HUMBOLDT BANCORP STOCK OPTION AGREEMENT
This Humboldt Bancorp Stock Option Agreement (the "Agreement"), dated as of
September 20, 2000, between Humboldt Bancorp, a California corporation
("Humboldt"), and Tehama Bancorp, a California corporation ("Tehama") is made
with reference to the following:
RECITALS
A. Humboldt and Tehama have entered into an Agreement and Plan of
Reorganization and Merger dated September 20, 2000 (the "Reorganization
Agreement"), whereby Tehama would be merged with Humboldt (the "Merger").
B. As partial consideration to Tehama for entering into the Reorganization
Agreement, Humboldt has agreed to issue to Tehama an option entitling the
holder thereof to purchase up to 19.9% (or 1,470,000 shares) of the
outstanding common stock of Humboldt ("Common Stock"), assuming the
exercise of this Option, subject to such restrictions and conditions as may
be imposed by bank regulatory authorities having jurisdiction over Tehama
and Humboldt, respectively.
C. Terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Reorganization Agreement or Article VI hereof.
In consideration of these premises and of the representations, covenants and
agreements hereinafter set forth, Humboldt and Tehama hereby agree as follows:
ARTICLE I
ISSUANCE AND SALE OF OPTION
Section 1.1. Issuance And Sale of The Option. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations and
warranties hereinafter set forth, and in consideration for the execution and
delivery of the Reorganization Agreement, Humboldt hereby issues to Tehama one
or more irrevocable options (such options, together with any options issued
pursuant to Section 1.4, the "Options") entitling the holder thereof to purchase
in the aggregate up to 1,470,000 duly authorized and newly issued shares of
Common Stock, subject to adjustment as provided below. The Options being issued
at the time of the execution of this Agreement will be evidenced by a single
certificate in the form of Exhibit A hereto. All Options issued pursuant to
Section 1.4 will be evidenced by one or, at Tehama's request, more certificates
in the form of Exhibit A hereto, dated the date of their issuance, exercisable
at the adjusted exercise price at the time in effect for the Options issued
pursuant to this Section 1.1, provided that at no time shall the number of
shares for which the Options are exercisable (without effect to any shares
subject to or issued pursuant to the options) exceed 19.9% of the number of
shares of Common Stock then issued and outstanding.
Section 1.2. Option Price. The initial exercise price at which shares of Common
Stock may be acquired pursuant to exercise of the Options shall be $11.75 per
share (the "Option Price"), subject to adjustment as provided in Section 1.4.
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Section 1.3. Exercise of Options.
(a) Subject to their prior termination pursuant to Section 7.1, the Options
may be exercised in whole or in part only after the occurrence of an Acquisition
Event as that term is defined in the Reorganization Agreement.
(b) In the event Tehama is entitled to and wishes to exercise the Options,
it shall send to Humboldt a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three Business Days nor later than 60 Business Days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, Tehama shall promptly file
the required notice or application for approval, shall promptly notify Humboldt
of such filing, and shall expeditiously process the same and the period of time
that otherwise would run pursuant to this sentence shall run instead from the
date on which any required notification periods have expired or been terminated
or such approvals have been obtained and any requisite waiting period or periods
shall have passed.
(c) At the closing referred to in subsection (b), Tehama shall pay to
Humboldt the aggregate purchase price for the shares of Common Stock purchased
pursuant to the exercise of the Options in immediately available funds by wire
transfer to a bank account designated by Humboldt, provided that failure or
refusal of Humboldt to designate such a bank account shall not preclude Tehama
from exercising the Options.
(d) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (c), Humboldt shall deliver to Tehama
a certificate or certificates representing the number of shares of Common Stock
purchased by Tehama.
(e) Upon the giving by Tehama to Humboldt of the written notice of exercise
of the Options provided for under subsection (b) and the tender of the
applicable purchase price in immediately available funds, Tehama shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Humboldt shall then
be closed or that certificates representing such shares of Common Stock shall
not then be actually delivered to Tehama. Humboldt shall pay all expenses, and
any and all federal, state and local taxes or other charges that may be payable
in connection with the preparation, issue and delivery of stock certificates
hereunder in the name of Tehama.
Section 1.4. Additional Options; Adjustments to Option Price And Number of
Shares. The number of shares to which the Options may be exercised and the
Option Price shall be subject to adjustment as provided below:
(a) Additional Options. If Humboldt shall, on one or more occasions after
the date hereof, issue additional shares of Common Stock, and if, as a result of
any such issuance the shares of Common Stock issued or issuable upon the
exercise of Options issued pursuant to Section 1.1 hereof shall represent less
than 19.9% of the outstanding Common Stock, assuming the exercise of all Options
and all other options or other securities convertible into Common Stock,
Humboldt shall issue to Tehama, promptly upon Tehama's demand, without further
consideration, Options to purchase a number of authorized but unissued shares of
Common Stock which, when added to the shares issued or issuable upon the
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exercise of such previously issued Options, would represent 19.9% as the case
may be of the outstanding Common Stock.
(b) Adjustment For Stock Splits And Combinations. If Humboldt at any time
or from time to time after the date of this Agreement effects a subdivision of
Common Stock, the Option Price then in effect immediately before that
subdivision shall be proportionately decreased, and conversely, if Humboldt at
any time or from time to time after the date of this Agreement combines the
outstanding shares of Common Stock, the Option Price then in effect immediately
before the combination shall be proportionately increased. Any adjustment under
this subsection (b) shall become effective at the close of business on the date
the subdivision or combination becomes effective.
(c) Adjustment For Certain Dividends And Distributions. In the event
Humboldt at any time or from time to time after the date of this Agreement
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, then and in each such event the Option Price then in
effect shall be decreased as of the time of such issuance or, in the event such
a record date is fixed, as of the close of business on such record date, by
multiplying the Option Price then in effect by a fraction (i) the numerator of
which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date, and (ii) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution;
provided, however, that if such record date is fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor,
the Option Price shall be recomputed accordingly as of the close of business on
such record date and thereafter the Option Price shall be adjusted pursuant to
this subsection (c) as of the time of actual payment of such dividends or
distributions.
(d) Adjustments For Other Dividends And Distributions. In the event
Humboldt at any time or from time to time after the date of this Agreement
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
Humboldt other than shares of Common Stock, then in each such event provision
shall be made so that the holders of Options shall receive upon exercise
thereof, in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of Humboldt which they would have received
had their Options been converted into Common Stock on the date of such event and
had they thereafter, during the period from the date of such event to and
including the date of exercise of the Options, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 1.4.
(e) Adjustment For Reclassification, Exchange And Substitution. If Common
Stock issuable upon the exercise of the Options is changed into the same or a
different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 1.4),
then and in any such event each holder of Options shall have the right
thereafter to receive upon exercise of the Options the kind and amount of stock
and other securities and property receivable upon such reorganization,
reclassification or other change by holders of the number of shares of Common
Stock into which such Options might have been exercised immediately prior to
such reorganization, reclassification or change, all subject to further
adjustment as provided in this Section 1.4.
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(f) Reorganization, Mergers, Consolidations And Sales of Assets. If at any
time or from time to time there is a capital reorganization of the shares of
Common Stock (other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Section
1.4), or a merger or consolidation of Humboldt with or into another corporation,
or the sale of all or substantially all of Humboldt's properties and assets to
any other person, then, as a part of such reorganization, merger, consolidation
or sale, provision shall be made so that the holders of the Options shall
thereafter be entitled to receive upon exercise of the Options the number of
shares of stock or other securities or property of Humboldt, or of the successor
corporation resulting from such merger or consolidation or sale, to which a
holder of Common Stock deliverable upon exercise of the Options would have been
entitled in such capital reorganization, merger, consolidation or sale. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 1.4 and the other terms and conditions with respect
to the rights of the holders of the Options after the reorganization, merger,
consolidation or sale to the end that the provisions of this Agreement,
including this Section 1.4 (including adjustment of the Option Price then in
effect and number of shares purchasable upon exercise of the Options) shall be
applicable after that event and be as nearly equivalent to the provisions hereof
as may be practicable.
