Re: Dividend Payment in Kind and Exchange of Preferred Stock
March 23,
2010
▇▇▇▇▇▇▇▇▇
Fund Manager GP, LLC
▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Irvine,
CA 92614
Gentlemen:
This
letter will confirm our agreement regarding Series B Mandatorily Convertible
Cumulative Perpetual Preferred Stock (“Series B Preferred
Stock”) of Bridge Capital Holdings (the “Company”) and Series
B-1 Mandatorily Convertible Cumulative Perpetual Preferred Stock (“Series B-1 Preferred
Stock”) of the Company, which the Company originally issued and sold
pursuant to the terms of a Stock Purchase Agreement dated December 4, 2008, as
amended, and entered into between the Company, and ▇▇▇▇▇▇▇▇▇ Fund Manager GP,
LLC (the “Manager”) on behalf
of and as General Partner of each of the following investment-related limited
partnerships: ▇▇▇▇▇▇▇▇▇ Community BancFund, L.P.; ▇▇▇▇▇▇▇▇▇ Community
BancFund-A, L.P.; and ▇▇▇▇▇▇▇▇▇ Community BancFund-CA, L.P. (collectively, the
“Investors”). The
Manager and the Company are collectively referred to herein as the “Parties” and
individually referred to herein as a “Party.”
The
rights preferences and privileges of the Series B and Series B-1 Preferred Stock
is set forth in the Certificate of Determination of the Series B Preferred Stock
and the Series B-1 Preferred Stock (the “Certificate of
Determination”). Capitalized terms used but not otherwise
defined herein have the definitions set forth in the Certificate of
Determination.
The terms
and conditions of this letter agreement are set forth below.
1. Background
The
Parties entered a Stock Purchase Agreement dated as of December 4, 2008 and as
amended on December 18, 2008 (the “Stock Purchase
Agreement”). Pursuant to the
terms of the Stock Purchase Agreement, on December 17, 2008, the Company sold
131,901 shares of its Series B Preferred Stock and 168,099 of its Series B-1
Preferred Stock to the Investors for aggregate consideration of
$30.0 million. From the original date of issuance to the date of
this letter agreement, the Investors are the record holders of all outstanding
shares of the Series B Preferred Stock and all outstanding shares of the Series
B-1 Preferred Stock.
1
The Company has paid dividends on the
Series B and Series B-1 Preferred Stock for some periods, and has accrued (but
not yet paid) dividends for certain periods. The Parties desire to
enter into an agreement with respect to dividends that will (i) settle in full
the obligations of the Company with respect to dividends on the Series B and
Series B-1 Preferred Stock that have not yet been declared, but are to become
payable as of March 31, 2010, by delivery of debt that is convertible into
shares of the Company’s Common Stock at a price per share based on the Closing
Price of the Common Stock on the date hereof and (ii) provide for the
payment of those dividends that were heretofore declared and are currently in
arrears, in the aggregate amount of $1,389,041.10, by delivery of shares of the
Company’s Common Stock at a price per share based on the Closing Price of the
Common Stock on the date hereof.
The
Parties also desire to enter into an agreement providing that in exchange for
all outstanding shares of Series B and Series B-1 Preferred Stock, the Company
will issue $30 million in aggregate amount of the Company’s Common Stock to the
Investors (pro rata) at a price per share based on the Closing Price of the
Common Stock on the date hereof.
2. Payment
with Respect to March 31, 2010 Dividend
a. Payment in
Kind. The Company agrees to declare the dividend with respect
to the Series B and Series B-1 Preferred Stock for the quarter ended March 31,
2010 and to pay that dividend by delivery to the Investors of unsecured
promissory notes (“Notes”) in the respective amounts set forth on Exhibit A, which
Notes are convertible into shares of the Company’s Common Stock at a price per
share based on the Closing Price of the Common Stock on the date hereof, as
provided in the form of Notes set forth in Exhibit
B.
b. Procedures. Subject
to the terms and conditions hereof, on March 31, 2010 the Company shall issue
and deliver Notes to be issued pursuant to Section 3(b) above at the offices of
the Manager.
