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Exhibit 10.7
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 Perry P. Oei (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 execution of the initial agreement or of the action
of the Board providing for such Business Combination; or
(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
second 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.
(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.
(6)
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.
(7)
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: (i) failure to perform
substantially employment obligations (other than any such failure
resulting from incapacity due to physical or mental illness or
following the Executive’s notification of a termination for
Good Reason), after a written demand for substantial performance is
delivered to the Executive by the Board or, if the Company is not
the ultimate parent corporation of the Company and is not
publicly-traded, the board of directors of the ultimate parent of
the Company (the "Applicable Board") or the Chief Executive Officer
of the Company that specifically identifies the manner in which the
Applicable Board or the Chief Executive Officer of the Company
believes that the Executive has not substantially performed his
duties; (ii) conviction of or guilty or nolo contendere plea to a
felony; or (iii) willful commission of an act of fraud, dishonesty
or gross misconduct which is materially and demonstrably injurious
to the Company or the Bank.
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 or the Bank. Any act, or
failure to act, based upon authority (x) given pursuant to a
resolution duly adopted by the Applicable Board, (y) upon the
instructions of the Chief Executive Officer of the Company or the
Bank (as applicable) or an officer of the Company or the Bank (as
applicable) senior to the Executive or (z) based upon the advice of
counsel for the Company or the Bank (as applicable) shall be
conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of the Company
and the Bank.
(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: The occurrence of any of the following events after a Change
of Control, without Executive’s prior written consent:
(i) an adverse and significant change in Executive’s
position, duties, responsibilities or status with the Company or
the Bank; (ii) a change in Executive’s principal office
location to a location further away from Executive’s home
which is more than 30 miles from Executive’s principal
office; (iii) the taking of any action by the Company or the Bank
to eliminate benefit plans in which Executive participated or was
eligible to participate immediately prior to a Change of Control
without providing substitutes therefor, to materially reduce
benefits thereunder or to substantially diminish the aggregate
value of the incentive awards or other fringe benefits applicable
to Executive; provided that if none of the Company, a surviving
entity nor its parent following a Change of Control is a
publicly-held company, the failure to provide stock-based benefits
shall not be deemed Good Reason if benefits of comparable value
using recognized valuation methodology are substituted therefor;
and provided, further that a reduction or elimination in the
aggregate of not more than 10% in aggregate benefits in connection
with across the board reductions or modifications affecting
similarly situated persons of executive rank in the Bank shall not
constitute Good Reason; (iv) any reduction in
Executive’s Annual Base Salary; or (v) any material breach by
the Company or the Bank of this Agreement.
(d)
Notice of Termination . Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b). "Notice of
Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the
extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated, and
(3) if the Date of Termination (as defined herein) is other than
the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination
any fact or circumstance that contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the
Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Executive’s or the Company’s respective
rights hereunder.
(e)
Date of Termination . "Date of Termination" means (1)
if the Executive’s employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date of receipt
of the Notice of Termination or any later date specified in the
Notice of Termination, (which date shall not be more than 30 days
after the giving of such notice), as the case may be, (2) if the
Executive’s employment is terminated by the Company other
than for Cause or Disability, the date on which the Company
notifies the Executive o
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