstate commerce corruptly in furtherance of

an offer, payment, promise to pay or authorization of the payment of any money, or other

property, gift, promise to give, or authorization of the giving of anything of value to any

"foreign official" (as such term is defined in the FCPA) or any foreign political party or

official thereof or any candidate for foreign political office, in contravention of the FCPA

and the Company, its subsidiaries and, to the knowledge of the Company, its other

affiliates have conducted their businesses in compliance with the FCPA and have

instituted and maintain policies and procedures designed to ensure, and which are

reasonably expected to continue to ensure, continued compliance therewith.

(xvii) Money Laundering Laws. The operations of the Company and its

subsidiaries are and have been conducted at all times in compliance with applicable

financial recordkeeping and reporting requirements of the Currency and Foreign

Transactions Reporting Act of 1970, as amended, the money laundering statutes of all

jurisdictions, the rules and regulations thereunder and any related or similar rules,

regulations or guidelines, issued, administered or enforced by any Governmental Entity

(collectively, the "Money Laundering Laws"). No action, suit or proceeding by or before

any Governmental Entity involving the Company or any of its subsidiaries with respect to

the Money Laundering Laws is pending or, to the best knowledge of the Company,

threatened which would reasonably be expected to have a Material Adverse Effect.

(xviii) OFAC. None of the Company, any of its subsidiaries or, to the knowledge

of the Company, any director, officer, agent, employee, affiliate or other person acting on

behalf of the Company or any of its subsidiaries is (A) an individual or entity ("Person")

currently the subject of any sanctions administered or enforced by the United States

Government, including, without limitation, the U.S. Department of the Treasury's Office

of Foreign Assets Control ("OFAC"), the United Nations Security Council ("UNSC"), the

European Union, Her Majesty's Treasury ("HMT"), or other relevant sanctions authority

(collectively, "Sanctions") or (B) located, organized or resident in a country or territory

that is the subject of Sanctions.
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(xix) Dividend Payments. Neither the Company nor any subsidiary of the

Company is currently prohibited, directly or indirectly, under any order of any

Regulatory Agency (other than orders applicable to bank or savings and loan holding

companies and their subsidiaries generally), under any applicable law, or under any

agreement or other instrument to which it is a party or is subject, from paying any

dividends on any of its capital stock (including the Securities in the case of the Company,

and any dividends to the Company in the case of any subsidiary of the Company), from

making any other distribution on the Company’s or such subsidiary's capital stock, or in

the case of any subsidiary, from repaying to the Company or any other subsidiary of the

Company any loans or advances to such subsidiary or from transferring any of such

subsidiary's properties, assets or operations to the Company or any other subsidiary of the

Company. Except as disclosed in Schedule B, as of the date of this Agreement, the

Company has declared and paid, and for the foreseeable future after the date of this

Agreement intends to declare and pay, each scheduled dividend payment on the

Securities.

(b) Intention to Bid for or Repurchase Securities.

(i) Intention to Bid. Except as disclosed in Schedule B, neither the Company

nor any officers and directors of the Company intends to submit bids for the Securities in

the Auction.

(ii) Redemption or Repurchase of Securities. As disclosed in Schedule B, the

Company may repurchase or redeem the Securities subject to certain conditions.

(c) Representations and Warranties by the Selling Shareholder. The Selling

Shareholder represents and warrants to, and agrees with, the Company, the Winning Bidder(s)

and each Placement Agent at each Representation Date as follows:

(i) Good and Marketable Title. The Selling Shareholder now has and at the

Closing Time will have good and marketable title to the Securities to be sold by it, free

and clear of any liens, encumbrances, equities and claims, and full right, power and

authority to effect the sale and delivery of the Securities. Upon the delivery of, against

payment for, the Securities pursuant to this Agreement and the Bidder Letter with each

Winning Bidder and, assuming a Winning Bidder does not have notice of any adverse

claim (within the meaning of the Uniform Commercial Code as in effect in the State of

New York), such Winning Bidder will acquire good and marketable title thereto, free and

clear of any liens, encumbrances, equities and claims.

(ii) Authorization of Agreement. The Selling Shareholder has full right,

power and authority to execute and deliver this Agreement and to perform its obligations
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hereunder, and this Agreement has each been duly authorized, executed and delivered by

or on behalf of the Selling Shareholder.

(iii) Absence of Further Requirements. No consent, approval or waiver is

required under any instrument or agreement to which the Selling Shareholder is a party or

by which the Selling Shareholder is bound in connection with the Auction, the offering

and sale by the Selling Shareholder and the purchase by a Winning Bidder of any of the

Securities under this Agreement or the Bidder Letter with such Winning Bidder or the

consummation by the Selling Shareholder of any of the other transactions contemplated

under this Agreement or such Bidder Letter.

