Exhibit 10.1

CORNERSTONE BANCSHARES, INC.

SUMMARY OF OFFERING

$3.75 - $3.85 per Share

We are offering up to $15,000,000 of our common stock at $3.75 - $3.85 per share (the “ Shares ”). Subscribers are subscribing for a specific dollar amount of Shares within the above mentioned range, and the final price per Share and number of Shares will be determined upon the closing of the offering. Proceeds of the offering will be escrowed pending the satisfaction of all conditions to the completion of the merger with SmartFinancial, Inc., and escrow will be broken only if all such conditions have been met, including but not limited to, shareholder approval and regulatory approval of the merger. We must raise capital to increase our capital levels to obtain regulatory approval for the merger and to provide us with the ability to redeem our Series A preferred stock immediately prior to closing of the merger. Certain of our directors and executive officers have expressed interest, and will likely invest in this offering, but specific amounts to be invested have not yet been determined.

Important disclosures about us, the merger and other matters is contained in our registration statement on Form S-4 (Registration Number 333-203449) (the “Merger Registration Statement”), which you should read carefully and can be found on the Securities and Exchange Commission’s website at sec.gov in the company filings section.

In addition, there are significant risks associated with an investment in this offering. Among them is the risk that you might not be able to sell the Shares when or at a price you desire. The Shares may not be resold in the absence of an effective registration statement under the Securities Act of 1933, as amended, and any applicable state securities laws, or an opinion of counsel acceptable to us that such registration is not required. Although we will use our best efforts to cause a registration statement for the resale of the Shares to become effective within 90 days of the completion of the merger, we may be unable to do so. Furthermore, even if a registration statement is effective, certain developments described in the Registration Rights Agreement (attached as Appendix B to the Subscription Agreement) would prohibit resales at certain times. Historically, there has not been an active trading market for our common stock, which is not currently listed on any securities exchange. Although we intend to attempt to list our common stock on the Nasdaq Capital Market after the merger, we may not be able to do so, and even if the listing is completed, an active trading market for our common stock might not develop. Additional significant risk factors and considerations affecting forward-looking statements are contained in the Merger Registration Statement.

Subscription Agreement

cornerstone bancshares, inc.

THE SECURITIES SUBJECT TO THIS SUBSCRIPTION AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THERE ARE RESTRICTIONS ON THE TRANSFERABILITY OF THE SECURITIES DESCRIBED HEREIN. THE PURCHASE OF THE SECURITIES INVOLVES A HIGH DEGREE OF RISK.

Cornerstone Bancshares, Inc.

835 Georgia Avenue

Chattanooga, Tennessee 37402

Ladies and Gentlemen:

The undersigned understands that Cornerstone Bancshares, Inc., a corporation organized under the laws of the State of Tennessee (the “ Company ”), is offering shares of the Company’s Common Stock, par value $1.00 per share (the shares being offered are herein referred to as “ Shares ”), which is more fully described in that certain Offering Summary attached as Appendix A hereto (the “ Offering Summary ”). The undersigned further understands that the offering is being made without current registration of the Shares under the Securities Act of 1933, as amended (the “ Securities Act ”), or any securities laws of any state of the United States (“ State Securities Laws ”). Further, the offering is being made only to “accredited investors” (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act) pursuant to the exemption from certain federal registration requirements as provided in Rule 506(c) of Regulation D promulgated under Securities Act.

1.           Subscription . The undersigned, desiring to purchase the dollar value of Shares within the price range as indicated on the signature page hereto, hereby irrevocably subscribes for Shares for the aggregate purchase price noted thereon, upon acceptance of this subscription agreement (this “ Subscription Agreement ”) by the Company. The undersigned acknowledges that the Shares will be subject to restrictions on transfer as set forth in this Subscription Agreement and the registration rights agreement set forth as Appendix B hereto (the “ Registration Rights Agreement ”). Upon acceptance of this Subscription Agreement by the Company, the undersigned shall be entitled to such rights and subject to such obligations as set forth in (i) the Registration Rights Agreement, and (ii) this Subscription Agreement. In addition to this Subscription Agreement, the undersigned shall execute a Joinder to the Registration Rights Agreement.

2.           Acceptance of Subscription; Issuance of the Shares . It is understood and agreed that the Company shall have the sole right, at its complete discretion, to accept or reject this Subscription Agreement, in whole or in part, for any reason and that the same shall be deemed to be accepted by the Company only when it is signed by a duly authorized officer of the Company and delivered to the undersigned. Subscriptions need not be accepted in the order received, and the Shares may be allocated among subscribers. Notwithstanding anything in this Subscription Agreement to the contrary, the Company shall have no obligation to issue any of the Shares to any person who is a resident of a jurisdiction in which the issuance of the Shares to such person would constitute a violation of any State Securities Laws.