3. Payment
with Respect to Accrued Dividends
a. Acknowledgement of Dividend
Amounts. The Company acknowledges that dividends have been
declared and remain unpaid on the Series B and Series B-1 Preferred Stock with
respect to accruals as of September 30, 2009 and December 31, 2009, in the
aggregate amount of $1,389,041.10.
b. Agreement Regarding
Payment. The Company agrees to pay the aggregate sum of such
dividends, to the Investors in shares of the Company’s Common Stock at a price
per share based on the Closing Price of the Common Stock on the date
hereof.
c. Procedures. Subject
to the terms and conditions hereof, on March 31, 2010, the Company shall issue
and deliver certificates representing the aggregate shares of Common Stock to be
issued pursuant to Section 2(a) above at the offices of the Manager, or evidence
of book-entry record ownership of the aggregate shares of Common Stock shall be
delivered by the Company at the offices of the Manager as well as any cash paid
in lieu of fractional shares.
4. Exchange
of Preferred Stock for Common Stock
a. Exchange. The
Company agrees that in exchange for all outstanding shares of Series B and
Series B-1 Preferred Stock to be surrendered by the Investors, the Company shall
issue $30 million in aggregate amount of the Company’s Common Stock (at a price
per share based on the Closing Price of the Common Stock on the date hereof) to
the Investors; provided, however that cash may be issued solely in lieu of
fractional shares.
2
b. Conversion
Procedures. Subject to the terms and conditions hereof, on
March 31, 2010, the Investors shall surrender to the Company at the offices of
the Company certificates representing 131,901 shares of Series B Preferred Stock
and certificates representing 168,099 Series B-1 Preferred Stock in exchange for
Common Stock. Subject to the terms and conditions hereof, on March
31, 2010, the Company shall issue and deliver certificates representing the
aggregate shares of Common Stock to be issued pursuant to Paragraph 4(a) above
at the offices of the Manager, or evidence of book-entry record ownership of the
aggregate shares of Common Stock shall be delivered by the Company at the
offices of the Manager as well as any cash paid in lieu of fractional
shares. The attached Exhibit A reflects
the number of shares to be delivered to the respective Investors, inclusive of
those exchanged for the Series B and Series B-1 Preferred Stock pursuant to this
Section 4 and those paid in respect of dividends pursuant to Section
3.
5. Representations
and Warranties
The
Company represents and warrants to the Manager and the Investors that as of the
date of this letter agreement, the Company has all requisite legal and corporate
power and authority to execute and deliver this letter agreement and perform its
obligations under the terms of this letter agreement and has obtained all
required board and shareholder approval to enter into this letter
agreement.
The
Manager, on behalf of itself and the Investors, hereby represents and warrants
to the Company, that as of the date of this letter agreement, the Manager has
all requisite legal power and authority to execute and deliver this letter
agreement and to carry out and perform its obligations under the terms of this
letter agreement.
6. Covenants
Each
Party shall and shall cause its affiliates to, cooperate and consult with the
other and use reasonable best efforts to prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other documents, and to obtain all necessary permits, consents, orders,
approvals and authorizations of, or any exemption by, all third parties and any
federal, state or local governmental authority, court, government or
self-regulatory organization, commission or any regulatory, administrative or
other agency, or any department thereof, necessary or advisable to consummate
the transactions contemplated by this letter agreement, and to perform the
covenants contemplated hereby.
Each
Party shall execute, and cause its affiliates to execute, as applicable, and
deliver such further certificates, agreements and other documents and to take
such other actions as the other parties may reasonably request to consummate or
implement such transactions or to evidence such events or matters.
Without
limiting the generality of the foregoing, Company shall instruct its stock
transfer agent to issue certificates representing the Common Stock to the
respective Investors, and to include appropriate restrictive legends on such
certificates. The Parties acknowledge and agree that the registration
rights provided for in the Stock Purchase Agreement with respect to the Series B
and Series B-1 Preferred Stock, and any Common Stock issued upon conversion
thereof or paid in kind as dividends upon such Preferred Stock shall apply to
the Common Stock issued hereunder.
3
7. Binding
Effect
The
provisions of this letter agreement shall be binding upon and inure to the
benefit of the Parties hereto and each of their respective successors and
assigns.
8. Governing
Law
This
letter agreement shall be governed by and construed in accordance with the
internal laws of the State of California.
9. Severability
of Provisions
In case
any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect in any jurisdiction, as to such jurisdiction, such
provision shall be ineffective to the extent of such invalidity, illegality or
unenforceability, and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
10. Counterparts
This
Agreement may be executed in two counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other party.