(d) Officer's Certificates. Any certificate signed by any officer of the Company or

any of its subsidiaries (including the Bank) and delivered to the Winning Bidder(s) and/or the

Placement Agents shall be deemed a representation and warranty by the Company and, if

applicable, the Bank to the Winning Bidder(s) and the Placement Agents as to the matters

covered thereby.

SECTION 2. Sale and Delivery of Securities; Closing.

(a) Securities. On the basis of the representations, warranties and covenants

contained herein and in each Bidder Letter, and subject to the terms and conditions contained

herein and in the Auction Procedures described in each Bidder Letter, the Selling Shareholder

agrees to sell, and each Placement Agent agrees to use commercially reasonable efforts to place,

the number of Securities at the clearing price, in each case, determined in accordance with the

Auction Procedures, directly to the Bidder or Bidders that the Placement Agents and the Selling

Shareholder determine, pursuant to the Auction Procedures, has won the Auction (each such

Bidder, a "Winning Bidder"); provided that the Selling Shareholder may, in its discretion,

determine not to sell any Securities upon completion of the Auction. The Selling Shareholder

shall notify the Placement Agents whether it has decided to sell the Securities in the Auction as

promptly as practicable after completion of the Auction and determination of the clearing price,

as well as the specific number of Securities it has decided to sell.

(b) Compensation. The Company shall not be responsible for the payment of any

fees to the Placement Agents hereunder for the services to be provided by the Placement Agents

in connection with the Auction.

(c) Payment. Payment of the purchase price for, and delivery of certificates for, the

Securities shall be made at the offices of Paul, Weiss, Rifkind, Wharton & Garrison LLP, or at

such other place as shall be agreed upon by the Winning Bidder(s) and the Selling Shareholder,

at 9:00 A.M. (New York City time) on the eighth business day after the Pricing Date, or such

other time not later than ten business days after such date as shall be agreed upon by the Winning
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Bidder(s) and the Selling Shareholder (such time and date of payment and delivery being herein

called "Closing Time").

Prior to the Closing Time, the Selling Shareholder, or a Placement Agent, if so directed

by the Selling Shareholder, will provide payment and wire transfer instructions to the Winning

Bidder(s). At or prior to the Closing Time, each Winning Bidder shall make payment to the

Selling Shareholder by wire transfer of immediately available funds in accordance with such

instructions against delivery at the Closing Time to such Winning Bidder of certificates for the

Securities in physical form registered in the name of such Winning Bidder or its authorized agent

or nominee.

Notwithstanding anything to the contrary contained herein, neither Placement Agent shall

have any obligation to purchase any Securities from the Selling Shareholder or have any liability,

to the Selling Shareholder or otherwise, in the event that a Winning Bidder fails to consummate

the purchase of the Securities.

SECTION 3. Covenants of the Company. The Company covenants with the Winning

Bidder(s), each Placement Agent and the Selling Shareholder as follows:

(a) Update of Information. If, prior to the Closing Time, any event shall occur or

condition shall exist which would, singly or in the aggregate, result in a Material Adverse Effect

the Company will promptly give the Winning Bidder(s), the Placement Agents and the Selling

Shareholder written notice of such event or condition and effects therefrom, as well as copies of

any related documentation.

(b) Blue Sky Qualifications. The Company will use its best efforts, in cooperation

with the Placement Agents and the Selling Shareholder, to qualify the Securities for offering and

sale under the applicable securities laws of such states as the Placement Agents and the Selling

Shareholder may reasonably designate and to maintain such qualifications in effect so long as

required to complete the placement of the Securities; provided, however, that the Company shall

not be obligated to file any general consent to service of process or to qualify as a foreign

corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to

subject itself to taxation in respect of doing business in any jurisdiction in which it is not

otherwise so subject.

(c) Restriction on Sale of Securities. During a period of 30 days from the date of this

Agreement, the Company will not, without the prior written consent of the Placement Agents,

(i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to

purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase

or otherwise transfer or dispose of any shares of preferred stock or any securities convertible into

or exercisable or exchangeable for preferred stock or file any registration statement under the

1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement
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or any transaction that transfers, in whole or in part, directly or indirectly, the economic

consequence of ownership of preferred stock, whether any such swap or transaction described in

clause (i) or (ii) above is to be settled by delivery of preferred stock or such other securities, in

cash or otherwise.

(d) Registrar; Transfer Agent. The Company will maintain a registrar and transfer

agent for the Securities.

SECTION 4. [Intentionally Omitted]

SECTION 5. Payment of Expenses.