3.           Payment for the Shares; Escrow . Payment for the Shares from the undersigned shall be delivered to U.S. Bank, as escrow agent (the “ Escrow Agent ”), by personal check, cashier’s check, wire transfer of immediately available funds, or other means approved by the Company, in the amount set forth on the signature page hereto, for deposit in the Company’s escrow account until the conditions set forth in Section 6 below are satisfied. At such time as the conditions set forth in Section 6 are satisfied, this Subscription Agreement, if accepted by the Company, shall become effective and funds delivered to the Escrow Agent will be released to the Company. In the event that the conditions set forth in Section 6 are not satisfied or waived by December 31, 2015, the Escrow Agent shall promptly return the undersigned’s payment for the Shares subscribed for to the undersigned. For the avoidance of doubt, no interest shall be paid or accrue on any payment for Shares held by the Escrow Agent.

4.           Representations and Warranties of the Company . As of the date of acceptance of this Subscription Agreement, the Company represents and warrants that:

(a)         Except for Cornerstone Community Bank, a Tennessee-chartered commercial bank and wholly-owned subsidiary of the Company (the “ Subsidiary ”), neither the Company nor the Subsidiary owns or controls, directly or indirectly, any interest or investment in any corporation, partnership, association or other form of business entity.

(b)         The Company and the Subsidiary are corporations duly organized, validly existing and in good standing under the laws of the State of Tennessee. The Company and the Subsidiary are each qualified to do business as a foreign corporation in every jurisdiction in which qualification is so required. The Company and the Subsidiary each have the requisite corporate power and authority to own and operate their respective properties and assets and to carry on their respective businesses as presently conducted.

(c)         The Company has all requisite legal and corporate power and authority to enter into this Subscription Agreement, to sell the Shares, and to carry out and perform its other obligations under the terms of this Subscription Agreement. Neither the Company nor the Subsidiary is a party to, subject to or bound by any contract, law or order which would (A) conflict with or be breached or violated, or the obligations thereunder accelerated, increased, extinguished or terminated (whether or not with notice or lapse of time or both), by the execution, delivery or performance by the Company of this Subscription Agreement, or (B) prevent the carrying out of the transactions contemplated hereby. The Company’s execution of this Subscription Agreement and the consummation of the transactions contemplated hereby will not result in the creation of any liens against the Company, the Subsidiary, or any of the properties or assets of either of them. None of the execution and delivery of this Subscription Agreement by the Company, the performance by the Company of its obligations hereunder, or the consummation by the Company of the transactions contemplated hereby will violate, conflict with or result in any breach of any provision of the Company’s amended and restated charter, as amended, amended and restated bylaws, as amended, or other organizational documents of the Company.

(d)         The authorized capital stock of the Company currently consists of (A) 20,000,000 shares of Common Stock, $1.00 par value per share, of which 6,637,941 shares are issued and outstanding, and (B) 2,000,000 shares of preferred stock, no par value per share, 600,000 shares of which are designated as the Series A Convertible Preferred Stock and 600,000 shares of which are issued and outstanding (the “ Series A Preferred Stock ”). There are 1,194,185 unexercised options to purchase shares of common stock outstanding. All issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued, and are fully paid and non-assessable.

(e)          Following the consummation of the transactions contemplated by that certain Agreement and Plan of Merger dated December 5, 2014 (the “ Merger Agreement ,” and the transactions contemplated thereby, collectively, the “ Merger ”) among the Company, the Subsidiary, SmartFinancial, Inc., a Tennessee corporation (“ SmartFinancial ”), and SmartBank, a Tennessee corporation and wholly-owned bank subsidiary of SmartFinancial (“ SmartBank ”), which remain subject to shareholder and regulatory approval, among other conditions to closing set forth in Appendix E hereto, the Company will be authorized to issue 40,000,000 shares of common stock, $1.00 par value per share, and 2,000,000 shares of preferred stock, $1.00 par value per share. Further, in connection with the Merger, (A) the existing 6,637,941 shares of Company Common Stock outstanding will be automatically reclassified and changed via to a 4-to-1 reverse stock split into 1,659,486 shares of fully paid and non-assessable Common Stock (the “ Reverse Stock Split ”), (B) each share of SmartFinancial common stock issued and outstanding immediately prior to the effective time of the Merger (other than specified shares held by the Company or SmartFinancial and shares as to which the holder as has perfected his or her right to dissent from the Merger pursuant to Chapter 23 of the Tennessee Business Corporation Act) will be cancelled in exchange for the right to receive 4.20 shares (or 1.05 shares following the Reverse Stock Split, collectively, the “ Exchange Ratio ”) of the Company’s common stock, (C) each share of Series A Preferred Stock will be redeemed by the Company, and (D) 12,000 shares of issued and outstanding SmartFinancial Non-Cumulative Perpetual Preferred Stock, Series A (the “ SmartFinancial SBLF Stock ”) will be exchanged for 12,000 shares of the Company’s Non-Cumulative Perpetual Preferred Stock, Series B (the “ Cornerstone SBLF Stock ”), having equivalent rights, preferences, privileges and voting powers as the SmartFinancial SBLF Stock. Further, if the Merger is completed, each option to purchase shares of SmartFinancial common stock will be converted into an option to purchase a number of shares of Company Common Stock equal to the number of shares of SmartFinancial Common Stock previously subject to the option multiplied by the Exchange Ratio, and the per share exercise price of such option will become the per share exercise price of the option immediately prior to the Merger divided by the Exchange Ratio.

