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Exhibit 10.5
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 Irwin Wong (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-outsta nding 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
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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 Exe
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