(a) Expenses. The Company will pay or cause to be paid all expenses incident to the

performance of its obligations under this Agreement, including (i) the preparation, issuance and

delivery of the certificates for the Securities in physical form to each Winning Bidder, including

any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or

delivery of the Securities to such Winning Bidder, (ii) the fees and disbursements of the

Company's counsel and other advisors, (iii) the qualification of the Securities under securities

laws in accordance with the provisions of Section 3(b) hereof, (iv) the fees and expenses of the

registrar and transfer agent for the Securities, (v) the costs and expenses of any state securities

law analysis in connection with the transactions contemplated by this Agreement, and (vi) the

costs and expenses (including, without limitation, any damages or other amounts payable in

connection with legal or contractual liability) associated with the reforming of any contracts for

sale of the Securities caused by a breach of the representation contained in Section 1(a)(i) hereof.

(b) Termination of Agreement. If this Agreement is terminated by the Placement

Agents in accordance with the provisions of Section 6 or Section 10(a)(i) hereof, the Company

shall reimburse the Placement Agents for all of their out-of-pocket expenses, including the

reasonable fees and disbursements of counsel for the Placement Agents.

(c) Other Agreement. The provisions of this Section 5 shall not supersede or

otherwise affect any agreement that the Company and the Selling Shareholder may otherwise

have entered into for the allocation of such expenses between them.

SECTION 6. Conditions of Placement Agents' Obligations. The obligations of the

Placement Agents hereunder are subject to the accuracy of the representations and warranties

contained herein or in certificates of any officer of the Company or any of its subsidiaries

(including the Bank) delivered pursuant to the provisions hereof, to the performance by the

Company of its covenants and other obligations hereunder, and to the following further

conditions:
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(a) Opinion of Counsel for Company. At the Closing Time, the Placement Agents

and the Selling Shareholder shall have received the favorable opinion, dated the Closing Time, of

Gaeta & Eveson, P.A., counsel for the Company, in form and substance satisfactory to the

Placement Agents and the Selling Shareholder, to the effect set forth in Exhibit A hereto and to

such further effect as counsel to the Placement Agents and the Selling Shareholder may

reasonably request.

(b) Officers' Certificate. At the Closing Time, there shall not have been, since the

date hereof or since the date of the latest audited balance sheet included in the last financial

statements of the Company filed with the applicable regulator and the Commission, any Material

Adverse Change, and the Placement Agents and the Selling Shareholder shall have received a

certificate of the Chief Executive Officer or the President and of the chief financial or chief

accounting officer of the Company, dated the Closing Time, to the effect set forth in Exhibit B

hereto.

(c) Evidence of Blue Sky Compliance. If any directors or executive officers of the

Company are intending to bid in the Auction, the Company shall have delivered to the Selling

Shareholder and the Placement Agents, prior to the date hereof, evidence sufficient to the Selling

Shareholder and the Placement Agents that such directors and/or executive officers of the

Company have complied and will comply with the requirements under applicable state securities

law.

(d) Maintenance of Rating. Since the execution of this Agreement, there shall not

have been any decrease in or withdrawal of the rating of any securities of the Company or any of

its subsidiaries (including the Bank) by any "nationally recognized statistical rating organization"

(as defined for purposes of Section 3(a)(62) of the 1934 Act) or any notice given of any intended

or potential decrease in or withdrawal of any such rating or of a possible change in any such

rating that does not indicate the direction of the possible change.

(e) Determination of Clearing Price. The Selling Shareholder and the Placement

Agents shall have determined, in writing, the clearing price for the Securities in the Auction.

(f) Reissuance of Securities. The Company shall have reissued the Securities, in the

respective numbers determined in accordance with the Auction Procedures, in physical form in

the name of each Winning Bidder or its authorized agent or nominee.

(g) Additional Documents. At the Closing Time, all proceedings taken by the

Company and the Bank in connection with this Agreement shall be satisfactory in form and

substance to the Selling Shareholder and the Placement Agents.
13

(h) Termination of Agreement. If any condition specified in this Section shall not

have been fulfilled when and as required to be fulfilled, the obligations of the Placement Agents

may be terminated by the Placement Agents by notice to the Company and the Selling

Shareholder at any time at or prior to Closing Time, and such termination shall be without

liability of any party to any other party except as provided in Section 4 and except that Sections 1,

7, 8, 9, 14, 15 and 16 shall survive any such termination and remain in full force and effect.

SECTION 7. Indemnification.