(f)          The Shares, when issued, delivered, and paid for in the manner set forth in this Subscription Agreement, will be duly authorized, validly issued and fully paid.

(g)          Upon the acceptance by the Company of this Subscription Agreement, all corporate action on the part of the Company and its directors, officers and shareholders necessary for (A) the authorization of this Subscription Agreement and the execution, delivery and performance by the Company of all its obligations under this Subscription Agreement and any document contemplated hereby, and (B) the authorization, issuance and delivery by the Company of the Shares has been taken. Upon the acceptance by the Company of this Subscription Agreement, this Subscription Agreement constitutes the valid and binding obligation of the Company and is enforceable against it in accordance with the terms hereof, except as enforceability may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally, and except that the availability of the remedy of specific performance or other equitable relief is subject to the discretion of the court before which any proceeding therefor may be brought.

(h)          Subject to the accuracy of the undersigned’s representations in Section 5 below, the offer, sale and issuance of the Shares subscribed for pursuant to the terms of this Subscription Agreement constitute transactions exempt from the registration requirements of the Securities Act. The Company makes no and expressly disclaims any representations or warranties related to any tax benefits or advantages intended to be obtained by any of the parties hereto in connection with the transactions contemplated herein.

(i)          Other than as set forth in the Registration Rights Agreement, the Company is not under any obligation and has not granted any rights to register under the Securities Act any of its presently outstanding securities or any of its securities that may subsequently be issued. To the Company’s knowledge, except as provided herein, no shareholder of the Company is a party to any agreement with respect to the voting of the Company’s securities.

(j)          Except for notice filings in accordance with the Securities Act and applicable State Securities Laws, no consent, approval, qualification, authorization, registration, designation, declaration or filing of or with any local, state or federal governmental authority on the part of the Company is required in connection with the valid execution, delivery or performance by the Company of this Subscription Agreement, or the offer, sale or issuance by the Company of the Shares, or the consummation by the Company of any transaction contemplated hereby.

5.           Representations and Warranties of the Undersigned . The undersigned hereby represents, acknowledges, and warrants to and covenants with the Company as follows:

(a)          The undersigned has received the Registration Rights Agreement, and the undersigned is familiar with and understands the Registration Rights Agreement. Subject to and only after the Company’s acceptance of this Subscription Agreement, the undersigned agrees to be bound by the Registration Rights Agreement by executing a Joinder thereto.

(b)          The undersigned acknowledges that it shall be required to provide either (A) current financial and other information to the Company, Hovde Group, LLC, a broker-dealer registered with FINRIA, in its capacity as placement agent in connection with the offering (the “ Placement Agent ”), or affiliates or representatives of the Company or the Placement Agent, to enable the Company to determine whether the undersigned is qualified to purchase Shares, or (B) third-party verification of the foregoing, as described in Appendix C . The undersigned acknowledges that the undersigned has completed the Investor Qualification Statement contained in Appendix C and that the information contained therein is complete and accurate as of the date thereof. Any information that has been furnished or that will be furnished by the undersigned to evidence its status as an “accredited investor” is accurate and complete, and does not contain any misrepresentation or material omission.

(c)          The undersigned has all requisite authority (and in the case of an individual, the capacity) to purchase the Shares subscribed for, and to enter into this Subscription Agreement and the Registration Rights Agreement and to perform all the obligations required to be performed hereunder and thereunder.

(d)          The undersigned, in determining to purchase Shares, has relied solely upon the above-referenced documents, and has had the opportunity to consult with the undersigned’s own legal counsel, accountant, or other advisers as to the suitability of the purchase of Shares, including with respect to tax and other considerations relating to the purchase of Shares, and has been offered, during the course of discussions concerning the purchase of Shares, the opportunity to ask such questions regarding and inspect such documents concerning the Company and its business and affairs as the undersigned has requested so as to understand more fully the nature of the investment and to verify the accuracy of the information supplied. The undersigned confirms that it is not relying on any communication (written or oral) of the Company, the Placement Agent or any of their affiliates or representatives as investment advice or as a recommendation to purchase Shares. It is understood that information and explanations related to the terms and conditions of the Shares and the offering shall not be considered investment advice or a recommendation to purchase Shares, and that neither the Company, the Placement Agent, nor any of their affiliates or representatives is acting or has acted as an advisor to the undersigned in connection with the undersigned’s decision to invest in the Shares. The undersigned acknowledges that neither the Company, the Placement Agent, nor any of their affiliates or representatives have made any representation regarding the proper characterization of the Shares for purposes of determining the undersigned’s authority to invest in the Shares.

(e)          The Shares being acquired will be acquired for the undersigned’s own account without a view to public distribution or resale. The undersigned has no contract, undertaking, agreement, or arrangement to sell or otherwise transfer or dispose of any Shares or any portion thereof to any other person.

