AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 2006
REGISTRATION NO.: 333-135976
===============================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------------
Amendment No. 1
to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------------------------
CATHAY GENERAL BANCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------------------------------
DELAWARE 6022 95-4274680
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE) IDENTIFICATION NO.)
777 NORTH BROADWAY
LOS ANGELES, CALIFORNIA 90012
(213) 625-4700
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL AND EXECUTIVE OFFICES)
DUNSON K. CHENG
CATHAY GENERAL BANCORP
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
777 NORTH BROADWAY
LOS ANGELES, CALIFORNIA 90012
(213) 625-4700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
_____________________________________
COPIES TO:
EDWARD D. HERLIHY, ESQ. CHRISTOPHER J. ZINSKI, ESQ.
CRAIG M. WASSERMAN, ESQ. DAVID P. MCHUGH, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ SCHIFF HARDIN LLP
51 WEST 52ND STREET 6600 SEARS TOWER
NEW YORK, NY 10019 CHICAGO, IL 60606
(212) 403-1000 (312) 258-5500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement and all
other conditions to the proposed merger described herein have been satisfied or
waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
_____________________________
================================================================================
NEW ASIA BANCORP, INC.
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
August 11, 2006
Dear New Asia Bancorp Stockholders:
The board of directors of New Asia Bancorp, Inc. has agreed to a merger of
New Asia Bancorp with and into Cathay General Bancorp. The details of the merger
are set forth in the Agreement and Plan of Merger, dated as of July 6, 2006,
between Cathay General Bancorp and New Asia Bancorp, Inc. Following the merger,
Cathay General Bancorp intends to merge New Asia Bank with and into Cathay Bank.
If we complete the merger, you will be entitled to elect to receive (but
subject to proration and adjustment), in consideration for each of your New Asia
Bancorp shares, either shares of Cathay common stock with a value of $32.60
(based on the average closing price of Cathay common stock during the ten
consecutive trading days preceding the fifth business day prior to the closing),
cash in the amount of $32.60 or a combination of shares of Cathay common stock
and cash with a value in the aggregate amount of $32.60 (based on the average
closing price of Cathay common stock during the ten consecutive trading days
preceding the fifth business day prior to the closing). Based on a price per
share of Cathay common stock of $35.495, which was the average closing price at
the time the Agreement and Plan of Merger was signed, those New Asia Bancorp
shareholders receiving Cathay common stock would receive a per share
consideration of 0.9184 share of Cathay common stock.
If Cathay's average closing stock price were $36.807 (which is the average
closing price of Cathay common stock from July 28, 2006 to August 10, 2006), the
most recent practicable date before mailing of this document, those New Asia
Bancorp shareholders receiving Cathay common stock would receive 0.8857 shares
of Cathay common stock. Because the number of shares of Cathay common stock
issuable is dependent on the average closing price at closing and will not be
known until immediately prior to the closing, the exact number of shares of
Cathay common stock that New Asia Bancorp stockholders will be entitled to
receive pursuant to the merger will not be known until that time. Pursuant to
the Agreement and Plan of Merger, a minimum of 45% of the outstanding New Asia
Bancorp shares will be converted into the right to receive Cathay common stock
and a maximum of 60% of the outstanding New Asia Bancorp shares will be
converted into the right to receive Cathay common stock; however, if the Cathay
common stock price at closing is less than $30.92, then 45% of the New Asia
Bancorp shares will be converted into the right to receive Cathay common stock
and the remainder will be converted into the right to receive cash. WE URGE YOU
TO OBTAIN CURRENT MARKET QUOTATIONS OF CATHAY COMMON STOCK. Cathay common stock
is listed on The NASDAQ Stock Market under the symbol "CATY."
Your board of directors believes that the terms of the merger are fair and
in the best interest of New Asia Bancorp and its stockholders. In reaching this
decision, the board considered numerous factors as described in the attached
proxy statement/prospectus, including the opinion of its financial advisor,
Hovde Financial, Inc.
THE MERGER CANNOT BE COMPLETED UNLESS YOU APPROVE IT. To be adopted, the
proposal to approve the Agreement and Plan of Merger must receive the
affirmative vote of not less than a majority of the shares entitled to be cast
at a special meeting of New Asia Bancorp stockholders called to consider the
merger. The special stockholders' meeting will be held on September 23, 2006 at
10:00 a.m., local time, at 222 W. Cermak Rd., Chicago, IL 60616. Failure to vote
will have the same effect as voting against the approval of the Agreement and
Plan of Merger. Certain directors and executive officers of New Asia Bancorp who
beneficially own and have the right to vote 404,171 shares, or approximately 56%
of the shares entitled to be voted at the meeting, have agreed to vote their
shares in favor of approval of the Agreement and Plan of Merger.
Following this letter you will find a formal notice of the special meeting
of stockholders and our proxy statement, which also serves as the prospectus for
the shares of Cathay common stock to be issued in connection with the merger.
The proxy statement/prospectus provides you with detailed information concerning
the Agreement and Plan of Merger and the merger and the consideration to be
received by New Asia Bancorp stockholders pursuant to the Agreement and Plan of
Merger. You may also obtain more information about Cathay from documents that it
has filed with the Securities and Exchange Commission. The board of directors of
New Asia Bancorp recommends that you vote FOR approval of the Agreement and Plan
of Merger.
On behalf of the board of directors,
Benjamin Wong
Chairman
PLEASE GIVE CAREFUL ATTENTION TO ALL OF THE INFORMATION ENCLOSED WITH THIS
LETTER, INCLUDING THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THE
PROXY STATEMENT/PROSPECTUS. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE
DISCUSSION IN THE SECTION OF THE PROXY STATEMENT/PROSPECTUS ENTITLED "RISK
FACTORS" BEGINNING ON PAGE 12.
None of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Securities and Exchange Commission or any state securities
commission has approved the securities to be issued by Cathay or determined if
the proxy statement/prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The shares of Cathay common stock to be issued in connection with the
merger are not savings or deposit accounts or other obligations of a bank and
are not insured by the Federal Deposit Insurance Corporation, the Bank Insurance
Fund or any other governmental agency. Such shares are not guaranteed by Cathay
and are subject to investment risk, including the possible loss of principal.
The enclosed proxy statement/prospectus is dated August 11, 2006 and is
first being mailed to stockholders of New Asia Bancorp on or about August 15,
2006.
NEW ASIA BANCORP, INC.
222 WEST CERMAK ROAD
CHICAGO, IL 60616
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 23, 2006
TO THE STOCKHOLDERS OF NEW ASIA BANCORP:
A special meeting of stockholders of New Asia Bancorp will be held on
September 23, 2006 at 10:00 a.m., local time, at 222 W. Cermak Rd., Chicago, IL
60616. The special meeting is for the following purposes:
AGREEMENT AND PLAN OF MERGER. To consider and vote upon a proposal to
approve the Agreement and Plan of Merger, dated as of July 6, 2006, between
Cathay General Bancorp and New Asia Bancorp, Inc., under the terms of which
New Asia Bancorp will merge with and into Cathay, as more fully described
in the accompanying proxy statement/prospectus. The Agreement and Plan of
Merger is attached as APPENDIX A to the proxy statement/prospectus that
accompanies this notice.
Holders of record of New Asia Bancorp common stock at the close of
business on August 3, 2006, the record date for the special meeting, are
entitled to notice of, and to vote at, the special meeting or any adjournments
or postponements of such meeting. The affirmative vote of the holders of not
less than a majority of the shares entitled to be cast at the New Asia Bancorp
special meeting is required to approve the Agreement and Plan of Merger. As of
the record date, there were 719,762 shares of New Asia Bancorp common stock
outstanding and entitled to vote at the special meeting.
New Asia Bancorp stockholders have the right to dissent from the merger
and obtain payment of the fair value of their shares under the applicable
provisions of Delaware law. A copy of the applicable statutes regarding
dissenters' rights is attached as APPENDIX B to the accompanying proxy
statement/prospectus. For an explanation of your dissenters' rights and how to
exercise them, please see the discussion under the heading "The Merger --
Dissenters' Rights."
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY
USING THE ENCLOSED ENVELOPE. If for any reason you later desire to revoke your
proxy, you may do so at any time before it is voted at the meeting. If you do
not vote your shares, it will have the same effect as voting against the
Agreement and Plan of Merger.
THE BOARD OF DIRECTORS OF NEW ASIA BANCORP HAS DETERMINED THAT THE
AGREEMENT AND PLAN OF MERGER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF NEW ASIA BANCORP AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE AGREEMENT AND PLAN OF MERGER.
BY ORDER OF THE BOARD OF DIRECTORS,
BENJAMIN WONG
CHAIRMAN
Chicago, Illinois
August 11, 2006
REFERENCES TO ADDITIONAL INFORMATION
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND
FINANCIAL INFORMATION ABOUT CATHAY FROM DOCUMENTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION THAT ARE NOT INCLUDED IN OR DELIVERED WITH THIS DOCUMENT.
You can obtain these documents by requesting them in writing or by telephone
from Cathay or from the SEC, at the address and telephone numbers provided in
the section entitled "Where You Can Find More Information About Cathay."
You will not be charged for the documents that you request. IF YOU WOULD
LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY, SEPTEMBER 18, 2006 (FIVE BUSINESS
DAYS PRIOR TO THE NEW ASIA BANCORP SPECIAL STOCKHOLDERS' MEETING) IN ORDER TO
RECEIVE THEM BEFORE THE NEW ASIA BANCORP SPECIAL STOCKHOLDERS' MEETING.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THIS DOCUMENT AND THE MERGER....................iii
SUMMARY.......................................................................1
SELECTED HISTORICAL AND COMPARATIVE PER-SHARE DATA............................6
New Asia Bancorp Historical Selected Financial Data........................6
Summary Historical Financial Data of New Asia Bancorp......................7
Cathay Historical Selected Financial Information...........................8
Comparative Stock Price and Dividend Information...........................8
New Asia Bancorp Common Stock..............................................9
FORWARD-LOOKING STATEMENTS....................................................9
RISK FACTORS.................................................................12
NEW ASIA BANCORP SPECIAL STOCKHOLDERS' MEETING...............................16
Proxy Statement-Prospectus................................................16
Date, Time, Place.........................................................16
Purpose...................................................................16
Record Date; Shares Outstanding and Entitled To Vote......................16
Vote Required.............................................................16
Voting, Solicitation and Revocation of Proxies............................16
THE MERGER...................................................................17
Background of the Merger..................................................17
Cathay's Reasons for the Merger...........................................19
New Asia Bancorp's Reasons for the Merger; Recommendation of, and Factors
Considered by, New Asia Bancorp's Board of Directors......................20
Opinion of New Asia Bancorp's Financial Advisor...........................21
Structure of the Merger...................................................27
Merger Consideration......................................................27
Election Procedure........................................................28
Allocation Calculation....................................................29
Regulatory Approvals Required for the Merger..............................30
Management, Operations and Shareholdings After the Merger.................32
NASDAQ Listing............................................................32
Resales of Cathay Common Stock............................................32
Material United States Federal Income Tax Consequences of the Merger......32
Accounting Treatment......................................................35
Dissenters' Rights........................................................35
Interests of Certain Persons in the Merger................................37
THE MERGER AGREEMENT.........................................................38
Structure of the Merger...................................................38
Effective Time............................................................38
Additional Agreements.....................................................38
Conditions to the Merger..................................................39
Nonsolicitation...........................................................40
Termination...............................................................41
Termination Fee...........................................................42
Representations and Warranties............................................42
Covenants; Conduct of Business Prior to Effective Time....................42
Cathay Covenants Relating to Employee Matters.............................45
Additional Covenants......................................................45
Amendment and Waiver......................................................45
CATHAY CAPITAL STOCK.........................................................46
Anti-Takeover Provisions in Cathay's Certificate of Incorporation and
Bylaws....................................................................46
Purpose and Takeover Defensive Effects of Cathay's Restated Certificate of
Incorporation and Restated Bylaws.........................................47
COMPARISON OF CATHAY COMMON STOCK WITH NEW ASIA BANCORP COMMON STOCK.........48
Authorized Capital Stock..................................................48
i
Issuance of Common Stock..................................................48
Liquidation Rights........................................................48
Preemptive Rights.........................................................49
Voting Rights.............................................................49
Stockholder Action Without a Meeting......................................49
Stockholder Vote on Business Combinations.................................49
Special Meetings of Stockholders..........................................49
Dividends.................................................................50
Amendment of Certificate of Incorporation and Bylaws......................50
Board of Directors........................................................50
Nomination to the Board of Directors......................................51
Dissenters' Rights........................................................51
Limitation of Personal Liability of Directors and Officers................51
INFORMATION ABOUT CATHAY AND CATHAY BANK.....................................51
General...................................................................51
Cathay Bank...............................................................51
Additional Information Concerning Cathay and Cathay Bank..................52
INFORMATION ABOUT NEW ASIA BANCORP...........................................52
General...................................................................52
New Asia Bank.............................................................52
WHERE YOU CAN FIND MORE INFORMATION ABOUT CATHAY.............................52
LEGAL MATTERS................................................................54
EXPERTS......................................................................54
OTHER BUSINESS...............................................................54
Appendix A: Agreement and Plan of Merger
Appendix B: Section 262 of Delaware General Corporations Law
Appendix C: Hovde Financial, Inc. Fairness Opinion, dated July 6, 2006
Appendix D: Form of Voting Agreement
ii
QUESTIONS AND ANSWERS ABOUT THIS DOCUMENT AND THE MERGER
WHAT IS THE PURPOSE OF THIS PROXY STATEMENT/PROSPECTUS?
This document serves both as a proxy statement of New Asia Bancorp and as
a prospectus for Cathay common stock. As a proxy statement, it is being provided
to you by New Asia Bancorp, because the board of directors of New Asia Bancorp
is soliciting your proxy to vote to approve the proposed merger of New Asia
Bancorp with and into Cathay. As a prospectus, it is being provided to you by
Cathay, because Cathay is offering shares of its common stock in connection with
the merger.
WHAT WILL NEW ASIA BANCORP STOCKHOLDERS RECEIVE IN THE MERGER?
Under the Agreement and Plan of Merger, Cathay will issue, for each share
of New Asia Bancorp stock, either shares of Cathay common stock with a value of
$32.60 (based on the average closing price during the ten consecutive trading
days preceding the fifth business day prior to the closing), cash in the amount
of $32.60 or a combination of shares of Cathay common stock and cash with a
value in the aggregate amount of $32.60 (based on the average closing price
during the ten consecutive trading days preceding the fifth business day prior
to the closing). The average closing price on which the value of the shares of
Cathay common stock will be based may vary from the closing price of Cathay
common stock on the date Cathay and New Asia Bancorp announced the merger, on
the date that this document was mailed to New Asia Bancorp stockholders, on the
date of the special meeting of the New Asia Bancorp stockholders and on the date
the merger is completed.
Because the number of shares of Cathay common stock issuable is dependent
on the average closing price of those shares at closing, we cannot calculate the
number of shares issuable until then. Based on a price per share of Cathay
common stock of $35.495 which was the average closing price at the time the
Agreement and Plan of Merger was signed, those New Asia Bancorp shareholders
receiving Cathay common stock would receive a per share consideration of 0.9184
shares of Cathay common stock. If Cathay's average closing stock price were
$36.807 (which is the average closing price of Cathay common stock from July 28,
2006 to August 10, 2006), the most recent practicable date before mailing of
this document, those New Asia Bancorp shareholders receiving Cathay common stock
would receive 0.8857 shares of Cathay common stock.
Pursuant to the Agreement and Plan of Merger, a minimum of 45% of the
outstanding New Asia Bancorp shares will be converted into the right to receive
Cathay common stock and a maximum of 60% of the outstanding New Asia Bancorp
shares will be converted into the right to receive Cathay common stock; however,
if the Cathay common stock price at closing is less than $30.92, then 45% of the
New Asia Bancorp shares will be converted into the right to receive Cathay
common stock and the remainder will be converted into the right to receive cash.
Only whole shares of Cathay common stock will be issued in connection with
the merger. Accordingly, New Asia Bancorp stockholders will receive cash,
without interest, in lieu of any fractional share of Cathay common stock they
otherwise would be entitled to receive.
WHAT WILL I RECEIVE IN THE MERGER?
Under the Agreement and Plan of Merger, unless you provide a notice of
dissent, you may elect to receive either:
o Cathay common stock for all of your shares,
o cash for all of your shares, or
o Cathay common stock for some of your shares and cash for the rest of
your shares.
The form of merger consideration that you will receive will depend on the
elections made by all New Asia Bancorp stockholders. If New Asia Bancorp
stockholders elect to receive more of one form of consideration than is
available, we will allocate the available amount ratably among the New Asia
Bancorp stockholders electing to receive that form of consideration, and those
New Asia Bancorp stockholders will receive the other form of consideration for
the balance of their New Asia Bancorp shares. Accordingly, you may not receive
as much of one form of merger consideration as you elect. Pursuant to the
Agreement and Plan of Merger, a minimum of 45% of the outstanding New Asia
Bancorp shares will be converted into the right to receive Cathay common stock,
and a maximum of 60% of the outstanding New Asia Bancorp shares will be
converted into the right to receive Cathay common stock; however, if the Cathay
common stock price at closing is less than $30.92, then 45% of the New Asia
Bancorp shares will be converted into the right to receive Cathay common stock
and the remainder will be converted
iii
into the right to receive cash. See "The Merger -- Allocation Calculation" for a
more detailed discussion of allocation procedures under the Agreement and Plan
of Merger.
WILL NEW ASIA BANCORP STOCKHOLDERS BE ABLE TO TRADE IN THE CATHAY COMMON STOCK
THAT THEY RECEIVE UPON THE COMPLETION OF THE MERGER?
Yes. The shares of Cathay common stock to be issued in connection with the
merger have been registered under the Securities Act of 1933, as amended, and
will be listed on The NASDAQ Stock Market under the symbol "CATY." Shares of
Cathay common stock received by persons who are not deemed to be "affiliates" of
either New Asia Bancorp or Cathay before the merger, or of Cathay after the
merger, may be sold without restriction. Shares of Cathay common stock received
by persons who are affiliates of New Asia Bancorp or Cathay before the merger
may only be sold in compliance with Rule 145 under the Securities Act, or as
otherwise permitted under the Securities Act. An affiliate is someone who
controls, is controlled by or is under common control with the company in
question and typically includes directors, executive officers and significant
stockholders of New Asia Bancorp.
IF I ELECT TO RECEIVE SHARES OF CATHAY COMMON STOCK, HOW MANY SHARES OF CATHAY
COMMON STOCK WILL I RECEIVE FOR MY SHARES OF NEW ASIA BANCORP COMMON STOCK?
The actual number of shares of Cathay common stock that you will receive
for each of your New Asia Bancorp shares cannot be determined until shortly
before the effective time of the merger. Those shareholders receiving Cathay
common stock will receive shares of Cathay common stock with a value of $32.60
(based on the average closing price during the ten consecutive trading days
preceding the fifth business day prior to the closing). The average closing
price on which the value of the shares of Cathay common stock will be based may
vary from the closing price of Cathay common stock on the date Cathay and New
Asia Bancorp announced the merger, on the date that this document was mailed to
New Asia Bancorp stockholders, on the date of the special meeting of the New
Asia Bancorp stockholders and on the date the merger is completed.
WILL THE VALUE OF THE MERGER CONSIDERATION I RECEIVE (CATHAY COMMON STOCK OR
CASH) DEPEND ON WHICH ELECTION I MAKE?
No. Regardless of whether you receive shares of Cathay common stock or
cash, the consideration paid for each share of New Asia Bancorp stock at closing
will be $32.60. Since the value of Cathay common stock fluctuates with its
trading price, however, the actual number of shares of Cathay common stock that
you receive per share and the value of those shares when you actually receive
your certificate representing Cathay common stock will likely not be exactly the
same as the cash to be paid per share.
The actual number of shares of Cathay common stock that you receive will
depend on the average closing price during the ten consecutive trading days
preceding the fifth business day prior to the closing. This average closing
price may vary from the closing price of Cathay common stock on the date Cathay
and New Asia Bancorp announced the merger, on the date that this document was
mailed to New Asia Bancorp stockholders, on the date of the special meeting of
the New Asia Bancorp stockholders and on the date the merger is completed.
HOW DO I ELECT THE FORM OF CONSIDERATION I PREFER TO RECEIVE?
Each New Asia Bancorp shareholder is being sent an Election Form and
transmittal materials at the time this proxy statement/prospectus is being
mailed. You must properly complete and deliver the Election Form, the completed
and signed letter of transmittal, the appropriate completed and signed backup
withholding tax form and your New Asia Bancorp stock certificates to the
exchange agent, American Stock Transfer & Trust Co., before 5:00 p.m., New York
time, not later than September 29, 2006. An Election Form will be deemed
properly completed only if an election is indicated for each share of New Asia
Bancorp common stock covered by such Election Form and only if accompanied by
certificates representing all shares of New Asia Bancorp common stock covered by
the Election Form. A return envelope will be provided for submitting the
Election Form, transmittal materials and stock certificates to the exchange
agent. This is different from the envelope that you will use to return your
completed proxy card. Your election choices and election procedures are
described under "The Merger -- Election Procedure." PLEASE DO NOT SEND YOUR NEW
ASIA BANCORP STOCK CERTIFICATES OR ELECTION FORM WITH YOUR PROXY CARD.
If your shares are held in a brokerage or other custodial account, you
should receive instructions from the entity where your shares are held advising
you of the procedures for making your election and delivering your shares. If
you do not receive these instructions, you should contact the entity where your
shares are held.
iv
If the merger is not completed, any New Asia Bancorp stock certificates
that you previously sent to the exchange agent will be promptly returned to you
without charge.
MAY I SUBMIT AN ELECTION FORM IF I VOTE AGAINST THE MERGER?
Yes. You may submit an Election Form even if you vote against the
Agreement and Plan of Merger.
WHAT IS THE DEADLINE FOR RECEIPT OF MY ELECTION FORM?
The Election Form, the completed and signed letter of transmittal, the
appropriate completed and signed backup withholding tax form and your New Asia
Bancorp stock certificates must be received by the exchange agent, American
Stock Transfer & Trust Co., by 5:00 p.m., New York time, on September 29, 2006.
MAY I CHANGE MY ELECTION ONCE IT HAS BEEN SUBMITTED?
Yes. You may revoke your election of merger consideration with respect
to all or a portion of your shares of New Asia Bancorp common stock by
delivering written notice of your revocation to the exchange agent by 5:00 p.m.,
New York time, on September 29, 2006. If you instruct a broker to submit an
election for your shares, you must follow your broker's directions for changing
those instructions.
If an election is properly revoked with respect to shares of New Asia
Bancorp common stock represented by stock certificates, the certificates
representing such shares will be promptly returned upon written request of the
holder who submitted them to the exchange agent and the holder would be deemed
to have made no election with respect to such shares unless and until a new
Election Form is submitted, which must be received by the exchange agent by 5:00
p.m., New York time, on September 29, 2006.
You will not be entitled to revoke or change your election or sell your
shares of New Asia Bancorp common stock after the election deadline.
WHAT HAPPENS IF I DO NOT MAKE AN ELECTION PRIOR TO THE DEADLINE?
If you fail to submit a valid Election Form to the exchange agent prior to
5:00 p.m., New York time, on September 29, 2006, then you will be deemed to have
made no election and will receive either shares of Cathay common stock, cash or
a combination of shares of Cathay common stock and cash, depending on the
elections made by other stockholders.
If you do not properly submit your Election Form with your New Asia
Bancorp stock certificates by the election deadline, then, promptly after the
closing date of the merger, the exchange agent will mail to you a letter of
transmittal and instructions for surrendering your New Asia Bancorp stock
certificates for use in exchanging your New Asia Bancorp stock certificates for
the merger consideration.
WILL I RECEIVE THE FORM OF MERGER CONSIDERATION THAT I ELECT?
You will receive the form of merger consideration that you elect if the
New Asia Bancorp stockholders do not elect to receive more of that form of
consideration than is available under the Agreement and Plan of Merger. If, on
the other hand, the New Asia Bancorp stockholders elect to receive more of that
form of consideration than is available, then you will receive the form of
consideration you elect only for a portion of your shares, and you will receive
the other form of consideration for the balance. The number of New Asia Bancorp
shares for which you will receive your desired form of consideration will be
determined by multiplying the total number of shares covered by your election by
a fraction, the numerator of which is the maximum number of New Asia Bancorp
shares that can be converted into the desired form of consideration under the
Agreement and Plan of Merger and the denominator of which is the total number of
New Asia Bancorp shares electing to receive that form of consideration.
Pursuant to the Agreement and Plan of Merger, a minimum of 45% of the
outstanding New Asia Bancorp shares will be converted into the right to receive
Cathay common stock and a maximum of 60% of the outstanding New Asia Bancorp
shares will be converted into the right to receive Cathay common stock; however,
if the Cathay common stock price at closing is less than $30.92, then 45% of the
New Asia Bancorp shares will be converted into the right to receive Cathay
common stock and the remainder will be converted into the right to receive cash.
For a detailed description of these allocation procedures, please see the
discussion under the heading "The Merger -- Allocation Calculation."
v
WILL I RECEIVE ANY FRACTIONAL SHARES OF CATHAY COMMON STOCK AS PART OF THE
MERGER CONSIDERATION?
No. Cathay will not issue fractional shares in the merger. As a result,
the total number of shares of Cathay common stock that you will receive in the
merger will be rounded down to the nearest whole number. You will receive a cash
payment for the value of any remaining fraction of a share of Cathay common
stock that you would otherwise have been entitled to receive.
WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
New Asia Bancorp will hold a special meeting of its stockholders on
September 23, 2006 at 10:00 a.m., local time, at 222 W. Cermak Rd., Chicago, IL
60616.
HOW DO I VOTE?
To vote, please indicate on the enclosed proxy card how you want to vote
and then sign, date and mail your proxy card in the enclosed envelope as soon as
possible so that your shares will be represented at the special meeting.
WHY IS MY VOTE IMPORTANT?
If you fail to vote, that will have the same effect as voting against the
approval of the Agreement and Plan of Merger. Approval of the Agreement and Plan
of Merger requires the affirmative vote of not less than a majority of the
shares of New Asia Bancorp stock outstanding and entitled to vote at the special
meeting. Certain directors and executive officers of New Asia Bancorp who
beneficially own and have the right to vote 404,171 shares, or approximately 56%
of the shares entitled to be voted at the meeting, have agreed to vote their
shares in favor of approval of the Agreement and Plan of Merger.
WHAT HAPPENS IF I RETURN MY PROXY BUT DO NOT INDICATE HOW TO VOTE MY SHARES?
If you sign and return your proxy card, but do not provide instructions on
how to vote your shares, your shares will be voted "FOR" approval of the
Agreement and Plan of Merger. If you return an unsigned proxy card, your proxy
will be invalid, and your shares will not be voted at the special meeting.
WHAT DOES THE NEW ASIA BANCORP BOARD OF DIRECTORS RECOMMEND?
The board of directors of New Asia Bancorp unanimously recommends that New
Asia Bancorp's stockholders vote "FOR" the Agreement and Plan of Merger.
CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
Yes. You may change your vote at any time before your proxy is voted at
the special meeting, as follows:
o You may send a written notice stating that you would like to revoke
your proxy and provide new instructions on how to vote;
o You may complete and submit a later-dated proxy card; or
o You may attend the meeting and vote in person.
If you choose either the first or second method above, you must submit your
notice of revocation or your new proxy card to New Asia Bancorp's secretary
prior to the special meeting.
WHO MAY VOTE AT THE MEETING?
The board of directors of New Asia Bancorp has set August 3, 2006 as the
record date for the meeting. If you were the record owner of New Asia Bancorp
common stock at the close of business on August 3, 2006, you may vote at the
meeting.
WHEN WILL THE MERGER OCCUR?
We currently expect to complete the merger during the fourth quarter of
2006. The merger will occur after approval of the stockholders of New Asia
Bancorp is obtained and the other conditions to the merger are satisfied or
waived. Cathay and New Asia Bancorp are working toward completing the merger as
quickly as possible.
vi
HOW SOON AFTER THE MERGER IS COMPLETED CAN I EXPECT TO RECEIVE MY CASH AND/OR
CATHAY COMMON STOCK?
Cathay will work with its exchange agent, American Stock Transfer & Trust
Co., to distribute the consideration payable in the merger as promptly as
practicable following the completion of the merger. If you are entitled to
receive $200,000 or more of cash in merger consideration, you will be able to
receive this cash by wire transfer if you have completed and delivered all
required documentation (including wire transfer instructions) at least two
business days prior to the closing date of the merger. You will not be
responsible for any wire transfer costs associated with the wire transfer.
SHOULD I SEND IN MY STOCK CERTIFICATES WITH MY PROXY CARD?
No. Please do not send your stock certificates with your proxy card. At
the time this proxy statement/prospectus is mailed, an exchange agent will mail
or deliver an Election Form and transmittal materials. Before the election
deadline, which is 5:00 p.m., New York time, on September 29, 2006, you should
send your New Asia Bancorp stock certificates to the exchange agent, together
with a completed and signed Election Form and transmittal materials.
AM I ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER?
Yes. Under Delaware law, New Asia Bancorp stockholders have the right to
dissent from the merger and to receive payment in cash for the fair value of
their shares of New Asia Bancorp common stock. New Asia Bancorp stockholders
electing to exercise dissenters' rights must comply with the provisions of the
Delaware appraisal laws in order to perfect their rights. A brief summary of the
material provisions of the procedures that a New Asia Bancorp stockholder must
follow in order to dissent from the merger and perfect dissenters' rights is
provided under the section entitled "The Merger -- Dissenters' Rights." In
addition, the full text of the Delaware appraisal laws is set forth in APPENDIX
B to this document.
WHAT DO I NEED TO DO NOW?
We encourage you to read this proxy statement/prospectus in its entirety.
Important information is presented in greater detail elsewhere in this document,
and documents governing the merger are attached as appendices to this proxy
statement/prospectus. In addition, much of the business and financial
information about Cathay that may be important to you is incorporated by
reference into this document from documents separately filed by Cathay with the
Securities and Exchange Commission. This means that important disclosure
obligations to you are satisfied by referring you to one or more documents
separately filed with the Securities and Exchange Commission.
Following review of this proxy statement/prospectus, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE as soon
as possible so that your shares can be voted at New Asia Bancorp's special
meeting of stockholders. Additionally, PLEASE COMPLETE, SIGN AND DATE THE
ELECTION FORM AND TRANSMITTAL MATERIALS AND RETURN THEM ALONG WITH YOUR STOCK
CERTIFICATES IN THE ENCLOSED ENVELOPE, to Cathay's exchange agent before 5:00
p.m., New York time, on September 29, 2006.