(a) Indemnification of Agents. The Company and the Bank, jointly and severally,

agree to indemnify and hold harmless each Placement Agent, its affiliates (as such term is

defined in Rule 501(b) promulgated under the 1933 Act (each, an "Affiliate")), selling agents,

partners, officers and directors, each person, if any, who controls a Placement Agent within the

meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, the Selling Shareholder

and the Selling Shareholder's agents, including, without limitation, Houlihan Lokey Capital, Inc.

(the "Financial Agent") as follows:

(i) against any and all loss, liability, claim, damage and expense whatsoever,

as incurred, arising out of (1) the engagement as Placement Agent under this Agreement,

(2) any untrue statement or alleged untrue statement of a material fact included in any

information provided by the Company or its subsidiaries to the Bidders, or included in

any Public Filing, or the omission or alleged omission in such information (or any

amendment or supplement thereto) of a material fact necessary in order to make the

statements therein, in the light of the circumstances under which they were made, not

misleading or (3) the breach or alleged breach of any representation, warranty or

covenant of the Company or the Bank under this Agreement;

(ii) against any and all loss, liability, claim, damage and expense whatsoever,

as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or

any investigation or proceeding by any Governmental Entity, commenced or threatened,

or of any claim whatsoever based upon any such untrue statement or omission, or any

such alleged untrue statement or omission; provided that (subject to Section 7(c) hereof)

any such settlement is effected with the written consent of the Company; and

(iii) against any and all expense whatsoever, as incurred (including the fees

and disbursements of counsel chosen by the Placement Agents), reasonably incurred in

investigating, preparing or defending against any litigation, or any investigation or

proceeding by any Governmental Entity, commenced or threatened, or any claim

whatsoever based upon any such untrue statement or omission, or any such alleged untrue

statement or omission, to the extent that any such expense is not paid under (i) or

(ii) above.
14

(b) Actions against Parties; Notification. Each indemnified party shall give notice as

promptly as reasonably practicable to each indemnifying party of any action commenced against

it in respect of which indemnity may be sought hereunder, but failure to so notify an

indemnifying party shall not relieve such indemnifying party from any liability hereunder to the

extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from

any liability which it may have otherwise than on account of this indemnity agreement. In case

any such action is brought against any indemnified party and such indemnified party seeks or

intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to

participate in and, to the extent that it shall elect, jointly with all other indemnifying parties

similarly notified, by written notice delivered to the indemnified party promptly after receiving

the aforesaid notice from such indemnified party, to assume the defense thereof with counsel

reasonably satisfactory to such indemnified party; provided, however, if the defendants in any

such action include both the indemnified party and the indemnifying party and the indemnified

party shall have reasonably concluded that a conflict may arise between the positions of the

indemnifying party and the indemnified party in conducting the defense of any such action or

that there may be legal defenses available to it and/or other indemnified parties which are

different from or additional to those available to the indemnifying party, the indemnified party or

parties shall have the right to select separate counsel to assume such legal defenses and to

otherwise participate in the defense of such action on behalf of such indemnified party or parties.

Upon receipt of notice from the indemnifying party to such indemnified party of such

indemnifying party's election so to assume the defense of such action and approval by the

indemnified party of counsel, the indemnifying party will not be liable to such indemnified party

under this Section 7 for any legal or other expenses subsequently incurred by such indemnified

party in connection with the defense thereof unless (i) the indemnified party shall have employed

separate counsel in accordance with the proviso to the immediately preceding sentence (it being

understood, however, that the indemnifying party shall not be liable for the expenses of more

than one separate counsel (together with local counsel), approved by the indemnifying party (or

by the Placement Agents in the case of Section 8 hereof), representing the indemnified parties

who are parties to such action) or (ii) the indemnifying party shall not have employed counsel

satisfactory to the indemnified party to represent the indemnified party within a reasonable time

after notice of commencement of the action, in each of which cases the fees and expenses of

counsel shall be at the expense of the indemnifying party. No indemnifying party shall, without

the prior written consent of the indemnified parties, settle or compromise or consent to the entry

of any judgment with respect to any litigation, or any investigation or proceeding by any

Governmental Entity, commenced or threatened, or any claim whatsoever in respect of which

indemnification or contribution could be sought under this Section 7 or Section 8 hereof

(whether or not the indemnified parties are actual or potential parties thereto), unless such

settlement, compromise or consent (i) includes an unconditional release of each indemnified

party from all liability arising out of such litigation, investigation, proceeding or claim and

(ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or

on behalf of any indemnified party.

(c) Settlement without Consent if Failure to Reimburse. If at any time an indemnified

party shall have requested an indemnifying party to reimburse the indemnified party for fees and

expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of

the nature contemplated by Section 7(a)(ii) effected without its written consent if (i) such
15

settlement is entered into more than 45 days after receipt by such indemnifying party of the

aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such

settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying

party shall not have reimbursed such indemnified party in accordance with such request (other

than those fees and expenses that are being contested in good faith) prior to the date of such

settlement.