(f)          The undersigned is a resident of the state set forth on the signature page hereto and is not acquiring Shares as a nominee or agent or otherwise for any other person.

(g)          The undersigned (A) can bear the economic risk of the purchase of the Shares subscribed for, including the total loss of the undersigned’s investment, and (B) has such knowledge and experience in business and financial matters as to be capable of evaluating the merits and risks of an investment in the Shares.

(h)          The undersigned understands (A) that some of the information provided to the undersigned is forward looking in nature and could be affected by known and unknown risks, uncertainties, and other factors that might materially alter the results suggested by this information and (B) that the undersigned has been made aware of several of these risks and understands that the Company’s performance might be materially different from what the forward looking information implies.

(i)          The undersigned understands that the Shares have not been registered under the Securities Act or State Securities Laws, are subject to substantial transfer restrictions under applicable law, and are “restricted securities” under applicable federal securities laws and that the Securities Act and the rules of the Securities and Exchange Commission (the “ Commission ”) provide in substance that the undersigned may dispose of the Shares only pursuant to an effective registration statement under the Securities Act or an exemption therefrom; and the undersigned understands that, other than as set forth in the Registration Rights Agreement, the Company has no obligation or intention to register any of the Shares. Consequently, the undersigned understands that the undersigned must bear the economic risks of the investment in the Shares until such time as such time as (A) the Shares are registered pursuant to a registration statement under the Securities Act, or (B) the Shares may be resold in a transaction that is exempt from the registration provisions of the Securities Act and all applicable State Securities Laws (including Rule 144 thereunder).

(j)          No federal or state agency, including the Commission or the securities commission or authorities of any state, has approved or disapproved the Shares, passed upon or endorsed the merits of the offering, or made any finding or determination as to the fairness of the Shares for public investment.

(k)          The Shares are being offered and sold in reliance on specific exemptions from the registration requirements of federal and state laws, and the Company, the Placement Agent, and their affiliates and representatives are relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments, and understandings set forth herein in order to determine the suitability of the undersigned to acquire Shares.

(l)          The undersigned represents and acknowledges that an investment in the Shares involves a high degree of risk and should be regarded as highly speculative.

(m)          The undersigned confirms that neither the Company, the Placement Agent, nor their affiliates or representatives have (A) given any guarantee or representation as to the potential success, return, effect, or benefit (either legal, tax, financial, accounting, or otherwise) of an investment in the Shares, or (B) made any representation to the undersigned regarding the legality of an investment in the Shares under applicable legal investment or similar laws or regulations. In deciding to purchase Shares, the undersigned is not relying on the advice or recommendations of the Company, the Placement Agent, or their affiliates or representatives, and the undersigned has made its own independent decision that the investment in the Shares is suitable and appropriate for the undersigned.

(n)          The undersigned has such knowledge, skill, and experience in business, financial, and investment matters that the undersigned is capable of evaluating the merits and risks of an investment in the Shares. The undersigned has considered the suitability of the Shares as an investment in light of its own circumstances and financial condition, and the undersigned is able to bear the risks associated with an investment in the Shares.

(o)          The undersigned agrees: (A) that the undersigned will not sell, assign, pledge, give, transfer or otherwise dispose of the Shares or any interest therein, or make any offer or attempt to do any of the foregoing, except pursuant to a registration of the Shares under the Securities Act and all applicable State Securities Laws, or in a transaction that is exempt from the registration provisions of the Securities Act and all applicable State Securities Laws; (B) that the Shares will bear a legend making reference to the foregoing restrictions; and (C) that the Company and its transfer agent shall not be required to give effect to any purported transfer of such Shares except upon compliance with the foregoing restrictions.

6.           Conditions to Obligations of the Undersigned and the Company . The obligations of the undersigned to purchase and pay for the Shares specified on the signature page hereto and of the Company to sell such Shares are subject to the satisfaction simultaneously at the closing at the purchase and sale of such Shares of the following conditions precedent:

(a)          the representations and warranties of the Company contained in Section 4 hereof and of the undersigned contained in Section 5 hereof shall be true and correct as of the closing in all material respects with the same effect as though such representations and warranties had been made as of the closing; and

(b)          all of the conditions set forth in the Merger Agreement, a summary of which such conditions is set forth Appendix E hereto, shall be or have been satisfied or waived prior to December 31, 2015.

7.           Legend . The Shares sold pursuant to this Subscription Agreement will bear a legend in substantially the following form:

“ THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS. ”

8.           Waiver; Amendment . Neither this Subscription Agreement nor any provision hereof shall be modified, changed, discharged, or terminated, and no provision of this Subscription Agreement may be waived, except by an instrument in writing signed by the party against whom the modification, change, discharge, termination, or waiver is sought.

9.           Assignability . Neither this Subscription Agreement nor any right, remedy, obligation, or liability arising hereunder or by reason hereof shall be assignable by either the Company or the undersigned without the prior written consent of the other party. The terms and conditions of this Subscription Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties.

10.          Waiver of Jury Trial . THE UNDERSIGNED IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED BY THIS SUBSCRIPTION AGREEMENT.