WHAT RISKS SHOULD I CONSIDER?
You should review carefully the discussion of "Risk Factors." You should
also review the factors considered by the New Asia Bancorp board of directors in
approving the Agreement and Plan of Merger. See "The Merger -- Background of the
Merger" and "The Merger -- New Asia Bancorp's Reasons for the Merger;
Recommendation of, and Factors Considered by, New Asia Bancorp's Board of
Directors."
WHO CAN HELP ANSWER MY QUESTIONS?
If you have questions about the merger, the meeting or your proxy, or if
you need additional copies of this document or a proxy card, you should contact:
Benjamin Wong / Lloyd Gibson
New Asia Bancorp
222 West Cermak Road
Chicago, IL 60616
Phone: (312) 225-5991
Fax: (312) 225-2627
e-mail: BWONG@NEWASIABK.COM; LLOYDGIBSON@NEWASIABK.COM
vii
This proxy statement/prospectus does not cover any resale of the Cathay
shares to be received by stockholders of New Asia Bancorp upon consummation of
the proposed merger, and no person is authorized to make any use of this proxy
statement/prospectus in connection with any such resale.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
viii
SUMMARY
THIS SUMMARY, TOGETHER WITH THE PRECEDING SECTION ENTITLED "QUESTIONS AND
ANSWERS ABOUT THIS DOCUMENT AND THE MERGER," HIGHLIGHTS SELECTED INFORMATION
ABOUT THIS PROXY STATEMENT/PROSPECTUS. WE URGE YOU TO READ CAREFULLY THE ENTIRE
PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS TO WHICH WE REFER TO FULLY
UNDERSTAND THE MERGER. THE AGREEMENT AND PLAN OF MERGER IS ATTACHED AS APPENDIX
A TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED BY REFERENCE INTO THIS
DOCUMENT. EACH ITEM IN THE SUMMARY REFERS TO THE HEADING IN THIS PROXY
STATEMENT/PROSPECTUS WHERE THAT SUBJECT IS DISCUSSED IN MORE DETAIL.
INFORMATION ABOUT CATHAY:
Cathay General Bancorp
777 North Broadway
Los Angeles, California 90012
Phone: (213) 625-4700
Cathay, headquartered in Los Angeles, California, is a Delaware
corporation and is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended. Cathay is the holding company for Cathay Bank,
a California state-chartered bank. Founded in 1962, Cathay Bank offers a wide
range of financial services. Cathay Bank currently operates thirty branches in
California, nine branches in New York State, one in Massachusetts, one in
Houston, Texas, two in Washington State and representative offices in Taipei,
Hong Kong and Shanghai. Cathay Bank's website is found at
HTTP://WWW.CATHAYBANK.COM/
As of June 30, 2006, Cathay had total assets of approximately $7.46
billion, total net loans held in portfolio of approximately $5.32 billion, total
deposits of approximately $5.25 billion and approximately $862 million in
stockholders' equity. Cathay common stock trades on The NASDAQ Stock Market
under the symbol "CATY."
For more information on the business of Cathay, please refer to Cathay's
Annual Report on Form 10-K for the fiscal year ended December 31, 2005 and the
Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30,
2006. Please refer to the section of this proxy statement/prospectus entitled
"Where You Can Find More Information About Cathay" to find out where you can
obtain copies of Cathay's Annual Report, as well as the other documents Cathay
has filed with the Securities and Exchange Commission.
INFORMATION ABOUT NEW ASIA BANCORP:
New Asia Bancorp
222 West Cermak Road
Chicago, IL 60616
Phone: (312) 225-5991
New Asia Bancorp is the holding company for New Asia Bank, an Illinois
state-chartered bank. New Asia Bank was formed in 1987 in Chicago Chinatown by a
group of Chinese and American business men and women. The marketing goal of the
Bank is targeted to meet the financial needs of Asian residents and businesses
in the Chicago area. New Asia Bank has three full-service offices in the Chicago
area: one in Chinatown, one in North Chinatown and one in the western suburbs.
New Asia Bank's website is found at HTTP://WWW.NEWASIABK.COM.
As of June 30, 2006, New Asia Bancorp had total assets of approximately
$139 million, total loans of approximately $112 million, total deposits of
approximately $115 million and total shareholders' equity of approximately $11.4
million. At the record date, New Asia Bancorp had 144 stockholders of record,
owning 719,762 shares of stock.
NEW ASIA BANCORP WILL MERGE INTO CATHAY.
The Agreement and Plan of Merger provides for the merger of New Asia
Bancorp with and into Cathay, with Cathay as the surviving entity after the
merger. Upon the completion of the merger, your shares of New Asia Bancorp
common stock will be exchanged for shares of Cathay common stock, cash or a
combination of stock and cash. After the merger, you will no longer own shares
of New Asia Bancorp. The directors of New Asia Bancorp before the merger will
not serve as directors of Cathay after the merger. As a result of the merger,
New Asia Bancorp will cease to exist as a separate entity.
1
The Agreement and Plan of Merger also provides for a subsequent merger of
New Asia Bank with and into Cathay Bank, the wholly-owned banking subsidiary of
Cathay, with Cathay Bank as the surviving entity after the merger. As a result
of the merger, New Asia Bank will cease to exist as a separate entity.
The Agreement and Plan of Merger is attached as APPENDIX A to this document
and is incorporated by reference into this document. We encourage you to read
the Agreement and Plan of Merger in its entirety.
APPROVAL OF THE AGREEMENT AND PLAN OF MERGER REQUIRES THE AFFIRMATIVE VOTE OF
NOT LESS THAN A MAJORITY OF THE SHARES OF NEW ASIA BANCORP COMMON STOCK THAT ARE
OUTSTANDING AND ENTITLED TO VOTE.
In order to approve the Agreement and Plan of Merger, not less than a
majority of the outstanding shares of New Asia Bancorp common stock entitled to
vote as of the record date must be voted at the special meeting in favor of
approval. Cathay's stockholders do not have to vote on the transaction.
At the record date, New Asia Bancorp had 144 stockholders of record owning
719,762 shares of stock. As of the record date, New Asia Bancorp directors and
executive officers and their affiliates owned and were entitled to vote
approximately 481,581 shares of New Asia Bancorp common stock, representing
approximately 67% of the outstanding shares of New Asia Bancorp common stock.
Certain directors and executive officers of New Asia Bancorp who beneficially
own and have the right to vote 404,171 shares, or approximately 56% of the
shares entitled to be voted at the meeting, have agreed to vote their shares in
favor of approval of the Agreement and Plan of Merger.
WHAT NEW ASIA BANCORP STOCKHOLDERS WILL RECEIVE UPON THE COMPLETION
OF THE MERGER.
Under the Agreement and Plan of Merger, for each share of New Asia Bancorp
stock, Cathay will issue either shares of Cathay common stock with a value of
$32.60 (based on the average closing price during the ten consecutive trading
days preceding the fifth business day prior to the closing), cash in the amount
of $32.60 or a combination of shares of Cathay common stock and cash with a
value in the aggregate amount of $32.60 (based on the average closing price
during the ten consecutive trading days preceding the fifth business day prior
to the closing). The average closing price on which the value of the shares of
Cathay common stock will be based may vary from the closing price of Cathay
common stock on the date Cathay and New Asia Bancorp announced the merger, on
the date that this document was mailed to New Asia Bancorp stockholders, on the
date of the special meeting of the New Asia Bancorp stockholders and on the date
the merger is completed.
Because the number of shares of Cathay common stock issuable is dependent
on the average closing price of those shares at closing, we cannot calculate the
number of shares issuable until then. Based on a price per share of Cathay
common stock of $35.495, which was the average closing price at the time the
Agreement and Plan of Merger was signed, those New Asia Bancorp shareholders
receiving Cathay common stock would receive a per share consideration of 0.9184
share of Cathay common stock. If Cathay's average closing stock price were
$36.807 (which is the average closing price of Cathay common stock from July 28,
2006 to August 10, 2006), the most recent practicable date before mailing of
this document, those New Asia Bancorp shareholders receiving Cathay common stock
would receive 0.8857 shares of Cathay common stock.
If you provide a notice of dissent, vote against the merger and perfect
your dissenters' rights, you will receive cash for your shares as provided under
the applicable provisions of Delaware law. See "The Merger -- Dissenters'
Rights."
MARKET PRICE AND SHARE INFORMATION.
The following table sets forth the closing sale prices per share of Cathay
common stock as reported on The NASDAQ Stock Market on July 5, 2006, the last
trading day before we announced the transaction, and on August 10, the most
recent practicable trading day before the date on which this proxy
statement/prospectus was mailed to New Asia Bancorp's stockholders. On July 20,
2006, the most recent practicable trading day before the preliminary version of
this proxy statement/prospectus was first submitted to the Securities Exchange
Commission, the closing sale price per share of Cathay common stock was $36.78.
CATHAY
CLOSING
DATE PRICE
______________________________________________________________ ______________
July 5, 2006 $ 35.74
August 10, 2006 $ 36.15
2
The market price of Cathay common stock will fluctuate prior to the
effective time of the merger. Therefore, you should obtain current market
quotations for Cathay common stock. Cathay common stock is listed on The NASDAQ
Stock Market under the symbol "CATY." See "Comparative Stock Price and Dividend
Information -- Cathay common stock."
YOU MAY ELECT TO RECEIVE STOCK OR CASH CONSIDERATION, SUBJECT TO ALLOCATION.
Under the Agreement and Plan of Merger, unless you provide a notice of
dissent, you may elect to receive either:
o Cathay common stock for all of your shares,
o cash for all of your shares, or
o Cathay stock for some of your shares and cash for the rest of your
shares.
Because the aggregate number of shares of Cathay common stock and the
aggregate amount of cash that will be issued and paid in the merger are fixed,
the form of merger consideration that you will receive will depend in part on
the elections made by all New Asia Bancorp stockholders. If New Asia Bancorp
stockholders elect to receive more of one form of consideration than is
available, we will allocate the available amount ratably among the New Asia
Bancorp stockholders electing to receive that form of consideration, and those
New Asia Bancorp stockholders will receive the other form of consideration for
the balance of their New Asia Bancorp shares. Accordingly, you may receive a
form of merger consideration that differs from your election. See "The Merger --
Allocation Calculation" for a more detailed discussion of allocation procedures
under the Agreement and Plan of Merger.
If you provide a notice of dissent, vote against the merger and perfect
your dissenters' rights, you will receive cash for your shares as provided under
the applicable provisions of Delaware law. See "The Merger -- Dissenters'
Rights."
At the time this proxy statement/prospectus is mailed, an exchange agent
will mail or deliver an Election Form with instructions for making your election
as to the form of consideration that you prefer to receive in the merger. The
available elections, election procedures and deadline for making elections are
described under the heading "The Merger -- Election Procedure." If you fail to
submit a valid Election Form that is received by the exchange agent on or before
the election deadline, you will receive either Cathay common stock or cash for
each of your shares of New Asia Bancorp stock, depending upon what remains
available after the considering the elections made by other New Asia Bancorp
stockholders.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER.
The merger has been structured to qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code. Assuming the merger so
qualifies, for United States federal income tax purposes, New Asia Bancorp
stockholders generally will not recognize any gain or loss on the exchange of
shares of New Asia Bancorp common stock for shares of Cathay common stock
(although New Asia Bancorp stockholders will generally recognize gain (but not
loss) to the extent of any cash received as part of the merger consideration).
The merger is conditioned on the receipt by each of New Asia Bancorp and Cathay
of a tax opinion from its respective counsel that the merger will constitute a
"reorganization" within the meaning of section 368(a) of the Internal Revenue
Code. Determining the actual tax consequences of the merger to you may be
complex. You should consult your own tax advisor for a full understanding of the
merger's tax consequences to you. For further discussion, see "--Material United
States Federal Income Tax Consequences of the Merger" below.
THE NEW ASIA BANCORP BOARD OF DIRECTORS RECOMMENDS STOCKHOLDER APPROVAL OF THE
MERGER.
The New Asia Bancorp board of directors believes that the merger is in the
best interests of the New Asia Bancorp stockholders and has unanimously approved
the Agreement and Plan of Merger. The New Asia Bancorp board of directors
recommends that New Asia Bancorp stockholders vote "FOR" approval of the
Agreement and Plan of Merger.
3
NEW ASIA BANCORP'S FINANCIAL ADVISOR SAYS THE MERGER CONSIDERATION IS FAIR TO
NEW ASIA BANCORP STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW.
Hovde Financial, Inc. has served as financial advisor to New Asia Bancorp
in connection with the merger. It has given an opinion to the New Asia Bancorp
board of directors that, as of July 6, 2006, the consideration Cathay will pay
for the New Asia Bancorp common stock is fair to New Asia Bancorp stockholders
from a financial point of view. Hovde's opinion is expressly based upon, and
subject to, the assumptions made, matters considered and qualifications and
limitations stated in the opinion. A copy of the opinion delivered by Hovde is
attached to this document as APPENDIX C. You should read the opinion carefully
and in its entirety.
New Asia Bancorp agreed to pay Hovde a fee for its services equal to
(1) 1.5% of such portion of the total consideration received by the stockholders
of New Asia Bancorp as is less than $15 million, plus (2) 3% of such portion of
the total consideration received by the stockholders of New Asia Bancorp as is
equal to or greater than $15 million but less than $20 million, plus (3) 5% of
such portion of the total consideration received by the stockholders of New Asia
Bancorp as is equal to or greater than $20 million. The fee is payable upon the
completion of the merger. Based on consideration to be received by New Asia
Bancorp stockholders of approximately $23.5 million in the aggregate, the fee
payable to Hovde would be approximately $598,212. New Asia Bancorp has also
agreed to reimburse Hovde for its out-of-pocket expenses.
NEW ASIA BANCORP HAS AGREED NOT TO PURSUE ANOTHER SALE TRANSACTION.
New Asia Bancorp has agreed that it will not, and will not permit its
employees, advisors or other representatives to, do any of the following, except
in connection with the Agreement and Plan of Merger:
o solicit, initiate, encourage or otherwise facilitate any acquisition
proposal,
o enter into any agreement with respect to an acquisition proposal,
o participate in any discussions or negotiations regarding any
acquisition proposal, or
o make or authorize any statement or recommendation in support of any
acquisition proposal.
Notwithstanding these prohibitions, if within 20 calendar days after the date of
this proxy statement/prospectus (1) New Asia Bancorp receives an unsolicited
written acquisition proposal that New Asia Bancorp's board of directors believes
in good faith constitutes a "superior proposal" and (2) New Asia Bancorp's board
of directors determines in good faith, after consultation with its outside legal
and financial advisors, that the failure to do so would reasonably be expected
to breach the directors' fiduciary duties under applicable law, then New Asia
Bancorp may furnish information about itself to the person making the superior
proposal, subject to a customary confidentiality agreement, and may participate
in discussions or negotiations regarding the superior proposal after providing
notice to Cathay.
A "superior proposal" is a bona fide written proposal made by a third
party to acquire all of the outstanding shares, or substantially all the assets,
of New Asia Bancorp (1) on terms that the board of directors of New Asia Bancorp
determines in its good-faith judgment, following consultation with Hovde, to be
more favorable from a financial point of view to the New Asia Bancorp
stockholders than those provided in the Agreement and Plan of Merger, (2) that
the New Asia Bancorp board of directors determines is reasonably likely to be
consummated on the terms set forth and (3) for which any required financing is
either already committed or, in the good-faith determination of the New Asia
Bancorp board of directors, highly likely to be obtained.
For a discussion of the circumstances under which the board of directors
of New Asia Bancorp may terminate the Agreement and Plan of Merger to accept a
superior proposal, and the fees that would be payable upon termination, see
"Either Party May Terminate the Agreement and Plan of Merger under Certain
Circumstances" and "New Asia Bancorp Must Pay a Termination Fee under Certain
Circumstances," below.
COMPLETION OF THE MERGER IS SUBJECT TO SATISFACTION OR WAIVER OF CERTAIN
CONDITIONS.
Completion of the merger is subject to the satisfaction or waiver of
certain conditions, including, among others:
o approval of the Agreement and Plan of Merger by New Asia Bancorp
stockholders holding not less than a majority of the shares of New
Asia Bancorp stock that are outstanding and entitled to vote at the
special meeting;
o approval of the merger by federal and state-bank regulatory
authorities;
4
o the absence of a judgment, order, injunction or decree preventing the
consummation of the merger;
o accuracy of each party's representations and warranties in the
Agreement and Plan of Merger;
o compliance by each party with all material terms, covenants and
conditions of the Agreement and Plan of Merger;
o the obtainment of certain consents;
o the receipt by each of New Asia Bancorp and Cathay of a tax opinion
from its respective counsel to the effect that the merger will
constitute a "reorganization" within the meaning of section 368(a) of
the Internal Revenue Code; and
o New Asia Bancorp's net worth satisfying certain minimum amounts
specified in the Agreement and Plan of Merger.
THE MERGER MAY NOT BE COMPLETED WITHOUT ALL REQUIRED REGULATORY APPROVALS.
The transaction must be approved by the Federal Deposit Insurance
Corporation, the Illinois Department of Financial and Professional Regulation
and the California Department of Financial Institutions. Cathay has also
requested confirmation from the Federal Reserve System that its approval is not
required under the Bank Holding Company Act of 1956, as amended. Cathay expects
to obtain all necessary approvals, although Cathay cannot be certain if or when
it will obtain them.
EITHER PARTY MAY TERMINATE THE AGREEMENT AND PLAN OF MERGER UNDER CERTAIN
CIRCUMSTANCES.
The Agreement and Plan of Merger may be terminated either before or after
it is approved by the New Asia Bancorp stockholders:
o by mutual consent of Cathay and New Asia Bancorp;
o by either party if any required regulatory approval is denied, any
request for an approval is withdrawn or any governmental entity
issues an order enjoining or prohibiting the merger;
o by either party if the merger does not become effective by April 6,
2007;
o by either party if the other party is in material breach of the
Agreement and Plan of Merger and fails to cure such breach within the
time periods provided; and
o by New Asia Bancorp, at any time prior to the 25th day after
istribution of this proxy statement/prospectus, if its board of
directors determines its fiduciary duties require such termination in
order to allow New Asia Bancorp to enter into an agreement relating
to a "superior proposal."
See "The Merger Agreement -- Termination."
NEW ASIA BANCORP MUST PAY A TERMINATION FEE UNDER CERTAIN CIRCUMSTANCES.
The Agreement and Plan of Merger provides that New Asia Bancorp must pay
Cathay a termination fee of $1,650,000 if the Agreement and Plan of Merger is
terminated due to a material breach by New Asia Bancorp of its representations,
warranties or covenants or if New Asia Bancorp terminates the Agreement and Plan
of Merger in order to accept a superior acquisition proposal. New Asia Bancorp
agreed to pay a termination fee under these circumstances in order to induce
Cathay to enter into the Agreement and Plan of Merger. This arrangement could
have the effect of discouraging other companies from trying to acquire New Asia
Bancorp. See "The Merger Agreement -- Termination Fee."
NEW ASIA BANCORP STOCKHOLDERS WILL HAVE DIFFERENT RIGHTS AFTER THE MERGER.
The rights of New Asia Bancorp stockholders are governed by Delaware law,
as well as New Asia Bancorp's charter and bylaws. After completion of the
merger, the rights of the former New Asia Bancorp stockholders receiving Cathay
common stock upon the completion of the merger will be governed by Delaware law,
as well as Cathay's certificate of incorporation and bylaws. Although Cathay's
certificate of incorporation and bylaws are similar to New Asia Bancorp's
charter and bylaws, there are some substantive and procedural differences that
will affect the rights of New Asia Bancorp stockholders. See "Comparison of
Cathay Common Stock with New Asia Bancorp Common Stock."
5
NEW ASIA BANCORP STOCKHOLDERS HAVE DISSENTERS' RIGHTS.
Under Delaware law, New Asia Bancorp stockholders have the right to
dissent from the merger and receive cash for the fair value of their shares of
New Asia Bancorp common stock. A stockholder electing to dissent must strictly
comply with all the procedures required by Delaware law. These procedures are
described later in this document, and a copy of the relevant portions of
Delaware law is attached as Appendix B. See "The Merger -- Dissenters' Rights."
INTERESTS OF NEW ASIA BANCORP EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER.
Some of the members of New Asia Bancorp's management have interests in the
merger that are in addition to, or different from, their interests as New Asia
Bancorp shareholders generally. One executive officer of New Asia Bancorp, Lloyd
Gibson, is a party to an existing agreement with New Asia Bank that provides for
severance benefits in connection with certain terminations of employment prior
to or following a change in control of New Asia Bank, and, in connection with
the merger, another executive officer, Benjamin Wong, signed an employment
agreement with Cathay Bank on July 26, 2006. The employment agreement is to be
effective on the effective time of the merger and provides for, among other
things, severance payments on certain termination of employment and for
non-competition payments. In addition, in connection with the merger, six
executive officers of New Asia Bancorp will be eligible to receive retention
payments at the discretion of the board of directors of New Asia Bancorp. Under
the Agreement and Plan of Merger, prior to the closing of the merger, New Asia
Bank may purchase a "tail policy" covering persons serving as officers and
directors of New Asia Bancorp or New Asia Bank immediately prior to the
effective time of the merger for a period of up to five years from the effective
time of the merger with respect to acts or omissions occurring prior to the
effective time of the merger which were committed by such officers and directors
in their capacity as such. See "The Merger -- Interests of Certain Persons in
the Merger."
The New Asia Bancorp and Cathay boards of directors were aware of
these interests and considered them, among other matters, in approving the
merger agreement and the transactions contemplated by the merger agreement.
SELECTED HISTORICAL AND COMPARATIVE PER SHARE DATA
The following information is provided to aid you in your analysis of the
financial effects of the merger. The historical financial data in the following
tables shows financial results actually achieved by New Asia Bancorp and by
Cathay for the periods presented. These are historical figures.
NEW ASIA BANCORP HISTORICAL SELECTED FINANCIAL DATA
The following selected financial information for the fiscal years ended
December 31, 2005 and 2004 and March 31, 2004, 2003, 2002 and 2001 is derived
from audited financial statements of New Asia Bancorp. The financial information
of and for the six months ended June 30, 2006 is derived from unaudited
financial statements. The unaudited financial statements include all
adjustments, consisting of normal recurring accruals, which New Asia Bancorp
considers necessary for fair presentation of the financial results of operations
for such periods. The operating results for the six months ended June 30, 2006
are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 2006. The financial data below should be read in
conjunction with the financial statements and notes thereto, which are included
in New Asia Bancorp's annual reports to its stockholders. Copies of annual
reports from earlier years are available upon request from New Asia Bancorp at
the address set forth in "Who can help answer my questions?" in the section of
this proxy statement/prospectus entitled "Questions and Answers about this
Document and the Merger."
6
SUMMARY HISTORICAL FINANCIAL DATA OF NEW ASIA BANCORP
SIX MONTHS ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JUNE 30, DECEMBER 31, MARCH 31,
----------------- -------------------- -------------------------------------------
2006 2005 2005 2004 2004 2003 2002 2001
------ --------- -------- ------- --------- ------- ------- ----------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS:
Interest income $ 4,065 $ 3,371 $ 7,476 $ 5,528 $ 8,266 $10,406 $10,782 $11,551
Interest expense 1,916 1,157 2,692 1,694 2,900 4,365 5,588 6,597
------ --------- -------- ------- --------- ------- ------- ----------
Net interest income 2,149 2,214 4,784 3,834 5,366 6,041 5,194 4,954
Provision for loan losses - 60 60 25 452 1,956 545 467
------ --------- -------- ------- --------- ------- ------- ----------
Net interest income after
provision for loan losses 2,149 2,154 4,724 3,809 4,914 4,085 4,649 4,487
Noninterest income 400 727 1,066 3,401 1,234 1,791 1,973 1,247
Realized gain (loss) on
securities - - - - - - - -
Noninterest expenses 2,340 2,366 4,829 4,840 7,660 5,484 4,655 4,210
------ --------- -------- ------- --------- ------- ------- ----------
Income before provision for
income taxes 209 515 961 2,370 (1,512) 392 1,967 1,524
Provision for income taxes 33 175 207 944 (530) 78 723 543
------ --------- -------- ------- --------- ------- ------- ----------
Net income 176 340 754 1,426 (982) 314 1,244 981
====== ========= ======== ======= ========= ======= ======= ==========
Basic earnings per share 0.24 0.47 1.05 1.98 (1.38) 0.44 1.76 1.39
Diluted earnings per share 0.24 0.47 1.05 1.98 (1.38) 0.44 1.76 1.39
Cash dividends paid per
common share 1.00 - - - - 0.66 0.88 0.87
STATEMENT OF FINANCIAL
CONDITION:
Total assets 139,452 132,174 144,708 139,054 149,759 169,746 161,286 150,871
Net loans receivable 111,884 105,240 109,215 97,953 108,772 123,495 119,775 104,758
Total deposits 114,636 108,350 123,995 119,343 131,198 149,266 135,882 129,580
Stockholders' equity 11,381 11,510 11,892 11,172 9,621 10,620 10,714 10,105
Book value per share 15.81 15.99 16.52 15.52 13.56 15.05 15.17 14.27
KEY OPERATING RATIOS:
Return on average assets 0.25% 0.52% 0.56% 0.70% -1.14% 0.19% 0.80% 0.67%
Return on average
stockholders' equity 2.92% 4.22% 6.56% 9.85% -17.31% 2.94% 11.95% 9.71%
Average equity to average
assets 8.10% 8.71% 8.55% 7.08% 6.42% 6.26% 6.64% 6.70%
Net interest margin 2.79% 3.38% 2.82% 3.27% 3.49% 3.61% 3.90% 4.08%
Non-performing assets to
total assets 0.35% 0.98% 0.19% 0.85% 1.64% 1.68% 1.64% 0.29%
Dividend payout ratio 408.96% 0.00% 0.00% 0.00% 0.00% 150.00% 49.92% 62.39%
Allowance for loan and lease 321.68% 132.46% 270.29% 137.07% 64.37% 61.98% 31.35% 36.23%
losses to non-performing
assets
7
CATHAY HISTORICAL SELECTED FINANCIAL INFORMATION
The following selected consolidated financial information for the fiscal
years ended December 31, 2005, 2004, 2003, 2002 and 2001 is derived from audited
consolidated financial statements of Cathay. The financial information of and
for the six months ended June 30, 2006 and 2005 is derived from unaudited
financial statements. The unaudited financial statements include all
adjustments, consisting of normal recurring accruals, which Cathay considers
necessary for fair presentation of the financial results of operations for such
periods. The operating results for the six months ended June 30, 2006 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 2006. The financial data below should be read in conjunction
with Cathay's consolidated financial statements and notes thereto, incorporated
by reference in this proxy statement/prospectus. See "Where You Can Find More
Information About Cathay."
SELECTED HISTORICAL FINANCIAL DATA OF CATHAY GENERAL BANCORP
SIX MONTHS ENDED JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
---------------------------- -------------------------------------------------------
2006 2005 2005 2004 2003 2002 2001
------------- ---------- ------- --------- ---------- ------- ----------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS:
Interest income $ 225,705 $ 165,319 $ 350,661 $ 274,979 $ 167,267 $ 144,061 $ 159,352
Interest expense 89,514 47,367 110,279 60,162 40,148 39,920 66,153
------------- ---------- --------- --------- ---------- --------- ----------
Net interest income 136,191 117,952 240,382 214,817 127,119 104,141 93,199
Provision for loan losses 3,000 500 (500) 0 7,150 6,000 6,373
------------- ---------- --------- --------- ---------- --------- ----------
Net interest income after
provision for loan losses 133,191 117,452 240,882 214,817 119,969 98,141 86,826
Noninterest income 10,826 11,452 22,486 16,265 22,993 16,171 14,779
Noninterest expenses 54,395 46,807 96,887 90,660 55,140 43,317 40,165
------------- ---------- --------- --------- ---------- --------- ---------
Income before provision for income
taxes 89,622 82,097 166,481 140,422 87,822 70,995 61,440
Provision for income taxes 33,234 31,403 62,390 53,609 32,250 22,295 18,820
------------- ---------- ---------- --------- ---------- --------- ---------
Net income $ 56,388 $ 50,694 $ 104,091 $ 86,813 $ 55,572 $ 48,700 $ 42,620
============= ========== ========== ========= ========== ========= =========
Basic earnings per share $ 1.11 $1.00 $2.07 $1.74 $1.44 $1.35 $1.18
Diluted earnings per share 1.10 0.99 2.05 1.72 1.42 1.34 1.17
Cash dividends declared per share 0.18 0.18 0.36 0.30 0.28 0.27 0.25
STATEMENT OF FINANCIAL CONDITION:
Total assets $ 7,457,650 $6,073,302 $6,397,503 $6,098,005 $5,541,915 $2,753,998 $2,453,144
Net loans receivable 5,323,445 4,109,795 4,574,831 3,757,464 3,229,751 1,848,078 1,640,032
Total deposits 5,253,910 4,828,760 4,916,350 4,595,137 4,428,08 2,314,643 2,122,348
Total borrowings and Subordinated 1,233,586 441,726 607,976 689,916 414,69 78,500 52,114
Debentures
Stockholders' equity 861,917 734,819 773,617 715,993 619,296 287,961 246,011
Book value per share 16.73 14.67 15.41 14.13 12.48 8.00 6.85
KEY OPERATING RATIOS:
Return on average assets 1.64% 1.66% 1.69% 1.51% 1.58% 1.88% 1.82%
Return on average stockholders' 14.26% 14.02% 14.05% 13.27% 15.13% 18.30% 18.36%
equity
Average equity to average assets 11.48% 11.86% 12.05% 11.38% 10.42% 10.27% 9.92%
Net interest margin (tax 4.30% 4.22% 4.26% 4.09% 3.87% 4.34% 4.34%
equivalent basis)
Non-performing assets to total 0.38% 0.26% 0.28% 0.37% 0.71% 0.26% 0.39%
assets
Dividend payout ratio 16.23% 18.01% 17.44% 17.19% 18.15% 20.13% 21.25%
Allowance for loan and lease 231.26% 383.09% 36.50% 279.83% 167.56% 338.76% 252.83%
losses to non-performing
assets
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION
CATHAY COMMON STOCK
Cathay common stock is quoted on The NASDAQ Stock Market under the symbol
"CATY." The following table sets forth for the periods indicated:
o the high and low sale prices for Cathay common stock as reported on
The NASDAQ Stock Market, and
o dividends per share on Cathay common stock.