(d) Exclusion. Notwithstanding the foregoing, the indemnification provided for in

this Section 7 and the contribution provided for in Section 8 shall not apply to the Bank to the

extent that such indemnification or contribution, as the case may be, by the Bank is found by any

Regulatory Agency, or in a final judgment by a court of competent jurisdiction, to constitute a

transaction that is subject to the provisions of Section 23A or Section 23B of the Federal Reserve

Act.

SECTION 8. Contribution. If the indemnification provided for in Section 7 hereof is for

any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any

losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party

shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses

incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect

the relative benefits received by the Company, the Bank and the Selling Shareholder, on the one

hand, and the Placement Agents, on the other hand, from the offering of the Securities pursuant

to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable

law, in such proportion as is appropriate to reflect not only the relative benefits referred to in

clause (i) above but also the relative fault of the Company, the Bank and the Selling Shareholder,

on the one hand, and the Placement Agents, on the other hand, in connection with the statements

or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as

any other relevant equitable considerations.

The relative benefits received by the Company, the Bank and the Selling Shareholder, on

the one hand, and the Placement Agents, on the other hand, in connection with the offering of the

Securities pursuant to this Agreement shall be deemed to be in the same respective proportions

as the total net proceeds from the offering of the Securities pursuant to this Agreement (before

deducting expenses) received by the Company, the Bank and the Selling Shareholder, on the one

hand, and the total placement fees received by the Placement Agents, on the other hand, bear to

the aggregate initial offering price of the Securities.

The relative fault of the Company, the Bank and the Selling Shareholder, on the one hand,

and the Placement Agents, on the other hand, shall be determined by reference to, among other

things, whether any such untrue or alleged untrue statement of a material fact or omission or

alleged omission to state a material fact relates to information supplied by the Company, the

Bank or the Selling Shareholder or by the Placement Agents, as the case may be, and the parties'

relative intent, knowledge, access to information and opportunity to correct or prevent such

statement or omission.
16

The parties hereto agree that it would not be just and equitable if contribution pursuant to

this Section 8 were determined by pro rata allocation (even if the Placement Agents were treated

as one entity for such purpose) or by any other method of allocation which does not take account

of the equitable considerations referred to above in this Section 8. The aggregate amount of

losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to

above in this Section 8 shall be deemed to include any legal or other expenses reasonably

incurred by such indemnified party in investigating, preparing or defending against any litigation,

or any investigation or proceeding by any Governmental Entity, commenced or threatened, or

any claim whatsoever based upon any such untrue or alleged untrue statement or omission or

alleged omission.

Notwithstanding the provisions of this Section 8, neither Placement Agent shall be

required to contribute any amount in excess of the placement fees received by such Placement

Agent in connection with the Securities sold through it as agent.

No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of

the 1933 Act) shall be entitled to contribution from any person who was not guilty of such

fraudulent misrepresentation.

For purposes of this Section 8, each person, if any, who controls a Placement Agent

within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each

Placement Agent's Affiliates, selling agents, partners, officers and directors shall have the same

rights to contribution as such Placement Agent. The Placement Agent's respective obligations to

contribute pursuant to this Section 8 are several in proportion to the number of Securities sold

through each of them as agent, and not joint.

SECTION 9. Representations, Warranties and Agreements to Survive. All

representations, warranties and agreements contained in this Agreement, or in certificates of

officers of the Company or any of its subsidiaries (including the Bank) submitted pursuant hereto,

shall remain operative and in full force and effect regardless of (i) any investigation made by or

on behalf of a Placement Agent or its Affiliates, partners, officers, directors and or selling agents,

any person controlling a Placement Agent or any person controlling the Company or the Selling

Shareholder or any representative of the Selling Shareholder and (ii) delivery of and payment for

the Securities.

SECTION 10. Termination of Agreement.

