Document:

LOAN MODIFICATION AND
EXTENSION AGREEMENT

    

    THIS LOAN
MODIFICATION AND EXTENSION AGREEMENT (“Agreement”) is made as of
the 31st day of
March, 2010, by and between STEELCLOUD, INC., a Virginia corporation
(hereinafter referred to as the “Maker”, the “Company” or the "Borrower") and
CALEDONIA CAPITAL CORPORATION, a Delaware corporation (hereinafter called the
"Lender").

    

    WITNESSETH:

    

    WHEREAS,
Borrower heretofore executed and delivered to the Lender its one certain Secured
Promissory Note dated July 1, 2009 in the original principal amount of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) (together with all
amendments, modifications, substitutions, extensions or renewals thereof
hereinafter referred to as "Note 1"); and

    

    WHEREAS,
Note 1 is governed and secured by that certain Business Loan and Security
Agreement dated July 1, 2009 between Borrower and Lender (the "Loan Agreement"),
encumbering Borrower’s interest in certain business asset, as more particularly
described in the Loan Agreement (the "SteelWorks Mobile System");
and

    

    WHEREAS,
Borrower heretofore executed and delivered to the Lender its one certain
Revolving Line of Credit Promissory Note dated November 3, 2009 in the original
principal amount of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00)
(together with all amendments, modifications, substitutions, extensions or
renewals thereof hereinafter referred to as "Note 2" and, together with Note 1
sometimes collectively referred to herein as the “Notes”); and

    

    WHEREAS,
Note 2 is governed and secured by that certain Line of Credit and Security
Agreement dated November 3, 2009 between Borrower and Lender (the "Line of
Credit Agreement"), encumbering all of Borrower’s business asset, as more
particularly described in the Loan Agreement (the "Business Assets");
and

    

    WHEREAS,
the Maturity Date of Note 1 and Note 2 is currently March 31, 2010;
and

    

    WHEREAS,
Borrower and Lender have agreed hereby upon the terms and conditions for the
extension of the Maturity date of Note 1 and Note 2, as hereinafter set
forth.

    

    NOW,
THEREFORE, the parties hereto in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, do hereby agree as
follows:

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    1.           Incorporation of
Recitals. The parties hereto acknowledge and agree that the recitals
hereinabove set forth are true and correct in all material respects and that the
same are incorporated herein and made a part hereof by this
reference.

    

    2.           Extension of Maturity
Date. The Maturity Date of both Notes is hereby extended to
December 31, 2011 (the “Extended Maturity Date”), when the entire principal
balance remaining unpaid, together with interest accrued thereon, shall be due
and payable in full.

    

    3.           Interest. From and
after April 1, 2010, interest shall accrue on the unpaid principal
balance of both Notes at the rate of twenty percent (20.00%) per annum until
paid. Interest shall continue to be due and payable in monthly installments of
accrued interest on the 1st day of each month hereafter until the Extended
Maturity Date. Section 1.2 of Note 1 is hereby deleted in its entirety without
replacement. The following provision is hereby deleted from Note 2 without
replacement:

    

    “or (b)
the date that the Borrower shall have raised a total of not less than $1,000,000
in New Equity Capital (defined below) from one or more investors
(“Capitalization Date”). For the purposes of this clause, New Equity Capital
shall be defined as capital invested in the equity of the Borrower accompanied
by the issuance by Borrower of shares of stock which were not trading in the
public markets prior to the date of this Note.”

    

    4.           Outstanding
Obligations.  Maker hereby represent that as of the date
hereof the outstanding principal indebtedness evidenced by Note 1 is $250,000.00
and Note 2 is $150,000.00.

    

    5.           Extension Fee/Accrued Late
Fees.   In consideration of Lender’s agreement to extend the
Maturity Date of the Notes and in satisfaction of certain accrued late fees due
pursuant to the Notes, Borrower shall, concurrent with its execution of this
Agreement shall issue and deliver to Lender certificate(s) evidencing 500,000
fully paid and non-assessable shares of the Borrower’s Common Stock, par value
$0.001 per share (“Common
Stock”).