8
CASH DIVIDENDS
HIGH* LOW* DECLARED*
2004
First quarter $33.38 $26.75 $0.07
Second quarter $34.66 $30.10 $0.07
Third quarter $37.92 $35.29 $0.07
Fourth quarter $40.18 $35.92 $0.09
2005
First quarter $38.22 $31.19 $0.09
Second quarter $35.26 $29.51 $0.09
Third quarter $35.95 $32.62 $0.09
Fourth quarter $39.82 $32.70 $0.09
2006
First quarter $38.45 $34.10 $0.09
Second quarter $39.95 $34.28 $0.09
Third quarter (through August 10, 2006) $37.92 $35.23 $0.09
_________________________
* Adjusted for two-for-one stock split for stockholders of record as of
September 13, 2004, and completed on September 28, 2004.
At June 30, 2006, the 51,512,705 outstanding shares of Cathay common stock
were held by approximately 1,660 holders of record.
NEW ASIA BANCORP COMMON STOCK
New Asia Bancorp stock is privately held and not quoted on a stock
exchange or market, and no broker makes a market in the stock. Stock transfer
records maintained by New Asia Bancorp indicate that there have been relatively
infrequent transactions in New Asia Bancorp's stock. Sales and purchases of
shares of New Asia Bancorp common stock are privately negotiated, and New Asia
Bancorp may not be aware of the price for those transactions. As a result,
trading price data is very limited and may not accurately reflect the actual
market value of the shares.
At the record date, the 719,762 outstanding shares of New Asia Bancorp
common stock were held by approximately 144 holders of record.
Prior to the fourth quarter of 2002, New Asia Bancorp historically paid
quarterly dividends to its stockholders. On October 19, 2002, New Asia Bancorp
declared a dividend of $0.22 per share of common stock, payable on November 1,
2002. The total dividend amount was $155,546.38. In connection with an
investigation by the Federal Reserve Bank of Chicago and the Illinois Department
of Financial and Professional Regulation (f/k/a the State of Illinois Office of
Banks and Real Estate), and pursuant to the terms of a Written Agreement by and
among New Asia Bank, the Federal Reserve Bank of Chicago and the Illinois
Department of Financial and Professional Regulation, dated May 21, 2003, New
Asia Bank's ability to pay dividends was restricted beginning in the fourth
quarter of 2002. No dividends were paid by New Asia Bank or New Asia Bancorp
during the period in which the Written Agreement was in effect. This Written
Agreement was terminated effective February 27, 2006. On March 25, 2006, New
Asia Bancorp declared a dividend of $1.00 per share of common stock that was
payable on April 30, 2006. The total dividend amount was $719,762.00. In order
to pay the dividend to New Asia Bancorp's stockholders, New Asia Bank declared a
dividend to New Asia Bancorp in the amount of $1,500,000.
FORWARD-LOOKING STATEMENTS
This document, including information included or incorporated by reference
in this document, contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, statements about the benefits of the
merger between Cathay and New Asia Bancorp, including future financial and
operating results and performance; statements about Cathay's and New Asia
Bancorp's plans, objectives, expectations and intentions with respect to future
operations, products and services; and other statements identified by words such
as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," "will," "should," "may" or words of similar import. These
forward-looking statements are based upon the current beliefs and expectations
of Cathay's and New Asia Bancorp's management and are inherently subject to
significant business, economic and competitive uncertainties, risks and
contingencies, many of which are difficult to predict and generally beyond the
control of Cathay and New Asia Bancorp. In
9
addition, these forward-looking statements are subject to assumptions with
respect to future business strategies and decisions that are subject to change.
Actual results, performance or achievements may be materially different from the
anticipated results, performance or achievements discussed, expressed or implied
by these forward-looking statements.
In particular, certain statements are made in this document regarding
expected cost savings to result from the merger, the anticipated accretive
effect to earnings of the merger, an improved ability to compete with larger
competitors, restructuring charges expected to be incurred in connection with
the merger and the operation of the combined companies. The statements
concerning expected cost savings are based in part on assumptions about the
anticipated overlap of the two banks' operations, the amount of general and
administrative expenses, the size of anticipated reductions in fixed labor
costs, the amount of severance costs, the effort involved in aligning accounting
policies and the transactional costs of the merger. Although Cathay and New Asia
Bancorp believe these assumptions are reasonable, it is possible that these
assumptions are or may be inaccurate and therefore that the expected cost
savings may not be realized.
The following factors, among others, also could cause actual results to
differ materially from the anticipated results or other expectations expressed
in the forward-looking statements:
o Risk factors discussed and identified in public filings with the
Securities and Exchange Commission made by Cathay could adversely
affect Cathay's and New Asia Bancorp's operating results and business
plans;
o Competition from other financial institutions, whether banks,
investment banks, insurance companies or others, in Cathay's and New
Asia Bancorp's markets could adversely affect each company's
operating results and business plans;
o Governmental approvals of the merger may be delayed or may not be
obtained, or adverse regulatory conditions may be imposed in
connection with governmental approvals of the merger;
o The time and cost required to combine the businesses of Cathay and
New Asia Bancorp may not be combined successfully, or such
combination may take longer or be more difficult, time-consuming or
costly to accomplish than expected;
o The expected growth opportunities and cost savings from the merger
may not be fully realized or may take longer to realize than expected;
and
o Operating costs, customer losses and business disruption following
the merger, including adverse effects on relationships with employees,
may be greater than expected.
In addition, the following factors, among others, could cause actual
results to differ materially from the anticipated results or other expectations
expressed in the forward-looking statements by adversely affecting Cathay's and
New Asia Bancorp's operating results and business plans:
o Market fluctuations such as those affecting interest and foreign
exchange rates and the value of securities in which Cathay and New
Asia Bancorp invest;
o Changes in economic and business conditions in the areas and markets
in which Cathay and New Asia Bancorp operate, particularly those
affecting loans secured by real estate;
o Adverse governmental or regulatory policies or changes in tax law;
o Changes in business strategies or development plans or the inability
to execute same;
o Demographic changes;
o Deterioration or improvement in the ability of Cathay Bank's
borrowers to pay their debts to Cathay Bank; and
o The ability of Cathay Bank to assimilate other acquisitions, enter
new markets and lines of business, and open new branches,
successfully.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this document or the date of any
document incorporated by reference in this document. All subsequent written and
oral forward-looking statements concerning the merger or other matters addressed
in this document and
10
attributable to Cathay or New Asia Bancorp or any person acting on their behalf
are expressly qualified in their entirety by the cautionary statements contained
or referred to in this section. Except to the extent required by applicable law
or regulation, Cathay and New Asia Bancorp undertake no obligation to update
these forward-looking statements to reflect events, developments or
circumstances after the date of this document or to reflect the occurrence of
future events.
11
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS DOCUMENT, INCLUDING THE MATTERS ADDRESSED UNDER THE CAPTION
"FORWARD-LOOKING STATEMENTS," YOU SHOULD CAREFULLY CONSIDER THE MATTERS
DESCRIBED BELOW IN DETERMINING WHETHER TO APPROVE THE AGREEMENT AND PLAN OF
MERGER.
THE MERGER INVOLVES A HIGH DEGREE OF RISK. BECAUSE A PORTION OF THE
MERGER CONSIDERATION CONSISTS OF CATHAY COMMON STOCK, NEW ASIA BANCORP
STOCKHOLDERS WHO DO NOT ELECT AND RECEIVE 100% CASH WILL BECOME CATHAY
STOCKHOLDERS AFTER THE MERGER. AN INVESTMENT IN THE COMBINED COMPANIES WILL
INCLUDE RISKS DIFFERENT FROM AN INVESTMENT IN EITHER OF THE CONSTITUENT
COMPANIES.
CATHAY MAY BE UNABLE TO INTEGRATE OPERATIONS SUCCESSFULLY OR TO ACHIEVE
EXPECTED COST SAVINGS.
The earnings, financial condition and prospects of Cathay after the merger
will depend in part on Cathay's ability to integrate the operations and
management of New Asia Bancorp and New Asia Bank and to continue to implement
its own business plan. We cannot assure you that Cathay will be able to do so.
Among the issues that Cathay could face are:
o unexpected problems with operations, personnel, technology or credit;
o loss of customers and employees of New Asia Bancorp and New Asia Bank;
o difficulty in working with New Asia Bancorp's and New Asia Bank's
employees and customers;
o the assimilation of New Asia Bancorp's and New Asia Bank's operations,
sites and personnel;
o new offices acquired in the merger may not generate enough revenue to
offset acquisition costs; and
o instituting and maintaining uniform standards, controls, procedures
and policies.
Further, although Cathay anticipates cost savings as a result of the
merger, Cathay may not be fully able to realize those savings. Any cost savings
that are realized may be offset by losses in revenues or other charges to
earnings.
YOU WILL NOT KNOW UNTIL THE CLOSING OF THE MERGER THE NUMBER OF SHARES OF CATHAY
COMMON STOCK THAT WILL BE ISSUED IN CONNECTION WITH THE MERGER.
Under the Agreement and Plan of Merger, Cathay will issue, for each share
of New Asia Bancorp stock, either shares of Cathay common stock with a value of
$32.60 (based on the average closing price during the ten consecutive trading
days preceding the fifth business day prior to the closing), cash in the amount
of $32.60 or a combination of shares of Cathay common stock and cash with a
value in the aggregate amount of $32.60 (based on the average closing price
during the ten consecutive trading days preceding the fifth business day prior
to the closing). The average closing price on which the value of the shares of
Cathay common stock will be based may vary from the closing price of Cathay
common stock on the date Cathay and New Asia Bancorp announced the merger, on
the date that this document was mailed to New Asia Bancorp stockholders, on the
date of the special meeting of the New Asia Bancorp stockholders and on the date
the merger is completed. Accordingly, the exact number of shares of Cathay
common stock that you will be entitled to receive for each share of your New
Asia Bancorp common stock will not be known until immediately prior to the date
of the closing of the merger.
Neither Cathay nor New Asia Bancorp is permitted to terminate the
Agreement and Plan of Merger or resolicit the vote of New Asia Bancorp
stockholders solely because of changes in the market prices of either company's
stock. Stock price changes may result from a variety of factors, including
general market and economic conditions or changes in the respective businesses,
operations and prospects of New Asia Bancorp and Cathay. Many of these factors
are beyond the control of New Asia Bancorp or Cathay.
BECAUSE OF THE CLOSING CONDITIONS IN THE AGREEMENT AND PLAN OF MERGER AND THE
ABILITY OF EITHER NEW ASIA BANCORP OR CATHAY TO TERMINATE THE AGREEMENT AND PLAN
OF MERGER IN SPECIFIC INSTANCES, THERE CAN BE NO ASSURANCE WHEN OR IF THE MERGER
WILL BE COMPLETED.
The completion of the merger is subject to the satisfaction or waiver of a
number of closing conditions, and the parties have the right to terminate the
Agreement and Plan of Merger under certain circumstances. There can be no
assurance that the parties will be able to meet the closing conditions of the
Agreement and Plan of Merger or that closing conditions that are beyond their
control will be satisfied or waived. If Cathay and New Asia Bancorp are
12
unable to meet all the conditions or such conditions are otherwise not
satisfied, the parties will not be required, or able, to complete the merger.
See "The Merger -- Termination."
THE AGREEMENT AND PLAN OF MERGER LIMITS NEW ASIA BANCORP'S ABILITY TO PURSUE
OTHER TRANSACTIONS AND PROVIDES FOR THE PAYMENT OF A TERMINATION FEE IF NEW ASIA
BANCORP ACCEPTS A SUPERIOR PROPOSAL.
While the Agreement and Plan of Merger is in effect, subject to very
narrow exceptions, New Asia Bancorp and its directors, officers and agents are
prohibited from initiating or encouraging inquiries with respect to alternative
acquisition proposals. The prohibition limits New Asia Bancorp's ability to seek
offers that may be superior from a financial point of view from other possible
acquirers. If New Asia Bancorp receives an unsolicited proposal from a third
party that is superior to the merger from a financial point of view and
terminates the Agreement and Plan of Merger to accept that superior proposal,
New Asia Bancorp will be required to pay a $1,650,000 termination fee. This fee
makes it less likely that a third party will make an alternative acquisition
proposal.
THE LOAN PORTFOLIOS MAY NOT PERFORM AS EXPECTED.
Cathay's performance and prospects after the merger will depend to a
significant extent on the performance of the combined loan portfolios of Cathay
Bank and New Asia Bank, and ultimately on the financial condition of their
respective borrowers and other customers. The existing loan portfolios of the
two banks differ to some extent in the types of borrowers, industries and
credits represented. In addition, there are differences in the documentation,
classifications, credit ratings and management of the portfolios. As a result,
Cathay Bank's overall loan portfolio after the merger will have a different risk
profile than the loan portfolio of either New Asia Bank or Cathay Bank before
the merger. The performance of the two loan portfolios will be adversely
affected if any of such factors is worse than currently anticipated. In
addition, to the extent that Cathay does not retain present customers or incurs
additional expenses in retaining them, there could be adverse effects on future
consolidated results of operations of Cathay following the merger. Realization
of improvement in profitability is dependent, in part, on the extent to which
the revenues of New Asia Bancorp are maintained and enhanced.
A DOWNTURN IN THE REAL ESTATE MARKET COULD NEGATIVELY AFFECT CATHAY'S BUSINESS.
As of March 31, 2006, approximately 79.7% of Cathay's loan portfolio and
approximately 98.8% of New Asia Bancorp's loan portfolio consisted of loans
secured by various types of real estate. If real estate values decline
significantly in the areas served by Cathay, New Asia Bancorp or New Asia Bank,
higher default rates and reduced selling prices on foreclosed property held for
resale would reduce the net income of the combined companies.
THE MARKET PRICE OF CATHAY COMMON STOCK IS UNCERTAIN.
The market price of Cathay common stock on or after consummation of the
merger may vary from the prices of Cathay prior to the merger. Stock price
changes, whether before or after the merger, may result from a variety of
factors, including general market and economic conditions, changes in Cathay's
businesses, operations and prospects and regulatory considerations.
NEW ASIA BANCORP STOCKHOLDERS MAY NOT RECEIVE THE FORM OF MERGER CONSIDERATION
THAT THEY ELECT.
Because the maximum number of holders of New Asia Bancorp shares that can
elect to receive Cathay common stock is fixed, the form of merger consideration
that you will receive will depend on the elections made by all New Asia Bancorp
stockholders. If New Asia Bancorp stockholders elect to receive more of one form
of consideration than is available, we will allocate the available amount
ratably among the New Asia Bancorp stockholders electing to receive that form of
consideration, and those New Asia Bancorp stockholders will receive the other
form of consideration for the balance of their New Asia Bancorp shares.
Accordingly, you may not receive as much of one form of merger consideration as
you elect.
CHANGING INTEREST RATES MAY REDUCE NET INTEREST INCOME.
Banking companies' earnings depend largely on the relationship between the
cost of funds, primarily deposits, and the yield on earning assets, primarily
loans and investments. This relationship, known as the interest rate margin, is
subject to fluctuation and is affected by economic and competitive factors that
influence interest rates, the volume and mix of interest-earning assets and
interest-bearing liabilities, and the level of nonperforming assets.
Fluctuations in interest rates will affect the demand of customers for the
products and services of the combined banks after the merger. Cathay and New
Asia Bancorp are subject to interest rate risk to the degree that their
interest-bearing liabilities reprice or mature more slowly or more rapidly or on
a different basis than their interest-earning assets. Given the banks' current
volume and mix of interest-bearing liabilities and interest-earning assets,
13
their interest rate spread could be expected to increase during times of rising
interest rates and, conversely, to decline during times of falling interest
rates. Therefore, significant fluctuations in interest rates may have an adverse
effect on Cathay's consolidated results of operations.
CHANGES IN GOVERNMENT REGULATION AND MONETARY POLICY MAY HAVE AN UNFAVORABLE
IMPACT ON CATHAY.
The banking industry is subject to extensive federal and state supervision
and regulation. Such regulation limits the manner in which Cathay conducts its
business, undertakes new investments and activities and obtains financing. This
regulation is designed primarily for the protection of the deposit insurance
funds and consumers, and not to benefit holders of Cathay's or New Asia
Bancorp's common stocks. Financial institution regulation has been the subject
of significant legislation in recent years, and may be the subject of further
significant legislation in the future, none of which is in the control of Cathay
or New Asia Bancorp. Significant new laws or changes in, or repeal of, existing
laws may cause Cathay's consolidated results to differ materially. Further,
federal monetary policy, particularly as implemented through the Federal Reserve
System, significantly affects credit conditions for financial institutions,
primarily through open market operations in United States government securities,
the discount rate for bank borrowings and bank reserve requirements. Any
material change in these conditions would be likely to have a material impact on
Cathay's consolidated results of operations.
INTENSE COMPETITION EXISTS FOR LOANS AND DEPOSITS.
The banking and financial services business in California, New York and
Illinois generally, and specifically in the market area that will be served by
the combined bank, is highly competitive. Competitive pressure is increasing as
a result of changes in regulation, changes in technology and product delivery
systems and the accelerating pace of consolidation among financial services
providers. Cathay and New Asia Bancorp compete for loans, deposits and customers
with other commercial banks, savings and loan associations, securities and
brokerage companies, mortgage companies, insurance companies, finance companies,
money market funds, credit unions and other nonbank financial service providers.
Many of these competitors are much larger in total assets and capitalization,
have greater access to capital markets and offer a broader array of financial
services than Cathay or New Asia Bancorp. There can be no assurance that Cathay
will be able to compete effectively in its market, and the consolidated results
of operations of Cathay could be adversely affected if circumstances affecting
the nature or level of competition change.
UNANTICIPATED COSTS RELATING TO THE MERGER COULD REDUCE CATHAY'S FUTURE EARNINGS
PER SHARE.
Cathay believes that it has reasonably estimated the likely costs of
integrating the operations of New Asia Bancorp into Cathay, and the incremental
costs of operating as a combined company. However, it is possible that
unexpected transaction costs or future operating expenses, as well as other
types of unanticipated adverse developments, could have a material adverse
effect on the results of operations and financial condition of Cathay after the
merger. If the merger is completed and unexpected costs are incurred, the merger
could have a significant dilutive effect on Cathay's earnings per share, meaning
earnings per share could be less than if the merger had not been completed.
CATHAY MAY ENGAGE IN FURTHER EXPANSION THROUGH NEW BRANCH OPENINGS OR
ACQUISITIONS, WHICH COULD ADVERSELY AFFECT NET INCOME.
Cathay may engage in further expansion. There are risks associated with
expansion and, in particular, expansion through acquisitions. These risks
include, among others, incorrectly assessing the asset quality of a bank
acquired in a particular acquisition, encountering greater-than-anticipated
costs of opening new branches or incorporating acquired businesses, facing
resistance from customers or employees, and being unable to profitably deploy
assets acquired through expansion or in acquisitions. Additional country- and
region-specific risks are associated with Cathay's expansion and acquisitions
outside the United States, including in China. To the extent Cathay issues
capital stock in connection with additional acquisitions, these acquisitions and
related stock issuances may have a dilutive effect on earnings per share and
share ownership.
CATHAY MAY ISSUE ADDITIONAL CAPITAL STOCK IN THE FUTURE.
In order to fund internal growth and future acquisitions, Cathay may offer
shares of its common stock to the public. Any such offerings would have a
dilutive effect on earnings per share and share ownership. In addition, there is
no assurance that Cathay would be able to effectively utilize any additional
capital in the manner that it has done so in the past. Cathay does not currently
have any definitive understandings or plans to raise additional capital.
14
CATHAY HAS VARIOUS ANTI-TAKEOVER MEASURES THAT COULD IMPEDE A TAKEOVER OF
CATHAY.
Cathay has various anti-takeover measures in place. For example, Cathay
has adopted a Rights Plan and has included in its Restated Certificate of
Incorporation related provisions that may give certain holders of Cathay's
Series A Preferred Stock special rights in case of a consolidation, merger,
combination or other similar transaction. In addition, Cathay's Restated
Certificate of Incorporation has other provisions that could make more difficult
the acquisition of Cathay by means of a tender offer, a proxy contest, merger or
otherwise. These provisions include (i) a "staggered board," whereby only
one-third of the members of the board of directors are elected in any particular
year; and (ii) a requirement that any "Business Combination" (as defined in the
Restated Certificate of Incorporation) be approved by the affirmative vote of
not less than 80% of the voting power of the then-outstanding shares, unless it
is either approved by the board of directors or certain price and procedural
requirements are satisfied. See "Comparison of Cathay Common Stock with New Asia
Bancorp Common Stock."
NECESSARY REGULATORY APPROVALS MAY NOT BE OBTAINED.
Consummation of the merger is subject to prior receipt of all required
approvals and consents of the merger by all applicable federal and state
regulatory authorities. There can be no assurance that such federal and state
regulatory authorities will approve or take other required action with respect
to the merger and the related transactions or as to the date of such approvals
or action. See "Regulatory Approvals Required for the Merger."
SOME OF THE DIRECTORS AND EXECUTIVE OFFICERS OF NEW ASIA BANCORP MAY HAVE
INTERESTS IN THE MERGER THAT ARE DIFFERENT FROM THOSE OF NEW ASIA BANCORP'S
SHAREHOLDERS GENERALLY THAT MAY HAVE INFLUENCED THEIR DECISIONS TO SUPPORT OR
RECOMMEND THAT YOU APPROVE THE MERGER.
The interests of some of the directors and executive officers of New Asia
Bancorp may be different from those of New Asia Bancorp's shareholders, and
directors and officers of New Asia Bancorp may be party to agreements or
arrangements that provide for rights that are different from, or in addition to,
those of New Asia Bancorp's shareholders. See "Interests of Certain Persons in
the Merger."
THE MERGER MAY FAIL TO QUALIFY AS A REORGANIZATION FOR FEDERAL INCOME TAX
PURPOSES, RESULTING IN YOUR RECOGNITION OF TAXABLE GAIN OR LOSS IN RESPECT OF
YOUR SHARES OF NEW ASIA BANCORP COMMON STOCK AND RESULTING IN CORPORATE TAX
LIABILITY FOR CATHAY.
Cathay and New Asia Bancorp intend the merger to qualify as a
reorganization within the meaning of Section 368(a) of the Code, although the
Internal Revenue Service, or IRS, will not provide a ruling on the matter. New
Asia Bancorp and Cathay each will, as a condition to closing, obtain an opinion
from counsel that the merger will constitute a reorganization for federal income
tax purposes. These opinions do not bind the IRS or prevent the IRS from
adopting a contrary position. If the merger fails to qualify as a
reorganization, the merger will be treated for tax purposes as a taxable sale of
New Asia Bancorp's assets to Cathay, followed by a liquidation of New Asia
Bancorp, with Cathay as New Asia Bancorp's successor liable for the associated
corporate tax from the sale of assets. In such circumstances, you generally
would recognize gain or loss on each share of New Asia Bancorp stock surrendered
in an amount equal to the difference between your adjusted tax basis in that
share and the sum of the amount of cash and the fair market value of the Cathay
common stock received in exchange for that share in the liquidation.
NEW ASIA BANCORP'S STOCKHOLDERS WILL HAVE LESS INFLUENCE AS STOCKHOLDERS OF
CATHAY THAN AS STOCKHOLDERS OF NEW ASIA BANCORP.
You currently have the right to vote in the election of the board of
directors of New Asia Bancorp and on other matters affecting New Asia Bancorp.
The merger will transfer control of New Asia Bancorp to Cathay. If the merger
occurs, you will become a stockholder of Cathay with a percentage ownership of
Cathay that is much smaller than your percentage ownership of New Asia Bancorp.
Because of this, you will no longer be able to influence the management policies
of New Asia Bancorp's operations (to the extent you were able to do so before
the merger), and as a stockholder of Cathay with a small ownership percentage,
you will not be able to influence the management policies of Cathay.
15
NEW ASIA BANCORP SPECIAL STOCKHOLDERS' MEETING
PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus is being furnished to you in connection
with the solicitation of proxies by the New Asia Bancorp board of directors in
connection with the special meeting of stockholders.
This proxy statement/prospectus is first being furnished to New Asia
Bancorp's stockholders on or about August 15, 2006.
DATE, TIME, PLACE
The New Asia Bancorp special meeting of stockholders will be held on
September 23, 2006 at 10:00 a.m., local time, at 222 W. Cermak Rd., Chicago, IL
60616.
As described below under "Vote Required," approval of the Agreement and
Plan of Merger requires the affirmative vote of not less than a majority of the
shares of New Asia Bancorp common stock that are outstanding and entitled to
vote on the record date. If a quorum is not present at the special meeting,
either in person or by proxy, to approve the Agreement and Plan of Merger, New
Asia Bancorp may adjourn or postpone the meeting in order to permit further
solicitation of proxies by New Asia Bancorp. The persons appointed as proxies on
the form accompanying this document are authorized to vote to approve such
adjournment or postponement, unless the proxy appointing them instructs them to
vote against approval of the Agreement and Plan of Merger.
PURPOSE
At the special meeting, New Asia Bancorp stockholders will consider and
vote on a proposal to approve the Agreement and Plan of Merger.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
The New Asia Bancorp board of directors has fixed the close of business on
August 3, 2006 as the record date for determining the holders of shares of New
Asia Bancorp common stock entitled to notice of and to vote at the special
meeting. At the close of business on the record date, there were 719,762 shares
of common stock issued and outstanding held by 144 holders of record. Holders of
record of New Asia Bancorp common stock on the record date are entitled to one
vote per share, and are also entitled to exercise dissenters' rights if certain
procedures are followed. See "The Merger -- Dissenters' Rights" and APPENDIX B.
VOTE REQUIRED
The affirmative vote of not less than a majority of all shares of New Asia
Bancorp common stock outstanding and entitled to vote on the record date is
required to approve the Agreement and Plan of Merger. More than a majority of
the outstanding shares of New Asia Bancorp common stock must be present, either
in person or by proxy, in order to constitute a quorum for the meeting. For this
purpose, abstentions are counted in determining the shares present at the
meeting. As of the record date, New Asia Bancorp directors and executive
officers and their affiliates owned and were entitled to vote approximately
481,581 shares of New Asia Bancorp common stock, representing approximately 67%
of the outstanding shares of New Asia Bancorp common stock. Certain directors
and executive officers of New Asia Bancorp who beneficially own and have the
right to vote 404,171 shares, or approximately 56% of the shares entitled to be
voted at the meeting, have agreed to vote their shares in favor of approval of
the Agreement and Plan of Merger.
For voting purposes, however, only shares actually voted for the approval
of the Agreement and Plan of Merger will be counted as favorable votes in
determining whether the Agreement and Plan of Merger is approved by the holders
of New Asia Bancorp common stock. ABSTENTIONS, AS WELL AS UNVOTED SHARES, WILL
HAVE THE SAME EFFECT AS VOTES AGAINST APPROVAL OF THE AGREEMENT AND PLAN OF
MERGER.
VOTING, SOLICITATION AND REVOCATION OF PROXIES
If the enclosed proxy card is duly executed and received in time for the
special meeting, the shares represented by the proxy will be voted in accordance
with the instruction given. If no instruction is given, it is the intention of
the persons named in the proxy to vote the shares represented by the proxy FOR
the approval of the Agreement and Plan of Merger and in the proxy's discretion
on any other matter coming before the meeting. Any proxy given by a stockholder
may be revoked before its exercise by:
16
o written notice to the Secretary of New Asia Bancorp;
o a later-dated proxy; or
o attending the special meeting and voting in person.
New Asia Bancorp is soliciting the proxy for the special meeting on behalf
of the New Asia Bancorp board of directors. New Asia Bancorp will bear the cost
of solicitation of proxies from its stockholders. In addition to using the
mails, New Asia Bancorp may solicit proxies by personal interview, telephone and
facsimile. New Asia Bancorp does not expect to pay any compensation for the
solicitation of proxies.
THE MERGER
The following is a brief description of the material aspects of the merger.
There are other aspects of the merger that are not discussed below, but that are
contained in the Agreement and Plan of Merger. You are being asked to approve
the Agreement and Plan of Merger, and you are urged to read the Agreement and
Plan of Merger carefully. The Agreement and Plan of Merger is attached to this
proxy statement/prospectus as APPENDIX A and is incorporated by reference into
this document.
BACKGROUND OF THE MERGER
As part of New Asia Bancorp's ongoing effort to improve its community
banking franchise and enhance stockholder value, New Asia Bancorp's board of
directors and management have periodically reviewed various strategic options
available to New Asia Bancorp, including, among other things, continued
independence and a strategic merger with or acquisition by another financial
institution. In the course of these periodic reviews, New Asia Bancorp's board
of directors and management have considered the pro forma effect of various
future strategies on earnings per share, book value per share, return on equity
and other pertinent financial ratios, compared quantitative measures of New Asia
Bancorp's performance with those of other financial institutions and monitored
trends in the mergers and acquisitions environment for local, regional and
national financial institutions. New Asia Bancorp's board of directors
periodically received information about companies that were possible merger
partners for, and companies that were interested in, New Asia Bancorp.
During the normal course of its business, New Asia Bancorp received
inquiries regarding its willingness to consider acquisition by, or affiliation
with, other financial institutions. Consistent with the board of directors'
fiduciary obligations to its stockholders, New Asia Bancorp considered such
inquiries and evaluated the amount and form of consideration proposed, the
seriousness of the proposal, the likelihood the proposal could be consummated,
expected results from future operations and other considerations and factors
deemed relevant by New Asia Bancorp's board of directors and management. New
Asia Bancorp formulated its business plan with the intent of providing maximum
value to its stockholders by enhancing its franchise value and expanding its
business operations. New Asia Bancorp's board of directors has continuously
evaluated the cost of adding additional financial products and alternative
delivery methods in an effort to remain competitive in the marketplace, while
implementing its growth strategy and continuing to deliver New Asia Bank's
current array of services to its customers and provide competitive returns to
New Asia Bancorp's stockholders.
In 2004, facing regulatory uncertainties stemming from New Asia Bank
entering into a Written Agreement with the Federal Reserve Bank of Chicago and
the Illinois Department of Financial and Professional Regulation, New Asia
Bancorp's board of directors decided to engage Hovde Financial, Inc., an outside
financial advisor, to evaluate the then-current banking environment, financial
services industry trends, merger and acquisition activity within the industry,
and provide advice regarding New Asia Bancorp's strategic alternatives,
including, but not limited to, evaluation of a possible merger with a larger
institution and a sale of one or more of its branch locations. In the following
months, the board of directors of New Asia Bancorp worked with Hovde to elicit
interest from a group of logical prospective strategic partners, both in-market
and out-of-market. Cathay was one of the parties contacted. Ultimately, New Asia
Bancorp received inquiries from six parties ranging from desire to purchase New
Asia Bancorp to an acquisition of just one branch. At that time, Cathay also
expressed an interest in developing discussions with New Asia Bancorp but
ultimately did not submit a formal expression of interest. One of the parties
that did submit an expression of interest was CFS Bancorp in Munster, Indiana,
for the purchase of the Darien branch. After evaluating all the offers and
comparing the various alternatives available to New Asia Bancorp, the board of
directors decided to proceed with the sale of the Darien branch to CFS and to
remain independent for the
17
foreseeable future. The branch transaction with CFS was announced on July 2,
2004, and consummated on September 30, 2004.