(a) Termination. The Placement Agents may terminate this Agreement, by notice to

the Company and the Selling Shareholder, at any time at or prior to the Closing Time, (i) if there

has been, in the judgment of the Placement Agents, since the time of execution of this

Agreement or since the date of the latest audited balance sheet included in the last financial

statements of the Company filed with the applicable regulator and the Commission, any Material
17

Adverse Change, or (ii) if there has occurred any material adverse change in the financial

markets in the United States or the international financial markets, any outbreak of hostilities or

escalation thereof or other calamity or crisis or any change or development involving a

prospective change in national or international political, financial or economic conditions, in

each case the effect of which is such as to make it, in the judgment of the Placement Agents,

impracticable or inadvisable to proceed with the completion of the offering of the Securities or to

enforce contracts for the sale of the Securities, or (iii) if trading generally on the New York Stock

Exchange or in the Nasdaq Global Market has been suspended or materially limited, or minimum

or maximum prices for trading have been fixed, or maximum ranges for prices have been

required, by any of said exchanges or by order of the Securities and Exchange Commission,

FINRA or any other Governmental Entity, or (iv) if a material disruption has occurred in

commercial banking or securities settlement or clearance services in the United States or with

respect to Clearstream or Euroclear systems in Europe, or (v) if a banking moratorium has been

declared by either Federal, New York or North Carolina authorities.

(b) Liabilities. If this Agreement is terminated pursuant to this Section, such

termination shall be without liability of any party to any other party except as provided in

Section 5 hereof, and provided further that Sections 1, 7, 8, 9, 14, 15 and 16 shall survive such

termination and remain in full force and effect.

SECTION 11. Notices. All notices and other communications hereunder shall be in

writing and shall be deemed to have been duly given if mailed or transmitted by any standard

form of telecommunication. Notices to the Placement Agents shall be directed to Sandler O'Neill

at 1251 Avenue of the Americas, 6th Floor, New York, New York 10020, attention of General

Counsel, and Stifel at 237 Park Avenue, 8th Floor, New York, New York 10017, attention of

Ben Plotkin, with a copy to Capital Markets Legal; notices to the Company and the Bank shall be

directed to it at 101 North Spring Street, Greensboro, North Carolina 17401 attention of Robert

T. Braswell, with a copy to Gaeta & Eveson, P.A., 700 Spring Forest Road, Suite 335, Raleigh,

North Carolina 27609, Attention: Todd H. Eveson, Esq.; and notices to the Selling Shareholder

shall be directed to it at 1500 Pennsylvania Avenue, N.W., Washington, D.C. 20220, Attention:

Chief Counsel, Office of Financial Stability, facsimile number (202) 927-9225.

SECTION 12. No Advisory or Fiduciary Relationship. Each of the Company and the

Bank acknowledges and agrees that (a) the transaction contemplated by this Agreement,

including the determination of the offering price of the Securities and any related commissions,

is an arm's-length commercial transaction between the Company and the Bank, on the one hand,

and the Placement Agents, on the other hand, (b) in connection with the offering of the Securities

and the process leading thereto, neither Placement Agent is or has been acting as a principal,

agent or fiduciary of the Company or any of its subsidiaries or any of their respective

stockholders, creditors or employees or any other party, (c) neither Placement Agent has

assumed or will assume an advisory or fiduciary responsibility in favor of the Company or any of

its subsidiaries, including the Bank, with respect to the offering of the Securities or the process

leading thereto (irrespective of whether such Placement Agent has advised or is currently

advising the Company or any of its subsidiaries, including the Bank, on other matters) or any
18

other obligation to the Company or any of its subsidiaries, including the Bank, with respect to the

offering of the Securities, (d) the Placement Agents and their respective Affiliates may be

engaged in a broad range of transactions that involve interests that differ from those of the

Company and the Bank, and (e) the Placement Agents have not provided any legal, accounting,

financial, regulatory or tax advice with respect to the offering of the Securities and each of the

Company and the Bank has consulted its own respective legal, accounting, financial, regulatory

and tax advisors to the extent it deemed appropriate.

SECTION 13. Parties. This Agreement shall inure to the benefit of and be binding upon

the Placement Agents, the Company, the Bank, the Selling Shareholder, the Financial Agent and

the Winning Bidder(s) and their respective successors. Nothing expressed or mentioned in this

Agreement is intended or shall be construed to give any person, firm or corporation, other than

the Placement Agents, the Company, the Bank, the Selling Shareholder, the Financial Agent and

the Winning Bidder(s) and the successors and the controlling persons, Affiliates, selling agents,

officers and directors referred to in Sections 7 and 8 and their heirs and legal representatives, any

legal or equitable right, remedy or claim under or in respect of this Agreement or any provision

herein contained. This Agreement and all conditions and provisions hereof are intended to be for

the sole and exclusive benefit of the Placement Agents, the Company, the Bank, the Selling

Shareholder, the Financial Agent and the Winning Bidder(s) and such successors, controlling

persons, Affiliates, selling agents, officers and directors, heirs and legal representatives, and for

the benefit of no other person, firm or corporation. No purchaser of Securities shall be deemed

to be a successor by reason merely of such purchase. The Placement Agents, the Company, the

Bank, the Selling Shareholder and the Winning Bidder(s) agree that the Financial Agent shall be

an express third party beneficiary of this Agreement, and entitled to enforce any rights granted to

the Financial Agent hereunder as if it were a party hereto.