    

    6.           Modification of Existing
Warrants.   It is recognized and acknowledged that Borrower has
previously issued to Lender (i) that certain Common Stock Purchase Warrant dated
November 4, 2009 granting to Lender the right to purchase from time to time up
to 150,000 shares of Common Stock at a purchase price of $0.25 for each share of
Common Stock so purchased, and (ii) that certain Common Stock Purchase Warrant
dated November 23, 2009 granting to Lender the right to purchase from time to
time up to 225,000 shares of Common Stock at a purchase price of $0.25 for each
share of Common Stock so purchased (said Common Stock Purchase Warrants being
collectively referred to herein as the “Existing Warrants”). Borrower and Lender
do hereby agree that the Existing Warrants are both hereby amended to provide
that the Exercise Price (as defined in such Existing Warrants) shall hereafter
be $0.15 per share rather than $0.25 per share, subject to adjustment as
provided in the Existing Warrants.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    7.           Confirmation of
Liens.  The Maker hereby acknowledge and agree that (i) the
SteelWorks Mobile System is and shall remain in all respects subject to the
lien, charge and encumbrance of the Loan Agreement, (ii) the
Business Assets are and shall remain in all respects subject to the lien, charge
and encumbrance of the Line of Credit Agreement, (iii) and nothing herein
contained, and nothing done pursuant hereto, shall adversely affect or be
construed to adversely affect the lien, charge, or encumbrance of, or conveyance
effected by the Loan Agreement or the Line of Credit Agreement or the priority
thereof over other liens, charges, encumbrances or conveyances, or to release or
adversely affect the liability of any party or parties whomsoever who may now or
hereafter be liable under or on account of the Notes or any of the Loan
Documents (as hereinafter defined), nor shall anything herein contained or done
in pursuance hereof adversely affect or be construed to adversely affect any
other security or instrument held by the Lender as security for or evidence of
the indebtedness evidenced and secured thereby.

    

    8.           Continuation of Loan
Terms.  Except as otherwise expressly set forth herein, the outstanding
principal balance of the Notes shall continue to bear interest and to be repaid
on the terms and subject to the conditions set forth in the Notes and the other
documents evidencing and securing the Notes (this Agreement, the Notes, the Loan
Agreement, the Line of Credit Agreement and all such other documents, whether
currently existing or hereafter executed, and all modifications thereto,
extensions or renewals thereof and substitutions therefor being hereinafter
collectively referred to as the "Loan Documents"). All capitalized terms used
but not defined in this Agreement shall have the meaning given to such terms in
the Loan Documents.

    

    9.           Expenses.  The
Maker covenants and agrees to pay all fees, costs, charges and expenses incurred
by the Lender in connection with the preparation of this Agreement and the
extension of the Notes, including without limitation, the Lender's reasonable
attorneys fees.

    

    10.        Release of
Claims.  The Maker hereby releases and waives all claims and/or defenses it now
or hereafter may have against the Lender and its successors and assigns on
account of any occurrence relating to the Notes and/or the other Loan Documents
which accrued prior to the date hereof, including, but not limited to, any claim
that the Lender (a) breached any obligations to the Maker in connection with the
indebtedness evidenced by the Notes, (b) was or is in any way involved with the
Maker as a partner, joint venturer, or in any other capacity whatsoever other
than as a lender, (c) failed to timely respond to any offers to cure any
defaults under any document or agreement executed by the Maker or any third
party or parties in favor of the Lender. This release and waiver shall be
effective as of the date of this Agreement and shall be binding upon the Maker,
and shall inure to the benefit of the Lender and its successors and assigns. The
term "Lender" as used herein shall include, but shall not be limited to, its
present and former officers, directors, employees, agents and
attorneys.