(g) Sale of Shares Below Option Price.
(i) If at any time or from time to time after the date of this
Agreement, Humboldt issues or sells, or is deemed by the express provisions
of this subsection (g) to have issued or sold, Additional Shares of Common
Stock (as hereinafter defined), other than as a dividend or other
distribution on any class of stock as provided in subsection (c) above and
other than upon a subdivision or combination of shares of Common Stock as
provided in subsection (b) above, for an Effective Price (as hereinafter
defined) less than the Option Price (or, if an adjusted Option Price shall
be in effect by reason of a previous adjustment, then less than such
adjusted Option Price) then and in each such case the then existing Option
Price shall be reduced, as of the opening of business on the date of such
issuance or sale, to a price determined by multiplying that Option Price by
a fraction (i) the numerator of which shall be (A) the number of shares of
Common Stock Deemed Outstanding at the close of business on the day next
preceding the date of such issue or sale plus (B) the number of shares of
Common Stock which the aggregate consideration received (or by express
provision hereof deemed to have been received) by Humboldt for the total
number of Additional Shares of Common Stock so issued would purchase at
such Option Price, and (ii) the denominator of which shall be the number of
shares of Common Stock Deemed Outstanding at the close of business on the
date of such issuance after giving effect to such issuance of Additional
Shares of Common Stock. For purposes of this paragraph (i), "Common Stock
Deemed Outstanding" at any given time shall mean the sum of (1) the number
of shares of Common Stock actually outstanding at that time, (2) the number
of Additional Shares of Common Stock then deemed to have been issued under
paragraphs (iii) or (iv) of this subsection (g) and (3) the number of
shares of Common Stock then issuable upon exercise of stock options to the
extent not already deemed to have been issued under paragraphs (iii) or
(iv) of this subsection (g).
(ii) For the purpose of making any adjustment required under this
subsection (g), the consideration received by Humboldt for any issuance or
sale of securities shall (i) to the extent it consists of cash be computed
at the net amount of cash received by Humboldt after deduction of any
expenses payable by Humboldt and any underwriting or similar commissions,
compensation or concessions paid or allowed by Humboldt in connection with
such issue or sale, (ii) to the extent it consists of property other than
cash, be computed at the fair value of that property as determined in good
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faith by the Humboldt Board and (iii) if Additional Shares of Common Stock,
Convertible Securities (as hereinafter defined) or rights or options to
purchase either Additional Shares of Common Stock or Convertible Securities
are issued or sold together with other stock or securities or other assets
of Humboldt for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined
in good faith by the Humboldt Board to be allocable to such Additional
Shares of Common Stock, Convertible Securities or rights or options.
(iii) For the purpose of any adjustment required under this subsection
(g), if at any time or from time to time after the date of this Agreement
Humboldt issues or sells any rights or options for the purchase of, or
stock or other securities convertible into, Additional Shares of Common
Stock (such convertible stock or securities being hereinafter referred to
as "Convertible Securities"), then in each case Humboldt shall be deemed to
have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of Common
Stock issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by Humboldt for the issuance
of such rights or options or Convertible Securities plus, in the case of
such options or rights, the amounts of consideration, if any, payable to
Humboldt upon the exercise of such options or rights and, in the case of
Convertible Securities, the amounts of consideration, if any, payable to
Humboldt upon conversion (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities). No further
adjustment of the Option Price, adjusted upon the issuance of such rights,
options or Convertible Securities, shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any such
rights or options or the conversion of any such Convertible Securities. If
any such rights or options or the conversion privilege represented by any
such Convertible Securities shall expire or be canceled without having been
exercised, the Option Price adjusted upon the issuance of such options,
rights or Convertible Securities shall be readjusted to the Option Price
which would have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such
Convertible Securities, and such Additional Shares of Common Stock, if any,
were issued or sold for the consideration actually received by Humboldt
upon such exercise, plus the consideration, if any, actually received by
Humboldt for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted plus the consideration, if any,
actually received by Humboldt (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of
such Convertible Securities.
(iv) For the purpose of any adjustment required under this subsection
(g), if at any time or from time to time after the date of this Agreement
Humboldt issues or sells any rights or options for the purchase of
Convertible Securities, then in each such case Humboldt shall be deemed to
have issued at the time of the issuance of such rights or options the
maximum number of Additional Shares of Common Stock issuable upon
conversion of the total amount of Convertible Securities covered by such
rights or options and to have received as consideration for the issuance of
such Additional Shares of Common Stock an amount equal to the amount of
consideration, if any, received by Humboldt for the issuance of such rights
or options, plus the minimum amounts of consideration, if any, payable to
Humboldt upon the exercise of such rights or options and plus the minimum
amount of consideration, if any, payable to Humboldt (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion of such Convertible Securities. No further
adjustment of the Option Price, adjusted upon the issuance of such rights
or options, shall be made as a result of the actual issuance of the
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Convertible Securities upon the exercise of such rights or options or upon
the actual issuance of Additional Shares of Common Stock upon the
conversion of such Convertible Securities. The provisions of paragraph
(iii) above for the readjustment of the Option Price upon the expiration of
rights or options or the rights of conversion of Convertible Securities
shall apply in like manner to the rights, options and Convertible
Securities referred to in this paragraph (iv).
(v) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by Humboldt after the date of this Agreement whether or
not subsequently reacquired or retired by Humboldt, other than (i) shares
of Common Stock issued upon exercise of the Options and (ii) shares issued
by way of dividend or other distribution on shares of Common Stock excluded
from the definition of Additional Shares of Common Stock by the foregoing
clause (i) or shares of Common Stock resulting from any subdivision or
combination of shares of Common Stock so excluded, or shares issued by way
of dividend or other distribution on, or resulting from any subdivision or
combination of, shares of Common stock excluded from the definition of
"Additional Shares of Common Stock" by the foregoing clause (i). The
"Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by
Humboldt under this subsection (g), into the aggregate consideration
received or deemed to have been received by Humboldt for such issue under
this subsection (g).
ARTICLE II
REPURCHASE OF OPTIONS AND LIMITATIONS ON SALE
Section 2.1. Repurchase of Options.
(a) Prior to the occurrence of an Acquisition Event, Humboldt shall have no
right to repurchase the Options and Tehama shall have no right to require
Humboldt to repurchase the Options.
(b) At any time after the occurrence of an Acquisition Event, Humboldt
shall have the right to purchase (or to cause a person designated by Humboldt to
purchase), and Tehama shall have the right to require that Humboldt repurchase
(or, if Humboldt shall so elect, cause a person designated by Humboldt to
purchase), (i) all (but not fewer than all) the Options at the time beneficially
owned by Tehama and its Affiliates at the Option Call Price in effect for such
Options on the date of closing (as provided below) and (ii) all (but not fewer
than all) of the shares of Common Stock purchased by Tehama and its Affiliates
pursuant to this Agreement with respect to which Tehama has beneficial ownership
at a price equal to the aggregate Market Value for such shares as of the date of
closing (as provided below). Any purchase pursuant hereto shall take place on a
Business Day specified in a notice given by Humboldt to Tehama or by Tehama to
Humboldt, as the case may be (but in no event prior to the 30th day following
the date of any such notice to Tehama or later than the 30th day following the
date of any such notice to Humboldt).
