Exhibit 10.3
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
This
Change of Control Employment Agreement is made as of the 6th day of
November, 2006 (this “Agreement”), by and between
Cathay General Bancorp, a Delaware corporation (the
“Company”), Cathay Bank, a California state chartered
commercial bank and a wholly-owned subsidiary of the Company (the
“Bank”), and Anthony M. Tang (the
“Executive”).
WHEREAS,
the Board of Directors of the Company (the “Board”) and
the Board of Directors of the Bank (the “Bank Board”),
have determined that it is in the best interests of the Bank and
the Company and its stockholders to assure that the Company and/or
the Bank (as applicable) will have the continued dedication of the
Executive, notwithstanding the possibility, threat or occurrence of
a Change of Control (as defined herein). The Board believes
it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to encourage the
Executive’s full attention and dedication to the Company in
the event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements
upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that
provide the Executive with compensation and benefits arrangements
that are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain
Definitions . (a) “Effective Date” means
the first date during the Change of Control Period (as defined
herein) on which a Change of Control occurs. Notwithstanding
anything in this Agreement to the contrary, if a Change of Control
occurs and if the Executive’s employment with the Company is
terminated prior to the date on which the Change of Control occurs,
and if it is reasonably demonstrated by the Executive that such
termination of employment (1) was at the request of a third party
that has taken steps reasonably calculated to effect a Change of
Control or (2) otherwise arose in connection with or anticipation
of a Change of Control, then “Effective Date” means the
date immediately prior to the date of such termination of
employment.
(b) “Change
of Control Period” means the period commencing on the date
hereof and ending on the third anniversary of the date hereof;
provided , however , that, commencing on the date one
year after the date hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof, the
“Renewal Date”), unless previously terminated, the
Change of Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless, at least 60
days prior to the Renewal Date, the Company shall give notice to
the Executive that the Change of Control Period shall not be so
extended.
(c) “Affiliated
Company” means any company controlled by, controlling or
under common control with the Company.
(d) “Change
of Control” means:
(1) Any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (a “Person”) becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (A) the then-outstanding shares of
common stock of the Company (the “Outstanding Company Common
Stock”) or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding
Company Voting Securities”); provided , however
, that, for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change of Control: (i)
any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
Affiliated Company or (iv) any acquisition by any corporation
pursuant to a transaction that complies with Sections 1(d)(3)(A),
1(d)(3)(B) and 1(d)(3)(C);
(2) Any time at which individuals who,
as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a
majority of the Board; provided , however , that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board;
(3) Consummation of a reorganization,
merger, statutory share exchange or consolidation or similar
transaction involving the Company or any of its subsidiaries, a
sale or other disposition of all or substantially all of the assets
of the Company, or the acquisition of assets or stock of another
entity by the Company or any of its subsidiaries (each, a
“Business Combination”), in each case unless, following
such Business Combination, (A) all or substantially all of the
individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the
then-outstanding shares of common stock and the combined voting
power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including,
without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the
Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the
then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior
to the Business Combination, and (C) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at
the time of the exe-cution of the initial agreement or of the
action of the Board providing for such Business Combination;
or
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(4) Approval by the stockholders of
the Company of a complete liquidation or dissolution of the
Company.
Section 2. Employment
Period . The Company and/or the Bank (as applicable)
hereby agrees to continue the Executive in its employ, subject to
the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third
anniversary of the Effective Date (the “Employment
Period”). The Employment Period shall terminate upon
the Executive’s termination of employment for any
reason.
Section 3. Terms of
Employment . (a) Position and Duties
. (1) During the Employment Period, (A) the
Executive’s position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at any time
during the 120-day period immediately preceding the Effective Date
and (B) the Executive’s services shall be performed at the
office where the Executive was employed immediately preceding the
Effective Date or at any other location less than 35 miles from
such office.
(2) During the Employment Period, and
excluding any periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use
the Executive’s reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment
Period, it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive’s
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that,
to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive’s responsibilities to the Company.
(b)
Compensation . (1) Base Salary
. During the Employment Period, the Executive shall
receive an annual base salary (the “Annual Base
Salary”) at an annual rate at least equal to 12 times the
highest monthly base salary paid or payable, including any base
salary that has been earned but deferred, to the Executive by the
Company and the Affiliated Companies in respect of the 12-month
period immediately preceding the month in which the Effective Date
occurs. The Annual Base Salary shall be paid at such
intervals as the Company or the Bank (as applicable) pays executive
salaries generally. During the Employment Period, the Annual
Base Salary shall be reviewed at least annually, beginning no more
than 12 months after the last salary increase awarded to the
Executive prior to the Effective Date. Any increase in the
Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. The
Annual Base Salary shall not be reduced after any such increase and
the term “Annual Base Salary” shall refer to the Annual
Base Salary as so increased.
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(2) Annual Bonus .
In addition to the Annual Base Salary, the Executive shall
be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the “Annual Bonus”) in cash at
least equal to the Executive’s highest bonus earned under the
Company’s or the Bank’s (as applicable) annual
incentive plan or program, or any comparable bonus under any
predecessor or successor plan, for the last three full fiscal years
prior to the Effective Date (or for such lesser number of full
fiscal years prior to the Effective Date for which the Executive
was eligible to earn such a bonus, and annualized in the case of
any pro rata bonus earned for a partial fiscal year) (the
“Recent Annual Bonus”). (If the Executive has not
been eligible to earn such a bonus for any period prior to the
Effective Date, the “Recent Annual Bonus” shall mean
the Executive’s target annual bonus for the year in which the
Effective Date occurs.) Each such Annual Bonus shall be paid
no later than two and a half months after the end of the fiscal
year for which the Annual Bonus is awarded, unless the Executive
shall elect to defer the receipt of such Annual Bonus pursuant to
an arrangement that meets the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended (the
“Code”).