11.          Submission to Jurisdiction . With respect to any suit, action, or proceeding relating to any offers, purchases, or sales of the Shares, the undersigned irrevocably submits to the jurisdiction of the federal or state courts located in Hamilton County, Tennessee, which submission shall be exclusive. The undersigned hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Subscription Agreement or the subject matter hereof may not be enforced in or by such court.

12.          Governing Law . This Subscription Agreement shall be governed by, and construed in accordance with, the laws of the State of Tennessee, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

13.          Section and Other Headings . The section and other headings contained in this Subscription Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Subscription Agreement.

14.          Counterparts . This Subscription Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. This Subscription Agreement may be executed by facsimile signatures each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

15.          Entire Agreement . This Subscription Agreement (including the Appendices hereto) and the Registration Rights Agreement entered into among the undersigned, the Company and other purchasers of Shares constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.

16.          Delays or Omissions . No delay or omission to exercise any right, power, or remedy accruing to any party under this Subscription Agreement, upon any breach or default of any other party under this Subscription Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Subscription Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

17.          Severability . In case any one or more of the provisions contained in this Subscription Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Subscription Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

18.          Third Party Beneficiary . The Placement Agent shall be an express third party beneficiary of the representations and warranties of the undersigned set forth in Section 5 herein.

[ signature page follows ]

Individual Signature Page

By executing this Signature Page, the undersigned hereby executes, adopts, and agrees to be bound by the terms of this Subscription Agreement.

SubSCRIBER information

Current State of Residence : ___________________________________________________________________

*          Subscribers are subscribing for a specific dollar amount of Shares within the above mentioned price range, and the final price per share and number of Shares will be determined at the closing of the offering.

(Signature Page to Subscription Agreement)

Entity Signature Page

By executing this Signature Page, the undersigned hereby executes, adopts, and agrees to be bound by the terms of this Subscription Agreement.

SubSCRIBER information

Current State of FORMATION : __________________________________________________________________

*          Subscribers are subscribing for a specific dollar amount of Shares within the above mentioned price range, and the final price per share and number of Shares will be determined at the closing of the offering.

(Signature Page to Subscription Agreement)

ACCEPTANCE OF SUBSCRIPTION

The subscription of __________________________________________ for ___________ Shares is hereby accepted by the Company this the ______ day of __________________, 2015.

(Signature Page to Subscription Agreement)

[***]

APPENDIX B

REGISTRATION RIGHTS AGREEMENT

See attached.

Appendix C

INVESTOR QUALIFICATION STATEMENT

GENERAL INSTRUCTIONS

Complete the attached Investor Qualification Statement as follows:

subscribers who are natural persons :

subscribers who are not natural persons :

INVESTOR QUALIFICATION STATEMENT

part i.            accredited investor status

_________ True                _________ False

part ii.         regulation d matters

(a)          If the subscriber is a natural person (i.e., an individual), please indicate with an “X” the manner in which the subscriber qualifies as an “accredited investor” pursuant to Regulation D promulgated under the Securities Act:

¹ For purposes of this item, “ individual income ” means adjusted gross income as reported for federal income tax purposes, less any income attributable to a spouse or to property owned by a spouse, increased by the following amounts (but not including any amounts attributable to a spouse or to property owned by a spouse): (i) the amount of any interest income received which is tax-exempt under § 103 of the Internal Revenue Code; (ii) the amount of losses claimed as a limited partner in a limited partnership (as reported on Schedule E of Form 1040); (iii) any deduction claimed for depletion under § 611 et seq . of the Internal Revenue Code; and (iv) any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income pursuant to the provisions of § 1202 of the Internal Revenue Code prior to its repeal by the Tax Reform Act of 1986.

² For purposes of this item, “ joint income ” means adjusted gross income as reported for federal income tax purposes, including any income attributable to a spouse or to property owned by a spouse, increased by the following amounts (including any amounts attributable to a spouse or to property owned by a spouse): (i) the amount of any interest income received which is tax-exempt under § 103 of the Internal Revenue Code; (ii) the amount of losses claimed as a limited partner in a limited partnership (as reported on Schedule E of Form 1040); (iii) any deduction claimed for depletion under § 611 et seq . of the Internal Revenue Code; and (iv) any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income pursuant to the provisions of § 1202 of the Internal Revenue Code prior to its repeal by the Tax Reform Act of 1986.

(b)          If the subscriber is a natural person (i.e., an individual), please answer Questions 1-2 of this subparagraph (b).

(c)          If the subscriber is not a natural person (e.g., the subscriber is a corporation, partnership, limited liability company or other entity), please indicate with an “X” the manner in which the subscriber qualifies as an “accredited investor” pursuant to Regulation D promulgated under the Securities Act:

(d)          If the subscriber is not a natural person (e.g., the subscriber is a corporation, partnership, limited liability company or other entity), please mark either (1) or (2), as applicable, of this subparagraph (d) with an “X.”