(c) The closing of any repurchase of Options and/or shares pursuant to this
Section 2.1 shall take place at 10:00 a.m. Pacific Time, on the date set forth
in the applicable notice given by Humboldt or Tehama, as the case may be, at the
office of Tehama at the address set forth in Section 8.1. The amount payable to
Tehama and its Affiliates upon any repurchase of Options and/or shares shall be
paid in lawful money of the United States by a federal funds check or a wire
transfer of immediately available funds to an account designated by Tehama. Upon
receipt of such payment, Tehama shall deliver or cause to be delivered to
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Humboldt the certificates representing all the Options and/or shares being
repurchased free and clear of any liens, security interests, charges or
encumbrances.
Section 2.2. Certain Determinations of Market Value. The calculation of the
Market Value, as required herein, shall be calculated in accordance with this
Section 2.2. In the event that Market Value is to be determined pursuant to the
terms hereof and there is not an established trading market for shares of Common
Stock, or more than 50% of the outstanding shares of Common Stock are held
beneficially or of record by persons, each of whom owns (individually or
together with members of any group of which such persons are members) 5% or more
of the outstanding shares of Common Stock, then Tehama may elect to have an
investment banking firm mutually agreeable to Humboldt and Tehama determine (i)
whether, in the opinion of such investment banking firm, as a result of the
absence of an established trading market or the concentration of stock holdings,
Market Value (determined in accordance with the provisions of the definition of
Market Value in Article VI) does not accurately reflect the fair market value of
a block of 1,000 shares of Common Stock on the date as of which Market Value is
to be determined, and (ii) if such investment banking firm determines that
Market Value (as so determined) does not accurately reflect such fair market
value, such investment banking firm shall make determination of the fair market
value of a share of Common Stock on the date as of which Market Value is to be
determined, based on whatever factors it deems relevant, as soon as possible and
shall promptly give written notice to Tehama and Humboldt of its determination.
The fees of such investment banking firm in connection with such determination
shall be paid by Tehama. Such determination shall be final and binding on the
parties hereto and the fair market value so determined shall, if higher than the
Market Value that would otherwise apply, be the Market Value of a share of
Common Stock. In the event such determination is not transmitted to Tehama and
Humboldt prior to the scheduled closing date with respect to any repurchase of
Options or Common Stock, the scheduled closing of such transaction shall not be
postponed, and Humboldt shall make such payments on the closing date as are
required based on the Market Value of a share of Common Stock determined as if
Tehama had not made an election under this Section 2.2. Within three Business
Days after such investment banking firm's determination is made and conveyed to
Tehama and Humboldt in writing, Humboldt shall make a payment to Tehama, or
Tehama shall make a payment to Humboldt, as the case may be, equal to the
difference between the amount paid on the closing date and the amount that would
have been so payable had such amount been determined on the basis of such
investment banking firm's determination of the Market Value of a share of Common
Stock.
ARTICLE III
RESTRICTIONS ON TRANSFERABILITY OF STOCK;
COMPLIANCE WITH SECURITIES ACT OF 1933
Section 3.1. Restrictions on Transferability. The Options acquired by Tehama or
any Affiliate of Tehama pursuant to this Agreement and the shares of Common
Stock issuable upon exercise of such Options and any shares of capital stock
received or issued in respect thereof, including, without limitation, securities
issued upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event (such Options and all such shares of Common Stock
and securities being collectively called the "Restricted Stock") shall not be
hypothecated, nor shall any claim or liability exist, nor shall any agreement,
written or oral, be entered into by Tehama or any Affiliate of Tehama which
would cause any claim or liability to exist with respect to the Restricted
Stock, and the Restricted Stock shall not be transferred except upon the
conditions, to the extent applicable, specified in this Article III. Tehama will
cause any proposed transferee of Restricted Stock held by Tehama or any other
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Affiliate of Tehama to agree to take ownership of such Restricted Stock subject
to the provisions, to the extent applicable, of this Article III; provided,
however, that the provisions of this Article shall cease to apply to any
Restricted Stock which shall have been sold in a registered public offering in
accordance with the provisions of this Article III. Tehama represents that it is
purchasing the Restricted Stock for its own account and not with a view to or
for sale in connection with any distribution of such Restricted Stock.
Section 3.2. Restrictive Legend; Notice of Proposed Transfers.
(a) Each certificate representing Restricted Stock shall (unless otherwise
permitted by the provisions of paragraph (b) of this Section) be stamped or
otherwise imprinted with a legend in substantially the following form:
THESE SHARES/OPTIONS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THESE SHARES/OPTIONS MAY NOT BE SOLD OR TRANSFERRED
EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER SAID ACT OR (ii) AN OPINION OF COUNSEL
THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS AVAILABLE.
THE TRANSFERABILITY OF THESE SHARES/ OPTIONS IS FURTHER SUBJECT TO THE
PROVISIONS OF A STOCK OPTION AGREEMENT DATED AS OF SEPTEMBER 20, 2000, A
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICE OF THE SECRETARY OF
HUMBOLDT BANCORP.
(b) Each holder of a certificate representing Restricted Stock by
acceptance thereof agrees to comply in all respects with the provisions of this
Section 3.2(b). Prior to any proposed transfer of any Restricted Stock other
than pursuant to a registration under the Securities Act, the holder thereof
shall give written notice to Humboldt of such holder's intention to effect such
transfer. Each such notice shall describe the manner and circumstances of the
proposed transfer of the Restricted Stock to be transferred and shall be
accompanied by an unqualified written opinion of counsel reasonably satisfactory
to Humboldt to the effect that such proposed transfer may be effected without
registration under the Securities Act. Subject to Section 3.11 hereof, upon
delivery to Humboldt of such notice and such opinion of counsel, the holder of
such Restricted Stock shall be entitled to transfer such Restricted Stock in
accordance with the terms of such notice delivered by the holder to Humboldt.
Each certificate evidencing Restricted Stock transferred as above provided shall
bear the appropriate restrictive legend set forth in paragraph (a) above, except
that such certificate shall not bear such restrictive legend if the opinion of
counsel referred to above shall be to the further effect that such legend is not
required in order to establish compliance with any provisions of the Securities
Act.
Section 3.3. No Transfers Prior to Acquisition Event. Notwithstanding anything
to the contrary set forth in this Agreement or the Restricted Stock, neither
Tehama nor any Affiliate of Tehama shall sell, transfer or otherwise dispose of
all or any portion of the Options owned by it, other than to an Affiliate of
Tehama, except after the occurrence of an Acquisition Event; provided, however,
that following an Acquisition Event, if Humboldt or Tehama shall give notice of
its election to exercise its rights under Section 2.1, then such right of Tehama
and its Affiliates to sell, transfer or otherwise dispose of the Restricted
Stock shall no longer be exercised unless Humboldt shall have defaulted in its
obligation to repurchase such Restricted Stock on the date specified in any
notice.
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Section 3.4. Limitations on Transferees And Manner of Transfer.
(a) In the event that Tehama and its Affiliates become entitled pursuant to
the provisions of Section 3.3 to sell, transfer or otherwise dispose of
Restricted Stock, such Restricted Stock may be sold or transferred (subject to
Section 3.11 hereof) only (i) to a third party (or a third party and its
Affiliates) in a transaction which complies with the provisions of paragraph (b)
of this Section or (ii) to one or more underwriters or dealers in connection
with a broad public distribution complying with the provisions of paragraph (c)
of this Section of the shares of Common Stock issuable pursuant to the exercise
of the transferred Options (such shares being hereinafter referred to as the
"Underlying Shares"). The provisions of this Section shall only apply to sales,
transfers or dispositions by Tehama and its Affiliates, and shall not apply to
sales, transfers or dispositions by transferees of Tehama or its Affiliates
(except that any sale or disposition by dealers or underwriters shall be
conducted in accordance with the applicable provisions of this Section and
further except that all resales shall be made in accordance with the Securities
Act).