    

    11.        Continuing Agreements;
Novation.  Except as expressly modified hereby, the parties hereto
ratify and confirm each and every provision of the Notes and each of the other
Loan Documents as if the same were set forth herein. In the event that any of
the terms and conditions in the Notes or in any of the other Loan Documents
conflict in any way with the terms and provisions hereof, the terms and
provisions hereof shall prevail. The parties hereto covenant and agree that the
execution of this Agreement is not intended to and shall not cause or result in
a novation with regard to the Notes and/or the other Loan Documents and that the
existing indebtedness of the Maker to the Lender evidenced by the
Notes is continuing, without interruption, and has not been discharged by a new
agreement.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    12.        Captions. The
captions herein set forth are for convenience only and shall not be deemed
to define, limit or describe the scope or intent of this Agreement.

    

    13.        Governing Law. The
provisions of this Agreement shall be construed, interpreted and
enforced in accordance with the laws of the Commonwealth of Virginia as the same
may be in effect from time to time.

    

    14.        Counterparts. This
Agreement may be executed in any number of counterparts,
and each such counterpart shall be deemed to be an original. It shall not be
necessary that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on more than one
counterpart.

    

    15.        Additional Financial
Covenants. Anything contained in the
Loan Documents to
the contrary notwithstanding, until Note 1 and Note 2 have been paid in full,
Borrower covenants and agrees as follows:

    

    Limitation on
Indebtedness. Without the Lender’s prior written consent, Borrower shall not
incur, create, contract for, waive, assume, have outstanding, guarantee or
otherwise become liable with respect to any indebtedness other than (i) the
indebtedness evidenced by the Notes, and (ii) unsecured trade payables incurred
by Borrower in the ordinary course of operating its business.

    

    16.         Lender’s Conversion
Option. The Lender shall have the right at any time and from time to time
to convert the all, or any part, of the outstanding balance due under the Notes
into shares of Common Stock of the Borrower at the conversion rate of $0.10 per
share of Common Stock (subject to adjustment in the event of stock splits or
combinations). To exercise such conversion right, Lender must give written
notice to Borrower (“Conversion Notice”) of such intent at least five (5) days
prior to such conversion and specifying the portion of the outstanding principal
balance of the Notes to be so converted. No fractional shares of the Company's
Common Stock shall be issued upon conversion of the Notes. In lieu of the
Company issuing any fractional shares to the Lender upon the conversion of the
Notes, the Company shall pay to the Lender the amount of outstanding principal
that is not so converted in cash. Within five (5) days after receipt of the
Conversion Notice, (a) the Company at its expense will issue and deliver to the
Lender a certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion and pay any outstanding interest accrued
under the Notes, (b) the principal balance of the Notes shall be reduced by the
amount so converted, and (c) upon conversion of all of the outstanding principal
balance due under the Notes, the Lender shall concurrently surrender the Notes,
marked paid, at the principal office of the Company. Upon conversion of all of
the outstanding principal balance due under the Notes, and payment of any
accrued and outstanding interest thereon, the Company shall be forever released
from all its obligations and liabilities under the Notes. Anything contained in
the Notes to the contrary notwithstanding, neither of the Notes may be prepaid
without the Borrower providing the Lender not less than thirty (30) days prior
written notice of such prepayment and the Lender shall not be
required to accept any prepayment of the Notes if following receipt of such
written notice Lender has delivered a Conversion Notice to the
Company.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and year
first above written.

    

    
      
        
          
            
              
                	 
      	
                        BORROWER:

                      
	 
      	 
      
	 
      	
                        SteelCloud,
      Inc.