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Very
truly yours,
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/s/ ▇▇▇▇▇▇
▇. ▇▇
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By: ▇▇▇▇▇▇
▇. ▇▇
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Title:
Executive Vice President
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Chief
Financial Officer
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AGREED
AND ACCEPTED:
▇▇▇▇▇▇▇▇▇
COMMUNITY BANCFUND, L.P.,
▇▇▇▇▇▇▇▇▇
COMMUNITY BANCFUND-A, L.P.,
▇▇▇▇▇▇▇▇▇
COMMUNITY BANCFUND-CA, L.P.
By: ▇▇▇▇▇▇▇▇▇ FUND MANAGER GP,
LLC
Their: General
Partner
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/s/
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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By:
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▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
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Its:
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Managing
Member
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4
Exhibit
A
Schedule
of Investors
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Name & Address
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Shares of
Common
Stock to be
received in
conversion of
Preferred
Shares
(Sec. 4)
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Shares of
Common
Stock to be
received in
respect of
accrued
dividends
(Sec. 3)
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Total Shares
of Common
Stock
|
Note
Amounts
(Sec. 2)
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||||||||||||
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▇▇▇▇▇▇▇▇▇
Community BancFund, LP
c/▇
▇▇▇▇▇▇▇▇▇ Fund Manager GP LLC
▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
115,390 | 6,043 | 121,433 | $ | 25,701.27 | |||||||||||
|
▇▇▇▇▇▇▇▇▇
Community BancFund-A, LP
c/▇
▇▇▇▇▇▇▇▇▇ Fund Manager GP LLC
▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
3,283,097 | 152,138 | 3,435,235 | $ | 731,279.95 | |||||||||||
|
▇▇▇▇▇▇▇▇▇
Community BancFund-CA, LP
c/▇
▇▇▇▇▇▇▇▇▇ Fund Manager GP LLC
▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
147,612 | 6,009 | 153,621 | $ | 32,879.53 | |||||||||||
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TOTAL
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3,710,289 | $ | 789,860.75 | |||||||||||||
5
Exhibit
B
Form
of Notes
NOTE
THE
SECURITIES EVIDENCED HEREBY AND ISSUABLE PURSUANT TO THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY
APPLICABLE STATE SECURITIES LAWS (“BLUE SKY
LAWS”). ANY TRANSFER OF THIS NOTE AND SUCH SECURITIES WILL BE
INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT AND AS REQUIRED BY BLUE
SKY LAWS IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH
TRANSFER TO COMPLY WITH THE ACT AND BLUE SKY LAWS.
a
California corporation
10%
CONVERTIBLE UNSECURED NOTE
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$_______________
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March
31, 2010
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FOR VALUE
RECEIVED, Bridge Capital Holdings, a California corporation (the “Company”), promises
to pay to the order of _______________________
(“Holder”), on
the Repayment Date (defined in paragraph 4), in lawful money of the United
States and in immediately available funds, the principal amount of
_________________________ Dollars and ______ cents ($_______________), and all
accrued and unpaid interest, unless earlier converted in accordance with the
terms hereof.
1. Terms. This
10% Convertible Unsecured Note (this “Note”) is being
issued and delivered by the Company pursuant to Section 2 of that certain letter
agreement dated March 23, 2010 (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the “Letter Agreement”),
by and among the Company, ▇▇▇▇▇▇▇▇▇ Community BancFund, L.P., ▇▇▇▇▇▇▇▇▇
Community BancFund-A, L.P. and ▇▇▇▇▇▇▇▇▇ Community BancFund-CA,
L.P.. Unless otherwise set forth herein, all capitalized terms used
herein without definition shall have the meanings given to such terms in the
Letter Agreement.
2. Interest. Subject
to paragraph 3 of this Note, interest on this Note shall compound monthly in
arrears, calculated on a 360-day year at a rate per month equal to one-twelfth
(1/12th) of ten percent (10%). Interest on this Note shall accrue on
and from the date hereof until all amounts outstanding are paid in
full. In no event shall interest or any other amount paid or agreed
to be paid under this Note exceed the highest lawful rate permissible under
applicable usury laws. If fulfillment of any provision hereof shall
be deemed by a court of competent and final jurisdiction to violate any
applicable usury restrictions, then the obligation to be fulfilled shall be
automatically reduced to the limit of such highest lawful rate, and any amount
received in excess of such limit shall be applied to reduce the unpaid principal
balance hereof and not to the payment of interest.