Going forward, Ben Wong, Chairman of New Asia Bancorp, periodically
updated the representatives at Hovde in terms of New Asia Bancorp's operational
progress. In particular, in March 2006, Mr. Wong contacted Eugene Katz, an
investment banker at Hovde, to apprise him of the Written Agreement being lifted
from New Asia Bank. Mr. Wong and Mr. Katz then decided to contact Cathay to
inquire as to whether Cathay would be interested in restarting discussions with
New Asia Bancorp.
On March 22, 2006, Mr. Katz met in Los Angeles with the senior management
of Cathay. He updated them on the progress of New Asia Bank in terms of
resolving its regulatory issues and conveyed Mr. Wong's continued interest in
merging with Cathay.
In the following weeks, financial information was exchanged between the
representatives of Hovde and Cathay. In late April 2006, Dunson Cheng, CEO of
Cathay, telephoned Mr. Wong to discuss Cathay's interest in New Asia Bancorp and
inquire about the Chicago market. On May 13, 2006, Mr. Cheng met in Chicago with
Mr. Wong and they discussed the mutual benefits of a possible merger.
Continued dialogue resulted in Cathay's submitting an expression of
interest for $22.6 million on June 6, 2006, subject to completion of diligence
and based on certain assumptions. After further negotiations, Cathay resubmitted
another expression of interest for $23.75 million on June 8, 2006, subject to
completion of diligence and based on certain assumptions. On June 14, 2006,
Cathay provided the board of directors of New Asia Bancorp with a draft of the
definitive merger agreement and the voting agreement.
On June 17, 2006, representatives of Hovde met with the board of directors
of New Asia Bancorp to discuss the expression of interest from Cathay. Hovde
summarized the perceived advantages and disadvantages of the Cathay proposal.
Also present at the meeting were representatives from New Asia Bancorp's outside
legal counsel, Schiff Hardin LLP, who gave a presentation regarding the board's
fiduciary duties to New Asia Bancorp's stockholders in the context of possible
strategic alternatives. As part of the decision process, the board of directors
of New Asia Bancorp considered the aggregate value of the proposal, the form of
the consideration offered and Cathay's ability to complete the transaction in a
timely manner, as well as its community banking focus and general culture.
During that meeting, the board of directors considered the possibility that an
affiliation by New Asia Bancorp with a larger entity might result in improved
stockholder value as compared to continuation as an independent, privately held
company. The board of directors also considered such factors as the competitive
advantages of operating as part of a larger financial institution, including the
ability to engage in larger loan transactions, the ability to facilitate trade
finance business and the stronger capital position of a larger company. Based on
this information, New Asia Bancorp's board of directors concluded that
continuing to explore a merger with Cathay provided a good strategic opportunity
for New Asia Bancorp and its stockholders. The board of directors of New Asia
Bancorp then authorized Mr. Wong and outside director Mark Hanket to work with
New Asia Bancorp's representatives at Hovde and Schiff Hardin in negotiating a
definitive merger agreement with Cathay.
Following the meeting, on June 23, 2006, Cathay and New Asia Bancorp
executed an confidentiality agreement and Hovde invited Cathay to conduct due
diligence and to engage in further discussions regarding a possible transaction.
Management of New Asia Bank provided Cathay with requested due diligence
information and met with representatives of Cathay in Chicago on June 23, 2006.
Over the next two weeks, with the assistance from its financial and legal
advisors, New Asia Bancorp negotiated the terms of a definitive merger agreement
and voting agreements with representatives of Cathay. On July 1, 2006, New Asia
Bancorp's board of directors held a meeting that was also attended by
representatives of Hovde and Schiff Hardin. The meeting included a detailed
discussion of the proposed transaction with Cathay, a presentation of certain
materials provided by Hovde and a description by Schiff Hardin of the terms of
the current draft of the definitive merger agreement and the voting agreements.
Hovde provided a financial analysis of the proposed transaction and told New
Asia Bancorp's board of directors that, upon execution of the merger agreement,
Hovde was prepared to deliver a written opinion as to the fairness of the
proposed merger consideration to New Asia Bancorp's stockholders from a
financial point of view. Schiff Hardin reviewed legal aspects of the proposed
transaction and the current drafts of the definitive merger agreement and the
voting agreements with New Asia Bancorp's board of directors and answered
directors' questions. At this time, the board of directors also examined
Cathay's desire to have Mr. Wong enter into an ongoing employment and noncompete
agreement and learned of Cathay's willingness to institute transaction bonuses
for six critical New Asia Bank employees in addition to any
18
severance such employees may be due. After the conclusion of this presentation
and discussion, New Asia Bancorp's board of directors unanimously approved the
definitive merger agreement but noted that there remained an open issue as to
whether certain tax credits that were available to New Asia Bank would be
available to Cathay following the merger.
Further dialogue ensued over the next few days between the directors of
New Asia Bancorp, Cathay and their respective advisors. After additional
deliberations, the parties concluded that they could not determine with
certainty whether the tax credits available to New Asia Bank would be available
to Cathay after the merger and agreed to reduce the merger consideration to
$23.5 million or $32.60 per share to reflect this fact. The board of directors
of New Asia Bancorp held a telephonic meeting on July 6, 2006 to discuss the
change to the amount of the merger consideration. At this time, Hovde confirmed
that it still believed that the merger consideration, as revised, was fair to
New Asia Bancorp from a financial point of view, and the board of directors
authorized Mr. Wong, Chairman of the Board, to execute the definitive merger
agreement on behalf of New Asia Bancorp.
The definitive merger agreement was executed, and a press release was
issued on July 6, 2006, announcing the proposed affiliation with Cathay.
CATHAY'S REASONS FOR THE MERGER
In reaching its determination to approve the Agreement and Plan of Merger,
the Cathay board of directors considered a number of factors. Following is a
description of each of the material factors that the Cathay board of directors
believes favor the merger:
o its knowledge of Cathay's business, operations, financial condition,
earnings and prospects and of New Asia Bancorp's business, operations,
financial condition, earnings and prospects, taking into account the
results of Cathay's due-diligence review of New Asia Bancorp and New
Asia Bank, including Cathay's assessments of New Asia Bank's credit
policies, asset quality, adequacy of loan loss reserves, interest rate
risk and litigation;
o the fact that Chicago is the third largest city in the country and a
central economic hub in Cathay's national expansion strategy and the
acquisition will present a new market opportunity for Cathay;
o the merger is intended to qualify as a tax-free reorganization for
federal income tax purposes;
o management's assessment that the merger will likely meet certain
criteria they deem necessary for a successful merger -- strategic fit,
acceptable execution risk and financial benefits to Cathay and its
shareholders;
o Cathay will effectuate the merger partially through the issuance of
equity securities, and New Asia Bancorp stockholders would own
approximately 0.6% of the combined company on a fully diluted basis;
o the combined branch network of the two companies, which is expected to
allow for more effective marketing and customer convenience;
o the likelihood of a successful integration of New Asia Bank's
business, operations and workforce with those of Cathay Bank and of
successful operation of the combined company despite the challenges of
such integration, and the belief that customer disruption in the
transition phase would not be significant due to the complementary
nature of the markets served by Cathay Bank and New Asia Bank;
o the Agreement and Plan of Merger contains provisions designed to limit
the ability of the New Asia Bancorp board of directors to entertain
third-party acquisition proposals and provisions providing for payment
of a $1,650,000 termination fee if the merger agreement is terminated
under certain circumstances;
o the fact that certain directors and executive officers of New Asia
Bancorp who beneficially own and have the right to vote approximately
56% of the shares entitled to be voted at the meeting have agreed to
vote their shares in favor of approval of the Agreement and Plan of
Merger;
o the ability to retain key New Asia Bancorp management personnel,
including Mr. Wong; and
o its belief that the overall terms of the Agreement and Plan of Merger
are fair to Cathay.
19
The Cathay board of directors also considered certain potentially negative
factors that could arise from the proposed merger. The material potentially
negative factors considered were as follows:
o that the merger consideration is fixed, regardless of the value of
Cathay common stock, and, accordingly, any decrease in the value of
Cathay common stock will increase the number of shares that Cathay is
required to issue;
o that the Agreement and Plan of Merger provides that New Asia Bancorp
may terminate the Agreement and Plan of Merger, in response to a bona
fide written acquisition proposal not solicited in violation of the
Agreement and Plan of Merger that the board believes in good faith
constitutes a "superior proposal";
o the need to obtain New Asia Bancorp stockholder and regulatory
approvals in order to complete the transaction; and
o the risk that the anticipated benefits of the merger might not be
fully realized.
The foregoing discussion of the factors considered by the Cathay board of
directors is not intended to be exhaustive, but rather includes the material
factors considered by the Cathay board of directors. In reaching its decision to
approve the Agreement and Plan of Merger, the merger and the other transactions
contemplated by the Agreement and Plan of Merger, the Cathay board of directors
did not quantify or assign any relative weights to the factors considered, and
individual directors may have given different weights to different factors. The
Cathay board of directors considered all these factors as a whole, including
discussions with, and questioning of, Cathay management and Cathay's legal
advisors, and, overall, considered the factors to be favorable to, and to
support, its determination.
NEW ASIA BANCORP'S REASONS FOR THE MERGER; RECOMMENDATION OF, AND FACTORS
CONSIDERED BY, NEW ASIA BANCORP'S BOARD OF DIRECTORS
The New Asia Bancorp board of directors believes the merger is in the best
interests of New Asia Bancorp and the New Asia Bancorp stockholders. The New
Asia Bancorp board of directors unanimously recommends that New Asia Bancorp
stockholders vote FOR the approval of the Agreement and Plan of Merger.
In reaching its determination to approve the Agreement and Plan of Merger,
the New Asia Bancorp board of directors consulted with its management and its
financial and legal advisors and considered a number of factors. Following is a
description of each of the material factors that the New Asia Bancorp board of
directors believes favor the merger:
o TERMS OF THE MERGER. The terms of the merger, including the
consideration being paid, the structure of the merger and the fact
that, when the merger was publicly announced, the aggregate
consideration being paid to New Asia Bancorp stockholders represented
a premium over the last known sales price for shares of New Asia
Bancorp.
o FAIRNESS OPINION. Hovde Financial, Inc.'s opinion, discussed below in
"Opinion of New Asia Bancorp's Financial Advisor," stating that, based
upon and subject to the assumptions made, matters considered and
qualifications and limitations stated in the opinion, as of July 6,
2006, the merger consideration was fair to New Asia Bancorp
stockholders from a financial point of view.
o LIQUIDITY. The expectation that, as a NASDAQ-listed security, Cathay
common stock will provide greater liquidity for New Asia Bancorp
stockholders than their current investment.
o PRODUCTS AND SERVICES. The fact that New Asia Bancorp customers would
be afforded new products and services not previously available. For
instance, larger credit relationships, international banking services
and enhanced cash management services will be available.
o CORPORATE VALUES. The belief that Cathay and New Asia Bancorp share a
common vision of the importance of customer service and local
decision-making and that management and employees of New Asia Bancorp
and Cathay possess complementary skills and expertise.
o COMPETITIVE ISSUES. The belief that joining forces with Cathay will
enable New Asia Bancorp to better meet the competition in New Asia
Bancorp's market, which has increased in the past few years and is
expected to increase in the future as other larger banks enter the
market.
20
o FUTURE PROSPECTS. The New Asia Bancorp board of directors believes
that future earnings prospects will be stronger on a combined basis.
In addition, affiliations with Cathay will offer expansion
opportunities not currently available.
o OTHER STRATEGIES. The alternatives to the merger, and the timing and
likelihood of success in trying to achieve such alternatives.
o REORGANIZATION. The expectation that the merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code.
o RISKS OF REMAINING INDEPENDENT. The New Asia Bancorp board of
directors considered the risks and costs associated with remaining an
independent bank.
o APPROVALS. The likelihood of receiving required regulatory approvals
in a timely fashion and the likelihood that the merger would be
completed.
In the course of its deliberations regarding the merger, the New Asia
Bancorp board of directors also considered the following information, which the
board of directors determined did not outweigh the benefits to New Asia Bancorp
and its stockholders expected to be provided by the merger:
o BUSINESS INTERRUPTION. The possible disruption to New Asia Bancorp's
business that may result from the announcement of the merger and the
resulting distraction of its management's and employees' attention
from the day-to-day operations of New Asia Bancorp's business.
o INTEGRATION ISSUES. The difficulty inherent in integrating two
businesses and the risk that the cost efficiencies, synergies and
other benefits expected to be obtained from the merger may not be
fully realized.
o TERMINATION FEES. Certain provisions in the Agreement and Plan of
Merger require New Asia Bancorp to pay a termination fee of $1,650,000
in certain circumstances, including where the Agreement and Plan of
Merger is terminated following the receipt of a superior proposal and
the superior proposal is accepted.
o RISK OF TERMINATION. The possibility that the merger might not be
completed and the effect of the resulting announcement of the
termination of the Agreement and Plan of Merger on, among other
things, New Asia Bancorp's operating results, particularly in light of
the costs incurred in connection with the transaction.
o POSSIBLE LOSS OF KEY EMPLOYEES. The possible loss of key employees of
New Asia Bank that may occur as a result of the announcement of the
merger.
o OTHER MATTERS. Other matters described in the sections entitled "Risk
Factors."
The foregoing discussion of the information considered by the New Asia
Bancorp board of directors is not intended to be exhaustive but includes all of
the material factors considered by the board of directors. In reaching its
determination to approve and recommend the Agreement and Plan of Merger, the New
Asia Bancorp board of directors did not assign any relative or specific weights
to the factors considered in reaching that determination, and individual
directors may have given differing weights to different factors. Given the
above, the New Asia Bancorp board of directors determined that the Agreement and
Plan of Merger is in the best interests of New Asia Bancorp and its stockholders
and unanimously approved the merger.
OPINION AND COMPENSATION OF NEW ASIA BANCORP'S FINANCIAL ADVISOR
On May 13, 2004, New Asia Bancorp formalized its retention of Hovde to
provide its financial services to New Asia Bancorp, including a potential sale
of New Asia Bancorp. Hovde has delivered to the board of directors of New Asia
Bancorp its opinion that, based upon and subject to the various considerations
set forth in its written opinion dated July 6, 2006, the merger consideration to
be paid to the stockholders of New Asia Bancorp is fair from a financial point
of view as of such date. In requesting Hovde's advice and opinion, no
limitations were imposed by New Asia Bancorp upon Hovde with respect to the
investigations made or procedures followed by it in rendering its opinion. THE
FULL TEXT OF THE OPINION OF HOVDE, DATED JULY 6, 2006, WHICH DESCRIBES THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED HERETO AS APPENDIX C. NEW ASIA BANCORP'S
STOCKHOLDERS SHOULD READ THIS OPINION IN ITS ENTIRETY.
21
Hovde is a nationally recognized investment banking firm and, as part of
its investment banking business, is continually engaged in the valuation of
financial institutions in connection with mergers and acquisitions, private
placements and valuations for other purposes. As a specialist in securities of
financial institutions, Hovde has experience in, and knowledge of, banks,
thrifts and bank and thrift holding companies. The board of directors of New
Asia Bancorp selected Hovde to act as its financial advisor in connection with
the merger on the basis of the firm's reputation and expertise in transactions
such as the merger.
Hovde received a fee from New Asia Bancorp for performing a financial
analysis of the merger and rendering a written opinion to the board of directors
of New Asia Bancorp as to the fairness, from a financial point of view, of the
merger to the stockholders of New Asia Bancorp. Hovde received all of such fee
subsequent to Hovde's presentation of its fairness opinion and analysis to the
board of directors of New Asia Bancorp. In addition, New Asia Bancorp has agreed
to pay Hovde fees upon the consummation of the merger equal to (1) 1.5% of such
portion of the total consideration received by the stockholders of New Asia
Bancorp as is less than $15 million, plus (2) 3% of such portion of the total
consideration received by the stockholders of New Asia Bancorp as is equal to or
greater than $15 million but less than $20 million, plus (3) 5% of such portion
of the total consideration received by the stockholders of New Asia Bancorp as
is equal to or greater than $20 million. Based on consideration to be received
by the stockholders of New Asia Bancorp of $23.5 million in the aggregate, the
fee payable to Hovde Financial LLC would be approximately $598,212. In addition
to its fees and regardless of whether the merger is consummated, New Asia
Bancorp has agreed to reimburse Hovde for its reasonable out-of-pocket expenses.
New Asia Bancorp has also agreed to indemnify Hovde against any claims, losses
and expenses arising out of the merger or Hovde's engagement that did not arise
from Hovde's gross negligence or willful misconduct.
HOVDE'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE MERGER CONSIDERATION, AND, AS SUCH, DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER OF NEW ASIA BANCORP AS TO HOW THE STOCKHOLDER
SHOULD VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE OPINION OF HOVDE SET
FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION.
The following is a summary of the analyses performed by Hovde in connection
with its fairness opinion. Certain of these analyses were discussed in a
presentation to the board of directors of New Asia Bancorp by Hovde. The summary
set forth below does not purport to be a complete description of either the
analyses performed by Hovde in rendering its opinion or the presentation
delivered by Hovde to the board of directors of New Asia Bancorp, but it does
summarize all of the material analyses performed and presented by Hovde.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances. In arriving at its
opinion, Hovde did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Hovde believes that its
analyses and the following summary must be considered as a whole and that
selecting portions of its analyses, without considering all factors and
analyses, could create an incomplete view of the process underlying the analyses
set forth in its report to the board of directors of New Asia Bancorp and its
fairness opinion.
In performing its analyses, Hovde made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of New Asia Bancorp and Cathay.
The analyses performed by Hovde are not necessarily indicative of actual value
or actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Hovde's analysis of the fairness of the merger consideration, from a financial
point of view, to the stockholders of New Asia Bancorp. The analyses do not
purport to be an appraisal or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade at the present
time or at any time in the future. Hovde's opinion does not address the relative
merits of the merger as compared to any other business combination in which New
Asia Bancorp might engage. In addition, as described above, Hovde's opinion to
the board of directors of New Asia Bancorp was one of many factors taken into
consideration by the board of directors of New Asia Bancorp in making its
determination to approve the merger agreement.
The opinion expressed by Hovde was based on market, economic and other
relevant considerations as they existed and could be evaluated as of the date of
the opinion. Events occurring after the date of issuance of the opinion,
including changes affecting the securities markets, the results of operations or
material changes in the financial condition of either New Asia Bancorp or Cathay
could materially affect the assumptions used in preparing this opinion.
22
During the course of its engagement, and as a basis for arriving at its
opinion, Hovde reviewed and analyzed material bearing upon the financial and
operating conditions of New Asia Bancorp and Cathay and material prepared in
connection with the merger, including, among other things, the following:
o the merger agreement and all attachments thereto;
o certain historical publicly available information concerning New Asia
Bancorp and Cathay;
o certain internal financial statements and other financial and
operating data concerning New Asia Bancorp and Cathay;
o certain other information provided to Hovde by members of the senior
management of New Asia Bancorp for the purpose of reviewing the future
prospects of New Asia Bancorp, including financial forecasts related
to its business, earnings, assets and liabilities;
o the historical market prices and trading volumes of Cathay common
stock;
o the nature and terms of recent merger and acquisition transactions to
the extent publicly available, involving banks, thrifts and bank and
thrift holding companies that Hovde considered relevant; and
o the pro forma ownership of Cathay common stock by the holders of New
Asia Bancorp common stock relative to the pro forma contribution of
New Asia Bancorp's assets, liabilities, equity and earnings.
In addition, Hovde:
o analyzed the pro forma impact of the merger on the combined company's
earnings, consolidated equity capitalization and financial ratios;
o took into account its assessment of general economic, market and
financial conditions and its experience in other transactions, as well
as its knowledge of the commercial banking industry and its general
experience in securities valuations; and
o performed such other analyses and considered other factors as it
deemed appropriate.
In rendering its opinion, Hovde assumed, without independent verification,
the accuracy and completeness of the financial and other information provided to
it and relied upon the accuracy of the representations of the parties contained
in the Agreement and Plan of Merger. Hovde also assumed the financial forecasts
furnished to or discussed with Hovde by New Asia Bancorp and Cathay were
reasonably prepared and reflected the best currently available estimates and
judgments of senior management of New Asia Bancorp and Cathay as to the future
financial performance of New Asia Bancorp, Cathay or the combined company, as
the case may be. Hovde has not made any independent evaluation or appraisal of
any properties, assets or liabilities of New Asia Bancorp.
CONTRIBUTION ANALYSIS. Hovde prepared a contribution analysis showing
percentages of assets, net loans, deposits, equity and tangible equity at April
30, 2006 for New Asia Bancorp and March 31, 2006 for Cathay, and the trailing
twelve months and estimated calendar-year 2006 net income on GAAP basis that
would be contributed to the combined company on a pro forma basis. These
contribution percentages were compared to the approximately 1.54%
(hypothetically assuming all New Asia Bancorp shares were to be converted
entirely into Cathay common stock) of the pro forma common shares outstanding
that holders of New Asia Bancorp common stock would own.
NEW ASIA BANCORP CATHAY
(%) (%)
------------------- -------------------
Assets 2.00 98.00
Net Loans 2.16 97.84
Deposits 2.30 97.70
Equity 1.40 98.60
Tangible Equity 2.15 97.85
LTM Net Income 0.61 99.39
2006 Estimated Net Income 0.34 99.66
23
ANALYSIS OF SELECTED TRANSACTIONS. As part of its analysis, Hovde reviewed
three groups of comparable transactions. The first peer group included
transactions, which have occurred since January 1, 1998, that involved target
banks across the nation that focus on serving the Chinese population that had
total assets less than $3 billion (the "Chinese Merger Group"). This Chinese
Merger Group consisted of the following 17 transactions:
BUYER SELLER
---------------------------- --------------------------------
Cathay General Bancorp Inc. Great Eastern Bank
East West Bancorp Inc. Standard FSB
Summit Bank Corp. Concord Bank NA
UCBH Holdings Inc. Asian American B&TC
East West Bancorp Inc. United National Bank
MetroCorp Bancshares Inc. First United Bank
UCBH Holdings Inc. Pacifica Bancorp Inc.
East West Bancorp Inc. Trust Bancorp Inc.
Cathay Bancorp Inc. GBC Bancorp
UCBH Holdings Inc. First Continental Bank
East West Bancorp Inc. Pacific Business Bank
UCBH Holdings Inc. Bank of Canton of California
East West Bancorp Inc. Prime Bank
East West Bancorp Inc. American International Bank
East West Bancorp Inc. First Central Bank, NA
UCBH Holdings Inc. USB Holdings
Summit Bank Corp. California Security Bank
Hovde also reviewed comparable transactions involving banks headquartered
in the Chicago metropolitan area announced since January 1, 2002, in which the
total assets of the seller were less than $250 million (the "Chicago Merger
Group"). This Chicago Merger Group consisted of the following 14 transactions:
BUYER SELLER
----------------------------- ----------------------------------
ShoreBank Corp. Greater Chicago Bank
First Banks, Inc. TEAMCO
BankFinancial Corp University National Bank
First Banks Inc. Northway State Bank
Princeton National Bancorp. Somonauk FSB Bancorp Inc.
Metropolitan Bank Group Inc. Allegiance Community Bank,
Metropolitan Bank Group Inc. Citizens Bank Illinois NA
BMO Financial Group Lakeland Financial Corp.
Northern States Financial Corp Round Lake Bankcorp Inc.
Wintrust Financial Corp. Village Bancorp Inc.
Wintrust Financial Corp. Advantage National Bancorp
State Financial Services Corp. Lakes Region Bancorp Inc.
Metropolitan Bank Group Inc. Firstcom Bancorp Inc.
Investor group First Schaumburg Bancorp. Inc.
Hovde then reviewed comparable transactions involving banks headquartered
in the metropolitan areas of the Midwestern United States (Iowa, Illinois,
Indiana, Kansas, Michigan, Minnesota, Missouri, North Dakota, Nebraska, Ohio,
Oklahoma, South Dakota and Wisconsin) announced since January 1, 2002, in which
the total assets of the seller were less than $250 million and the seller's ROA
was less than 50 b.p. (the "Underperforming Merger Group"). This Underperforming
Merger Group consisted of the following 21 transactions:
BUYER SELLER
-------------------------------- ----------------------------------
First Banks, Inc. TEAMCO
Investor Group Ridgestone Financial Services
First Banks, Inc. Pittsfield Community Bncp Inc
Whitaker Bk Corp. of Kentucky Berea National Bank
North Shore Bank FSB IL St Bk of Lake in the Hills
Menahga Bancshares Inc. Sebeka Bancshares Inc.
24
BUYER SELLER
-------------------------------- ----------------------------------
Security State Bk Hldg Co. CNB Inc.
First National Bancorp Inc. Nobles Agency Inc.
Dearborn Bancorp Inc. Bank of Washtenaw
Pilot Bancorp Inc. Farmers NB of Winfield
Lincoln Bancorp First Shares Bancorp Inc.
MainSource Financial Group Peoples Financial Corp.
Wayne Savings Bancshares Stebbins Bancshares Inc.
Fentura Financial Inc. West Michigan Financial Corp.
ColoEast Bankshares Inc. First National Bank of Tribune
Wintrust Financial Corp. Village Bancorp Inc.
Kankakee Bancorp Inc. Aviston Financial Corp.
Ctzns Union Bncp Shelbyvlle Larue Bancshares Inc.
MainSource Financial Group First Community Bancshares Inc
Reliance Bancshares, Inc. Bank of Godfrey
Metropolitan Bank Group Inc. Firstcom Bancorp Inc.
Hovde calculated the medians of the following relevant transaction ratios
in the Chinese Merger Group, the Chicago Merger Group and the Underperforming
Merger Group: the multiple of the offer value to the acquired company's book
value; the multiple of the offer value to the acquired company's tangible book
value; the multiple of the offer value to the acquired company's earnings for
the twelve months preceding the announcement date of the transaction; and the
tangible book value premium to core deposits. Hovde compared these multiples
with the corresponding multiples for the merger, valuing the per share
consideration that would be received pursuant to the merger agreement at $32.60
per diluted share of New Asia Bancorp. In calculating the multiples for the
merger, Hovde used New Asia Bancorp's earnings for the twelve months ended April
30, 2006 and New Asia Bancorp's tangible book value and core deposits as of
April 30, 2006. The results of this analysis are as follows:
OFFER VALUE TO:
_________________________________________________________
RATIO OF TANGIBLE
12 MONTHS BOOK VALUE
TANGIBLE PRECEDING PREMIUM TO CORE
BOOK VALUE BOOK VALUE EARNINGS DEPOSITS
(X) (X) (X) (X)
__________ __________ _________ _______________
Cathay...................................... 2.08 2.08 35.8 13.7
Chinese Merger Group median.................. 2.04 2.07 19.7 25.6
Chicago Merger Group median.................. 2.14 2.20 22.6 14.7
Underperforming Merger Group median.......... 1.79 1.87 40.1 8.1
DISCOUNTED CASH FLOW ANALYSIS. Hovde estimated the present value of all
shares of New Asia Bancorp's common stock by utilizing New Asia Bancorp's
estimated future earnings stream. Reflecting New Asia Bancorp's internal
projections and historical averages, Hovde assumed a 5.0% annual asset growth
and a $300 thousand sequential annual core net income growth, which resulted in
2006-2010 net income of $400 thousand, $700 thousand, $1.0 million, $1.3
million, and $1.6 million, respectively. The dividends were projected to remain
at the current 0% core level. In all cases, the present value of these cash
flows was calculated based on a range of discount rates of 12.0%, 13.0%, and
14.0%. These rates and values were chosen to reflect different assumptions
regarding the required rates of return of holders or prospective buyers of New
Asia Bancorp's common stock.
Hovde first analyzed the value of New Asia Bancorp's common shares from a
perpetual growth perspective using a 5.0% annual asset and net income growth
assumptions post-2010. This analysis resulted in a range of values of $17.87 to
$23.59 per share with a midpoint of $20.37. Going further, Hovde derived the
take-out value of New Asia Bancorp's common stock using both the terminal value
earnings multiple and terminal value book value approaches. In arriving at the
terminal value of New Asia Bancorp's earnings stream in 2010, Hovde assumed a
terminal earnings value multiple at a range of 19.0x, 20.0x and 21.0x.
Similarly, in arriving at the terminal value of
25
New Asia Bancorp's book value in 2010, Hovde assumed a terminal book value
multiple at a range of 190.0%, 200.0% and 210.0%. The terminal values were then
discounted, along with annual cash flows, to arrive at the present value for New
Asia Bancorp's common stock. These analyses and its underlying assumptions
yielded a per-share range of value for New Asia Bancorp's common stock of
approximately $23.09 to $25.23 with a midpoint of $24.13 based on the earnings
approach and $23.32 to $25.48 with a midpoint of $24.37 based on the book value
approach.
COMPARABLE COMPANY ANALYSIS. Using publicly available information, Hovde
compared the stock market valuation and operating characteristics of Cathay on
stand-alone basis with other nationwide banks focused on serving the Asian
population, predominantly of the Chinese and Korean descent (the "Comparable
Group"). The Comparable Group consisted of the following eight publicly traded
institutions:
COMPANY NAME HEADQUARTERS TICKER
------------------------------ ------------------- ---------
Center Financial Corporation Los Angeles, CA CLFC
East West Bancorp, Inc. Pasadena, CA EWBC
Hanmi Financial Corporation Los Angeles, CA HAFC
MetroCorp Bancshares, Inc. Houston, TX MCBI
Nara Bancorp, Inc. Los Angeles, CA NARA
Summit Bank Corporation Atlanta, GA SBGA
UCBH Holdings, Inc. San Francisco, CA UCBH
Wilshire Bancorp Inc. Los Angeles, CA WIBC
Indications of such financial performance and stock market valuation
included the calculation of price-to-book value, price-to-tangible book value,
price-to-2006 estimated GAAP earnings and price-to-2007 estimated GAAP earnings.