(e)          If the subscriber is an accredited investor for the reason described in (c)(8)(C) above, a separate Investor Qualification Statement must be submitted for each person making investment decisions for the subscriber. If the subscriber is an accredited investor for the reason described in (c)(12) above, a separate Investor Qualification Statement must be submitted for each shareholder, partner, member or other owner of the subscriber. If the subscriber is described in (d)(2) above, a separate Investor Qualification Statement must be submitted for each direct or indirect shareholder, partner, member or other owner of the subscriber.

³ For this calculation, if an entity was organized or reorganized for the purpose of investing in the subscriber, each of such entity’s investors must be treated as an indirect investor in the subscriber.

In addition, if one of the entity’s investors is another entity (the “ Higher-Tier Entity ”) which was organized or reorganized for the purpose of participating in the investment, each of the Higher-Tier Entity’s investors must be treated as an indirect investor in the subscriber and, therefore, included in the blank above. This rule must be applied again until an individual or entity which was not so formed is reached.

For example, assume that: (i) the subscriber is a partnership that was organized or reorganized for the purpose of investing in the Company; (ii) the subscriber partnership has three partners, one of whom is a long-standing corporation, one of whom is an individual and one of whom is a corporation (“ NewCo ”) formed for the purpose of investing in the subscriber partnership; and (iii) NewCo has three shareholders. In this example, the answer called for in (d)(2) above would be 5.

If one of NewCo’s shareholders is an entity that was organized or reorganized for the purpose of investing in NewCo, the rule set forth above would be applied again until an individual or an entity which was not so formed is reached.

part iii.         miscellaneous matters

(a)          No part of the funds used by the subscriber to acquire Shares constitutes assets of any “employee benefit plan” within the meaning of § 3(3) of ERISA or other “benefit plan investor” (as defined in U.S. Department of Labor Regulations §§ 2510.3-101 et seq. , as amended) or assets allocated to any insurance company separate account or general account in which any such employee benefit plan or benefit plan investor (or related trust) has any interest.

(b)           The subscriber is ( please check and complete the applicable description ):

part iv.         suitability matters

Please check yes (“true”) or no (“false”) for each of the additional questions below related to your knowledge and experience, financial condition and tax bracket, ability to bear the risks associated with this investment, and investment goals.

The subscriber hereby represents and warrants that all of the answers, statements and information set forth in Parts I, II, III and IV of this Investor Qualification Statement are true and correct on the date hereof and will be true and correct as of the date, if any, that the Subscription Agreement to which this Investor Qualification Statement is attached is accepted by the Company. The subscriber hereby agrees to provide such additional information as requested by the Company.

Appendix D

____________________________ (the “ Investor ”) has asked this firm to deliver to Cornerstone Bancshares, Inc. (the “ Company ”) this verification letter (the “ Verification Letter ”) to assist the Company in verifying whether the Investor is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (an “ Accredited Investor ”).

I confirm that I am authorized to sign this Verification Letter on behalf of my firm and that I am, or, as applicable, my firm is ( check one ):

In providing this Verification Letter, we are relying without independent verification on the accuracy and completeness of the Supporting Documents (defined below) and the Back-up Certificate (attached hereto), each as delivered to us by the Investor. While we are not aware of any facts that would lead us to believe that either the Supporting Documents or the Back-up Certificate are incomplete or inaccurate, we make no affirmative representation as to their completeness or accuracy.

Subject to the preceding paragraph, and based only on our review of the Supporting Documents and the Back-up Certificate, we confirm that the Investor ( check at least one ):

In support of this Verification Letter, we have received from the Investor and reviewed originals or copies of (the “ Supporting Documents ”) ( check all that apply ):

We consent to the Company’s reliance on this Verification Letter in connection with a potential investment by the Investor in an offering of the Company’s securities (the “ Offering ”). However, we assume no liabilities or obligations in connection with the Company’s determination of whether the Investor is an Accredited Investor.

This Verification Letter speaks only as of the date below. We expressly disclaim any obligation to update the contents of this Verification Letter.

We are delivering this Verification Letter to the Company in connection with the Offering. This Verification Letter may not be relied upon by the Company, or by any other person, for any other purpose.

Appendix E

Conditions to Consummation of the Merger

The respective obligations of the Company, the Subsidiary, SmartFinancial and SmartBank to consummate the Merger are subject to the satisfaction or, to the extent permissible, waiver of certain conditions, including:

The respective obligations of SmartFinancial and SmartBank to consummate the merger is also subject to the satisfaction or, to the extent permissible, waiver of certain additional conditions, including:

The respective obligations of the Company and the Subsidiary to consummate the Merger are also subject to the satisfaction or, to the extent permissible, waiver of certain additional conditions, including:

Exhibit 10.2

registration RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made as of __________, 2015, by and among Cornerstone Bancshares, Inc., a Tennessee corporation (the “ Company ”), and each of the investors who has executed a joinder hereto (each of which is referred to in this Agreement as an “ Investor ,” and, together, collectively, the “ Investors ”).

RECITALS

WHEREAS, the Company and each Investor have executed a Subscription Agreement (each, a “ Purchase Agreement ,” and together, collectively, the “ Purchase Agreements ”) whereby each Investor has agreed to purchase Common Stock (as defined below) of the Company in connection with the Private Placement (as defined below).