3. Payments. The
principal amount and all accrued and unpaid interest thereon shall be payable
from the Company to Holder on the Repayment Date (as defined in paragraph
4).
4. Repayment
Date. To the extent not previously paid, and unless exchanged
for other debt securities of the Company or converted as provided in paragraph
11, this Note, together with all accrued but unpaid interest hereon, shall be
due and payable, in immediately available funds, on the first to occur of the
following: (i) March 31, 2011, or (ii) a Change in Control (such
date, or such earlier date as provided herein, the “Repayment
Date”). As used herein, a “Change in Control”
shall means (A) the merger, consolidation or other reorganization of the
Company, with or into one or more entities, as a result of which the outstanding
shares of the Company immediately prior to such merger or consolidation are, or
are to be, converted (x) solely into cash or non-voting securities of the
surviving or resulting entity, or (y) at least in part into voting securities of
the surviving or resulting entity, but such voting securities will represent
less than fifty percent (50%) of the outstanding voting securities of the
surviving or resulting entity; (B) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the company to a person that was not a
shareholder thereof on the date of this Agreement; or (C) a person who is not an
Investor or a Shareholder or an affiliate thereof as of the date of this
Agreement acquires directly or indirectly eighty percent (80%) or more of the
Company’s outstanding voting securities. Holder shall surrender this
Note, duly endorsed to the Company, upon receipt of full payment of outstanding
principal and accrued but unpaid interest.
5. Each
of the following shall constitute an “Event of Default”
under this Note:
(a) The Company
shall fail to pay when due (whether at stated maturity, by acceleration or
otherwise) any payment of principal, interest or any other sum payable
hereunder, which such breach is not cured within five (5) business days
following written notice thereof from Holder.
(b) A breach by the
Company of any representation, warranty, covenant or other obligation under this
Note or the Letter Agreement, which breach is not cured within thirty (30) days
following written notice thereof from Holder.
(c) A final judgment
or judgments shall be entered against the Company in the aggregate amount of
$1,000,000 (net of insurance proceeds, if any), and such judgment or judgments
shall remain unstayed, unvacated, undischarged or unsatisfied for 30 calendar
days.
(d) The Company shall
default (unless waived) in the performance or observance (subject to any
applicable grace period) of any agreement, covenant or condition with respect to
any indebtedness in an amount in excess of $1,000,000 (including indebtedness
created under this Note) if the effect of such default is to accelerate the
maturity of any such indebtedness or to permit the holder or holders of any such
indebtedness, or any trustee or agent for such holders, to cause such
indebtedness to become due and payable prior to its expressed maturity or, if
such indebtedness is a guaranty and the default has the effect, under the terms
of such guaranty, of permitting the holder or holders to call upon such guaranty
in advance of nonpayment of the guaranteed indebtedness.
(e) The Company
shall (i) institute a voluntary case seeking liquidation or reorganization under
any bankruptcy law, or shall consent to the institution of an involuntary case
thereunder against it; (ii) file a petition initiating or shall otherwise
institute any similar proceeding under any other applicable federal or state
law, or shall consent thereto; (iii) apply for, or by consent or acquiescence
there shall be an appointment of, a receiver, liquidator, sequestrator, trustee
or other officer with similar powers, or the Company shall make an assignment
for the benefit of creditors; (iv) have an involuntary case commenced seeking
the liquidation or reorganization of the Company under any bankruptcy law, or
any similar proceeding against the Company under any other applicable federal or
state law and such case is not dismissed within sixty (60) calendar days from
the commencement thereof; or (v) have any other similar relief be granted
against the Company under any applicable federal or state law.
6. Usury. Regardless
of any other provision of this Note or the Letter Agreement to the contrary, if
for any reason the effective rate of interest under this Note should exceed the
maximum lawful rate of interest, then the effective rate of interest under this
Note shall be deemed reduced to, and shall be, such maximum lawful rate of
interest, and (a) the amount which would otherwise be excessive interest shall
be deemed applied to the reduction of the outstanding principal amount and not
the payment of interest, and (b) if the loan evidenced by this Note has been or
is paid in full, the excess principal payment under the foregoing clause (a)
shall be returned to the Company. The parties agree that any such
application of excessive interest to the outstanding principal amount or the
refunding of such excess interest shall be a complete settlement and acquittance
thereof.