(b) Tehama and its Affiliates shall be entitled, subject to the other
applicable provisions of this Article III (including Section 3.11) and Section
2.1, to sell or transfer Restricted Stock in one or more transactions exempt
from the registration requirements of Section 5 of the Securities Act. For
purposes of the immediately preceding sentence, it shall be assumed that all
Options, if any, that already have been sold or transferred by Tehama and its
Affiliates are still outstanding and have not been exercised in whole or in part
to purchase shares of Common Stock.
(c) Options owned by Tehama and its Affiliates, unless sold to Humboldt or
an Affiliate of Humboldt or in compliance with paragraph (b) of this Section,
may only be sold or transferred to one or more underwriters or dealers in
accordance with the provisions of this paragraph. Tehama and its Affiliates may,
subject to the terms and conditions set forth in this paragraph (c), sell or
transfer Options in whole or in part to one or more underwriters or dealers who
agree in writing with Tehama, prior to the effective time of any such sale or
transfer, to exercise such Options and offer and sell the Underlying Shares
either (i) to the public in a public offering registered under the Securities
Act (or any successor federal securities laws) pursuant to a distribution, or
(ii) in other transactions complying with the requirements of paragraph (b)
above. Notwithstanding any other provision of this Agreement to the contrary,
the exercise of any Options transferred to underwriters or dealers in accordance
with this Section and the acquisition by such underwriters or dealers of shares
of Common Stock pursuant to such exercise may be made simultaneously on the date
of the closing of the sale or transfer by Tehama or its Affiliates of the
relevant Options to such underwriters or dealers, provided Humboldt is given
written notice of the date of such closing at least five Business Days prior
thereto. At any such closing, against payment of the exercise price for shares
of Common Stock to be acquired pursuant to the exercise of Options, Humboldt
will deliver or cause to be delivered certificates representing the Underlying
Shares to such underwriters or dealers, in such names and denominations as it or
they shall designate not fewer than two Business Days prior to such closing.
Section 3.5. "Demand" Registration. From and after such date as Tehama and its
Affiliates become entitled pursuant to Section 3.4 to sell or transfer any
Restricted Stock, Humboldt shall, if requested by Tehama, as expeditiously as
possible, use its best efforts to effect the registration of the Restricted
Stock (which Humboldt has been requested to register on a form in general use
under the Securities Act (or any successor federal securities law) selected by
Humboldt, in order to permit the sale or other disposition of such Restricted
Stock in accordance with the intended method of sale or other disposition set
forth in the request (subject to the provisions of Section 3.4(c)). The right to
10
require registration of the Restricted Stock under this Section 3.5 may only be
exercised once unless Tehama is advised in writing by its investment banking
firm (a copy of which advice shall be supplied to Humboldt) that, in the opinion
of such firm, an additional or two additional registrations are appropriate to
maximize the benefits to Tehama of the proposed distribution of Restricted
Stock, in which event Tehama may exercise once or twice more, as applicable, its
rights under this Section 3.5. Upon the issuance of a stop order or injunction,
Humboldt may withdraw any such registration statement and abandon the proposed
offering which Tehama shall have demanded, in which case Tehama's right shall be
reinstated.
Section 3.6. "Piggyback" Registration. From and after such date as Tehama and
its Affiliates become entitled pursuant to Section 3.4 to sell or transfer any
Restricted Stock, if at any time Humboldt proposes to register any of its
securities under the Securities Act (or any successor federal securities law),
whether or not for sale for its own account (except with respect to registration
statements filed with respect to the issuance of securities under employee
benefit plans), it will give written notice to Tehama of its intention to do so.
Upon the written request of Tehama, given within 15 calendar days after receipt
of Humboldt's notice, Humboldt will use its best efforts to cause to be included
in the shares to be covered by the registration statement proposed to be filed
by Humboldt, in accordance with the request of Tehama, the Restricted Stock to
be sold by dealers or underwriters in accordance with the provisions of Section
3.4; provided, however, that Humboldt need not include such Restricted Stock in
such registration statement if Humboldt is advised in writing by its investment
banking firm (a copy of which advise shall be supplied to Tehama) that the
inclusion of such securities shall, in the opinion of such firm, materially
interfere with the orderly sale and distribution of the Humboldt securities
being sold by it. Humboldt may, in its sole discretion and without the consent
of Tehama, withdraw any such registration statement and abandon the proposed
offering in which Tehama shall have requested to participate pursuant to this
Section.
Section 3.7. Registration Procedures And Expenses.
(a) If and whenever Humboldt is required by the provisions of this Article
III to use its best efforts to effect the registration of any of the Restricted
Stock under the Securities Act (or any successor federal securities law), Tehama
and its Affiliates (including the underwriters in the case of a registration of
Underlying Shares) (individually referred to as a "selling holder" or "holder"
and collectively referred to as "selling holders" or "holders") will furnish in
writing such information as is reasonably requested by Humboldt for inclusion in
the registration statement relating to such offering and such other information
and documentation as Humboldt shall reasonably request, and Humboldt will, as
expeditiously as possible:
(i) prepare and file with the SEC or any other federal agency at the
time administering the Securities Act (or a successor federal securities
law) a registration statement with respect to such securities and use its
best efforts to cause such registration statement to become and remain
effective for such period as may be necessary to permit the successful
marketing of such securities, but not exceeding 90 days;
(ii) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act;
(iii) furnish to each selling holder of Restricted Stock being
registered such number of copies of a prospectus and preliminary prospectus
in conformity with the requirements of the Securities Act (or any successor
federal securities law), and such other documents as such seller may
11
reasonably request in order to facilitate the public sale or other
disposition of the Restricted Stock being registered owned by such seller;
(iv) furnish, at the request of any holder or holders of securities
being registered pursuant to this Article III, on the date that such
securities are delivered to the underwriters for sale pursuant to such
registration or if such securities are not being sold through underwriters,
on the date the registration statement with respect to such securities
becomes effective (A) an opinion dated such date of independent counsel
representing Humboldt for the purposes of such registration, addressed to
the underwriters, if any, and to the holder or holders making such request,
stating that such registration statement has become effective under the
Securities Act (or such successor law) and that (a) to the best of the
knowledge of such counsel, no stop order suspending the effectiveness
thereof has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Securities Act (or such
successor federal securities law); (b) the registration statement, the
related prospectus and each amendment or supplement thereto comply as to
form in all material respects with the requirements of the Securities Act
(or such successor law) and the applicable rules and regulations of the SEC
thereunder, except that such counsel need express no opinion as to
financial information or information provided by selling holders contained
therein; (c) such counsel (subject to such customary limitation on the
scope of their investigation as shall be set forth in such opinion) has no
reason to believe that either the registration statement or the prospectus,
or any amendment or supplement thereto, contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading except
that such counsel need express no opinion as to financial information or
information provided by selling holders contained therein; (d) the
descriptions in the registration statement and in the prospectus, or any
amendment or supplement thereto, of all legal and governmental matters and
all contracts and other legal documents or instruments are accurate and
fairly present the information required to be shown; and (e) such counsel
does not know of any legal or governmental proceedings, pending or
contemplated, required to be described in the registration statement or
prospectus, or any amendment or supplement thereto, or to be filed as
exhibits to the registration statement which are not described and filed as
required; and (B) a letter dated such date, from the independent certified
public accountants of Humboldt, addressed to the underwriters, if any, and
to the holder or holders by or on behalf of whom a request is made, stating
that they are independent certified public accountants within the meaning
of the Securities Act (or such successor law) and that in the opinion of
such accountants the financial statements and other financial data of
Humboldt included in the registration statement or the prospectus, or any
amendment or supplement thereto, comply as to form in all material respects
with the applicable accounting requirements of the Securities Act (or such
successor law). Such letter from the independent certified public
accountants shall additionally cover such other financial matters
(including information as to the period ending not more than five business
days prior to the date of such letter) with respect to the registration in
respect of which such letter is being given as the holder of Restricted
Stock being registered may reasonably request;
(v) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as each such selling holder of such
Restricted Stock shall reasonably request and do any and all other acts and
things which may be necessary or reasonably desirable to enable such seller
to consummate the public sale or other disposition in such jurisdictions as
may be requested by such seller; provided, however, that Humboldt shall
have no obligation to qualify to do business in any jurisdiction or to file
a general consent to service of process in any jurisdiction;
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(vi) notify each selling holder of Restricted Stock covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act (or any successor Federal
securities law), of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
(viii) provide a transfer agent and registrar for all Restricted Stock
covered by such registration statement not later than the effective date of
such registration statement;
(ix) use its best efforts to list all Common Stock covered by such
registration statement on each securities exchange, if any, on which any of
the shares of Common Stock is then listed (unless such Common Stock is
already so listed) if such listing is then permitted under the rules of
such exchange or with the NASDAQ, National Market System; and
(x) undertake to take such further actions as may be reasonably
requested by the underwriters.