                      
	 
      	 
      
	 
      	
                        By:

                      	/s/
      Brian Hajost  
	 
      	 
      	
                        Brian
      Hajost, President

                      
	 
      	 
      
	 
      	
                        LENDER:

                      
	 
      	 
      
	 
      	
                        Caledonia
      Capital Corporation

                      
	 
      	 
      
	 
      	
                        By:

                      	/s/
      Edward M. Murchie  
	 
      	 
      	
                        Edward
      M. Murchie,
President

                      

              

            

          

        

      

    

     

    
      
         

      

      
        5March 23,
2010

     

    Carpenter
Fund Manager GP, LLC

    5 Park
Plaza, Suite 950

    Irvine,
CA  92614

     

    Re:  Dividend Payment
in Kind and Exchange of Preferred Stock

     

    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 Carpenter Fund Manager GP,
LLC (the “Manager”) on behalf
of and as General Partner of each of the following investment-related limited
partnerships: Carpenter Community BancFund, L.P.; Carpenter Community
BancFund-A, L.P.; and Carpenter 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.

     

    
      
        
          
            	
                    Very
      truly yours,

                  
	 
      
	
                    Bridge
      Capital Holdings

                  
	 
      
	      
                    /s/  Thomas
      A. Sa

                  
	
                    By:  Thomas
      A. Sa

                  
	 
      
	
                    Title:
      Executive Vice President

                  
	
                    Chief
      Financial Officer

                  

          

        

      

    

    

    AGREED
AND ACCEPTED:

     

    CARPENTER
COMMUNITY BANCFUND, L.P.,

    CARPENTER
COMMUNITY BANCFUND-A, L.P.,

    CARPENTER
COMMUNITY BANCFUND-CA, L.P.

    By:          CARPENTER FUND MANAGER GP,
LLC

    Their:      General
Partner

    

    
      
        
          	
                  
                    /s/
      John B. Flemming

                  

                
	
                  By:

                	
                  John
      B. Flemming

                
	
                  Its:

                	
                  Managing
      Member

                

        

      

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    Exhibit
A

     

    Schedule
of Investors

     

    
      
        	
                 

                Name & Address

              	 	
                Shares of

                Common

                Stock to be

                received in

                conversion of

                Preferred

                Shares

                (Sec. 4)

              	 	 	
                Shares of

                Common

                Stock to be

                received in

                respect of

                accrued

                dividends

                (Sec. 3)

              	 	 	
                
                

                Total Shares

                of Common

                Stock

              	 	 	
                
                

                Note

                Amounts 

                (Sec. 2)

              	 
	
                Carpenter
      Community BancFund, LP

                c/o
      Carpenter Fund Manager GP LLC

                5
      Park Plaza

                Suite
      950

                Irvine,
      CA  92614

              	 	 	115,390	 	 	 	6,043	 	 	 	121,433	 	 	$	25,701.27	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Carpenter
      Community BancFund-A, LP

                c/o
      Carpenter Fund Manager GP LLC

                5
      Park Plaza

                Suite
      950

                Irvine,
      CA  92614

              	 	 	3,283,097	 	 	 	152,138	 	 	 	3,435,235	 	 	$	731,279.95	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Carpenter
      Community BancFund-CA, LP

                c/o
      Carpenter Fund Manager GP LLC

                5
      Park Plaza

                Suite
      950

                Irvine,
      CA  92614

              	 	 	147,612	 	 	 	6,009	 	 	 	153,621	 	 	$	32,879.53	 
	
                TOTAL

              	 	 	 	 	 	 	 	 	 	 	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.

    

    Bridge
Capital Holdings

    a
California corporation

    

    10%
CONVERTIBLE UNSECURED NOTE

    

    
      	
              $_______________

            	
              March
      31, 2010

            

    

    

    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, Carpenter Community BancFund, L.P., Carpenter
Community BancFund-A, L.P. and Carpenter 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 Holder 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
Holder.  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.

     

    
      
        
          
            	 
      	
                    BRIDGE
      CAPITAL HOLDINGS

                  
	 
      	
                    a
      California corporation

                  
	 
      	 
      
	 
      	
                    By:  __________________________

                  
	 
      	 
      
	 
      	
                    Title:
      _________________________

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