WHEREAS, the Investors desire to enter into this Agreement in order to provide for certain registration rights with respect to the Company.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

For purposes of this Agreement:

“ Affiliate ” means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including without limitation any general partner, limited partner, officer, director, or manager of such Person.

“ Common Stock ” means shares of the Company’s common stock, $1.00 par value per share, sold pursuant to the Purchase Agreements.

“ Damages ” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Holder ” means any holder of Registrable Securities who is a party to this Agreement.

“ Immediate Family Member ” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, domestic partner, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein .

“ Person ” means any individual, corporation, partnership, trust, limited liability company, association or other entity .

“ Private Placement ” means the sale of up to $15,000,000 of Common Stock pursuant to the Purchase Agreements entered into between each Investor and the Company.

“ Purchase Agreement ” has the meaning set forth in the recitals hereto.

“ Registrable Securities ” means any Common Stock, excluding in all cases, however , any Registrable Securities which have been previously registered or which have been, or could be, sold to the public either pursuant to a registration statement or Rule 144.

“ Restricted Securities ” means the securities of the Company required to bear the legend set forth in Section 2.8(b) hereof.

“ SEC ” means the U.S. Securities and Exchange Commission.

“ SEC Rule 144 ” means Rule 144 promulgated by the SEC under the Securities Act.

“ SEC Rule 145 ” means Rule 145 promulgated by the SEC under the Securities Act.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

The Company covenants and agrees as follows:

(a)           Subject to the limitations of Section 2.1(b) below, as soon as practicable, the Company agrees to use its best efforts to prepare and file a registration statement with respect to the Registrable Securities, and use its best efforts to cause such registration statement to become effective under the Securities Act within ninety (90) days after the date of this Agreement and, thereafter, keep such registration statement effective until the earlier of (i) six (6) months following the date of this Agreement or (ii) all Registrable Securities are resold pursuant to such registration statement. Following the earlier of (x) six (6) months following the date of this Agreement, or (y) all of the Registrable Securities are resold pursuant to such registration statement, the Company may, in its sole discretion, elect to deregister all Registrable Securities covered by such registration statement.

(b)           Notwithstanding the foregoing obligations, if the Company furnishes to the Holders a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than ninety (90) days; provided , however , that the Company may not invoke this right more than once in any six (6) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such ninety (90) day period other than pursuant to a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or a registration relating to an SEC Rule 145 transaction.

Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a)           prepare and file with the SEC a registration statement with respect to the Registrable Securities and use its best efforts to cause such registration statement to become effective and, thereafter, keep such registration statement effective until the earlier of (i) six (6) months following the date of this Agreement or (ii) all Registrable Securities are resold pursuant to such registration statement;

(b)           prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

(c)           furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

(d)           use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably required; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(e)           use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

(f)           provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

(g)           notify each Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

(h)           after such registration statement becomes effective, notify each Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

All expenses incurred in connection with registrations, filings, or qualifications pursuant to Section 2 , including all registration, filing, and qualification fees, printers’ and accounting fees, and fees and disbursements of counsel for the Company shall be borne and paid by the Company.

No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2 .

If any Registrable Securities are included in a registration statement under this Section 2 :

(a)           To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; and each Person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Section 2.6(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

(b)           To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any other Holder selling securities in such registration statement, and any controlling Person of any such other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such Holder expressly for use in connection with such registration; and each such Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Section 2.6(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld.

(c)           Promptly after receipt by an indemnified party under this Section 2.6 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.6 , give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided , however , that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.6 , to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.6 .

(d)           Notwithstanding anything else herein to the contrary, the foregoing indemnity agreements of the Company and the Holders are subject to the condition that, insofar as they relate to any Damages arising from any untrue statement or alleged untrue statement of a material fact contained in, or omission or alleged omission of a material fact from, a preliminary prospectus (or necessary to make the statements therein not misleading) that has been corrected in the form of prospectus included in the registration statement at the time it becomes effective, or any amendment or supplement thereto filed with the SEC pursuant to Rule 424(b) under the Securities Act (the “ Final Prospectus ”), such indemnity agreement shall not inure to the benefit of any Person if a copy of the Final Prospectus was furnished to the indemnified party and such indemnified party failed to deliver, at or before the confirmation of the sale of the shares registered in such offering, a copy of the Final Prospectus to the Person asserting the loss, liability, claim, or damage in any case in which such delivery was required by the Securities Act.

(e)           To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.6 , then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided , however , that, in any such case, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(f)           The obligations of the Company and Holders under this Section 2.6 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2 , and otherwise shall survive the termination of this Agreement.

With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration, the Company shall:

(a)           make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company in connection with this Agreement;

(b)           use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

(c)           furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company in connection with this Agreement), the Securities Act, and the Exchange Act; (ii) a copy of or reference to the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration.