(b) If any registration statement pursuant to Section 3.5 or 3.6 shall have
been declared effective and, in the judgment of Humboldt, (A) any event shall
occur or state of facts exist (other than as described in clause (B)) which
requires a notice to the selling holders of Restricted Stock pursuant to clause
(vi) of paragraph (a) of this Section 3.7 or (B) the offering at the time of
Restricted Stock pursuant to such registration statement would adversely affect,
or would be improper in view of, a public offering, financing, reorganization,
recapitalization, merger, consolidation, acquisition, or other similar
transaction, or negotiations, discussions or pending proposals with respect
thereto, immediately upon receipt of notice to such effect from Humboldt, Tehama
shall cease to offer or sell any Restricted Stock registered thereunder and
cease to deliver or use the prospectus in use thereunder. In the case of any
matter described in clause (A), Humboldt shall, as promptly as practicable,
furnish to each selling holder a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchaser of such securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing. In the case of any matter
described in clause (B), Humboldt shall promptly notify Tehama at such times as,
in Humboldt's judgment, such offering may be recommenced (which shall be no
later than 90 days following such suspension); provided that Tehama may, in its
sole discretion, discontinue such offering with respect to the Restricted Stock
covered thereby, in which event Tehama shall be entitled to "demand"
registration rights hereunder to the full extent as if such offering had not
been requested.
All expenses incurred by Humboldt in complying with Sections 3.5 and 3.6 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for Humboldt, the expense of any
special audits incident to or required by such registration, and blue sky fees
13
and expenses are herein called "Registration Expenses," except for all
underwriting discounts and selling commissions applicable to the sales, all fees
and disbursements of counsel for any selling holder or holders (including
counsel designated by any seller for a "due diligence" investigation of
Humboldt), all of which are herein called "Selling Expenses." Humboldt shall pay
all Registration Expenses and the selling holder or holders of Restricted Stock
being registered shall pay all Selling Expenses.
Section 3.8. Indemnification. In the event of a registration of any of the
Restricted Stock under the Securities Act (or any successor Federal securities
law) pursuant to this Article III, Humboldt will indemnify and hold harmless
each underwriter of such Restricted Stock, Tehama and its Affiliates as the
transferors of the Restricted Stock or any portion thereof to underwriters, and
each other person, if any, who controls such seller, assignor or underwriter
within the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter, assignor or controlling person may become subject under the
Securities Act (or such successor law) or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such Restricted Stock
shall have been registered under the Securities Act (or such successor law), any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse such
seller, transferor and underwriter and each such controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that Humboldt will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, said preliminary prospectus or
said prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished to Humboldt through an instrument
executed by such seller, transferor or underwriter specifically for use in the
preparation thereof; and provided further that if any losses, claims, damages or
liabilities arise out of or are based upon an untrue statement, alleged untrue
statement, omission or alleged omission contained in any preliminary prospectus
which did not appear in the final prospectus, Humboldt shall not have any such
liability with respect thereto to such seller, transferor or underwriter or any
person who controls such seller, transferor or underwriter within the meaning of
Section 15 of the Securities Act if such seller, transferor or underwriter or
any person on their behalf delivered a copy of the preliminary prospectus to the
person alleging such losses, claims, damages or liabilities and failed to
deliver a copy of the final prospectus, as amended or supplemented if it has
been amended or supplemented, to such person at or prior to the written
confirmation of the sale to such person.
In the event of any registration of any Restricted Stock under the Securities
Act (or a successor Federal securities law) pursuant to this Article III, each
seller of such Restricted Stock (other than any underwriter or dealer purchasing
Underlying Shares), and Tehama and its Affiliates, as transferors of Restricted
Stock, severally and not jointly, will indemnify and hold harmless Humboldt,
each person, if any who controls Humboldt within the meaning of Section 15 of
the Securities Act, each officer of Humboldt who signs the registration
statement and each director of Humboldt against any and all such losses, claims,
damages, or liabilities arising out of or based upon any untrue statement or
alleged untrue statement in or omission or alleged omission from any such
registration statement, prospectus, amendment or supplement, if the untrue
statement or omission or alleged untrue statement or omission in respect of
which such loss, claim, damage or liability is asserted was made in reliance
upon and in conformity with information furnished in writing to Humboldt by or
on behalf of such seller or transferor specifically for use in connection with
14
the preparation of such registration statement, preliminary prospectus,
prospectus, amendment or supplement; provided, however, that, if any losses,
claims, damages or liabilities arise out of or are based upon an untrue
statement, alleged untrue statement, omission or alleged omission contained in
any preliminary prospectus which did not appear in the final prospectus, such
seller or transferor shall not have any such liability with respect thereto to
Humboldt, any person who controls Humboldt within the meaning of Section 15 of
the Securities Act, any officer of Humboldt who signed the registration
statement or any director of Humboldt if Humboldt or any person on their behalf
delivered a copy of the preliminary prospectus to the person alleging such
losses, claims, damages or liabilities and failed to deliver a copy of the final
prospectus, as amended or supplemented if it has been amended or supplemented,
to such person at or prior to the written confirmation of the sale to such
person; and provided further that the liability of any such seller or transferor
so to indemnify shall be limited to an amount equal to the net profit received
by such seller upon the sale of such Restricted Stock, or if the Option is sold,
the profit on the sale of the Option, pursuant to such registration statement,
or by such transferor from the seller, as the case may be.
Payments in respect of indemnifications required by this Section 3.8 shall be
made by periodic payments during the course of the investigation or defense, as
and when bills are received or expenses incurred. Any party which proposes to
assert the right to be indemnified under this Section 3.8 will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim is to be made against an indemnifying party
under this Section 3.8, notify each such indemnifying party of the commencement
of such action, suit or proceeding, enclosing a copy of all papers served, but
the omission so to notify such indemnifying party of any such action, suit or
proceeding shall not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 3.8. In case any such
action, suit or proceeding shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the extent that
it shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party, and after notice from such indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its own counsel in any such
action, but the fees and expenses of such counsel shall be at the expense of
such indemnified party, when and as incurred, unless (i) the employment of
counsel by such indemnified party has been authorized in writing by the
indemnifying party, (ii) the indemnified party shall have reasonably concluded
that there may be a conflict of interest between the indemnifying party and the
indemnified party in the conduct of the defense of such action (in which case
the indemnifying party shall not have the right to direct the defense of such
action on behalf of the indemnified party) or (iii) the indemnifying party shall
not in fact have employed counsel to assume the defense of such action. An
indemnifying party shall not be liable for employed counsel to assume the
defense of such action. An indemnifying party shall not be liable for any
settlement of any action or claim effected without its consent. In no event
shall an indemnifying party be required to pay for more than one counsel for an
indemnified party, exclusive of local counsel.