(3) Incentive, Savings and
Retirement Plans . During the Employment Period, the
Executive shall be entitled to participate in all cash incentive,
equity incentive, savings and retirement plans, practices,
policies, and programs applicable generally to other peer
executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide
the Executive with incentive opportunities (measured with respect
to both regular and special incentive opportunities, to the extent,
if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable,
in the aggregate, than the most favorable of those provided by the
Company and the Affiliated Companies for the Executive under such
plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, those provided generally at
any time after the Effective Date to other peer executives of the
Company and the Affiliated Companies.
(4) Welfare Benefit Plans
. During the Employment Period, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the
Company and the Affiliated Companies (including, without
limitation, medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident insurance
plans and programs) to the extent applicable generally to other
peer executives of the Company and the Affiliated Companies, but in
no event shall such plans, practices, policies and programs provide
the Executive with benefits that are less favorable, in the
aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, those provided generally at
any time after the Effective Date to other peer executives of the
Company and the Affiliated Companies.
(5) Expenses .
During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and the Affiliated
Companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
the Affiliated Companies.
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(6) Fringe Benefits
. During the Employment Period, the Executive shall be
entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if
applicable, use of an automobile and payment of related expenses,
in accordance with the most favorable plans, practices, programs
and policies of the Company and the Affiliated Companies in effect
for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated
Companies.
(7) Office and Support
Staff . During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most
favorable of the foregoing provided to the Executive by the Company
and the Affiliated Companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated
Companies.
(8) Vacation .
During the Employment Period, the Executive shall be entitled to
paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and the Affiliated
Companies as in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
the Affiliated Companies.
Section 4. Termination of
Employment . (a) Death or Disability
. The Executive’s employment shall terminate
automatically if the Executive dies during the Employment
Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during
the Employment Period (pursuant to the definition of
“Disability”), it may give to the Executive written
notice in accordance with Section 11(b) of its intention to
terminate the Executive’s employment. In such event,
the Executive’s employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the
Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the
Executive’s duties. “Disability” means the
absence of the Executive from the Executive’s duties with the
Company or the Bank (as applicable) on a full-time basis for 180
consecutive business days as a result of incapacity due to mental
or physical illness that is determined to be total and permanent by
a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive’s legal
representative.
(b)
Cause . The Company may terminate the
Executive’s employment during the Employment Period with or
without Cause. “Cause” means:
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(1) the willful and continued failure
of the Executive to perform substantially the Executive’s
duties (as contemplated by Section 3(a)(1)(A)) with the Company or
any Affiliated Company (other than any such failure resulting from
incapacity due to physical or mental illness or following the
Executive’s delivery of a Notice of Termination for Good
Reason), after a written demand for substantial performance is
delivered to the Executive by the Board or the Chief Executive
Officer of the Company that specifically identifies the manner in
which the Board or the Chief Executive Officer of the Company
believes that the Executive has not substantially performed the
Executive’s duties, or
(2) the willful engaging by the
Executive in illegal conduct or gross misconduct that is materially
and demonstrably injurious to the Company.
For purposes of this Section
4(b), no act, or failure to act, on the part of the Executive shall
be considered “willful” unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable
belief that the Executive’s action or omission was in the
best interests of the Company. Any act, or failure to act,
based upon authority (A) given pursuant to a resolution duly
adopted by the Board, or if the Company is not the ultimate parent
corporation of the Affiliated Companies and is not publicly-traded,
the board of directors of the ultimate parent of the Company (the
“Applicable Board”), (B)upon the instructions of the
Chief Executive Officer of the Company or an executive officer of
the Company that is senior to the Executive or (C) based upon the
advice of counsel for the Company shall be conclusively presumed to
be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Applicable
Board (excluding the Executive, if the Executive is a member of the
Applicable Board) at a meeting of the Applicable Board called and
held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with
counsel for the Executive, to be heard before the Applicable
Board), finding that, in the good faith opinion of the board, the
Executive is guilty of the conduct described in Section 4(b)(1) or
4(b)(2), and specifying the particulars thereof in
detail.
(c)
Good Reason . The Executive’s employment
may be terminated by the Executive for Good Reason or by the
Executive voluntarily without Good Reason. “Good
Reason” means:
(1) the assignment to the Executive of
any duties inconsistent in any respect with the Executive’s
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other diminution in such
position, authority, duties or responsibilities (whether or not
occurring solely as a result of the Company’s ceasing to be a
publicly traded entity), excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
that is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(2) any failure by the Company to
comply with any of the provisions of Section 3(b), other than an
isolated, insubstantial and inadvertent failure not occurring in
bad faith and that is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
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(3) the Company’s requiring the
Executive (i) to be based at any office or location other than as
provided in Section 3(a)(1)(B), (ii) to be based at a location
other than the principal executive offices of the Company if the
Executive was employed at such location immediately preceding the
Effective Date, or (iii) to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
&n