(a)           The Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement; provided , however , the transferor shall, within sixty (60) days after such transfer or assignment, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned. Notwithstanding the foregoing and anything to the contrary set forth herein, it is understood by the parties hereto that each Investor and any of its affiliated investment funds may, in its sole discretion, transfer all or any portion of the securities owned or held beneficially by it to any other affiliated investment fund or grant an affiliated investment fund participation rights therein, and any of the foregoing persons may distribute any such securities to any direct or indirect shareholder, member or partner of such person; provided that (i) the transferor shall, within thirty (30) days after such transfer or assignment, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned, and (ii) such transferee agrees to be bound by the relevant terms and conditions of this Agreement.

(b)           Each certificate or instrument representing (i) the Registrable Securities, and (ii) any other securities issued in respect of the securities referenced in clause (i), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.8(c) ) be stamped or otherwise imprinted with a legend substantially in the following form:

“ THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS. ”

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 2.8 .

(c)           The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 2 . Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144 or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Section 2.8 . Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.8(b) , except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate, partner, member, limited partner, retired partner, retired member, or stockholder of a Holder; or (ii) is a Holder’s Immediate Family Member or trust (or other estate-planning entity) for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; provided , however , that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

This Agreement shall be governed by, and construed in accordance with, the laws of the State of Tennessee, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. This Agreement may be executed by facsimile signatures each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

All notices, requests, consents and other communications under this Agreement shall be in writing and shall be deemed delivered (a) three business days after being sent by registered or certified mail, return receipt requested, postage prepaid or (b) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, in each case to the intended recipient as set forth below:

If to the Company, at Cornerstone Bancshares, Inc., 835 Georgia Avenue, Chattanooga, TN 37402, Attention: CEO, or at such other address as may have been furnished in writing by the Company to the other parties hereto, with a copy (which shall not constitute notice) to Miller & Martin, PLLC, 832 Georgia Avenue, Suite 1200, Chattanooga, TN 37402, Attention: Roddy Bailey; or

If to an Investor, at its address (and to any counsel for such Investor specified in writing to the Company) set forth in the Company’s records from time to time.

Any party may give any notice, request, consent or other communication under this Agreement using any other means (including, without limitation, personal delivery, messenger service, telecopy, first class mail or electronic mail), but no such notice, request, consent or other communication shall be deemed to have been duly given unless and until it is actually received by the party for whom it is intended. Any party may change the address to which notices, requests, consents or other communications hereunder are to be delivered by giving the other parties notice in the manner set forth in this Section.

Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of (i) the Company, and (ii) the holders of at least a majority of the Registrable Securities; provided that the Company may in its sole discretion waive compliance with Section 2.8(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.8(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion. The Company shall give prompt notice of any amendment or termination hereof to any party hereto that did not consent in writing to such amendment or termination. Any amendment, termination, or waiver effected in accordance with this Section 3.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of Common Stock after the date hereof in the Private Placement, any purchaser of such shares of Common Stock in the Private Placement may become a party to this Agreement by executing a joinder signature page to this Agreement and thereafter shall be deemed a Investor for all purposes hereunder. No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as a Investor hereunder.

This Agreement and the Purchase Agreements entered into between each Investor and the Company constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.

With respect to any suit, action or other proceeding arising out of or based upon this Agreement, the parties irrevocably submit to the jurisdiction of the federal or state courts located in Hamilton County, Tennessee, which submission shall be exclusive. The parties hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. The prevailing party shall be entitled to reasonable attorneys’ fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.

3.11.          Waiver of Jury Trial . THE UNDERSIGNED IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED BY THIS SUBSCRIPTION AGREEMENT.

No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

Cornerstone Bancshares, Inc.

Signature Page to

R egistration R ights A greement

JOINDER TO REGISTRATION RIGHTS AGREEMENT

This JOINDER (the “ Joinder ) to the Registration Rights Agreement (the “ Agreement ”), dated as of __________, 2015, by and among Cornerstone Bancshares, Inc., a Tennessee corporation (the “ Company ”), and certain equityholders of the Company, is made as of __________, 2015 by and between the Company and ____________________ (“ Investor ”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Agreement.

WHEREAS, on the date hereof, Investor has acquired __________ shares of Common Stock of the Company pursuant to the Private Placement and the Investor desires to become a party to the Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Joinder hereby agree as follows:

1.           Agreement to be Bound . Investor hereby (i) acknowledges that it has received and reviewed a complete copy of the Agreement and (ii) agrees that upon execution of this Joinder, it shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto and shall be deemed an Investor for all purposes thereof.

2.           Successors and Assigns . Except as otherwise provided herein, this Joinder shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and Investor and any subsequent holders of Registrable Securities and the respective successors and assigns of each of them, so long as they hold any Registrable Securities.

3.           Counterparts . This Joinder may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement.

4.           Notices . For purposes of Section 3.5 of the Agreement, all notices, demands or other communications to Investor shall be directed to:

____________________

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5.           Governing Law . All questions concerning the construction, validity and interpretation of this Joinder shall be governed by and construed in accordance with the domestic laws of the State of Tennessee, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Tennessee or any other Jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Tennessee.