Section 3.9. Obligations of Humboldt With Respect to Underwritten Offering. In
the event that Restricted Stock shall be sold pursuant to a registration
statement in an underwritten offering pursuant to Section 3.5, Humboldt agrees
to enter into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of an issuer of the
securities being registered and customary covenants and agreements to be
performed by such issuer, including, without limiting the generality of the
foregoing, customary provisions with respect to indemnification by Humboldt of
15
the underwriters of such offering. Humboldt shall have the right to approve the
managing underwriters for such offering (which in no event shall include an
affiliate of Tehama); provided, however, that such approval shall not be
unreasonably withheld.
Section 3.10. Rule 144 Requirements. Humboldt shall undertake to make publicly
available and available to the holders of Restricted Stock, pursuant to Rule 144
of the SEC under the Securities Act, such information as shall be necessary, and
to take such further action as any such holder may reasonably request, to enable
the holders of Restricted Stock to make sales of Restricted Stock pursuant to
the Rule. Humboldt shall furnish to any holder of Restricted Stock upon request
(after the preceding sentences shall have become applicable), a written
statement executed by Humboldt as to the steps it has taken to comply with the
current public information requirements of Rule 144.
Section 3.11. Rights of First Refusal.
(a) In the event Tehama or its Affiliates intend, at any time after the
occurrence of an Acquisition Event to sell, transfer or dispose of any
Restricted Stock (other than to an Affiliate of Tehama in a transaction not
intended to circumvent the transfer restrictions contained in this Agreement)
other than (i) pursuant to a sale or transfer of Options to one or more
underwriters or dealers in accordance with Section 3.4(c) (in which case Section
3.11(b) shall govern) or (ii) at any time after Humboldt has failed for any
reason to repurchase such Restricted Stock pursuant to Article II hereof on the
closing date scheduled for such repurchase, then:
(i) Tehama shall notify Humboldt in writing of its or its Affiliate's
intention to sell, transfer or dispose of such Restricted Stock specifying
the number of shares or amount of Options, as the case may be, proposed to
be disposed of, the identity or identities of the prospective purchaser or
purchasers thereof, the proposed purchase price therefor and the material
terms of any agreement relating thereto (the "Sale Notice"); and
(ii) Humboldt shall have the right, by written notice of its exercise
of its right of first refusal given to Tehama within 15 calendar days after
Humboldt's receipt of such notice of intention from Tehama, to purchase (or
to cause a Person designated by Humboldt to purchase) all, but not less
than all of, the Restricted Stock specified in such notice of intention for
cash at the gross price set forth therein (including broker's commissions
and other transaction costs of Tehama or its Affiliate to be paid or
absorbed by the prospective purchaser) if the terms set forth in such
notice of intention provide for a cash sale. If the purchase price
specified in such notice of intention include any property other than cash,
the purchase price at which Humboldt shall be entitled to purchase shall be
(x) the amount of cash included in the purchase price specified in such
notice of intention plus (y) property, to the extent feasible,
substantially similar to the property described in such notice of intention
and in any case of equivalent value to such property (as agreed to by
Humboldt and Tehama, or as determined by a nationally recognized investment
banking firm selected by Tehama and Humboldt).
If Humboldt shall have exercised its right of first refusal under this
subsection (a) (including the designation of another purchaser as referred to in
the next subparagraph), the closing of the purchase of the Restricted Stock as
to which such right of Humboldt shall have been exercised shall take place as
promptly as practicable, but in no event more than 10 Business Days after
Humboldt gives notice of such exercise, and if such closing does not occur
within such 10 days, such right of first refusal provided for herein (including
any assignment thereof) shall be null and void and of no further force and
16
effect with respect to such Restricted Stock and this Section 3.11 shall no
longer apply to any sale or disposition or proposed sale or disposition of such
Restricted Stock; provided that if prior notification to or approval of the
Federal Reserve Board or any other regulatory authority is required in
connection with such purchase, Humboldt shall promptly file the required notice
or application for approval and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which, as the case may be, (i) any required
notification period has expired or been terminated, or (ii) such approval has
been obtained and, in either event, any requisite waiting period shall have
passed.
If Humboldt elects not to exercise, or fails to exercise or cause to be
exercised, its right of first refusal provided in this subsection (a) within the
time specified for such exercise or if the Federal Reserve Board or any other
regulatory authority disapproves of Humboldt's proposed purchase, Tehama and its
Affiliates shall be free thereafter for a period of 90 days to consummate the
sale, transfer or other disposition with any purchaser or purchasers of the
Restricted Stock who shall have been specified in the sale notice at the price
(or at any price in excess of such price) and on the terms specified therein.
The right of first refusal provided for in this subsection (a) may only be
exercised with respect to the initial sale, transfer or other disposition of the
Restricted Stock by Tehama or an Affiliate (whether in blocks or as a whole) to
a person that is not an Affiliate of Tehama and not to subsequent sales,
transfers or other dispositions by purchasers of Restricted Stock.
(b) If Tehama or its Affiliates at any time propose to transfer any Options
to any underwriters or dealers pursuant to the provisions of Section 3.4, other
than at any time after Humboldt has failed for any reason to repurchase such
Options pursuant to Article II hereof on the closing date scheduled for such
repurchase, then Tehama shall first notify Humboldt in writing of such
intention, specifying the Options which it proposes to sell or transfer and the
name or names of the proposed dealers or of the proposed managing underwriters
in the underwriting syndicate to which the sale or transfer is proposed to be
made. Humboldt shall have the right, exercisable by written notice given to
Tehama 15 calendar days after Humboldt's receipt of notice from Tehama pursuant
to the immediately preceding sentence, to repurchase, or to cause a third party
designated by Humboldt to purchase, all, but not fewer than all, the Options
proposed to be sold or transferred on the terms and conditions hereinafter set
forth. Any notice given by Humboldt of exercise of its repurchase rights under
this subsection (b) shall specify a place in Tehama or Humboldt Counties and a
Business Day not earlier than 10 days and not later than 15 days after the date
of such notice for the closing of the repurchase of the Options being
repurchased. The purchase price payable to Humboldt or its designee for the
repurchase of Options pursuant to this paragraph (b) shall be a cash price equal
to the product of (x) the number of Underlying Shares covered by the relevant
Options (calculated as of the date of the closing of the repurchase) and (y) the
Share Price on such date. At the closing of a sale of Options pursuant to the
foregoing provisions, Humboldt or its designee will make payment to Tehama of
the aggregate price for the Options to be repurchased in one of the manners set
forth in Section 2.1(c). At such closing, Tehama shall deliver to Humboldt or
its designee the certificates representing the Options to be repurchased and
Humboldt shall deliver to Tehama replacement certificates representing the
Options (if any) which are not to be repurchased but were covered by the
certificate or certificates surrendered by Tehama. Any election by Humboldt
pursuant to this paragraph to exercise its repurchase rights in respect of
Options shall be irrevocable. In the event Humboldt fails timely to exercise its
repurchase rights in respect of Options within the period specified above during
which it must do so or notifies Tehama in writing prior to the expiration of
such period that it does not intend to exercise such rights or its designee
fails to repurchase Options on the date set for the closing of such a purchase,
Tehama and its Affiliates shall be free thereafter to consummate the sale and
17
transfer of the Options specified in this notice to Humboldt under this
paragraph to any underwriters or dealers who agree to exercise the Options and
sell the Underlying Shares in accordance with the provisions of Section 3.4(c),
and this Section 3.11 shall no longer apply to such sale or transfer of such
Options.