PRICE TO:
-------------------------------------------------
2006 2007
TANGIBLE ESTIMATED ESTIMATED
BOOK VALUE BOOK VALUE EARNINGS EARNINGS
(X) (X) (X) (%)
---------- ---------- --------- -------------
Cathay.................... 2.31 3.57 15.9 14.3
Comparable Group median... 2.59 3.30 15.5 13.9
LIQUIDITY ANALYSIS. Hovde also evaluated the liquidity aspects of Cathay
Common Stock. In particular, using the recent closing price of Cathay Common
Stock of $35.88, Hovde evaluated the daily trading patterns, including aggregate
volume and dollar value traded for Cathay Common Stock over various intervals
leading up to the merger. Finally, Hovde compared the derived values to the
aggregate amount of stock consideration to be issued to stockholders of New Asia
Bancorp (assuming a 50% stock and 50% cash election).
26
CATHAY COMMON STOCK
------------------------------------------------------
WEEKLY
AVERAGE
VOLUME AVERAGE DOLLAR VOLUME
AVERAGE AS A % OF DAILY AS A % OF
DAILY SHARES VOLUME STOCK
VOLUME OUTSTANDING TRADED CONSIDERATION
(ACTUAL) (%) ($) (%)
-------- ------------ -------- --------------
One Month............... 264,519 2.51 9,490,942 80.90
Three Months............ 197,074 1.87 7,071,015 60.27
Year-to-Date............ 173,543 1.65 6,226,723 53.07
One Year................ 208,861 1.98 7,493,933 63.88
Three Years............. 148,893 1.41 5,342,281 45.54
BASED UPON THE FOREGOING ANALYSES AND OTHER INVESTIGATIONS AND ASSUMPTIONS
SET FORTH IN ITS OPINION, WITHOUT GIVING SPECIFIC WEIGHTINGS TO ANY ONE FACTOR
OR COMPARISON, HOVDE DETERMINED THAT THE MERGER CONSIDERATION WAS FAIR FROM A
FINANCIAL POINT OF VIEW TO THE STOCKHOLDERS OF NEW ASIA BANCORP.
STRUCTURE OF THE MERGER
The Agreement and Plan of Merger provides for the merger of New Asia
Bancorp with and into Cathay, with Cathay as the surviving company, and the
subsequent merger of New Asia Bank with and into Cathay Bank, with Cathay Bank
as the surviving entity after the merger. The surviving companies will operate
under the "Cathay General Bancorp" and "Cathay Bank" names but retain the same
branch offices as New Asia Bancorp before the merger. As a result of the
mergers, each of New Asia Bancorp and New Asia Bank will cease to exist as a
separate entity.
Upon the completion of the merger, New Asia Bancorp stockholders will be
entitled to receive cash, Cathay common stock or a combination of cash and
Cathay common stock for their New Asia Bancorp common stock, as described below.
While Cathay and New Asia Bancorp believe that they will receive the necessary
regulatory approvals for the merger, there can be no assurance that such
approvals will be received or, if received, as to the timing of such approvals
or as to the ability to obtain such approvals on satisfactory terms. See "--
Conditions to the Completion of the Merger" and "-- Regulatory Requirements."
The terms of the merger were determined by Cathay and New Asia Bancorp on
the basis of arm's-length negotiations.
MERGER CONSIDERATION
The Agreement and Plan of Merger provides that, upon completion of the
merger, holders of New Asia Bancorp shares will on completion be entitled to
elect to receive (but subject to proration and adjustment as provided in the
Agreement and Plan of Merger), in consideration for each of their New Asia
Bancorp shares, either shares of Cathay common stock with a value of $32.60
(based on the average closing price during the ten consecutive trading days
preceding the fifth business day prior to the closing), cash in the amount of
$32.60 or a combination of shares of Cathay common stock and cash with a value
in the aggregate amount of $32.60 (based on the average closing price during the
ten consecutive trading days preceding the fifth business day prior to the
closing). Based on a price per share of Cathay common stock of $35.495, which
was the average closing price at the time the Agreement and Plan of Merger was
signed, those New Asia Bancorp stockholders receiving Cathay common stock would
receive a per share consideration of 0.9184 shares of Cathay common stock. If
Cathay's average closing stock price were $36.807 (which is the average closing
price of Cathay common stock from July 28, 2006 to August 10, 2006), the most
recent practicable date before mailing of this document. Those New Asia Bancorp
shareholders receiving Cathay common stock would receive 0.8857 shares of Cathay
common stock. The average closing price on which the value of the shares of
Cathay common stock will be based may vary from the closing price of Cathay
common stock on the date Cathay and New Asia Bancorp announced the merger, on
the date that this document was mailed to New Asia Bancorp stockholders, on the
date of the special meeting of the New Asia Bancorp stockholders and on the date
the merger is completed.
27
Because the number of shares of Cathay common stock issuable is dependent
on the average closing price of those shares at closing and will not be known
until immediately prior to the closing, the exact number of shares of Cathay
common stock that New Asia Bancorp stockholders will be entitled to receive will
not be known until that time. WE URGE YOU TO OBTAIN CURRENT MARKET QUOTATIONS OF
CATHAY COMMON STOCK.
No fractional shares of Cathay common stock will be issued to any holder of
New Asia Bancorp common stock upon the completion of the merger. For each
fractional share that would otherwise be issued, Cathay will pay cash in an
amount equal to the fraction multiplied by the average closing price during the
ten consecutive trading days preceding the fifth business day prior to the
closing, rounded to the nearest penny. No interest will be paid or accrued on
cash payable in lieu of fractional shares of Cathay common stock.
ELECTION PROCEDURE
ELECTION RIGHT. Subject to the allocation mechanism described in the next
section, each New Asia Bancorp stockholder will have the right to elect to
receive with respect to such stockholder's shares of New Asia Bancorp common
stock:
o Cathay common stock for all of such stockholder's shares;
o Cash for all of such stockholder's shares; or
o Cathay common stock for some shares and cash for the others.
Shares of New Asia Bancorp common stock with respect to which the holder fails
to make an effective election prior to the election deadline, or with respect to
which the holder properly revokes an effective election but fails to make a
subsequent effective election prior to the election deadline, will be deemed to
be "undesignated shares," as explained below.
A New Asia Bancorp stockholder who perfects his or her dissenters' rights
under Delaware law will receive the fair value for his or her shares in cash, as
determined pursuant to the procedures under Delaware law. See "Dissenters'
Rights" below. Any dissenting shares as to which dissenters' rights are not
properly exercised will be treated as undesignated shares.
Pursuant to the Agreement and Plan of Merger, a minimum of 45% of the
outstanding New Asia Bancorp shares will be converted into the right to receive
Cathay common stock, and a maximum of 60% of the outstanding New Asia Bancorp
will be converted into the right to receive Cathay common stock; however, if the
Cathay common stock price at closing is less than $30.92, then 45% of the New
Asia Bancorp shares will be converted into the right to receive Cathay common
stock, and the remainder will be converted into the right to receive cash.
Accordingly, there is no assurance that a holder of New Asia Bancorp common
stock will receive the form of consideration that he or she elects with respect
to all shares subject to the election.
ELECTION FORM. An Election Form and customary transmittal materials
containing instructions for use in effecting the surrender of New Asia Bancorp
stock certificates in exchange for the merger consideration and backup
withholding tax forms accompany this proxy statement/prospectus. The Election
Form allows a New Asia Bancorp stockholder to indicate the number of his or her
shares of New Asia Bancorp such stockholder elects to convert into for Cathay
common stock and the number of shares such stockholder elects to convert into
for cash, or to indicate that the stockholder makes no election. New Asia
Bancorp and Cathay will make available Election Forms to persons who become
holders of New Asia Bancorp common stock between the record date for the New
Asia Bancorp special meeting and the close of business on the day prior to the
election deadline.
Holders of New Asia Bancorp common stock who wish to elect the type of
merger consideration they will receive in the merger should carefully review and
follow the instructions set forth in the Election Form. Shares of New Asia
Bancorp common stock as to which the holder has not made a valid election prior
to the election deadline or as to which the holder has revoked an election but
has not made a subsequent valid election prior to the election deadline, which
is 5:00 p.m., Eastern Time, on September 29, 2006, will be deemed to be
undesignated shares.
If you do not properly submit your Election Form with your New Asia Bancorp
stock certificates by the election deadline, then, promptly after the closing
date of the merger, the exchange agent will mail to you a letter of transmittal
and instructions for surrendering your New Asia Bancorp stock certificates for
use in exchanging your New Asia Bancorp stock certificates for the merger
consideration.
28
To make a valid election, a New Asia Bancorp stockholder must submit a
properly completed and signed Election Form and transmittal materials so that it
is actually received by American Stock Transfer & Trust Co., Cathay's exchange
agent, on or prior to the election deadline in accordance with the instructions
on the Election Form. An Election Form will be deemed properly completed only if
an election is indicated for each share of New Asia Bancorp common stock covered
by such Election Form and only if accompanied by certificates representing all
shares of New Asia Bancorp common stock covered by the Election Form. Any
stockholder who fails to deliver a properly completed Election Form to the
exchange agent on or before the election deadline, or who fails to redeliver a
properly completed Election Form after an election has been revoked on or before
the election deadline, will not have made a valid election, and the shares of
New Asia Bancorp common stock owned by such stockholder will be deemed to be
undesignated shares.
An election may be revoked or changed by the person submitting the Election
Form prior to the election deadline. The exchange agent will have reasonable
discretion to determine whether any election, revocation or change has been
properly or timely made and to disregard immaterial defects in the Election
Forms, and any good-faith decisions of Cathay regarding these matters will be
binding and conclusive. None of Cathay, New Asia Bancorp or the exchange agent
will be under any obligation to notify any person of any defects in an Election
Form. If an election is revoked and any certificates have been transmitted to
the exchange agent, the exchange agent will, upon written request, return those
certificates to the stockholder who submitted them.
All shares of Cathay common stock issued to you in the merger will be
deemed issued as of the effective time of the merger, but until you surrender
your New Asia Bancorp stock certificates for exchange, you will not receive any
dividends or other distributions that may be declared after the effective time
with respect to the shares of Cathay common stock into which your New Asia
Bancorp shares may have been converted. Such dividends or other distributions
will accrue, however, and when you surrender your New Asia Bancorp certificates,
Cathay will pay any such unpaid dividends or other distributions, as well as any
cash into which any of your shares may have been converted, without interest.
After the effective time, there will be no transfers on the stock transfer books
of New Asia Bancorp of any shares of New Asia Bancorp common stock. If
certificates representing shares of New Asia Bancorp common stock are presented
for transfer after the completion of the merger, they will be cancelled and
exchanged for the merger consideration into which the shares of New Asia Bancorp
common stock represented by those certificates shall have been converted.
Failure to timely receive your certificates representing New Asia Bancorp common
stock may subject you to loss of your portion of the merger consideration
because it may escheat to the state where you reside.
If a certificate for New Asia Bancorp common stock has been lost, stolen or
destroyed, the exchange agent will issue the consideration properly payable
under the Agreement and Plan of Merger upon receipt of appropriate evidence as
to that loss, theft or destruction, appropriate evidence as to the ownership of
that certificate by the claimant, and reasonable assurances, such as a bond or
indemnity, satisfactory to Cathay in consultation with New Asia Bancorp, and
appropriate and customary identification.
ALLOCATION CALCULATION
Pursuant to the Agreement and Plan of Merger, a minimum of 45% of the
outstanding New Asia Bancorp shares will be converted into the right to receive
Cathay common stock, and a maximum of 60% of the outstanding New Asia Bancorp
will be converted into the right to receive Cathay common stock; however, if the
Cathay common stock price at closing is less than $30.92, then 45% of the New
Asia Bancorp shares will be converted into the right to receive Cathay common
stock, and the remainder will be converted into the right to receive cash. As a
result, even if you elect to receive all cash or all stock, you may nevertheless
receive a mix of cash and stock.
In the following discussion, "stock election shares" means shares of New
Asia Bancorp common stock with respect to which the holder has elected to
receive shares of Cathay common stock having a value of $32.60 (based on the
average closing price during the ten consecutive trading days preceding the
fifth business day prior to the closing), and "cash election shares" means
shares of New Asia Bancorp common stock with respect to which the holder has
elected to receive cash equal to $32.60. The "maximum stock conversion number"
is the maximum number of shares of New Asia Bancorp common stock that can be
converted into shares of Cathay common stock under the terms of the Agreement
and Plan of Merger, and the "minimum stock conversion number" is the minimum
number of shares of New Asia Bancorp common stock that can be converted into
shares of Cathay common stock under the terms of the Agreement and Plan of
Merger.
29
OVERSUBSCRIPTION OF THE STOCK CONSIDERATION. If the aggregate number of
stock election shares is greater than the maximum stock conversion number, then:
o All cash election shares and all undesignated shares will be converted
into the right to receive cash.
o The exchange agent will choose from among the holders of stock
election shares, pro rata in accordance with their respective numbers
of stock election shares, a sufficient number of stock election shares
to be converted into cash consideration until the number of remaining
stock election shares equals as closely as practicable the maximum
stock conversion number. Each share so chosen will be converted into
the right to receive cash, and each remaining stock election share
will be converted into Cathay common stock.
OVERSUBSCRIPTION OF THE CASH CONSIDERATION. If the aggregate number of
stock election shares is less than the minimum stock conversion number, then
o All stock election shares will be converted into shares of Cathay
common stock.
o The exchange agent will choose from among the holders of undesignated
shares, pro rata in accordance with their respective numbers of
undesignated shares, a sufficient number of undesignated shares (which
may be all undesignated shares) to be converted into Cathay stock
until the sum of such number and the number of stock election shares
equals as closely as practicable the minimum stock conversion number,
and each share so chosen will be converted into Cathay common stock.
All undesignated shares not chosen, if any, will be converted into the
right to receive cash.
o If the aggregate number of stock election shares and undesignated
shares is less than the minimum stock conversion number, then the
exchange agent will choose from among the holders of cash election
shares, pro rata in accordance with their respective numbers of cash
election shares, a sufficient number of cash election shares to be
converted into Cathay stock so that the sum of such number, the number
of all stock election shares and the number of all undesignated shares
equals as closely as practicable the minimum stock conversion number.
Each share so chosen will be converted into Cathay common stock, and
each remaining stock election share will be converted into the right
to receive cash.
NUMBER OF STOCK ELECTIONS IS GREATER THAN OR EQUAL TO THE MINIMUM STOCK
CONVERSION NUMBER AND LESS THAN OR EQUAL TO THE MAXIMUM STOCK CONVERSION NUMBER.
If the aggregate number of stock election shares is greater than or equal to the
minimum stock conversion number and less than or equal to the maximum stock
conversion number, then
o Each stock election share will be converted into Cathay common stock.
o Each cash election share and each undesignated share will be converted
into the right to receive cash.
Cathay will set forth the allocation calculations described above in a
certificate executed by the Chief Financial Officer of Cathay and furnished to
New Asia Bancorp at least two business days prior to the effective time of the
merger. Any calculation of a portion of a share of Cathay common stock shall be
rounded to the nearest ten-thousandth of a share (that is, 0.0001 of share), and
any cash payment shall be rounded to the nearest cent.
Because the stock consideration can fluctuate in value, the economic value
per share received by New Asia Bancorp stockholders who receive the Cathay
common stock may, as of the date of receipt by them, be more or less than the
amount of cash per share received by New Asia Bancorp stockholders who receive
cash.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
Consummation of the merger is subject to prior receipt of all required
approvals and consents of the merger by all applicable federal and state
regulatory authorities.
FEDERAL RESERVE SYSTEM. The merger is subject to the prior approval of or
waiver from the Federal Reserve System under Section 3 of the Bank Holding
Company Act of 1956, as amended.
Section 225.12(d)(2) of the Federal Reserve System's Regulation Y provides
that the approval of the Federal Reserve System is not required for certain bank
merger acquisitions by bank holding companies if the merger acquisition
transaction requires the prior approval of a federal supervisory agency under
the Bank Merger Act and certain other requirements are met.
30
Any transaction requiring the approval of the Federal Reserve System may
not be completed until 30 days after such approval, during which time the U.S.
Department of Justice may challenge such transaction on antitrust grounds and
seek divestiture of certain assets and liabilities. With the approval of the
Federal Reserve System and the U.S. Department of Justice, the waiting period
may be reduced to 15 days.
FDIC APPROVAL. The merger is subject to the prior written approval of the
Federal Deposit Insurance Corporation pursuant to Sections 18(c) and 44(a)(1) of
the Federal Deposit Insurance Act, as amended. In considering whether or not to
approve the merger, the FDIC will evaluate the competitive effects that the
merger will have on banking in the communities served by the banks, examine the
capital, management and earnings of the parties involved in the merger, assess
the convenience and needs of the community and take into consideration the
effectiveness of each insured party with regard to combating money-laundering
activities. Because the merger will be an interstate merger, the FDIC will also
consider Illinois law with respect to interstate bank mergers (including age
requirements), planned compliance with local filing requirements, deposit
concentration limits, the absence of an improper deposit production intent by
Cathay Bank, the Community Reinvestment Act records of both Cathay Bank and New
Asia Bank and the adequacy of Cathay Bank's capital and management.
ILLINOIS DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION APPROVAL.
Sections 22 and 30 of the Illinois Banking Act allow, with the approval of the
Illinois Commissioner of Banks and Real Estate, a bank or trust company to merge
with an Illinois state bank. The Commissioner shall not approve the merger
agreement unless he shall be of the opinion and shall find:
o That the resulting bank meets the requirements of the Illinois Banking
Act for the formation of a new bank at the proposed main banking
premises of the resulting bank;
o That the same matters exist with respect to the resulting bank that
would have been required under Section 10 of the Illinois Banking Act
for the organization of a new bank;
o That the merger agreement is fair to all persons affected; and
o That the resulting bank will be operated in a safe and sound manner.
CALIFORNIA COMMISSIONER OF FINANCIAL INSTITUTIONS APPROVAL. Sections 102,
4805.09 and 4881 of the California Financial Code allow, with the approval of
the California Commissioner of Financial Institutions, a bank or trust company
organized under the laws of another U.S. state to merge into a California state
bank. The Commissioner shall approve the application for approval of a merger,
if the Commissioner finds all of the following:
o The merger will not result in a monopoly and will not be in
furtherance of any combination or conspiracy to monopolize or to
attempt to monopolize the banking, savings association or industrial
loan business in any part of the State of California.
o The merger will not have the effect in any section of the State of
California of substantially lessening competition, tending to create a
monopoly, or otherwise being in restraint of trade.
o Upon consummation of the proposed merger, the merged bank's
stockholders' equity will be adequate and its financial condition will
be satisfactory.
o The directors and executive officers of the surviving depository
corporation will be satisfactory.
o The merged bank will afford a reasonable promise of successful
operation, and it is reasonable to believe that the merged bank will
be operated in a safe and sound manner and in compliance with all
applicable laws.
o The merger will be fair, just and equitable.
o In the case of a merger where the disappearing depository corporation
is a California saving association, the merger will not adversely
affect the total availability of financing for housing in any market
area of the disappearing savings association in California.
STATUS OF APPLICATIONS AND NOTICES. Cathay and New Asia Bancorp have filed,
or expect to file shortly, all requisite applications and notices to obtain the
regulatory approvals required in connection with the merger of Cathay and New
Asia Bancorp, as well as the merger of Cathay Bank and New Asia Bank. We cannot
assure you that all of the regulatory approvals described above will be obtained
and, if obtained, we cannot assure you as to the
31
timing of such approvals, our ability to obtain the approvals on satisfactory
terms or the absence of litigation challenging such approvals. We also
cannot assure you that the Department of Justice will not attempt to challenge
the transactions on antitrust grounds or for other reasons and, if such a
challenge is made, we cannot assure you as to its result. The parties'
obligation to complete the merger is conditioned upon the receipt of all
required regulatory approvals.
MANAGEMENT, OPERATIONS AND SHAREHOLDINGS AFTER THE MERGER
At the effective time of the merger, New Asia Bancorp will merge with and
into Cathay. As a result, New Asia Bancorp will cease to exist as a separate
entity, and all of its assets, liabilities and operations will be held and
managed by Cathay as the surviving entity in the merger. New Asia Bancorp's
directors will cease to hold board positions at the effective time of the
merger. Cathay's boards of directors and principal executive officers will not
change as result of the merger.
After the merger of New Asia Bancorp with and into Cathay, the control of
New Asia Bancorp will be transferred to Cathay. New Asia Bancorp stockholders
receiving shares of Cathay common stock in the merger, including New Asia
Bancorp stockholders who beneficially own more than five percent of New Asia
Bancorp common stock, each director and nominee of New Asia Bancorp and all New
Asia Bancorp directors and officers as a group, will become stockholders of
Cathay with a percentage ownership of Cathay that is much smaller than their
individual percentage ownership of New Asia Bancorp prior to the merger. Because
of this, New Asia Bancorp stockholders will no longer be able to influence the
management policies of New Asia Bancorp's operations (to the extent they were
able to do so before the merger), and as stockholders of Cathay with small
ownership percentages New Asia Bancorp stockholders will not be able to
influence the management policies of Cathay.
NASDAQ LISTING
Cathay common stock is listed for trading on The NASDAQ Stock Market under
the symbol "CATY."
RESALES OF CATHAY COMMON STOCK
The shares of Cathay common stock to be issued to stockholders of New Asia
Bancorp in the merger have been registered under the Securities Act. Such shares
will be freely transferable under the Securities Act, except for shares issued
to any person who may be deemed to be an "affiliate" of New Asia Bancorp within
the meaning of Rule 145 under the Securities Act. Such affiliates may only sell
their shares of Cathay common stock acquired in the merger (a) pursuant to an
effective registration statement under the 1933 Act covering those shares, (b)
in compliance with Rule 145 under the 1933 Act or (c) in accordance with an
opinion of counsel reasonably satisfactory to Cathay that an exemption from
Securities Act registration requirements applies to the sale.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material United States federal
income tax consequences of the merger that will generally be applicable to U.S.
holders (as defined below) of New Asia Bancorp common stock. This summary is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations promulgated thereunder, published judicial decisions and
administrative rulings, and other applicable authorities, all as in effect as of
the date of this proxy statement/prospectus and all of which are subject to
change (possibly with retroactive effect) and to differing interpretations. Any
such change could adversely affect the continuing validity of the matters
discussed in this summary.
This summary does not address all aspects of United States federal income
taxation that may be relevant to a U.S. holder in light of such holder's
particular circumstances or to holders who may be subject to special treatment
under United States federal income tax laws, including, for example, banks and
other financial institutions, tax-exempt organizations, insurance companies,
dealers in securities or foreign currency, traders in securities who elect to
apply a mark-to-market method of accounting, partnerships or other pass-through
entities and investors in such entities, U.S. expatriates, holders of New Asia
Bancorp common stock that are not U.S. holders, holders whose functional
currency is not the U.S. dollar, holders who hold their shares as part of a
hedging, straddle, constructive sale, conversion or other risk reduction
transaction, holders who properly exercise dissenters' rights, and holders who
acquired their shares in connection with stock option or stock purchase plans or
in other compensatory transactions. In addition, this summary does not address
any alternative minimum tax, any federal nonincome tax or any state, local or
foreign tax consequences of the merger. Moreover, this summary does not address
any tax consequences of any transaction other than the merger.
32
This summary applies only to U.S. holders of New Asia Bancorp common stock
who hold their stock as a capital asset within the meaning of Section 1221 of
the Code. As used in this summary, the term "U.S. holder" means a beneficial
owner of New Asia Bancorp common stock that is for United States federal income
tax purposes (i) a United States citizen or resident alien, (ii) a corporation
or other entity taxable as a corporation for United States federal income tax
purposes, created or organized under the laws of the United States, any state
thereof or the District of Columbia, (iii) a trust if either (a) it is subject
to the primary supervision of a court within the United States and one or more
U.S. persons have the authority to control all substantial decisions of the
trust or (b) it has a valid election in effect under applicable Treasury
regulations to be treated as a U.S. person and (iv) an estate that is subject to
United States federal income tax on its income regardless of the source of such
income.
If a partnership (including any other entity treated as a partnership for
United States federal income tax purposes) holds New Asia Bancorp common stock,
the tax treatment of a partner will generally depend on the status of the
partner and the activities of the partnership. Such a partner should consult its
tax advisor.
The merger has been structured to qualify as a "reorganization" within the
meaning of Section 368(a) of the Code. The obligations of Cathay and New Asia
Bancorp to consummate the merger are conditioned upon their receipt from their
respective counsel, Wachtell, Lipton, Rosen & Katz and Schiff Hardin LLP, of an
opinion of counsel, dated as of the closing date of the merger, substantially to
the effect that, on the basis of the facts, representations and assumptions set
forth in such opinions and the representations set forth in certificates to be
obtained from Cathay and New Asia Bancorp, the merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code. Such opinions
of counsel are not binding upon the Internal Revenue Service (the "IRS") or any
court, and none of Cathay, Cathay Bank or New Asia Bancorp has obtained or
intends to obtain any ruling from the IRS as to the United States federal income
tax consequences of the merger. In addition, if any of the facts,
representations or assumptions on which the opinions are based is inconsistent
with the actual facts, the tax consequences of the merger could be adversely
affected, and such opinions and this summary may not accurately describe the
United States federal income tax treatment of the merger. Consequently, no
assurance can be given that the IRS will not assert, or that a court would not
sustain, a position contrary to any of the matters discussed in this summary.
The remainder of this summary assumes that the merger will constitute a
reorganization within the meaning of Section 368(a) of the Code.
Holders of New Asia Bancorp common stock are urged to consult their own tax
advisors as to the tax consequences of the merger to them in their particular
circumstances, including, without limitation, the applicability and effect of
state, local and foreign tax laws and possible changes in tax laws.
In general, the United States federal income tax consequences of the merger
to a U.S. holder of New Asia Bancorp common stock will depend upon whether such
holder exchanges its stock solely for Cathay common stock, solely for cash or
for a combination of Cathay common stock and cash.
EXCHANGE SOLELY FOR CATHAY COMMON STOCK. If, pursuant to the merger, a U.S.
holder exchanges all of the New Asia Bancorp common stock actually owned by such
holder solely for Cathay common stock, such holder will not recognize any gain
or loss, except with respect to cash received instead of a fractional share of
Cathay common stock (as discussed below). The aggregate tax basis in the shares
of New Asia Bancorp common stock surrendered in exchange for the Cathay common
stock received in the merger (including any fractional shares deemed received
and exchanged for cash as described below) will be equal to the aggregate tax
basis in the shares of New Asia Bancorp surrendered in exchange for the Cathay
common stock.
EXCHANGE SOLELY FOR CASH. If, pursuant to the merger, a U.S. holder
exchanges all of the New Asia Bancorp common stock actually owned by such holder
solely for cash, such holder will generally recognize capital gain or loss in an
amount equal to the difference between the amount of cash received and such
holder's tax basis in the New Asia Bancorp common stock surrendered. The capital
gain or loss recognized will generally be long-term capital gain or loss if, as
of the effective date of the merger, the U.S. holder's holding period for the
New Asia Bancorp common stock surrendered exceeds one year. The deductibility of
capital losses is subject to limitations. If, however, such U.S. holder owns
(either actually or constructively) any shares of Cathay common stock after the
merger, then the exchange could be treated as having the effect of a
distribution of a dividend under the tests set forth in Section 302 of the Code
(described below), in which case such holder may have ordinary dividend income
up to the amount of cash received.
EXCHANGE FOR CATHAY COMMON STOCK AND CASH. If, pursuant to the merger, a
U.S. holder exchanges all of the New Asia Bancorp common stock actually owned by
such holder for a combination of Cathay common stock and
33
cash (other than cash received instead of a fractional share of Cathay
common stock), such holder will generally recognize gain (but not loss) equal to
the lesser of (i) the amount of gain realized on the exchange (I.E., the excess,
if any, of the sum of the fair market value of the Cathay common stock received
and the amount of cash received over the holder's tax basis in the New Asia
Bancorp common stock surrendered) or (ii) the amount of cash received (other
than cash received instead of a fractional share of Cathay common stock). Any
gain recognized will generally be long-term capital gain if, as of the effective
date of the merger, the U.S. holder's holding period for the New Asia Bancorp
common stock surrendered exceeds one year. A U.S. holder's aggregate tax basis
in the Cathay common stock received in the merger (including any fractional
shares deemed received and exchanged for cash as described below) will be equal
to the aggregate tax basis in the shares of New Asia Bancorp surrendered in
exchange for the Cathay common stock, decreased by the amount of any cash
received (other than cash received instead of fractional shares of Cathay common
stock) and increased by the amount of gain recognized (other than gain
recognized with respect to cash received instead of fractional shares of Cathay
common stock).
If the exchange has the effect of a distribution of a dividend, then any
gain recognized by a holder may be treated as ordinary dividend income (as
discussed below).
POSSIBLE TREATMENT OF GAIN AS A DIVIDEND. In general, any gain recognized
in the exchange will be capital gain unless the U.S. holder's receipt of cash
has the effect of a distribution of a dividend, in which case the gain will be
treated as ordinary dividend income to the extent of the holder's ratable share
of accumulated earnings and profits, as calculated for United States federal
income tax purposes. For purposes of determining whether the U.S. holder's
receipt of cash has the effect of a distribution of a dividend, the holder is
treated as if it first exchanged all of its shares of New Asia Bancorp common
stock solely for Cathay common stock and then Cathay immediately redeemed a
portion of the Cathay common stock in exchange for the cash the holder actually
received. The gain recognized in such deemed redemption will be treated as
capital gain if the deemed redemption is (i) "substantially disproportionate"
with respect to the holder or (ii) "not essentially equivalent to a dividend,"
each within the meaning of Section 302(b) of the Code. In applying the above
tests, a holder may, under the constructive ownership rules of Section 318 of
the Code, be deemed to own stock that is owned by other persons (such as certain
family members and certain entities in which the holder has an interest) or
stock underlying a holder's option to purchase such stock in addition to the
stock actually owned by the holder. The Internal Revenue Service has ruled that
any reduction in an interest of a minority shareholder in a publicly held
corporation whose relative stock interest is minimal and who exercises no
control with respect to corporate affairs would result in capital gain (as
opposed to dividend treatment).
CASH RECEIVED INSTEAD OF A FRACTIONAL SHARE. A U.S. holder who receives
cash instead of a fractional share of Cathay common stock will generally be
treated as having received such fractional share and then as having exchanged
such fractional share for cash in a redemption of such fractional share by
Cathay. The holder will generally recognize gain or loss in an amount equal to
the difference between the amount of cash received instead of the fractional
share and the portion of the holder's tax basis in the New Asia Bancorp common
stock exchanged in the merger that is allocable to the fractional share. Such
gain or loss will generally be long-term capital gain or loss if, as of the
effective date of the merger, the holding period for such share is greater than
one year.