SECTION 14. Trial by Jury. Each of the parties hereto other than the Selling

Shareholder (on its behalf and, to the extent permitted by applicable law, on behalf of its

stockholders and affiliates) hereby irrevocably waives, to the fullest extent permitted by

applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating

to this Agreement or the transactions contemplated hereby.

SECTION 15. GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM,

CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT

SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS

OF, THE STATE OF NEW YORK WITHOUT REGARD TO ITS CHOICE OF LAW

PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW

OF NEW YORK), PROVIDED THAT ALL RIGHTS AND OBLIGATIONS OF THE

SELLING SHAREHOLDER UNDER THIS AGREEMENT SHALL BE GOVERNED BY,

AND CONSTRUED IN ACCORDANCE WITH, THE FEDERAL LAWS OF THE UNITED

STATES OF AMERICA.

SECTION 16. Consent to Jurisdiction. Each of the parties hereto other than the Selling

Shareholder agrees that any legal suit, action or proceeding arising out of or based upon this
19

Agreement or the transactions contemplated hereby ("Related Proceedings") shall be instituted in

(i) the federal courts of the United States of America located in the City and County of New

York, Borough of Manhattan or (ii) the courts of the State of New York located in the City and

County of New York, Borough of Manhattan (collectively, the "Specified Courts"), and

irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to

the enforcement of a judgment of any Specified Court (a "Related Judgment"), as to which such

jurisdiction is non-exclusive) of the Specified Courts in any such suit, action or proceeding.

Service of any process, summons, notice or document by mail to such party's address set forth

above shall be effective service of process for any suit, action or proceeding brought in any

Specified Court. Each of the parties hereto irrevocably and unconditionally waives any objection

to the laying of venue of any suit, action or proceeding in the Specified Courts and irrevocably

and unconditionally waive and agree not to plead or claim in any Specified Court that any such

suit, action or proceeding brought in any Specified Court has been brought in an inconvenient

forum.

SECTION 17. Counterparts. This Agreement may be executed in any number of

counterparts, each of which shall be deemed to be an original, but all such counterparts shall

together constitute one and the same Agreement.

SECTION 18. Effect of Headings. The Section headings herein are for convenience only

and shall not affect the construction hereof.




Sch. A-1

SCHEDULE A

Form of Bidder Letter
B-1

SCHEDULE B

Disclosure Schedules

Section 1(a)(vi) – Regulatory Matters

The Bank previously was party to a joint memorandum of understanding dated January

27, 2011 (the “Bank MOU”) with the Federal Deposit Insurance Corporation (“FDIC”) and the

North Carolina Commissioner of Banks (“NCCOB”) that set forth a program of corrective action

that the Bank had agreed to implement. On October 23, 2012, the board of directors of the Bank

adopted a board resolution certifying that it (i) wished to work with the FDIC to exit the Bank

MOU, (ii) agreed to maintain a minimum Tier 1 Leverage Capital Ratio of at least 8% so long as

adversely classified assets were above a certain level, and (iii) was satisfied that appropriate

actions had been taken to satisfy all requirements of the Bank MOU and would continue efforts

to maintain good risk management procedures.

In December of 2012 and January of 2013, respectively, the FDIC and NCCOB

terminated the Bank MOU, thereby eliminating the Bank’s obligation to seek prior approval

from the FDIC and NCCOB under the terms of the Bank MOU for certain actions detailed

therein, including having to seek the written consent of the FDIC and NCCOB prior to paying

any cash dividends.

Section 1(a)(xix) –Dividend Payments

The Company was previously party to a memorandum of understanding (the “Company

MOU”) with its primary federal regulator, the Federal Reserve Bank of Richmond, that required

the Company to seek the Reserve Bank’s written approval prior to declaring or paying any

dividends on the Securities. The Company MOU was terminated in January of 2013.

During 2011, the Company missed three of the four scheduled dividend payments and

during 2012, the Company missed three of the four regularly scheduled dividend payments. On

January 31, 2013, the Company brought current outstanding missed dividend payments, thereby

eliminating the approximately $800,000 in previously non-current dividend payments. While no

assurances can be given as to the ability of the Company to declare and pay dividends on the

Securities in the future, the Company anticipates being able to pay, and intends to so pay, future

scheduled dividend payments on the Securities.
B-2

Section 1(b)(ii) – Issuer Redemption or Repurchase

The Company may redeem the Securities, at any time, in whole or in part, at its option,

subject to prior approval by the appropriate federal banking agency, for cash, for a redemption

price equal to 100% of the liquidation preference amount per share of the Securities plus any

accrued and unpaid dividends to but excluding the date of redemption.