(c) Tehama shall have the right to withdraw any notice given by it pursuant
to this Section 3.11 at any time before Humboldt shall have given notice of its
intention to exercise its right of first refusal hereunder (including by
designation of another purchaser).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HUMBOLDT
Humboldt represents and warrants to Tehama that:
Section 4.1. Authorization of Agreement; No Conflicts.
(a) The execution and delivery of this Agreement by Humboldt and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Humboldt. This Agreement has
been duly executed and delivered by Humboldt and constitutes a valid and binding
obligation of Humboldt, enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with, or result in any
violation of or default or loss of a material benefit under any provision of the
articles of incorporation, articles or association or bylaws of Humboldt or,
except for the necessity of obtaining Requisite Regulatory Approvals, any
material mortgage, indenture, lease agreement or other material instrument or
any permit, concession, grant, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Humboldt or their
respective properties, other than any such conflict, violation, default or loss
which will not have a material adverse effect on Humboldt. No material consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental authority is required in connection with the execution
and delivery of this Agreement by Humboldt or the consummation by Humboldt of
the transactions contemplated hereby except for any approvals required to be
obtained pursuant to the BHCA or the Policy Statement of the Board of Governors
of the Federal Reserve System on Nonvoting Equity Investments by Bank Holding
Companies, 12 C.F.R. Section 225.143 (the "FRB Guidelines"), or any other
applicable laws, for the execution and delivery of this Agreement and the
issuance of the Options by Humboldt.
Section 4.2. Authorized Stock. Humboldt has taken all necessary corporate and
other action to authorize and reserve and, subject to obtaining the governmental
and other approvals and consents referred to herein, to permit it to issue, and,
at all times from the date hereof until the obligation to deliver Common Stock
upon the exercise of the Options terminates, will have reserved for issuance,
upon exercise of the Options, shares of Common Stock necessary for Tehama to
exercise the Options, and Humboldt will take all necessary corporate action to
authorize and reserve for issuance all additional shares of Common Stock or
other securities which may be issued pursuant to this Agreement. The shares of
Common Stock to be issued upon due exercise of the Options, including all
additional shares of Common Stock or other securities which may be issuable
pursuant to this Agreement, upon issuance pursuant hereto, shall be duly and
validly issued, fully paid and nonassessable, and shall be delivered free and
18
clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever, including any preemptive rights of any stockholder of Humboldt.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TEHAMA
Tehama represents and warrants to Humboldt that:
Section 5.1. Due Execution of Agreement; No Conflicts.
(a) This Agreement has been duly executed and delivered by Tehama and
constitutes a valid and binding obligation of Tehama, enforceable in accordance
with its terms.
(b) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with, or result in any
violation of or default or loss of a material benefit under, any provision of
the certificate of incorporation or Bylaws of Tehama or, except for the
necessity of obtaining Requisite Regulatory Approvals, any material mortgage,
indenture, lease, agreement or other material instrument, or any permit,
concession, grant, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Tehama or its respective properties,
other than any such conflict, violation, default or loss which (i) will not have
a material adverse effect on Tehama and its Subsidiaries taken as a whole. No
material consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required in connection
with the execution and delivery of this Agreement by Tehama or the consummation
by Tehama of the transactions contemplated hereby, except for (a) filings
required in order to obtain Requisite Regulatory Approvals, and (b) any
approvals required to be obtained pursuant to the BHCA, or the FRB Guidelines or
any other applicable law for the execution and delivery of this Agreement by
Humboldt, Tehama and the issuance of the Options.
ARTICLE VI
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth below (in
their singular and plural forms as applicable) shall have the meanings set forth
below.
"Change in Bank Control Act" means the Change in Bank Control Act of 1978, as
amended.
"Covered Shares" shall mean on any date, with respect to any Options, the
maximum number of shares of Common Stock that would be purchasable upon the
exercise on such date of such Options, assuming that such Options may be
exercised on such date to purchase the maximum number of shares of Common Stock
purchasable pursuant to the terms thereof (including the limitations contained
in the second paragraph of the certificate evidencing each such Option) without
regard to any provision therein (other than such limitations) or in this
Agreement or in any law limiting the right of any holder of such Options to
acquire shares otherwise purchasable thereunder.
19
"Market Value" shall mean, on any date, the average of the closing sale prices
of a share of Common Stock on the principal securities exchange on which the
shares of Common Stock are traded, or, if the shares of Common Stock are not at
the time listed on any national securities exchange, as reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), on the
20 trading days immediately preceding the three trading days immediately
preceding such date, (or such fewer number of trading days immediately preceding
such date for which shares of Common Stock have been listed for trading on such
exchange or quoted on NASDAQ); provided, however, that if Tehama seeks a
determination of the fair market value of a share of Common Stock pursuant to
the provisions of Section 2.2, Market Value shall, if required pursuant to the
terms of such Section, mean the fair market value of a share of Common Stock on
such date determined pursuant to such Section.
"Option Call Price" shall mean, when used with respect to any Option, the
product of (i) the number of Covered Shares on such date and (ii) the Share
Price on such date.
"Requisite Regulatory Approvals" shall mean all material permits, approvals and
consents required to be obtained, and all waiting periods required to expire,
prior to the consummation of the issuance of the Covered Shares under applicable
federal laws of the United States or applicable laws of any state having
jurisdiction over Tehama or Humboldt.
"Share Price" shall mean, with respect to any Options, the amount by which, on
the date of the Acquisition Event triggering the exercisability of the
Options(i) the Option Price on such date is less than (ii) the greatest of:
(i) the Market Value of a share of Common Stock on such date; and
(ii) the highest price paid on or prior to such date for a share of
Common Stock (including in any merger or consolidation) by a purchaser or
group of purchasers acting in concert of 50% or more of the outstanding
shares of Common Stock, or, in the case of a purchaser of 50% or more of
the consolidated assets of Humboldt (as shown on the books of Humboldt),
the Market Value of a share of Common Stock on the date of consummation of
such asset acquisition.
ARTICLE VII
TERMINATION
Section 7.1. Termination. Subject to Section 7.2, this Agreement may be
terminated in the following circumstances:
(a) at the Effective Time of the Merger, as set forth in the Reorganization
Agreement; or
(b) at the termination of the Reorganization Agreement prior to the
occurrence of an Acquisition Event.
Section 7.2. Effect of Termination. In the event of termination of this
Agreement pursuant to Section 7.1(b), the rights of the parties hereto shall
forthwith become void; provided that, if this Agreement shall terminate pursuant
to Section 7.1(b) and any party has filed an application to purchase securities
with any regulatory authority, this Agreement shall not terminate as provided in
20
Section 7.1(b), but shall remain in full force and effect until the day which is
30 Business Days (plus any applicable waiting periods) after the receipt or
denial of regulatory approval or consent, at which time the Agreement shall then
terminate.
Section 7.3. Indemnification For Breach. Each party to this Agreement agrees to
indemnify and hold harmless the other party against any loss, claim, damage or
liability arising out of or based upon a Default of this Agreement by such
defaulting party in accordance with the procedures set forth in the last
paragraph of Section 3.8 of this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or any such other address for a party as shall be specified
by like notice):
(a) If to Tehama:
Xx. Xxxxxxx X. Xxxxxxx
President & Chief Executive Officer
Tehama Bancorp
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
With copies to:
Xxxx X. Xxxx, Esq.