HOLDING PERIOD. The holding period of the shares of Cathay common stock
received by a U.S. holder in the merger (including any fractional share deemed
received and redeemed for cash) will include the holding period of the shares of
New Asia Bancorp common stock exchanged for such Cathay common stock.
MULTIPLE BLOCKS OF SHARES. If a U.S. holder holds shares of New Asia
Bancorp common stock acquired at different prices or at different times, gain or
loss and holding periods must be computed separately with respect to each
identifiable block of such shares and, if such holder receives a combination of
Cathay common stock and cash in the merger, any gain realized with respect to
one identifiable block of shares may not be offset with any loss realized with
respect to another identifiable block of shares. Any such holder should consult
its own tax advisor as to the manner in which gain or loss and holding periods
should be determined.
TAX TREATMENT OF NEW ASIA BANCORP AND CATHAY. No gain or loss will be
recognized by New Asia Bancorp or Cathay solely by reason of the merger.
BACKUP WITHHOLDING. Payments of cash to a U.S. holder may, under certain
circumstances, be subject to information reporting and backup withholding
(currently at a rate of 28%) unless such holder furnishes its taxpayer
identification number and certifies that it is not subject to backup withholding
or otherwise establishes an exemption from the backup withholding rules. Any
amounts withheld from payments to a holder under the backup withholding
34
rules are not an additional tax and may be allowed as a refund or credit
against the holder's United States federal income tax liability, provided that
the required information is timely furnished to the IRS.
REPORTING REQUIREMENTS. A U.S. holder who receives Cathay common stock as a
result of the merger will be required to retain records pertaining to the merger
and will be required to file with its United States federal income tax return
for the year in which the merger takes place a statement setting forth certain
facts relating to the merger.
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase transaction under generally
accepted accounting principles.
DISSENTERS' RIGHTS
Delaware law entitles the holders of shares of New Asia Bancorp common
stock who follow the procedures specified in Section 262 of the Delaware General
Corporation Law to have their shares appraised by the Delaware Court of Chancery
and to receive the "fair value" of their shares as of completion of the merger
in place of the merger consideration, as determined by the court. In order to
exercise these rights, a holder must demand and perfect the rights in accordance
with Section 262. The following is intended as a brief summary of the material
provisions of the Delaware statutory procedures required to be followed in order
for a New Asia Bancorp stockholder to dissent from the merger and perfect
appraisal rights. This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by reference to Section
262 of the Delaware General Corporation Law, the full text of which appears in
APPENDIX B to this document.
Section 262 requires that New Asia Bancorp stockholders be notified that
appraisal rights will be available not less than 20 days before the meeting of
New Asia Bancorp stockholders to vote on the adoption of the Agreement and Plan
of Merger. A copy of Section 262 must be included with the notice. This document
constitutes notice to the holders of shares of New Asia Bancorp common stock of
the availability of appraisal rights in connection with the merger in compliance
with the requirements of Section 262. If you are a New Asia Bancorp stockholder
and wish to consider exercising your appraisal rights, you should carefully
review the text of Section 262 contained in APPENDIX B to this document, since
failure to timely and properly comply with the requirements of Section 262 will
result in the loss of your appraisal rights under Delaware law.
If you are a New Asia Bancorp stockholder and wish to exercise your right
to demand appraisal under Section 262, you must satisfy the following three
conditions:
o deliver to New Asia Bancorp a written demand for appraisal of your
shares of New Asia Bancorp common stock before the vote with respect
to the adoption of the Agreement and Plan of Merger is taken at the
New Asia Bancorp special meeting;
o not vote in favor of adoption of the Agreement and Plan of Merger. A
proxy that does not contain voting instructions will, unless revoked,
be voted in favor of adoption of the Agreement and Plan of Merger.
Therefore, a New Asia Bancorp stockholder who votes by proxy and who
wishes to exercise appraisal rights must vote against adoption of the
Agreement and Plan of Merger or abstain from voting on the Agreement
and Plan of Merger. Voting against, abstaining from voting on or
failing to vote on the proposal to adopt the Agreement and Plan of
Merger will not constitute a written demand for appraisal within the
meaning of Section 262. The written demand for appraisal must be made
in addition to and separate from any proxy you deliver or vote you
cast in person; and
o continuously hold your shares of New Asia Bancorp common stock through
the completion of the merger.
If you fail to comply with these three conditions and the merger is
completed, you will be entitled to receive the merger consideration for your
shares of New Asia Bancorp common stock as provided for in the Agreement and
Plan of Merger, but you will have no appraisal rights with respect to your
shares of New Asia Bancorp common stock.
All demands for appraisal should be addressed to the Secretary of New Asia
Bancorp at 222 West Cermak Road, Chicago, IL 60616 before the vote on the
Agreement and Plan of Merger is taken at the New Asia Bancorp special meeting,
and should be executed by, or on behalf of, the record holder of the shares for
which appraisal rights are being exercised. The demand must reasonably inform
New Asia Bancorp of the identity of the holder and the intention of the holder
to demand appraisal of his or her shares of New Asia Bancorp common stock. If
your shares of New Asia Bancorp common stock are held through a broker, bank or
other nominee and you wish to
35
demand appraisal rights, you must act promptly to instruct the applicable
broker, bank or other nominee to follow the steps summarized in this section.
Within ten days after the effective date of the merger, Cathay must give
written notice of the date that the merger became effective to each New Asia
Bancorp stockholder who has properly filed a written demand for appraisal. At
any time within 60 days after the effective date of the merger, any New Asia
Bancorp stockholder who has demanded an appraisal has the right to withdraw the
demand and to accept the merger consideration in accordance with the Agreement
and Plan of Merger for his or her shares of New Asia Bancorp common stock.
Within 120 days after the effective date of the merger, either Cathay or any New
Asia Bancorp stockholder who has complied with the requirements of Section 262
may file a petition in the Delaware Court of Chancery demanding a determination
of the fair value of the shares held by all holders entitled to appraisal.
Cathay has no obligation to file such a petition in the event there are
dissenting stockholders. Accordingly, the failure of a New Asia Bancorp
stockholder to file such a petition within the period specified could nullify
the New Asia Bancorp stockholder's previously written demand for appraisal. If a
petition for appraisal is duly filed by a holder and a copy of the petition is
delivered to Cathay, Cathay will then be obligated, within 20 days after
receiving service of a copy of the petition, to provide the Chancery Court with
a duly verified list containing the names and addresses of all New Asia Bancorp
stockholders who have demanded an appraisal of their shares and with whom
agreements as to the value of their shares have not been reached by Cathay.
After notice to dissenting New Asia Bancorp stockholders, the Chancery Court is
empowered to conduct a hearing upon the petition, and to determine those New
Asia Bancorp stockholders who have complied with Section 262 and who have become
entitled to the appraisal rights provided thereby. The Chancery Court may
require the New Asia Bancorp stockholders who have demanded payment for their
shares to submit their stock certificates to the Register in Chancery for
notation on the certificates of the pendency of the appraisal proceedings, and
if any New Asia Bancorp stockholder fails to comply with that direction, the
Chancery Court may dismiss the proceedings as to that New Asia Bancorp
stockholder.
After determination of the New Asia Bancorp stockholders entitled to
appraisal of their shares, the Chancery Court will appraise the shares of New
Asia Bancorp common stock, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger, together
with a fair rate of interest, if any. When the value is determined, the Chancery
Court will direct the payment of such value, with interest thereon accrued
during the pendency of the proceeding, if the Chancery Court so determines, to
the holders entitled to receive the amount, upon surrender by such holders of
the certificates representing those shares of New Asia Bancorp common stock.
In determining fair value, the Chancery Court is required to take into
account all relevant factors. If you are a New Asia Bancorp stockholder, you
should be aware that the fair value of your shares as determined under Section
262 could be more, the same or less than the value that you are entitled to
receive under the terms of the Agreement and Plan of Merger.
Costs of the appraisal proceeding may be imposed upon the parties
participating in the appraisal proceeding by the Chancery Court as the Chancery
Court deems equitable in the circumstances. Upon the application of a New Asia
Bancorp stockholder, the Chancery Court may order all or a portion of the
expenses incurred by any New Asia Bancorp stockholder in connection with the
appraisal proceeding, including, but not limited to, reasonable attorneys' fees
and the fees and expenses of experts, to be charged pro rata against the value
of all shares entitled to appraisal. Any New Asia Bancorp stockholder who had
demanded appraisal rights will not, after the effective date of the merger, be
entitled to vote shares subject to that demand for any purpose or to receive
payments of dividends or any other distribution with respect to those shares,
other than with respect to payment as of a record date prior to the effective
date; however, if no petition for appraisal is filed within 120 days after the
effective date of the merger, or if the New Asia Bancorp stockholder delivers a
written withdrawal of his or her demand for appraisal and an acceptance of the
merger either within 60 days after the effective date of the merger or
thereafter with the written approval of Cathay, then the right of that New Asia
Bancorp stockholder to appraisal will cease and that holder will be entitled to
receive the merger consideration for his or her shares of New Asia Bancorp
common stock pursuant to the Agreement and Plan of Merger. Any withdrawal of a
demand for appraisal made more than 60 days after the effective date of the
merger may only be made with the written approval of Cathay and must, to be
effective, be made within 120 days after the effective date.
Under the Agreement and Plan of Merger, if any dissenting New Asia Bancorp
stockholder fails to perfect or has effectively withdrawn or lost his or her
appraisal rights before the election deadline, each of that stockholder's shares
of New Asia Bancorp common stock will be deemed to be undesignated shares unless
the stockholder makes
36
a valid election before the election deadline. If any dissenting New Asia
Bancorp stockholder fails to perfect or has effectively withdrawn or lost his or
her appraisal rights after the election deadline, each of that stockholder's
shares of New Asia Bancorp common stock will be deemed to be undesignated
shares. For further details on the "election deadline," "nonelection shares,"
the "effective time," "stock consideration" and "cash consideration," see "The
Merger Agreement -- Merger Consideration" and "-- Election Procedures; Exchange
of Stock Certificates."
Any cash ultimately paid to a dissenting New Asia Bancorp stockholder who
perfects his or her appraisal rights to be paid the fair value of his or her
shares will be considered cash consideration paid for purposes of the limit on
cash to be paid to New Asia Bancorp stockholders in the merger described under
"The Merger Agreement -- Merger Consideration."
In view of the complexity of Section 262, holders of shares of New Asia
Bancorp common stock who may wish to dissent from the merger and pursue
appraisal rights should promptly consult their personal legal advisors.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Some of the members of New Asia Bancorp's management have interests in the
merger that are in addition to, or different from, their interests as New Asia
Bancorp stockholders generally. The New Asia Bancorp and Cathay boards of
directors was aware of these interests and considered them, among other matters,
in approving the merger agreement and the transactions contemplated by the
merger agreement.
Certain directors, executive officers and stockholders of New Asia Bancorp
have entered into voting agreements with Cathay and Cathay Bank under which they
have agreed to vote their New Asia Bancorp shares in favor of approval of the
Agreement and Plan of Merger. See "The Merger Agreement -- Additional
Agreements."
In connection with the merger, Cathay Bank has entered into an employment
agreement with Mr. Benjamin Wong, Chairman of New Asia Bancorp, that, among
other things, provides for his continued employment following the merger.
Pursuant to employment agreement, dated July 26, 2006, Mr. Wong will be employed
as Senior Vice President of Cathay Bank, Midwest Region, for a period of three
years from the closing of the merger, which term will be extended for an
additional one-year period on the third anniversary of the closing of the
merger, unless Mr. Wong gives at least ninety days' prior written notice. While
employed, Mr. Wong's annual base salary will be $135,000 per annum, and he will
be eligible for a discretionary annual bonus with a target bonus equal to 30% of
annual base salary. In the event that Mr. Wong's employment is terminated other
than for cause, death or disability or in the event that Mr. Wong terminates his
employment for good reason, Mr. Wong will be entitled to all earned but unpaid
salary and accrued and vested benefits and a lump-sum payment equal to the
present value of the base salary and the bonus that would have been paid to Mr.
Wong had he remained employed until the expiration of the then-current term of
the employment agreement. In consideration for and subject to Mr. Wong's
compliance with certain restrictive covenants, including restrictions on
competition and the solicitation of employees for four years following his
termination of employment, upon termination of Mr. Wong's employment in
accordance with the terms of the employment agreement or during the term of the
employment agreement for any reason other than death, Mr. Wong will be entitled
to an aggregate payment equal to $951,840, payable in four equal installments.
In addition, at the closing of the merger, Mr. Wong will be entitled to a
retention bonus payment of $240,000. In the event any severance payments to Mr.
Wong are subject to the excise tax on parachute payments under Section 4999 of
the Internal Revenue Code, such payments will be reduced.
In connection with the merger, certain executive officers of New Asia
Bancorp, including Judi Yu, Julie Moy, Jennifer Linh, Teresa Au, Ed Sevik and
Dennis Selix, were awarded retention bonuses to be paid in two equal
installments, with the first installment to be paid on completion of the merger
and the second to be paid six months thereafter, subject to the employees'
continued employment on the payment date (unless terminated by Cathay without
cause). The amount of the retention bonus potentially payable to each of Judi
Yu, Julie Moy, Jennifer Linh, Teresa Au, Ed Sevik and Dennis Selix is $95,100,
$73,500, $65,520, $61,800, $50,520 and $42,504, respectively.
Prior to the execution of the Merger Agreement, New Asia Bank entered into
an employment agreement with Lloyd Gibson, the President and Chief Executive
Officer of New Asia Bancorp and a member of its board of directors, with a term
that commenced on May 1, 2006 and will end on December 31, 2007. The agreement
provides that, in the event Mr. Gibson's employment is terminated other than for
cause prior to a change in control or if following a change in control he is not
offered a position with comparable terms to those in effect prior to the change
in control, he will be entitled to receive a lump-sum payment equal to his
annual base salary of $210,000 for the remainder of the term of the agreement
plus six months and employer-paid health, life and long-term disability
insurance benefits for the same period. In addition, Mr. Gibson is party to a
restrictive covenants agreement that,
37
among other things, provides, that, for the two-year period following his
termination of employment for any reason, he will not advise customers or
clients of New Asia Bank, solicit the employees of New Asia Bank or compete with
New Asia Bank in specified counties in Illinois.
The Agreement and Plan of Merger provides that after the effective time
Cathay will indemnify persons who served as directors or officers of New Asia
Bancorp prior to the merger against liabilities or costs incurred in connection
with threatened or actual
s arising out of or pertaining to (i) the fact
that such person is or was a director or officer of New Asia Bancorp or any of
its predecessors or affiliates or (ii) the Agreement and Plan of Merger or any
transaction contemplated by the Agreement and Plan of Merger.
The Agreement and Plan of Merger also provides that New Asia Bancorp may
purchase a "tail policy" covering persons serving as officers and directors of
New Asia Bancorp or its subsidiaries immediately prior to the effective time of
the merger for a period of up to five years from the effective time of the
merger with respect to acts or omissions occurring prior to the effective time
of the merger which were committed by such officers and directors in their
capacity as such.
THE MERGER AGREEMENT
STRUCTURE OF THE MERGER
New Asia Bancorp will merge with and into Cathay and will cease to exist.
Subsequent to the merger of New Asia Bancorp into Cathay, New Asia Bank will
merge with and into Cathay Bank, and New Asia Bank will cease to exist. All of
the outstanding shares of New Asia Bancorp common stock will be converted into
the right to receive, at the election of the New Asia Bancorp stockholders (but
subject to proration and adjustment as provided in the Agreement and Plan of
Merger), either shares of Cathay common stock with a value of $32.60 (based on
the average closing price during the ten consecutive trading days preceding the
fifth business day prior to the closing), cash in the amount of $32.60 or a
combination of shares of Cathay common stock and cash with a value in the
aggregate amount of $32.60 (based on the average closing price during the ten
consecutive trading days preceding the fifth business day prior to the closing).
Whether a stockholder will receive the form of consideration he or she elects
will depend on election made by the stockholders.
EFFECTIVE TIME
An agreement of merger, along with certain officers' certificates and with
any necessary or desirable endorsements of state or federal bank regulatory
officials or agencies, shall be duly executed and filed with the Secretary of
State of the State of Delaware on the closing date by New Asia Bancorp and
Cathay Bank. The merger will become effective at such time as the filing of the
Agreement and Plan of Merger with the Secretary of State of the State of
Delaware becomes effective.
The closing date will occur only after the satisfaction or waiver of all
conditions to the merger set forth in the Agreement and Plan of Merger on the
fifth business day after such satisfaction or waiver.
ADDITIONAL AGREEMENTS
Certain directors, executive officers and stockholders of New Asia Bancorp
who own in the aggregate approximately 56% of the outstanding shares of New Asia
Bancorp have entered into voting agreements with Cathay and Cathay Bank in the
form attached to this proxy statement/prospectus as APPENDIX D.
Under these agreements, these stockholders have agreed that, at any meeting
of New Asia Bancorp's stockholders and on every action or approval by written
consent of the stockholders, they will:
o vote in favor of adoption and approval of the merger, the Agreement
and Plan of Merger and the transactions contemplated by the Agreement
and Plan of Merger, and any matter that could reasonably be expected
to facilitate the merger;
o vote against approval of any proposal made in opposition to or
competition with the consummation of the merger;
o vote against any merger, consolidation, sale of assets, reorganization
or recapitalization with any party other than with Cathay, Cathay Bank
and their affiliates;
o vote against any liquidation or winding-up of New Asia Bancorp; and
38
o not, and will not permit any entity under such stockholder's control
to, (i) solicit proxies or become a participant in a solicitation with
respect to an opposing proposal or otherwise encourage or assist any
party taking or planning any action that would compete with, restrain
or otherwise serve to interfere with or inhibit the timely
consummation of the merger, (ii) initiate a stockholder's vote or
action by consent of New Asia Bancorp stockholders with respect to an
opposing proposal or (iii) become a member of a group with respect to
any voting securities of New Asia Bancorp with respect to an opposing
proposal. An opposing proposal is defined as (a) any proposal made in
opposition to or in competition with consummation of the merger, (b)
any merger, consolidation, sale of assets, reorganization or
recapitalization, with any party other than with Cathay, Cathay Bank
and their affiliates or (c) any liquidation or winding-up of New Asia
Bancorp.
These stockholders also have agreed (with some limited exceptions) not to,
directly or indirectly, sell, transfer, pledge, assign or otherwise dispose of,
or enter into any contract, option, commitment or other arrangement or
understanding with respect to the sale, transfer, pledge, assignment or other
disposition of, any of the shares of New Asia Bancorp common stock owned or
beneficially held by him or her prior to the earlier to occur of (i) the
effective time of the merger, (ii) April 6, 2007 or (iii) the date on which the
Agreement and Plan of Merger is terminated (a) by New Asia Bancorp due to a
breach by Cathay of the Agreement and Plan of Merger or (b) by Cathay or New
Asia Bancorp due to failure of Cathay or New Asia Bancorp to have received
certain required regulatory approvals.
Cathay may in its discretion waive any of its rights under these voting
agreements.
CONDITIONS TO THE MERGER
The obligations of Cathay and New Asia Bancorp to consummate the merger are
subject to the satisfaction or waiver on or before the effective time of the
merger of, among other things, the following conditions:
o approval of the Agreement and Plan of Merger by the holders of not
less than a majority of the outstanding shares of New Asia Bancorp
common stock under applicable law,
o receipt of all consents and approvals of governmental authorities
required to consummate the merger,
o absence of any judgment, order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the merger, and
o absence of any statute, rule, regulation, order, injunction or decree
enacted, entered, promulgated or enforced by any governmental
authority prohibiting or making illegal the consummation of the
merger.
New Asia Bancorp's obligation to effect the merger is also subject to the
following additional conditions:
o the representations and warranties of Cathay in the Agreement and Plan
of Merger must be true and correct in all material respects as of the
date of the Agreement and Plan of Merger and (except to the extent
those representations and warranties speak as of an earlier date) as
of the closing date,
o Cathay will have performed in all material respects all obligations
required to be performed by it under the Agreement and Plan of Merger
at or prior to the closing date,
o all consents and approvals of all persons (other than governmental
entities) required for the consummation of the merger shall have been
obtained and shall be in full force and effect, unless the failure to
obtain such consent or approval would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on
New Asia Bancorp or Cathay,
o no proceeding will have been initiated by a governmental entity
seeking an injunction preventing the consummation of the merger or
other transaction contemplated by the Agreement and Plan of Merger,
and
o New Asia Bancorp will have received from its legal counsel, Schiff
Hardin LLP, an opinion to the effect that, on the basis of the facts,
representations and assumptions set forth or referred to in such
opinion, the merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
Cathay's obligation to effect the merger is also subject to the following
additional conditions:
o New Asia Bancorp's representations and warranties in the Agreement and
Plan of Merger must be true and correct in all material respects as of
the date of the Agreement and Plan of Merger and (except to the extent
those representations and warranties speak as of an earlier date) as
of the closing date,
39
o New Asia Bancorp will have performed in all material respects all
obligations required to be performed by New Asia Bancorp under the
Agreement and Plan of Merger at or prior to the closing date,
o all consents and approvals of all persons (other than governmental
entities) required for the consummation of the merger shall have been
obtained and shall be in full force and effect, unless the failure to
obtain such consent or approval would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on
New Asia Bancorp or Cathay,
o at the closing, the net worth of New Asia Bancorp, which excludes (i)
the after-tax effect of any expense related to the Agreement and Plan
of Merger and the transactions contemplated thereby, (ii) the
after-tax effect of any gain or loss from the sale of assets by New
Asia Bancorp in 2005 or 2006 in the ordinary course of business
consistent with its past practices and (iii) any change in the
"Accumulated Other Comprehensive Income (Loss), Net of Tax" line on
New Asia Bancorp's balance sheet after May 31, 2006 (all as set forth
in a balance sheet of New Asia Bancorp as of the end of the month
preceding the closing date of the merger) shall not be less than
$11,235,942,
o the balance of core deposits with New Asia Bancorp shall not be less
than $78,800,000 on non-interest bearing, interest bearing,
money-market, savings and certificates of deposit accounts, excluding
real estate tax escrow accounts,
o Cathay will have received from its legal counsel, Wachtell, Lipton,
Rosen & Katz, an opinion to the effect that, on the basis of the
facts, representations and assumptions set forth or referred to in
such opinion, the merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code,
o no proceeding will have been initiated by a governmental entity
seeking an injunction preventing the consummation of the merger or
other transaction contemplated by the Agreement and Plan of Merger,
and
o Cathay or Cathay Bank has entered into an employment agreement with
Benjamin Wong, Chairman of New Asia Bancorp.
If these and other conditions are not satisfied or waived, the Agreement and
Plan of Merger may be terminated. The Agreement and Plan of Merger may also be
terminated upon the occurrence of certain other events. See "-- Termination."
NONSOLICITATION
The Agreement and Plan of Merger provides that New Asia Bancorp (along with
its affiliates, directors, officers, employees, agents and representatives) will
cease any discussions or negotiations with any other parties regarding any
proposal or offer with respect to any transaction involving New Asia Bancorp
that would result in any of the following being proposed (any such proposal or
offer is hereinafter referred to as an "acquisition proposal"): (i) the direct
or indirect acquisition or purchase of a business that constitutes a substantial
portion of the net revenues, net income or assets of New Asia Bancorp; (ii) the
direct or indirect acquisition or purchase of any class of equity securities
representing ten percent (10%) or more of the voting power of New Asia Bancorp;
(iii) a tender offer or exchange offer that if consummated would result in any
person beneficially owning a substantial interest in any class of equity
securities of New Asia Bancorp; or (iv) a merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving New Asia Bancorp, other than the transactions contemplated by the
Agreement and Plan of Merger.
In addition, New Asia Bancorp agreed not to (nor to permit its employees or
any investment banker, financial advisor, attorney, accountant or other
representative retained by New Asia Bancorp to): (i) solicit, initiate or
encourage (including by way of furnishing information or assistance), take any
other action designed to facilitate, or that is likely to result in, any
inquiries or the making of any proposal that constitutes, or is reasonably
likely to lead to, any acquisition proposal; (ii) enter into any agreement with
respect to an acquisition proposal; (iii) participate in any discussions or
negotiations regarding any acquisition proposal; or (iv) make or authorize any
statement or recommendation in support of any acquisition proposal.
However, provided that if (A) prior to the 20th day after the date of the
distribution of this proxy statement/prospectus and (B) New Asia Bancorp's board
of directors determines in good faith, after consultation with its outside legal
and financial advisors, that failure to do so would reasonably be expected to
breach the fiduciary duties of the board of directors under applicable law, New
Asia Bancorp may, in response to a bona fide written acquisition proposal not
solicited in violation of the Agreement and Plan of Merger that the board
believes in
40
good faith constitutes a "superior proposal," and after supplying
forty-eight (48) hours' prior written notice to Cathay of such superior
proposal:
o furnish information with respect to New Asia Bancorp to any person
making such a superior proposal pursuant to a customary
confidentiality agreement, and
o participate in discussions or negotiations regarding such superior
proposal.
A "superior proposal" is a bona fide written proposal made by a third party to
acquire, directly or indirectly, including pursuant to a tender offer, exchange
offer, merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for consideration consisting of
cash and/or securities, 100% of the combined voting power of the shares of
capital stock of New Asia Bancorp then outstanding or all or substantially all
of the assets of New Asia Bancorp and otherwise (i) on terms and conditions that
the board of directors of New Asia Bancorp determines in its good-faith
judgment, following consultation with Hovde, to be more favorable from a
financial point of view to New Asia Bancorp's stockholders than the merger; (ii)
that constitutes a transaction that, in New Asia Bancorp board of directors'
good-faith judgment, is reasonably likely to be consummated on the terms set
forth, taking into account all legal, financial, regulatory and other aspects of
such proposal; and (iii) for which financing, to the extent required, is then
committed or which, in the good-faith judgment of the board of directors of New
Asia Bancorp, is highly likely to be obtained by such third party.
TERMINATION
The Agreement and Plan of Merger may be terminated prior to the effective
time of the merger:
o by mutual consent of Cathay and New Asia Bancorp;
o by either Cathay or New Asia Bancorp in the event (i) the approval of
any governmental authority required for consummation of the merger is
denied or an application for governmental approval is withdrawn at the
request of such governmental entity, unless within 30 days after such
denial or withdrawal a petition for rehearing or an amended
application is filed; or (ii) any governmental entity has issued a
final non-appealable order enjoining or otherwise prohibiting the
merger; provided that no party shall have the right to terminate the
Agreement and Plan of Merger if such governmental entity's action is
attributable to the party seeking to terminate the Agreement and Plan
of Merger;
o by either Cathay or New Asia Bancorp if the merger is not consummated
on or before April 6, 2007 (unless the failure to close by such date
is due to the failure of the party seeking to terminate the Agreement
and Plan of Merger to perform or observe the covenants and agreements
of such party set forth in the Agreement and Plan of Merger);
o by either Cathay or New Asia Bancorp or (provided that the terminating
party is not then in material breach of the provisions of the
Agreement and Plan of Merger) if there has been a material breach of
any of the representations or warranties contained in the Agreement
and Plan of Merger by the other party, which breach (i) is not cured
within 30 days following written notice to the party committing such
breach or (ii) by its nature, cannot be cured prior to the closing of
the merger; provided, however, that neither party will have the right
to terminate the Agreement and Plan of Merger unless the breach
(individually or combined with all other breaches) would constitute
the failure to satisfy the related condition precedent to that party's
obligation to close the merger;
o by either Cathay or New Asia Bancorp (provided that the terminating
party is not then in material breach of the provisions of the
Agreement and Plan of Merger) if there has been a material breach of
any of the covenants or agreements contained in the Agreement and Plan
of Merger by the other party, which breach (i) is not cured within 30
days following written notice to the party committing such breach or
(ii) by its nature cannot be cured prior to the closing of the merger;
o by New Asia Bancorp prior to the 25th calendar day following the date
this proxy statement/prospectus is distributed to stockholders in the
event that the board of directors of New Asia Bancorp determines in
good faith, after consultation with outside counsel, that in light of
a superior proposal it is necessary to terminate the Agreement and
Plan of Merger in order to comply with its fiduciary duties to New
Asia Bancorp and its stockholders under applicable law; provided,
however, that the board of directors of New Asia Bancorp must
concurrently enter into a definitive acquisition agreement or other
similar agreement related to a superior proposal; and provided
further, however, that the Agreement and Plan of Merger may be
41
terminated pursuant to this provision only after the fifth day
following Cathay's receipt of written notice advising Cathay that the
board of directors of New Asia Bancorp is prepared to accept a
superior proposal, and during such five-day period, if Cathay has
elected to do so, New Asia Bancorp shall have negotiated in good faith
with Cathay regarding adjustments in terms that would allow the
parties to proceed with this transaction; and
o by Cathay if New Asia Bancorp does not obtain stockholder approval at
the special stockholders' meeting.
TERMINATION FEE
If New Asia Bancorp terminates the Agreement and Plan of Merger to
concurrently enter into a definitive agreement or other similar agreement
related to a superior proposal, or Cathay terminates the Agreement and Plan of
Merger for a willful material breach by New Asia Bancorp (and Cathay is not
itself in material breach of the Agreement and Plan of Merger), New Asia Bancorp
shall pay to Cathay a termination fee equal to $1,650,000 by wire transfer of
same-day immediately available funds on the date of such termination.
REPRESENTATIONS AND WARRANTIES
The Agreement and Plan of Merger contains customary mutual representations
and warranties by each party relating to, among other things: (1) due
organization and good standing; (2) capitalization; (3) financial statements;
(4) corporate authority; (5) legal proceedings; (6) compliance with applicable
laws; (7) broker's fees; (8) absence of certain changes; (9) regulatory reports;
(10) disclosure controls and procedures; (11) qualification as reorganization;
(12) third-party approvals; and (13) taxes.
In addition, New Asia Bancorp makes representations and warranties relating
to, among other things: (1) employee benefit plans; (2) corporate records; (3)
derivatives; (4) certain contracts; (5) loans and deposits; (6) property; (7)
labor matters; and (8) insurance.
The representations and warranties of the parties terminate as of the
effective time of the merger.
COVENANTS; CONDUCT OF BUSINESS PRIOR TO EFFECTIVE TIME
The Agreement and Plan of Merger provides that, during the period from July
6, 2006 until the effective time of the merger, New Asia Bancorp will, among
other things:
o conduct business in the ordinary course consistent with past practice,
and
o use reasonable efforts to (i) preserve intact the business
organization, (ii) keep available the present services of the current
officers and employees, (iii) preserve the goodwill of customers and
others with whom business relationships exist and (iv) maintain the
deposits of New Asia Bancorp and its subsidiaries.