The Company's ability to redeem the Securities will depend on then-present facts and

circumstances and the amount of capital it holds or can raise at the holding company level. In

order for the Company to obtain approval from its applicable regulatory authorities to redeem the

Securities, it would expect that such regulatory authorities would require the Company to satisfy

its capital commitments to them, if any, after giving effect to the redemption of the Securities so

approved.

The Company has no present intention to exchange, redeem, or repurchase the Securities

within the 12 months following the date of this Agreement.
Exh. A-1

Exhibit A

FORM OF OPINION OF COMPANY'S COUNSEL

TO BE DELIVERED PURSUANT TO SECTION 6(a)

(i) The Company has been duly incorporated and is validly existing as a corporation

in good standing under the laws of the State of North Carolina.

(ii) The Company has corporate power and authority to enter into and perform its

obligations under, and to consummate the transactions contemplated under, the Operative

Documents.

(iii) The Securities have been duly authorized and validly issued and are fully paid and

non-assessable and none of the Securities were issued in violation of the preemptive or other

similar rights of any securityholder of the Company or any other entity.

(iv) The Placement Agency Agreement has been duly authorized, executed and

delivered by each of the Company and the Bank.

(v) The Articles of Amendment for the Securities have been duly filed with the

Secretary of State of the State of North Carolina. The form of certificate representing the

Securities complies in all material respects with the requirements of North Carolina state law, the

Charter and the By-Laws.

(vi) Assuming the accuracy of the representations, warranties and covenants of the

Winning Bidder(s) set forth in Section 1 of the Bidder Letter(s), respectively, no filing with, or

authorization, approval, consent, license, order, registration, qualification or decree of, any

Governmental Entity is necessary or required for the Company or the Bank to enter into, or

perform their respective obligations under, the Operative Documents or the consummation of the

transactions contemplated in the Placement Agency Agreement, except such as have been

already obtained.

(vii) The execution, delivery and performance of the Operative Documents and the

consummation of the transactions contemplated in the Placement Agency Agreement and

compliance by the Company and the Bank with their respective obligations under the Operative

Documents do not and will not result in any violation of the provisions of the Charter, By-Laws

or similar organizational documents of the Company or the Bank or any applicable law, statute,

rule, regulation, judgment, order, writ or decree, known to such counsel, of any Governmental

Entity.
Exh. A-2

(viii) Assuming the accuracy of the representations, warranties and covenants of the

Winning Bidder(s) set forth in Section 1 of the Bidder Letter(s), it is not necessary in connection

with the offer, sale and delivery of the Securities, by the Selling Shareholder through the

Placement Agents to the Winning Bidder(s) in accordance with the Placement Agency

Agreement and the Bidder Letter(s) to register the Securities under the 1933 Act.

Such opinion shall not state that it is to be governed or qualified by, or that it is otherwise

subject to, any treatise, written policy or other document relating to legal opinions, including,

without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
Exh. B-1

Exhibit B

FORM OF OFFICERS' CERTIFICATE TO BE DELIVERED PURSUANT TO SECTION 6(B)

[*], 2013

The undersigned, Robert T. Braswell, the President and Chief Executive Officer of

Carolina Bank Holdings, Inc. (the "Company"), and T. Allen Liles, the Chief Financial Officer,

Treasurer and Secretary of the Company, each hereby certifies, pursuant to Section 6(b) of the

Placement Agency Agreement, dated February ___, 2013, among (i) the Company, (ii) the Bank,

(iii) the United States Department of the Treasury and (iv) Sandler O'Neill & Partners, L.P. and

Stifel, Nicolaus & Company, Incorporated (the "Placement Agency Agreement") that:

(i) There has been no Material Adverse Change since both the date of the Placement Agency

Agreement and since the date of the latest audited balance sheet included in the last financial

statements of the Company filed with the applicable regulator.

(ii) The representations and warranties of the Company or the Bank, as the case may be, in the

Placement Agency Agreement are true and correct with the same force and effect as though

expressly made at and as of the Closing Time.

(iii) The Company has complied with all agreements and satisfied all conditions on its part to be

performed or satisfied at or prior to the Closing Time.

Capitalized terms used herein shall have the same meanings ascribed to them in the

Placement Agency Agreement.

IN WITNESS WHEREOF, we have hereunto signed our names as of the date first

written above.

CAROLINA BANK HOLDINGS, INC.

By:

Robert T. Braswell

President and Chief Executive Officer

By:

T. Allen Liles

Chief Financial Officer, Treasurer and Secretary