Shapiro, Buchman, Xxxxxxx & Xxxxxx LLP
0000 Xxxxx Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
(b) If to Humboldt:
Xx. Xxxxxxxx X. Xxxxx
President & Chief Executive Officer
Humboldt Bancorp
000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopier No.:(000) 000-0000
With copies to:
Xxxx Xxxxxx Xxxxxxx, Esq.
Xxxx Xxxxxx Xxxxxxx & Associates
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Section 8.2. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 8.3. Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors or the duly authorized
committees thereof. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto. The parties hereto agree
to make such amendments as may be necessary to respond to the request of any
Regulatory Authority with respect to this Agreement.
Section 8.4. Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the party which is, or whose shareholders are, entitled
to the benefits thereof.
Section 8.5. Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof; (b) except as
contemplated in this Agreement, is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder; and (c) except as
contemplated in this Agreement, shall not be assigned by operation of law or
otherwise. Humboldt and Tehama agree that, except as required by law, it shall
not issue any press release with respect to the transactions contemplated by
this Agreement without consulting with each other party hereto.
Section 8.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, Humboldt and Tehama have caused this Agreement to be signed
by their respective officers thereunto duly authorized, all as of the date first
above written.
HUMBOLDT BANCORP TEHAMA BANCORP
____________________________________ ____________________________________
Xxxxxxxx X. Xxxxx Xxxxxxx X. Xxxxxxx
President & Chief Executive Officer President & Chief Executive Officer
EXHIBIT A
HUMBOLDT BANCORP
OPTION NO. 1
September 20, 2000 1,470,000 Shares
This is to certify that, for value received and subject to the terms and
conditions provided for in a Humboldt Bancorp Stock Option Agreement dated as of
September 20, 2000 (the "Agreement") by and between Tehama Bancorp, a California
corporation ("Tehama"), and Humboldt Bancorp, a California corporation
("Humboldt"), pursuant to which Tehama and its assigns are entitled to purchase
from Humboldt, on the terms and conditions set forth therein, 1,470,000 fully
paid and nonassessable shares of common stock of Humboldt ("Common Stock"),
subject to adjustment as provided in the Agreement. Terms not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
This Option may be exercised by the holder (except any holder which shall not be
permitted by the Bank Holding Company Act of 1956, as amended ("BHCA"), or other
applicable law to own, or shall not have obtained all regulatory approvals
required by such Act or other applicable law as a precondition to its ownership
of, the shares of Common Stock covered hereby) as to the whole or any part of
the shares of Common Stock covered hereby at any time when such exercise shall
be permitted under the terms of this Option, by surrender of this Option at the
principal office of Humboldt or at the office of any transfer agent for the
Option and upon payment to Humboldt of the Option Price for shares so purchased
by wire transfer to a bank account designated by Humboldt. Thereupon, this
Option shall be deemed to have been exercised and the person exercising the same
to have become a holder of record of shares of Common Stock (or of the other
securities or property to which it is entitled upon such exercise) purchased
hereunder for all purposes, and such property or certificates for such shares or
securities so purchased shall be delivered to the purchaser. If this Option
shall be exercised in respect of a part of the shares of Common Stock covered
hereby, the holder shall be entitled to receive a new Option covering the number
of shares in respect of which this Option shall not have been exercised, but
otherwise identical hereto.
This Option is exchangeable, upon the surrender hereof by the holder hereof at
such office or agency of Humboldt, for new Options of this tenor representing in
the aggregate the right to subscribe for and purchase the number of shares which
may be subscribed for and purchased hereunder, each of such new Options to
represent the right to subscribe for and purchase not less than 1,000 shares of
Common Stock (except to the extent necessary to round out the balance of the
number of shares purchasable hereunder).
Humboldt covenants and agrees that all shares which may be issued upon the
exercise of the rights represented by this Option will, upon issuance, be fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue). Humboldt further covenants and agrees that
during the period within which the rights represented by this Option may be
exercised, Humboldt will at all times have authorized, and reserved, a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Option, and will at its expense expeditiously upon
each such reservation of shares use its best efforts to procure the listing
thereof (subject to issuance or notice of issuance) on all stock exchanges on
which the shares of Common Stock are then listed, or if Humboldt Shares are not
then listed on a stock exchange on the NASDAQ National Market System.
The rights of the holder of this Option shall be subject to the following
further terms and conditions:
Section 1.1. Humboldt shall at all times reserve and keep available, free from
preemptive rights, out of its authorized and unissued Common Stock or shares of
Common Stock held in treasury, for the purpose of effecting the exercise of this
Option, the full number of shares of Common Stock then issuable upon the
exercise of this and all other outstanding Options, computed on the assumption
that the adjustments required by the Agreement have become effective, in the
event such is not then the case.
Section 1.2. Humboldt will pay any and all taxes that may be payable in respect
of the issue or delivery of shares of Common Stock upon exercise of this Option.
Humboldt shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that of the holder of the Option or Options to be
exercised, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to Humboldt the amount of any such tax, or
has established, to the satisfaction of Humboldt, that such tax has been paid.
Section 1.3. This Option shall not entitle the holder to any rights of a
shareholder of Humboldt, either at law or in equity, or to any notice of
meetings of shareholders or of any other proceedings of Humboldt.
Section 1.4. Subject to Section 1.5 and the terms and conditions set forth in
the Agreement, this Option and all rights hereunder are transferable (in whole
or in part), on the books of Humboldt by the registered holder thereof in person
or by duly authorized attorney, upon surrender of this Option, properly
endorsed, to Humboldt (or if Humboldt shall have notified the registered holder
hereof of the appointment of an independent transfer agent for Options, then to
such transfer agent). As used herein the term "this Option" shall mean and
include any Option or Options hereafter issued in consequence of transfers of
this Option in whole or in part.
Section 1.5. THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS OPTION MAY NOT BE SOLD OR
TRANSFERRED EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO THIS
OPTION WHICH IS EFFECTIVE UNDER THE SECURITIES ACT, OR (ii) AN OPINION OF
COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IS
AVAILABLE. THE TRANSFERABILITY OF THIS OPTION IS FURTHER SUBJECT TO THE
PROVISIONS OF A STOCK OPTION AGREEMENT DATED AS OF SEPTEMBER 20, 2000, A COPY OF
WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICE OF THE SECRETARY OF THE HUMBOLDT
BANCORP.
Section 1.6. The holder of this Option, by the acceptance hereof, agrees that
prior to the exercise of any Options, at a time when said Options have not been
registered under the Securities Act or any similar Federal statute, it will, if
it has not requested or is then not entitled to such registration pursuant to
the provisions of Article III of the Agreement, deliver to Humboldt a written
representation that it is acquiring the shares of Common Stock issuable upon the
exercise of such Options for its own account for investment, and not with a view
to, or for sale in connection with, any distribution thereof, and not with any
present intention of distributing or selling the same.
Section 1.7.
(a) This Option shall terminate and be of no further force or effect as
provided in Article VII of the Agreement.
(b) Notwithstanding any other provision contained herein, this Option and
the rights conferred hereby shall terminate, and the full consideration paid by
Tehama for this Option shall be immediately due and payable to Tehama, if
Humboldt or Tehama receives written notice from the Federal Reserve Board to the
effect that the execution and delivery of the Agreement or the issuance of the
Options is not consistent with Section 3 of the BHCA.
Section 1.8. This Option shall be governed by and construed in accordance with
the laws of the State of California.
Section 1.9. This Option incorporates by reference all of the terms and
conditions of the Agreement.
HUMBOLDT BANCORP
------------------------------------
Xxxxxxxx X. Xxxxx
President & Chief Executive Officer
------------------------------------
Xxxx Xxxxx
Secretary