In addition, except as expressly contemplated by the Agreement and Plan of
Merger or specified in a schedule to the Agreement and Plan of Merger, without
the consent of Cathay, New Asia Bancorp will not (including authorization,
commitment or agreement to do), among other things:
DIVIDENDS AND STOCK
o declare or pay any dividends on, or make other distributions in
respect of, any shares of their capital stock other than, at the
request of Cathay, cause New Asia Bank to declare a special dividend
in an amount equal to the lesser of (I) the maximum permitted by
applicable law or (II) the amount that together with cash on hand at
New Asia Bancorp will be sufficient to discharge all indebtedness
outstanding under the Credit Facility Agreement, dated September 27,
2005, between JPMorgan Chase Bank, N.A. and New Asia Bancorp, and to
pay any related fees and expenses in connection therewith or in
connection with the Agreement and Plan of Merger and the transactions
contemplated by the Agreement and Plan of Merger.
o repurchase, redeem or otherwise acquire any of shares of capital stock
of New Asia Bancorp, or any securities convertible into or exercisable
for, any shares of capital stock of New Asia Bancorp;
CAPITAL STOCK
o issue, deliver, sell, pledge or otherwise encumber or subject to any
lien or authorize or propose issuance, delivery, sale, pledge or
encumbrance of or the imposition of any lien on, any shares of capital
stock of New Asia Bancorp or any securities convertible into or
exercisable for, or any rights, warrants, shares of
42
capital stock or options to acquire, any shares of capital stock of
New Asia Bancorp, or enter into any agreement with respect to any of
the foregoing,
o repurchase, redeem or otherwise acquire any shares of capital stock of
New Asia Bancorp in any securities convertible into or exercisable for
any shares of capital stock of New Asia Bancorp,
o split, combine or reclassify any shares of capital stock of New Asia
Bancorp or issue or authorize or propose the issuance of any other
securities in response of, in lieu of or in substitution for shares of
capital stock of New Asia Bancorp;
EMPLOYEES; HIRING; BENEFITS PLANS
o adopt, amend, renew or terminate any employment-related agreements or
arrangements with any current or former director, officer or employee
or increase the compensation or fringe benefits,
o increase compensation or fringe benefits to employees, except in the
ordinary course of business consistent with past practice, provided
that no increase shall result in an annual adjustment of more than 5%
or $5,000, or
o make any equity or equity-based grants or allocations under any plan
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or
performance units or shares);
ACQUISITIONS; CAPITAL EXPENDITURES
o acquire or agree to acquire, by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization
or division thereof or otherwise acquire any assets, including without
limitation any loan portfolios or pools, which would be material,
individually or in the aggregate, to New Asia Bancorp (other than in
connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of
business consistent with past practice), or
o make any capital expenditures other than those which (i) are made in
the ordinary course of business or are necessary to maintain existing
assets in good repair and (ii) in any event are in amounts not
exceeding $50,000 individually or $300,000 in the aggregate;
GOVERNING DOCUMENTS
o amend its organization certificate, bylaws or other similar governing
documents;
ACCOUNTING METHODS; BANKING OPERATIONS; DERIVATIVE TRANSACTIONS
o implement or adopt any change in accounting methods (other than as
required by applicable regulations or generally accepted accounting
principles),
o enter into any new line of business,
o open, close, sell or acquire any branches, or
o file any application to establish, relocate or terminate the
operations of any banking office;
CONTRACTS
o create, renew, amend or terminate, fail to perform any material
obligations under, waive the renewal or release any material rights
under or give notice of proposed renewal, amendment, waiver, release
or termination of any material contract, agreement or lease (other
than the renewal in the ordinary course of business of any lease the
term of which expires prior to the closing date);
CLAIMS
o pay, discharge, settle, compromise or satisfy any claims, liabilities
or obligations, other than in the ordinary course of business
consistent with past practice, or contemplated by its most recent
consolidated financial statements (or the notes thereto), or incurred
since December 31, 2005 in the ordinary course of business
43
consistent with past practice, other than causing New Asia Bank to, at
the request of Cathay, repay all indebtedness outstanding from the
Chicago Federal Home Loan Bank;
INDEBTEDNESS
o incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise become responsible for,
the obligations of any person, or pledge or otherwise encumber or
dispose of any assets of New Asia Bancorp (except in the ordinary
course of business consistent with past practice); provided, however,
that in no event shall any such indebtedness or obligations (excluding
deposits) be for a period exceeding six (6) months;
INVESTMENT SECURITIES
o enter into any transaction outside the ordinary course of business
consistent with past practice including:
o the purchase of certificates of deposit from brokers or other
third parties;
o the offering or payment of rates of interest on deposit accounts
materially different from the bank's past practices or current
market rates,
o the entry into any new material contracts, and
o the purchase or sale of investment securities unless such
transaction (i) is prudent, necessary, consistent with New Asia
Bancorp's written investment policies and its 2005 budget, duly
approved by senior management of New Asia Bancorp, and, if
involving a purchase, is limited to investment-grade securities;
(ii) does not cause the weighted average duration of New Asia
Bancorp's investment securities portfolio to exceed that
portfolio's weighted average duration as of May 31, 2006; and
(iii) will not cause the balance of New Asia Bancorp's investment
securities portfolio to exceed its May 31, 2006 forecast for the
month of the closing;
LOANS
o purchase, acquire, sell, license, lease, encumber, assign or otherwise
dispose of any loans, loan pools, loan portfolios, participation or
other interests in loans other than in the ordinary course of business
consistent with past practice,
o purchase, acquire, sell, license, lease, encumber, assign or otherwise
dispose of any of New Asia Bancorp's or New Asia Bank's material
assets, properties or other material rights or agreements other than
in the ordinary course of business consistent with past practice, and
o except pursuant to written agreements previously in effect, pay, loan
or advance any amount to, or sell, transfer or lease any properties or
assets to, or enter into any agreement or arrangement with, any of its
officers or directors or any of their immediate family members or any
of their affiliates or associates other than compensation in the
ordinary course of business consistent with past practice;
TAXES
o make, change or revoke certain material tax elections, file any
amended tax return, enter into any closing agreement with respect to a
material amount of taxes, settle any material tax claim or assessment
or take certain other tax related actions;
CONFIDENTIAL INFORMATION
o disclose confidential information of New Asia Bancorp or its
subsidiaries to a third party without requiring such third party to be
bound by customary confidentiality obligations, except as required by
law or permitted by the Agreement and Plan of Merger;
ADVERSE ACTIONS
o take any action or fail to take any action that is intended or is
reasonably likely to result in
o any of the conditions to the merger not being satisfied, or
o the merger not being classified as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended.
44
CATHAY COVENANTS RELATING TO EMPLOYEE MATTERS
Under the Agreement and Plan of Merger, Cathay agreed that, for two years
following the completion of the merger, Cathay will not reduce the salary, base
hourly wage rate or bonus opportunity of any employee of New Asia Bancorp or New
Asia Bank who is not terminated below the rate in effect immediately prior to
the closing of the merger. In addition, the Agreement and Plan of Merger
provides that employees of New Asia Bancorp and New Asia Bank will become
eligible to participate in Cathay's employee benefit plans on the same terms and
conditions that apply to Cathay's similarly situated employees. Cathay also
agreed that it would:
o waive all pre-existing condition requirements, evidence of
insurability provisions, waiting period requirements or any similar
provisions under certain benefit plans for such employees to the
extent such employees would not have been subject to such requirements
or provisions under New Asia Bancorp's or New Asia Bank's plans;
o cause its insurers to apply toward any deductible requirements and
out-of-pocket maximum limits under its benefit plans any similar
amounts paid (or accrued) by each employee under New Asia Bancorp's or
New Asia Bank's plans during the current plan year or, if that is not
possible, continue to maintain New Asia Bancorp's or New Asia Bank's
plans and provide these benefits for the remainder of such plans'
current plan year;
o recognize, for purposes of participation, eligibility and vesting (but
not for purposes of benefit accrual) under its plans, the service of
any New Asia Bancorp or New Asia Bank employee prior to the closing of
the merger; and
o be responsible for satisfying certain obligations under ERISA Sections
601 ET SEQ. and Section 4980B of the Internal Revenue Code of 1986 to
provide continuation coverage to any employee with respect to any
qualifying event which occurs on or after the closing of the merger.
Cathay also agreed that, if Cathay terminates the employment of any
individual employed by New Asia Bancorp or New Asia Bank (other than certain
executive officers) for any reason other than for cause within one year
following the closing of the merger, Cathay would provide such individual with
the severance pay as described in Cathay's severance policy in effect on the
closing.
The Agreement and Plan of Merger provides that Cathay shall indemnify and
hold harmless, as and to the fullest extent permitted by law, each of New Asia
Bancorp's or New Asia Bank's directors and officers against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's fees and
expenses to the fullest extent permitted by law), judgments, fines and amounts
paid in settlement.
ADDITIONAL COVENANTS
The Agreement and Plan of Merger provides that both New Asia Bancorp and
Cathay will report in their respective federal income tax returns for the
taxable period, including the closing date of the merger, that the merger
qualified as a reorganization under Section 368(a) of the Code, and will
properly file with their federal income tax returns all information required by
Treasury Regulations Section 1.368-3. Both New Asia Bancorp and Cathay agree
that, unless required by law, neither will take any tax reporting position
inconsistent with the characterization of the merger as a reorganization under
Section 368(a) of the Code.
In addition, the parties agree that neither New Asia Bancorp nor Cathay
will take any action that would cause the transactions contemplated by the
Agreement and Plan of Merger not to be in compliance with any takeover
provisions or to be subject to requirements imposed by any takeover laws, and
each of them will take all necessary steps within its control to make the
transactions comply with (or continue to comply with) or be exempt from (or
ensure the continued exemption of) any applicable takeover laws.
AMENDMENT AND WAIVER
Subject to applicable law: (1) the parties to the Agreement and Plan of
Merger may amend the agreement, provided that no amendment that reduces the
amount or changes the form of the merger consideration may be made after any
approval of the agreement by the stockholders of New Asia Bancorp; and (2) the
parties, by action of their respective boards of directors, may, at any time
prior to the effective time, extend the performance of any obligation or action
required by the Agreement and Plan of Merger, waive inaccuracies in
representations and warranties and
45
waive compliance with any agreements or conditions for their respective
benefit contained in the Agreement and Plan of Merger.
CATHAY CAPITAL STOCK
Cathay's authorized capital stock consists of: (a) 100,000,000 shares of
common stock, par value $0.01 per share, of which 51,512,705 shares were issued
and outstanding as of June 30, 2006; and (b) 10,000,000 shares of preferred
stock, par value $0.01 per share, of which 100,000 shares are designated as
Series A Junior Participating Preferred, but none of which shares of preferred
stock are issued and outstanding. Please note that, as described in the
subsection titled, "Cathay Has Various Anti-Takeover Measures That Could Impede
a Takeover of Cathay" in the Risk Factors Section above, the Cathay board of
directors declared a dividend distribution of one share purchase right for each
share of common stock to purchase one one-thousandth of a share of Series A
Junior Participating Preferred Stock, which will become exercisable on the tenth
day after occurrence of certain events, such as a tender or exchange offer. The
Cathay board of directors is authorized, without further stockholder action, to
issue other shares of preferred stock with such designations, preferences and
rights as the Cathay board of directors may determine.
Cathay common stock is listed for trading on The NASDAQ Stock Market under
the symbol "CATY."
Cathay's stockholders do not have preemptive rights to subscribe to any
additional securities that may be issued by Cathay. Each share of Cathay common
stock has the same relative rights and is identical in all respects to every
other share of Cathay common stock. If Cathay is liquidated, the holders of
Cathay common stock are entitled to share, on a pro rata basis, Cathay's
remaining assets after provision for liabilities and following the payment of
the full amount of liquidation preference to the holders of any outstanding
shares of Series A Participating Preferred.
For additional information concerning Cathay's capital stock, see
"Comparison of Cathay Common Stock with New Asia Bancorp Common Stock."
ANTI-TAKEOVER PROVISIONS IN CATHAY'S CERTIFICATE OF INCORPORATION AND BYLAWS
Cathay's Restated Certificate of Incorporation and Restated Bylaws contain
certain provisions that deal with matters of corporate governance and certain
rights of stockholders which might be deemed to have a potential "anti-takeover"
effect. These provisions may have the effect of discouraging a future takeover
attempt which is not approved by the board of directors but which individual
stockholders may deem to be in their best interest, or in which stockholders may
receive a substantial premium for their shares over then-current market prices.
As a result, stockholders who might desire to participate in such a transaction
may not have an opportunity to do so. Such provisions will also render the
removal of an incumbent board of directors or management more difficult.
The following description of certain of the provisions of Cathay's Restated
Certificate of Incorporation and Restated Bylaws is necessarily general, and
reference should be made in each case to such documents, which are contained as
exhibits to Cathay's previous filings with the Securities and Exchange
Commission. See "Where You Can Find More Information about Cathay" to learn how
to obtain a copy of these documents.
Cathay has various anti-takeover measures in place. For example, as
described below, Cathay has put in place the Rights Agreement and has included
in its Restated Certificate of Incorporation related provisions that may give
certain holders of Series A Junior Participating Preferred special rights in
case of a consolidation, merger, combination or other similar transaction.
On November 16, 2000, Cathay's board of directors adopted a Rights
Agreement between Cathay and American Stock Transfer & Trust Co., as Rights
Agent, and declared a dividend of one preferred share purchase right for each
outstanding share of Cathay common stock. The dividend was payable on January
19, 2001, to stockholders of record at the close of business on the record date,
December 20, 2000. Each preferred share purchase right entitles the registered
holder to purchase from Cathay one one-thousandth of a share of the Cathay
Series A Junior Participating Preferred Stock at a price of $200, subject to
adjustment. In general, the rights become exercisable if, after December 20,
2000, a person or group acquires 15% or more of Cathay's common stock or
announces a tender offer for 15% or more of the common stock. The Cathay board
of directors is entitled to redeem the rights at one cent per right at any time
before any such person acquires 15% or more of the outstanding common stock. The
rights will expire in ten years. The Rights Agreement is a successor to the
Bancorp's prior rights agreement, which expired at the close of business on
December 20, 2000.
46
In addition, Cathay's Restated Certificate of Incorporation has other
provisions that could make more difficult the acquisition of Cathay by means of
a tender offer, a proxy contest, merger or otherwise. These provisions include:
(i) the "staggered board," whereby only one-third of the members of the board of
directors are elected in any particular year; and (ii) a requirement that any
"Business Combination" (as defined in the Restated Certificate of Incorporation)
be approved by the affirmative vote of not less than 80% of the voting power of
the then-outstanding shares unless it is either approved by the board of
directors or certain price and procedural requirements are satisfied. See
"Comparison of Cathay Common Stock and New Asia Bancorp Common Stock."
DIRECTORS. Certain provisions of Cathay's Restated Certificate of
Incorporation and Restated Bylaws will impede changes in majority control of the
board of directors. Cathay's Restated Certificate of Incorporation and/or
Restated Bylaws provide that:
o Cathay's board is divided into three classes so that approximately
one-third of the total number of directors are elected each year. This
"classified" board of directors is intended to provide for continuity
of the board of directors and to make it more difficult and
time-consuming for a stockholder group to use its voting power to gain
control of the board of directors without consent of the incumbent
board of directors;
o any vacancy occurring in the board of directors, including a vacancy
created by an increase in the number of directors, shall be filled for
the remainder of the unexpired term by a majority vote of the
directors then in office;
o a director, in general, may be removed from office at any time only
for cause and only by the affirmative vote of eighty (80%) percent of
the then-outstanding shares of capital stock entitled to vote
generally in the election of directors, voting together as a single
class; and
o a procedure for the nomination of directors.
DELAWARE ANTI-TAKEOVER STATUTE. Cathay is subject to Section 203 of the
Delaware General Corporation Law, which prohibits a publicly held Delaware
corporation from engaging in a business combination with an interested
stockholder for a period of three years after the date of the transaction in
which the person becomes an interested stockholder, unless:
o before that date, the board of directors of the corporation approves
either the business combination or the transaction that resulted in
the stockholder's becoming an interested stockholder;
o upon consummation of the transaction that resulted in the
stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock,
excluding shares held by directors, officers and employee stock plans;
or
o on or after the consummation date, the business combination is
approved by the board of directors and by the affirmative vote at an
annual or special meeting of stockholders of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested
stockholder.
For purposes of Section 203, a business combination includes a merger,
asset sale or other transaction resulting in a financial benefit to the
interested stockholder. An interested stockholder is generally a person who,
together with affiliates and associates of that person, (a) owns 15% or more of
the corporation's voting stock or (b) is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock of
the corporation at any time within the prior three years.
PURPOSE AND TAKEOVER DEFENSIVE EFFECTS OF CATHAY'S RESTATED CERTIFICATE OF
INCORPORATION AND RESTATED BYLAWS
Cathay's board believes that the provisions contained in Cathay's Restated
Certificate of Incorporation and Restated Bylaws described above are prudent and
will reduce Cathay's vulnerability to takeover attempts and certain other
transactions which have not been negotiated with and approved by its board of
directors. The board of directors believes these provisions are in the best
interest of Cathay and its stockholders. In the judgment of the board of
directors, Cathay's board will be in the best position to determine the true
value of Cathay and to negotiate more effectively for terms that will be in the
best interest of its stockholders. Accordingly, the board of directors believes
that it is in the best interest of Cathay and its stockholders to encourage a
potential acquiror to negotiate directly with the board of directors, and that
these provisions will encourage such negotiations and discourage hostile
takeover attempts. It is also the view of the board of directors that these
provisions should not discourage
47
persons from proposing a merger or other transaction at a price reflective
of the true value of Cathay and otherwise in the best interest of all
stockholders.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it to incur great expense. Although a
tender offer or other takeover attempt may be made at a price substantially
above the current market prices, such offers are sometimes made for less than
all of the outstanding shares of a target company. As a result, stockholders may
be presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
which is under different management and whose objectives may not be similar to
those of the remaining stockholders. The concentration of control which could
result from a tender offer or other takeover attempt could also deprive Cathay's
remaining stockholders of benefits of certain protective provisions of the
Securities Exchange Act of 1934, if the number of beneficial owners became fewer
than 300, thereby allowing for Exchange Act deregistration.
Despite the belief of Cathay as to the benefits to stockholders of these
provisions of Cathay's Restated Certificate of Incorporation and Restated
Bylaws, these provisions may also have the effect of discouraging a future
takeover attempt which would not be approved by Cathay's board of directors, but
pursuant to which stockholders may receive a substantial premium for their
shares over then-current market prices. As a result, stockholders who might
desire to participate in such a transaction may not have any opportunity to do
so. Such provisions will also render the removal of Cathay's board of directors
and management more difficult. The board of directors of Cathay, however, has
concluded that the potential benefits outweigh the possible disadvantages.
COMPARISON OF CATHAY COMMON STOCK WITH NEW ASIA BANCORP COMMON STOCK
As a result of the merger, the holders of New Asia Bancorp common stock may
become stockholders of Cathay. As a holder of Cathay common stock, you will have
similar (but not identical) rights to those that you currently have with your
shares of New Asia Bancorp common stock.
The discussion below is a summary of various rights of stockholders and is
not intended to be a complete statement of all rights. The discussion is
qualified in its entirety by reference to the certificate of incorporation of
Cathay and the charter of New Asia Bancorp as well as the provisions of Delaware
and federal law.
AUTHORIZED CAPITAL STOCK
Cathay's authorized capital stock consists of: (a) 100,000,000 shares of
common stock, par value $0.01 per share and (b) 10,000,000 shares of preferred
stock, par value $0.01 per share, of which 100,000 shares are designated as
Series A Junior Participating Preferred. The Cathay board of directors is
authorized, without further stockholder action, to issue other shares of
preferred stock with such designations, preferences and rights as the Cathay
board of directors may determine.
New Asia Bancorp's authorized capital stock consists of 1,000,000 shares of
common stock, par value $0.25 per share.
ISSUANCE OF COMMON STOCK
As of June 30, 2006, there were 51,512,705 shares of Cathay common stock
issued and outstanding, and 4,942,805 shares of Cathay common stock reserved for
issuance under Cathay's employee and director stock option plans. There are no
shares of Cathay preferred stock that are issued and outstanding.
As of June 30, 2006, there were 719,762 shares of New Asia Bancorp common
stock issued and outstanding.
LIQUIDATION RIGHTS
In the event that Cathay is liquidated, the holders of Cathay common stock
are entitled to share, on a pro rata basis, Cathay's remaining assets after
provision for liabilities and following the payment of the full amount of
liquidation preference to the holders of any outstanding shares of Series A
Junior Participating Preferred. The Cathay board of directors is authorized to
determine the liquidation rights of any other preferred stock that may be
issued.
In the event that New Asia Bancorp is liquidated, the holders of New Asia
Bancorp common stock are entitled to share, on a pro rata basis, New Asia
Bancorp's remaining assets after provision for liabilities.
48
PREEMPTIVE RIGHTS
Cathay's stockholders do not have preemptive rights to subscribe to any
additional securities that may be issued by Cathay.
New Asia Bancorp's stockholders do not have preemptive rights to subscribe
to any additional securities that may be issued by New Asia Bancorp.
VOTING RIGHTS
All voting rights are currently vested in the holders of Cathay common
stock with each share being entitled to one vote. Cathay's stockholders do not
have cumulative voting rights for the election of directors.
All voting rights are currently vested in the holders of New Asia Bancorp
common stock with each share being entitled to one vote. New Asia Bancorp's
stockholders do not have cumulative voting rights for the election of directors.
STOCKHOLDER ACTION WITHOUT A MEETING
Subject to the rights of the holders of any class or series of preferred
stock of Cathay, any action required or permitted to be taken by the
stockholders of Cathay must be effected at an annual or special meeting of
stockholders of Cathay and may not be effected by any consent in writing by such
stockholders.
Any action required or permitted to be taken by the stockholders of New
Asia Bancorp must be effected at an annual or special meeting of the
stockholders of New Asia Bancorp; provided, however, that any action required or
permitted to be taken at any annual or special meeting may be taken without a
meeting, without prior notice and without a vote, if consent in writing, setting
forth the action so taken, is signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares are entitled to vote on
such action were present and voted.
STOCKHOLDER VOTE ON BUSINESS COMBINATIONS
Cathay's Restated Certificate of Incorporation provides that certain
transactions with an "interested stockholder" or its affiliates or associates be
approved by 80% or more of the voting power of the then-outstanding shares of
stock of Cathay entitled to vote in the election of directors (the "voting
stock"), voting together as a single class. Such supermajority approval is not
required if the transaction in question is (i) approved by a majority of
disinterested directors of Cathay and (ii) (if the transaction involves any cash
or other consideration to the stockholders of Cathay solely in their capacity as
stockholders of Cathay) certain price and procedural requirements are satisfied.
An "interested stockholder" is defined as (a) a person who is, or has publicly
disclosed a plan or intention to become, a beneficial owner of more than 10% of
the voting power of the voting stock or (b) an affiliate or associate of Cathay
as defined under the Securities Exchange Act of 1934, who at any time within the
two-year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10% of more of the voting power of the
then-outstanding voting stock. The affirmative vote of at least 80% of the
voting power of all of the then-outstanding shares of the voting stock, voting
together as a single class, is required to alter, amend or repeal this provision
of Cathay's Restated Certificate of Incorporation.
The Delaware General Corporation Law provides that, unless otherwise
provided in the Certificate of Incorporation or the Bylaws, a merger that has
been properly submitted to the stockholders of a corporation by the board of
directors of such corporation shall be approved by the stockholders of the
corporation upon a vote of a majority of the outstanding stock of the
corporation entitled to vote on such merger. Neither the Certificate of
Incorporation nor the Bylaws of New Asia Bancorp requires more than a majority
vote of the stockholders of New Asia Bancorp in order to approve a merger.
SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of Cathay stockholders, unless otherwise prescribed by
statute, may only be called, at any time, by the Chairman of the Board, the
President or by a majority of the members of the board of directors.
Special meetings of New Asia Bancorp stockholders, unless otherwise
prescribed by statute, may only be called, at any time, by the Chairman of the
Board, the Chief Executive Officer, the President, by a majority of the
outstanding common shares or pursuant to a resolution approved by a majority of
the board of directors plus one additional director.
49
DIVIDENDS
The payment of dividends by any bank or bank holding company is subject to
government regulation, in that regulatory authorities may prohibit banks and
bank holding companies from paying dividends in a manner that would constitute
an unsafe or unsound banking practice. In addition, a bank may not pay cash
dividends if doing so would reduce the amount of its capital below that
necessary to meet minimum applicable regulatory capital requirements. State laws
also limit a bank's ability to pay dividends.
Dividends may be paid on Cathay common stock when, as and if declared by
the Cathay board of directors out of funds legally available for the payment of
dividends. In addition, the Cathay board of directors may issue other preferred
stock that is entitled to such dividend rights as the board of directors may
determine, including priority over the common stock in the payment of dividends.
The ability of Cathay to pay dividends depends on its ability to receive
dividends or other distributions from its subsidiaries. The limitations and
restrictions imposed by statute or regulation may limit the amount of dividends
Cathay's subsidiaries, and Cathay, can pay. Historically, Cathay has declared
and paid dividends on a quarterly basis since January 1991.
Dividends may be paid on New Asia Bancorp's common stock when, as and if
declared by the New Asia Bancorp board of directors out of funds legally
available for the payment of dividends. The ability of New Asia Bancorp to pay
dividends depends on its ability to receive dividends or other distributions
from its subsidiary, New Asia Bank. The limitations and restrictions imposed by
statute or regulation may limit the amount of dividends New Asia Bancorp's
subsidiary, and New Asia Bancorp, can pay. See the discussion of New Asia
Bancorp's historical dividends set forth in "Selected Historical and Comparative
Per-Share Data -- Comparative Stock Price and Dividend Information."
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
The Delaware General Corporation Law authorizes a corporation's board of
directors to make various changes of an administrative nature to its certificate
of incorporation, including increasing the number of outstanding shares in
proportion to a stock split or stock divided in the corporation's own shares.
Other amendments to a corporation's certificate of incorporation must be
recommended to the stockholders by the board of directors, unless the board
determines that, because of a conflict of interest or other special
circumstances, it should make no recommendation and must be approved by a
majority of all votes entitled to be cast by each class of stockholders that has
a right to vote on the amendment.
Cathay's Restated Certificate of Incorporation provides that the
affirmative vote of the holders of at least 80% of the voting power of all of
the then-outstanding shares of the capital stock of Cathay entitled to vote
generally in the election of directors shall be required to alter, amend or
repeal certain provisions in such certificate of incorporation, such as those
regarding action by written consent, amendment of bylaws, election of directors
or business combinations with interested stockholders. The Cathay board of
directors may, by a majority vote of the directors, amend Cathay's Restated
Bylaws (however, if there is an interested stockholder at the time, the
amendment requires the approval of a majority of the disinterested directors).
The stockholders of Cathay also have power to amend Cathay's Restated Bylaws by
the affirmative vote of the holders of at least 80% of the voting power of all
of the then-outstanding shares of the capital stock of Cathay entitled to vote
generally in the election of directors.
New Asia Bancorp's Certificate of Incorporation provides that New Asia
Bancorp reserves the right to amend, alter, change or repeal any provision
contained in the Certificate of Incorporation in the manner prescribed by law.
The New Asia Bancorp board of directors may, by a majority vote of the
directors, amend, alter or repeal the Bylaws.
BOARD OF DIRECTORS
Cathay's Restated Certificate of Incorporation provides the board must be
staggered, divided into three classes, as nearly equal in number as reasonably
possible. Cathay's board currently consists of eleven (11) members, each of whom
has a staggered three-year term.
New Asia Bancorp's Certificate of Incorporation provides that the number of
directors of New Asia Bancorp shall be fixed from time to time by resolution of
either the stockholders or the board of directors. New Asia Bancorp's Bylaws
provide that the number of directors constituting the whole board shall consist
of one or more directors. New Asia Bancorp's Bylaws provide further that, at
each annual meeting of the stockholders, the stockholders shall elect directors,
each of whom shall hold office until the next annual meeting of the stockholders
50
and the election and qualification of his or her successor, or until his or her
earlier death, resignation or removal. New Asia Bancorp's board currently
consists of twelve members.
NOMINATION TO THE BOARD OF DIRECTORS
Only persons who are nominated in accordance with the procedures set forth
in the Cathay Restated Bylaws shall be eligible for election as directors.
Nominations of persons for election to the board of directors of Cathay may be
made at the direction of the board of directors or by the Nominating Committee
thereof or, to the extent authorized by applicable law, by any stockholder of
Cathay who is a stockholder of record at the time of notice provided for in the
Cathay Restated Bylaws, who is entitled to vote for the election of directors at
the meeting and who complies with the notice procedures set forth in the Bylaws
and with applicable law.
Only persons who are nominated in accordance with the procedures set forth
in the New Asia Bancorp Bylaws shall be eligible for election as directors.
Nominations of persons for election to the board of directors of New Asia
Bancorp may be made at the direction of the board of directors or, to the extent
authorized by applicable law, by any stockholder of New Asia Bancorp who is a
stockholder of record at the time of notice provided for in the New Asia Bancorp
Bylaws, who is entitled to vote for the election of directors at the meeting and
who complies with the notice procedures set forth in the Bylaws and with
applicable law.
DISSENTERS' RIGHTS
Under Delaware Law, appraisal rights are generally available for shares of
any class or series of a corporation in a merger or consolidation; provided
that, except in certain circumstances, no such rights are available for the
shares of any class or series of stock which, at the record date for the meeting
held to approve such transaction, were either (1) listed on a national
securities exchange or (2) held of record by more than 2,000 shareholders; and
further provided that no rights are available to stockholders of the surviving
corporation if the merger does not require their approval.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
Under the Delaware General Corporation Law, indemnification of directors
and officers is authorized to cover judgments, amounts paid in settlement and
expenses arising out of actions where the director or officer acted in good
faith and in or not opposed to the best interests of the corporation, and, in
criminal cases, where the director or officer had no reasonable cause to believe
that his or her conduct was unlawful. Unless limited by the corporation's
certificate of incorporation, Delaware Law requires indemnification if the
director or officer is wholly successful on the merits of the action. Cathay's
Restated Certificate of Incorporation and Restated Bylaws provide that Cathay
shall indemnify its directors, officers, employees and its agents to the fullest
extent authorized by law.
New Asia Bancorp's Certificate of Incorporation provides that New Asia
Bancorp shall indemnify its directors to the fullest extent authorized by law,
and New Asia Bancorp's Bylaws provide that New Asia Bancorp shall indemnify its
directors, officers, employees and its agents to the fullest extent authorized
by law.