7. Remedies. If
any Event of Default shall occur, then, and in every such event, and at any time
thereafter during the continuance of such event, the Holder may demand that all
amounts outstanding hereunder shall be forthwith due and payable, together with
any unpaid accrued fees and all other liabilities accrued hereunder, provided
that if an Event of Default shall occur as a result of the circumstances
described in paragraph 5(e), all amounts outstanding hereunder shall be
forthwith due and payable, together with any unpaid accrued fees and all other
liabilities accrued hereunder without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Company, and
Holder may, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by the Company, exercise any and
all rights and remedies accorded to Holder under this Note or any other
governing law. All rights, powers and remedies hereunder or afforded
at law are cumulative. No delay or omission by Holder to exercise any
right, power or remedy granted under this Note shall impair such right, power or
remedy or be construed to be a waiver of any Event of Default or an acquiescence
thereof, and any single or partial exercise of any such right, power or remedy
shall not preclude other or further exercise thereof or the exercise of any
other right, power or remedy. The nonprevailing party agrees to pay
all costs associated with any action regarding the collection or enforcement of
this Note when incurred, including reasonable attorneys’ fees.
8. Prepayments. This
Note may not be prepaid in whole or in part prior to August 31,
2010. This Note may be prepaid in whole or in part on or after August
31, 2010, provided that all accrued and unpaid interest on this Note (or, if
prepayment is partial, upon the portion of the principal that is being repaid)
shall be paid concurrent with such prepayment.
9. No Impairment; Waivers;
Reinstatement. No provision of this Note shall alter or impair
the obligation of the Company, which is absolute and unconditional, to pay the
principal of and interest on this Note at the place, at the time, and in the
currency herein prescribed. The Company hereby waives, to the full
extent permitted by law, presentment, demand for payment or other performance,
notice of nonpayment or other nonperformance, protest, notice of protest, notice
of dishonor and all other notices or demands in connection with the delivery,
acceptance, performance or default of this Note. Notwithstanding
anything herein to the contrary, this Note shall remain in full force and effect
and continue to be effective should any petition be filed by or against the
Company for liquidation or reorganization, should the Company become insolvent
or make an assignment for any benefit of creditors or should a receiver or
trustee be appointed for all or any significant part of the Company’s assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the obligations, whether as a “voidable
preference,” “fraudulent conveyance” or otherwise, all as though such payment,
or any part thereof, is rescinded, reduced, restored or returned.
10. Notices. Except
as otherwise provided herein, all notices hereunder shall be in writing and
shall be sent and deemed received in accordance with Section 10.2 of the Stock
Purchase Agreement.
11. Conversion
Rights. Holder shall have the right, but not the obligation,
to convert all or any part of this Note into the Company’s Common Stock at the
rate of one share for each Eight Dollars and 46 cents ($8.46) in Note principal
amount.
If Holder
elects to convert this Note into Common Stock, Holder shall give notice to the
Company of this election.
Upon the
conversion of this Note into Common Stock, in lieu of any fractional shares to
which Holder would otherwise be entitled, the Company shall pay Holder cash
equal to such fraction multiplied by the issue price of such Common
Stock.
As
promptly as practicable after the conversion of this Note, the Company at its
expense will issue and deliver to Holder, upon surrender of this Note, a
certificate or certificates for the number of full shares of Common Stock
issuable upon such conversion.
12. Miscellaneous. The
provisions of this Note shall inure to the benefit of ▇▇▇▇▇▇ and its successors
and assigns. No other person shall be deemed to be a third-party
beneficiary of this Note or shall have any rights hereunder. Any
assignment of this Note shall become effective only upon delivery of written
notice to the Company indicating the name and address of the
assignee. The Company may not assign this Note or any of the rights,
duties or obligations hereunder without the prior written consent of
▇▇▇▇▇▇. No amendment, modification, termination or waiver of any
provision of this Note, and no consent to any departure therefrom, shall be
effective without the written consent of the Holder. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given, if consented to in writing by the
Holder. This Note
shall be governed by, and construed in accordance with, the internal laws
(without regard to choice of law principles) of the State of
California. If any of the provisions in this Note shall, for
any reason, be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Note.
IN
WITNESS WHEREOF, the Company has executed this 10% Convertible Unsecured Note as
of the date first written above.
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a
California corporation
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By: __________________________
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Title:
_________________________
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