INFORMATION ABOUT CATHAY AND CATHAY BANK
GENERAL
Cathay General Bancorp is a Delaware corporation and is registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended. As
a bank holding company, Cathay is allowed to acquire or invest in the securities
of companies that are engaged in banking or in activities closely related to
banking as authorized by the Board of Governors of the Federal Reserve System.
As of June 30, 2006, Cathay had total assets of approximately $7.46
billion, total net loans held in portfolio of approximately $5.32 billion, total
deposits of approximately $5.25 billion and approximately $862 million in
stockholders' equity. Cathay common stock trades on The NASDAQ Stock Market
under the symbol "CATY."
CATHAY BANK
Cathay's principal asset and its wholly owned subsidiary, Cathay Bank, is a
state-chartered commercial bank, which is among the leading banks in the United
States serving the ethnic Chinese community.
Founded in 1962, Cathay Bank offers a wide range of financial services.
Cathay Bank currently operates thirty branches in California, nine branches in
New York State, one in Massachusetts, one in Houston, Texas, two in
51
Washington State and representative offices in Taipei, Hong Kong and
Shanghai. Cathay Bank's website is found at http://www.cathaybank.com.
ADDITIONAL INFORMATION CONCERNING CATHAY AND CATHAY BANK
Information concerning:
o directors and executive officers,
o executive compensation,
o principal stockholders,
o certain relationships and related transactions, and
o other related matters concerning Cathay and Cathay Bank
is included or incorporated by reference in Cathay's Annual Report on Form 10-K
for the fiscal year ended December 31, 2005 and the Quarterly Reports on Form
10-Q for the quarters ended March 31 and June 30, 2006. Additionally, Cathay's
financial statements and information, as well as management's discussion and
analysis thereof, are included in Cathay's Annual Report on Form 10-K for the
fiscal year ended December 31, 2005 and the Quarterly Reports on Form 10-Q for
the quarters ended March 31 and June 30, 2006. These reports are incorporated by
reference into this proxy statement/prospectus. If you want to obtain copies of
these documents or other information concerning Cathay, please see "Where You
Can Find More Information about Cathay."
INFORMATION ABOUT NEW ASIA BANCORP
GENERAL
New Asia Bancorp is a Delaware corporation and is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended. As a
bank holding company, New Asia Bancorp is allowed to acquire or invest in the
securities of companies that are engaged in banking or in activities closely
related to banking as authorized by the Board of Governors of the Federal
Reserve System.
As of June 30, 2006, New Asia Bancorp had total assets of approximately
$139 million, total loans of approximately $112 million, total deposits of
approximately $115 million and total shareholders' equity of approximately $11.4
million. New Asia Bancorp Stock is privately held and not quoted on a stock
exchange or market, and no broker makes a market in the stock.
NEW ASIA BANK
New Asia Bancorp's principal asset and its wholly owned subsidiary, New
Asia Bank, is a state-chartered bank and a member of the Federal Reserve System.
Founded in 1987, New Asia Bank offers a wide range of financial services
targeted at the needs of Asian residents and businesses in the Chicago area. New
Asia Bank currently operates three full-service offices in the Chicago area.
WHERE YOU CAN FIND MORE INFORMATION ABOUT CATHAY
Cathay files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information that Cathay files at the SEC's Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the Public Reference
Room. Cathay's SEC filings are also available to the public on the SEC Internet
site (HTTP://WWW.SEC.GOV).
Cathay has filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act relating to the shares of Cathay
common stock to be issued in connection with the merger. This proxy
statement/prospectus also constitutes the prospectus of Cathay filed as part of
the registration statement but does not contain all the information set forth in
the registration statement and exhibits thereto. You may copy and read the
registration statement and its exhibits at the public reference facilities
maintained by the Securities and Exchange Commission at the address set forth
above.
52
The SEC allows Cathay to "incorporate by reference" information into this
proxy statement/prospectus, which means that Cathay can disclose important
information to you by referring you to another document filed separately with
the Commission. The information incorporated by reference is deemed to be part
of this proxy statement/prospectus, except for any information superseded by
information contained directly in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Cathay has previously filed with the Commission. These
documents contain important information about Cathay and its financial
condition.
CATHAY SECURITIES AND EXCHANGE COMMISSION FILINGS (SEC
FILE NUMBER 001-31830): PERIOD OR DATE FILED
---------------------------------------------------------- ------------------------------------------------
Annual Report on Form 10-K.............................. Year ended December 31, 2005
Quarterly Reports on Form 10-Q.......................... Quarters ended March 31, 2006 and June 30, 2006
Current Reports on Form 8-K and 8-K/A................... Filed on May 12, 2005, May 17, 2005, September 6,
2005, September 15, 2005, October 24,
2005, October 25, 2005, November 10,
2005, November 30, 2005, December 14,
2005, December 16, 2005, December 19,
2005, January 10, 2006, January 30, 2006,
February 22, 2006, March 31, 2006, April 12, 2006,
May 11, 2006, May 16, 2006 and July 7, 2006
(other than the portions of those documents not
deemed to be filed)
Proxy Statement......................................... Filed on March 20, 2006
Description of Cathay common stock contained in the
Registration Statement on Form S-3...................... Filed on April 26, 2006
Cathay incorporates by reference any additional documents that it may file
with the SEC between the date of this proxy statement/prospectus and the date of
the New Asia Bancorp special meeting. These include periodic reports, such as
annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports
on Form 8-K, as well as proxy statements.
You can obtain the documents that are incorporated by reference through
Cathay or the SEC. You can also obtain these documents from the SEC, as
described above. These documents are also available from Cathay without charge,
excluding exhibits unless Cathay has specifically incorporated such exhibits by
reference in this proxy statement/prospectus. You may obtain documents
incorporated by reference in this proxy statement/prospectus by requesting them
in writing or by telephone from Cathay at 777 North Broadway, Los Angeles,
California 90012, (213) 625-4700, ATTN: Investor Relations. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC; the address
of such site is HTTP://WWW.SEC.GOV. Such reports, proxy and information can also
be found at Cathay's own website, HTTP://WWW.CATHAYBANK.COM. If you request any
incorporated documents from Cathay, Cathay will mail them to you by first class
mail, or another equally prompt means, within one business day after it receives
your request.
If you would like to request documents, please do so by September 18, 2006
to receive them before the meeting.
Cathay has supplied all information contained in this proxy
statement/prospectus relating to Cathay and Cathay Bank, and New Asia Bancorp
has supplied all such information relating to New Asia Bancorp and New Asia
Bank.
In deciding how to vote, you should rely only on the information contained
in this proxy statement/prospectus or incorporated herein by reference. Neither
Cathay nor New Asia Bancorp has authorized any person to provide you with any
information that is different from what is contained in this proxy
statement/prospectus. This proxy statement/prospectus is dated August 11, 2006.
You should not assume that the information contained in this proxy
statement/prospectus is accurate as of any date other than such date, and
neither the mailing to you of this proxy statement/prospectus nor the issuance
to you of shares of Cathay common stock will create any implication to the
contrary. This proxy statement/prospectus does not constitute an offer to sell
or a solicitation of any offer to buy any securities or the solicitation of a
proxy in any jurisdiction in which, or to any person to whom, it is unlawful.
53
LEGAL MATTERS
Certain legal matters with respect to Cathay, including the validity of the
shares of Cathay common stock to be issued in connection with the merger, will
be passed upon for Cathay by Wachtell, Lipton, Rosen & Katz. Wachtell, Lipton,
Rosen & Katz and Schiff Hardin have passed upon, among other things, certain
federal income tax consequences of the merger, and the receipt by Cathay and New
Asia Bancorp, respectively, of their respective opinions as to such federal
income tax consequences of the merger is a condition to the closing of the
merger.
EXPERTS
The consolidated financial statements of Cathay as of December 31, 2005 and
2004, and for each of the years in the three-year period ended December 31,
2005, and management's assessment of the effectiveness of internal control over
financial reporting as of December 31, 2005 have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent registered public accounting firm, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
OTHER BUSINESS
The only business to be conducted at the special meeting will be the
approval of the Agreement and Plan of Merger. No other business may be
presented.
54
APPENDIX A
-------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
CATHAY GENERAL BANCORP
AND
NEW ASIA BANCORP, INC.
DATED AS OF JULY 6, 2006
-------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER......................................................A-1
1.1 Definitions................................................A-1
1.2 The Merger.................................................A-2
1.3 Closing; Effective Time....................................A-2
1.4 Effects of the Merger......................................A-2
1.5 Conversion of Company Capital Stock........................A-2
1.6 Cathay Capital Stock.......................................A-4
1.7 Articles of Incorporation..................................A-4
1.8 Bylaws.....................................................A-4
1.9 Directors and Officers.....................................A-4
ARTICLE II Delivery of Merger Consideration................................A-4
2.1 Surrender of Company Capital Stock.........................A-4
2.2 Election and Allocation Procedures.........................A-6
2.3 Further Transfers of Company Capital Stock.................A-6
2.3 Dissenting Shares..........................................A-6
2.4 Alternative Method.........................................A-6
ARTICLE III Disclosure Schedules; Representations and Warranties of the
Company and Cathay..............................................A-6
3.1 Disclosure Schedule........................................A-6
ARTICLE IV Representations and Warranties of the Company...................A-7
4.1 Corporate Organization.....................................A-7
4.2 Capitalization.............................................A-7
4.3 Authority; No Violation....................................A-8
4.4 Consents and Approvals.....................................A-9
4.5 Regulatory Reports........................................A-10
4.6 Financial Statements; Methods of Accounting...............A-10
4.7 Broker's Fees.............................................A-11
4.8 Absence of Certain Changes or Events......................A-11
4.9 Legal Proceedings.........................................A-12
4.10 Taxes.....................................................A-13
4.11 Employee Benefit Plans....................................A-14
4.12 Disclosure Controls and Procedures........................A-15
4.13 Company Information.......................................A-15
4.14 Compliance with Applicable Law............................A-15
4.15 Contracts.................................................A-17
4.16 Environmental Matters.....................................A-18
4.17 Derivative Transactions...................................A-18
4.18 Opinion...................................................A-18
4.19 Approvals.................................................A-19
A-i
4.20 Loans and Deposits........................................A-19
4.21 Property..................................................A-19
4.22 Labor Matters.............................................A-20
4.23 Insurance.................................................A-21
4.24 Absence of Undisclosed Liabilities........................A-21
4.25 Qualification as Reorganization...........................A-22
4.26 Full Disclosure...........................................A-22
ARTICLE V Representations and Warranties of Cathay.......................A-22
5.1 Corporate Organization....................................A-22
5.2 Authority; No Violation...................................A-23
5.3 Consents and Approvals....................................A-24
5.4 Broker's Fees.............................................A-24
5.5 Cathay Information........................................A-24
5.6 Access to Funds...........................................A-24
5.7 Approvals.................................................A-24
5.8 Legal Proceedings.........................................A-24
5.9 Compliance with Applicable Law............................A-24
5.10 Regulatory Reports........................................A-25
5.11 Full Disclosure...........................................A-26
5.12 Capitalization............................................A-26
5.13 Financial Statements......................................A-26
5.14 Absence of Certain Changes or Events......................A-27
5.15 Taxes.....................................................A-27
5.16 Disclosure Controls and Procedures........................A-27
5.17 Absence of Undisclosed Liabilities........................A-27
5.18 Qualification as Reorganization...........................A-28
5.19 SEC Documents.............................................A-28
ARTICLE VI Covenants Relating to Conduct of Business......................A-29
6.1 Covenants of the Company..................................A-29
6.2 Covenants of Cathay.......................................A-32
6.3 Covenants of Both the Company and Cathay..................A-32
ARTICLE VII Additional Agreements..........................................A-33
7.1 Regulatory Matters........................................A-33
7.2 No Solicitation by the Company............................A-35
7.3 Access to Information.....................................A-36
7.4 Confidentiality...........................................A-37
7.5 Notification of Certain Matters...........................A-37
7.6 Employee Benefit Plans....................................A-37
7.7 Indemnification...........................................A-39
7.8 Reasonable Efforts; Additional Agreements.................A-40
7.9 Environmental/Undisclosed Liabilities Pool................A-40
7.10 Listing of Shares.........................................A-41
7.11 Filing and Other Fees.....................................A-41
A-ii
ARTICLE VIII Conditions Precedent...........................................A-41
8.1 Conditions to Each Party's Obligation To Effect the
Merger....................................................A-41
8.2 Conditions to Obligations of Cathay.......................A-41
8.3 Conditions to Obligations of the Company..................A-43
8.4 Frustration of Closing Conditions.........................A-43
ARTICLE IX Termination and Amendment......................................A-44
9.1 Termination...............................................A-44
9.2 Effect of Termination.....................................A-45
9.3 Amendment.................................................A-45
9.4 Extension; Waiver.........................................A-46
ARTICLE X General Provisions.............................................A-46
10.1 Nonsurvival of Representations, Warranties and
Agreements................................................A-46
10.2 Expenses..................................................A-46
10.3 Notices...................................................A-46
10.4 Interpretation............................................A-47
10.5 Counterparts..............................................A-47
10.6 Entire Agreement..........................................A-47
10.7 Governing Law.............................................A-48
10.8 Enforcement of Agreement..................................A-48
10.9 Severability..............................................A-48
10.10 Publicity.................................................A-48
10.11 Assignment; No Third Party Beneficiaries..................A-48
10.12 Fax Signatures............................................A-48
APPENDIX I -- Definitions I-1
EXHIBIT A -- Form of Affiliate Agreement
EXHIBIT B -- Employment Agreement Term Sheet
A-iii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of July 6, 2006 (this
"Agreement"), is entered into by and among Cathay General Bancorp, a Delaware
corporation, registered under the Bank Holding Company Act of 1956, as amended
("Cathay"), and New Asia Bancorp, Inc., a Delaware corporation, registered under
the Bank Holding Company Act of 1956, as amended, (the "Company").
WHEREAS, the Boards of Directors of Cathay and the Company have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transaction provided
for herein in which the Company will, subject to the terms and conditions set
forth herein, merge with and into Cathay, with Cathay being the surviving entity
(the "Merger") and following, and subject to the consummation of the Merger, the
merger (the "Subsequent Merger") of the Company's wholly-owned subsidiary, New
Asia Bank ("NAB"), an Illinois state-chartered commercial bank with and into
Cathay's wholly-owned Subsidiary, Cathay Bank, a California state-chartered
commercial bank ("Cathay Bank");
WHEREAS, the aggregate consideration to be paid to shareholders of
the Company in the Merger would consist of cash or shares of Cathay Common Stock
(as defined below) or a combination thereof with an aggregate value of $32.60
for each share of Company Capital Stock (as defined below) converted in the
Merger and a total value of $23,464,241.20 for all shares of Company Capital
Stock;
WHEREAS, the parties intend for each of the Merger and the Subsequent
Merger to constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder;
WHEREAS, concurrently with the execution and delivery of this
Agreement, as a condition and inducement to Cathay's willingness to enter into
this Agreement, Cathay and certain shareholders of the Company are entering into
shareholder voting agreements dated as of the date hereof (the "Support
Agreements") covering approximately 55% of the Company Capital Stock (as defined
below).
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger; and
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 DEFINITIONS. The defined terms used in this Agreement have the
meanings set forth on Appendix I hereto.
1.2 THE MERGER. Subject to the terms and conditions of this Agreement, in
accordance with applicable provisions of the DGCL, at the Effective Time, the
Company shall merge with and into Cathay. Cathay shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") in the
Merger and shall continue its corporate existence under the laws of the State of
Delaware. The name of the Surviving Corporation shall be "Cathay General
Bancorp" Upon consummation of the Merger, the separate corporate existence of
the Company shall terminate. The parties hereto hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Code Section 368 and the
regulations thereunder.
1.3 CLOSING; EFFECTIVE TIME.
(a) CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place at 10:00 a.m. on the
fifth (5th) business day after the satisfaction or waiver (subject to applicable
law) of the last to occur of the conditions set forth in Article VIII hereof
(other than those conditions which relate to actions to be taken at the Closing)
(the "Closing Date"), at the offices of Wachtell, Lipton, Rosen & Katz, New
York, NY 10019 unless another time, date or place is agreed to in writing by the
parties hereto.
(b) EFFECTIVE TIME. Subject to the provisions of this Agreement, a plan
and agreement of merger complying with the applicable provisions of Section 251
of the DGCL (the "Plan and Agreement of Merger") and a certificate complying
with Section 251 and Section 103 of the DGCL (the "Delaware Certificate"), shall
be duly executed and filed with the Secretary of State of the State of Delaware
(the "Delaware Secretary") and in the offices of such officials of the State of
Delaware and its political subdivisions as may be necessary or proper to effect
and evidence the Merger on the Closing Date by the Company and Cathay. The
Merger shall become effective at such time as the filings with the Delaware
Secretary of the Plan and Agreement of Merger become effective (the "Effective
Time").
1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Section 259 of the DGCL.
1.5 CONVERSION OF COMPANY CAPITAL STOCK.
(a) At the Effective Time, subject to the exceptions and limitations set
forth in Article II hereof, each share of Company Capital Stock issued and
outstanding immediately prior to the Effective Time (other than (y) any shares
of Company Capital Stock held directly or indirectly by the Company or Cathay
(except for Trust Account Shares and DPC Shares) and (z) Dissenting Shares),
shall, by virtue of this Agreement and without any action on the part of the
holder thereof, be cancelled and cease to exist and be converted into the right
to receive, at the election of the holder thereof as provided in Section 2.2
hereof, either (i) that number of shares of Cathay Common Stock equal to the
Exchange Ratio, (ii) an amount in cash, without interest, equal to $32.60 (the
"Per Share Cash Consideration"), or (iii) a combination of cash and shares of
Cathay Common Stock (valued at the Average Closing Price) having an aggregate
value equal to the Per Share Cash Consideration (collectively, the "Merger
Consideration"), subject to the limitations set forth in Section 2.2(c) on the
aggregate number of shares of Cathay Common Stock issued and the aggregate
amount of cash paid in exchange for all shares of Company Capital Stock. On or
before the Closing Date, Cathay shall authorize the issuance of and shall
A-2
make available to the Exchange Agent a sufficient number of shares of common
stock of Cathay to enable the Exchange Agent to deliver, if and when required,
the number of shares of common stock of Cathay that the shareholders of the
Company shall be entitled to receive as provided in this Agreement.
(b) Notwithstanding any other provision hereof, no fractional shares of
Cathay Common Stock shall be issued to holders of Company Capital Stock. In lieu
thereof, each such holder otherwise entitled to a fraction of a share of Cathay
Common Stock shall receive, at the time of surrender of the Certificate or
Certificates, an amount in cash, rounded to the nearest penny, equal to the
product of (i) the Average Closing Price multiplied by (ii) the fraction of a
share of Cathay Common Stock to which such holder otherwise would be entitled.
No such holder shall be entitled to dividends, voting rights, interest on the
value of, or any other rights in respect of a fractional share, except as
expressly provided herein.
(c) At the Effective Time, all shares of Company Capital Stock that are
owned directly by the Company or Cathay (other than shares of Company Capital
Stock (i) held directly or indirectly in trust accounts, managed accounts and
the like or otherwise held in a fiduciary capacity for the benefit of third
parties (any such shares and shares of Company Common Stock which are similarly
held being referred to herein as "Trust Account Shares") or (ii) in respect of a
debt previously contracted (any such shares of Company Capital Stock, and shares
of Cathay Common Stock which are similarly held, being referred to herein as
"DPC Shares")) shall be cancelled and shall cease to exist and no cash or other
consideration shall be delivered in exchange therefor. At the Effective Time,
each share of Company Capital Stock that is owned by any direct or indirect
wholly owned Subsidiary of Cathay or the Company shall, by virtue of this
Agreement and without any action on the part of the holder thereof, be converted
into the right to receive the Per Share Stock Consideration. The Per Share Stock
Consideration paid pursuant to the preceding sentence shall not be subject to,
and will not be deemed to be Stock Election Shares or otherwise taken into
account in calculating adjustments under Section 2.2(c).
(d) Notwithstanding anything in this Agreement to the contrary, shares of
Company Capital Stock which are outstanding immediately prior to the Effective
Time and as to which shareholders have given notice of their intention to assert
dissenters rights in accordance with Section 262 of the DGCL (such shares being
referred to herein as "Dissenting Shares") shall not be converted into the right
to receive the Merger Consideration but, instead, the holders thereof shall be
entitled to receive payment of the fair value of such Dissenting Shares in
accordance with the provisions of Section 262 of the DGCL; provided, however,
that (i) if any holder of Dissenting Shares shall subsequently withdraw, with
the consent of the Surviving Corporation, his demand for payment for such
shares, or (ii) if any holder of Dissenting Shares fails to establish or
otherwise loses his entitlement to payment of the fair value of such shares as
provided in Section 262 of the DGCL, such holder or holders (as the case may be)
shall not be entitled to receive payment of the fair value of such shares of
Company Capital Stock as contemplated by Section 262 of the DGCL, and each of
such shares shall thereupon cease to be Dissenting Shares and shall be deemed to
have been converted into the right to receive, as of the Effective Time, the
Merger Consideration without any interest thereon, as provided in Section 1.5(a)
and Article II hereof, as Undesignated Shares. Prior to the Effective Time, the
Company shall give Cathay prompt notice of any demands for payment for shares of
Company Capital Stock pursuant to Section 262 of the DGCL received by the
Company, withdrawals of any such
A-3
demands and any other documents or instruments received by the Company in
connection therewith. Cathay shall have the right to participate in and direct
all negotiations and proceedings with respect to any such demands. Prior to the
Effective Time, the Company shall not, except with the prior written consent of
Cathay, which consent shall not unreasonably be withheld or delayed, make any
payment with respect to, or settle or offer to settle, any such demands, or
agree to do any of the foregoing.
1.6 CATHAY CAPITAL STOCK. Each share of the Cathay Capital Stock issued
and outstanding immediately prior to the Effective Time shall remain outstanding
and shall not be converted or otherwise affected by the Merger.
1.7 ARTICLES OF INCORPORATION. At the Effective Time, the Articles of
Incorporation of Cathay, as in effect at the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation.
1.8 BYLAWS. At the Effective Time, the Bylaws of Cathay, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.9 DIRECTORS AND OFFICERS. The directors and officers of Cathay
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, each to hold office in accordance with the Articles
of Incorporation and Bylaws of the Cathay until their respective successors are
duly elected or appointed and qualified.
ARTICLE II.
DELIVERY OF MERGER CONSIDERATION
2.1 SURRENDER OF COMPANY CAPITAL STOCK.
(a) Prior to the Effective Time, Cathay shall appoint American Stock
Transfer & Trust Co., or its successor, or any other bank or trust company
mutually acceptable to Cathay and the Company, as exchange agent (the "Exchange
Agent") for the purpose of exchanging Certificates representing shares of
Company Capital Stock. At or prior to the Effective Time, Cathay shall deposit
with the Exchange Agent (i) such number of certificates of Cathay Common Stock
representing the shares of Cathay Common Stock to be issued pursuant to Section
1.5 and (ii) immediately available funds in an amount not less than the portion
of the cash payable pursuant to Section 1.5 to holders of the Company Capital
Stock (other than Dissenting Shares) outstanding immediately prior to the
Effective Time.
(b) Cathay shall direct the Exchange Agent to mail, as promptly as
practicable but in any event no later than the Mailing Date, to each holder of
record of a certificate or certificates representing any such shares of Company
Capital Stock (each, a "Certificate"): (i) a letter of transmittal to be
completed, signed and returned to the Exchange Agent by each such holder, (ii)
an Election Form to be completed, signed and returned to the Exchange Agent by
each such holder, (iii) appropriate and necessary documentation enabling such
holder to establish, if applicable, an exemption from Tax withholding in
connection with payment of the Merger Consideration to each such holder, and
(iv) instructions regarding the documentation described
A-4
in clauses (i) through (iii) above for use in effecting the surrender of the
Certificates. The instructions shall specify that (w) Election Forms, properly
completed and duly executed, are required to be returned to the Exchange Agent
by the Election Deadline, (x) the materials specified in clauses (i) and (iii)
above, properly completed and duly executed, are required to be returned to the
Exchange Agent, accompanied by one or more Certificates (or customary affidavits
and indemnification regarding the loss or destruction of such Certificates or
the guaranteed delivery of such Certificates) representing all shares of Company
Capital Stock covered by the Election Form submitted by such holder, (y)
delivery of the Certificates shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent, and (z) upon surrendering a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by Cathay,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration (subject to the provisions of Section 2.2), and the Certificate so
surrendered shall forthwith be canceled. If a beneficial owner of a certificate
or certificates representing shares of Company Common Stock is entitled to
receive an amount of cash as their portion of the Merger Consideration equal to
or in excess of $200,000, the Exchange Agent shall wire the amount of cash to
the beneficial owner or the holder of record, as the case may be, on or the next
business day following the Closing Date, provided the beneficial owner or the
holder of record, as the case may be, has completed and delivered all the
documentation required to be completed and delivered pursuant to Article II and,
at least two business days prior to the Closing Date, delivered wire transfer
instructions to the Exchange Agent. Neither the beneficial owner nor the holder
of record shall pay any of the wire transfer costs associated with the wire
transfer contemplated by the previous sentence.
(c) If any payment of the Merger Consideration for shares of Company
Capital Stock is to be made in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
payment that the Certificate be presented to the Exchange Agent, accompanied by
all documents required to evidence and effect the transfer of ownership thereof,
and that the person requesting such payment shall pay to the Exchange Agent in
advance any transfer costs and expenses, including Taxes, required by reason of
the payment of the Merger Consideration to a person other than the registered
holder of the Certificate surrendered, or required for any other reason, or
shall establish to the satisfaction of the Exchange Agent that such transfer
costs and expenses have been paid or are not payable.
(d) Until surrendered as contemplated by this Section 2.1 and except as
otherwise provided herein, each Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender
the Merger Consideration. Notwithstanding anything to the contrary set forth
herein, if any holder of shares of Company Capital Stock should be unable to
surrender the Certificates representing such shares, because the Certificates
have been lost or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificates to be lost, stolen or destroyed and, if
required by Cathay, the posting by such person of a bond in such amount as may
be determined to be adequate by Cathay as indemnity against any claim that may
be made against it with respect to such Certificates, such holder shall be
entitled to receive the Merger Consideration. No interest shall be paid on the
Merger Consideration.
A-5
2.2 ELECTION AND ALLOCATION PROCEDURES.
(a) In accordance with Section 2.1(b) hereof, an election form ("Election
Form") and the other materials specified in Section 2.1(b)(i)-(iv) hereof, as
well as other appropriate and customary transmittal materials, in such form as
Cathay and the Company shall mutually agree shall be mailed no less than
thirty-five (35) days prior to the anticipated Effective Time or on such other
date as the Company and Cathay shall mutually agree ("Mailing Date") to each
holder of record of Company Capital Stock as of a date no earlier than five (5)
business days prior to the Mailing Date ("Election Form Record Date"). Cathay
shall make available one or more Election Forms as may be reasonably requested
by all persons who become holders (or beneficial owners) of Company Capital
Stock after the Election Form Record Date and prior to the Election Deadline,
and the Company shall provide to the Exchange Agent all information reasonably
necessary for it to perform its obligations as specified herein. Each Election
Form shall permit the holder (or the beneficial owner through appropriate and
customary documentation and instructions) to elect (an "Election") to receive
either (i) Cathay Common Stock (a "Stock Election") with respect to all of such
holder's Company Capital Stock, (ii) cash (a "Cash Election") with respect to
all of such holder's Company Capital Stock, or (iii) Cathay Common Stock with
respect to a percentage of such holder's Company Capital Stock (a "Combination
Stock Election") and cash with respect to the remainder of such holder's Company
Capital Stock (a "Combination Cash Election"), subject to the provisions
contained in this Agreement. Any Company Capital Stock (other than Dissenting
Shares) with respect to which the holder (or the beneficial owner, as the case
may be) shall not have submitted to the Exchange Agent, an effective, properly
completed Election Form received prior to the Election Deadline shall be deemed
to be "Undesignated Shares" hereunder.
(b) Any Election shall have been properly made and effective only if the
Exchange Agent shall have actually received a properly completed Election Form
by 5:00 p.m. California time on or before the thirtieth (30th) day following the
Mailing Date, or such other time and date as Cathay and the Company may mutually
agree (the "Election Deadline"). An Election Form shall be deemed properly
completed to the extent an Election is indicated for shares of Company Capital
Stock covered by such Election Form. Any Election Form may be revoked or changed
by the person submitting such Election Form at or prior to the Election
Deadline. In the event an Election Form is revoked prior to the Election
Deadline, the shares of Company Capital Stock represented by such Election Form
shall automatically become Undesignated Shares unless and until a new Election
is properly completed and made with respect to such shares on or before the
Election Deadline, and, if such revoked Election Form was delivered to the
Exchange Agent accompanied by Certificates represented by such Election Form,
Cathay shall cause such Certificates to be promptly returned without charge to
the person submitting the revoked Election Form upon written request to that
effect from the holder who submitted such Election Form. Subject to the terms of
this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any decisions of Cathay and the Company required by the
Exchange Agent and made in good faith in determining such matters shall be
binding and conclusive. Neither Cathay nor the Exchange Agent shall be under any
obligation to notify any person of any defect in an Election Form.
A-6
(c) The allocation among the holders of shares of Company Capital Stock of
rights to receive the Per Share Stock Consideration or the Per Share Cash
Consideration will be made as follows:
(i) NUMBER OF STOCK ELECTIONS IS LESS THAN THE MINIMUM STOCK
CONVERSION NUMBER. If the aggregate number of Stock Election Shares (on
the basis of valid Election Forms received by the Election Deadline) is
less than the Minimum Stock Conversion Number, then
(A) each Stock Election Share will be, as of the Effective Time,
converted into the Per Share Stock Consideration,
(B) the Exchange Agent will allocate from among the Undesignated
Shares, pro rata to the holders of Undesignated Shares in accordance
with their respective numbers of Undesignated Shares, a sufficient
number of Undesignated Shares so that the sum of such number and the
number of Stock Election Shares equals as closely as practicable the
Minimum Stock Conversion Number, and each such allocated Undesignated
Share (each, a "Stock-Selected Undesignated Share") will be, as of
the Effective Time, converted into the Per Share Stock Consideration,
provided that if the sum of all Undesignated Shares and Stock
Election Shares is equal to or less than the Minimum Stock Conversion
Number, all Undesignated Shares will be Stock-Selected Undesignated
Shares,
(C) if the sum of Stock Election Shares and Undesignated Shares
is less than the Minimum Stock Conversion Number, the Exchange Agent
will allocate from among the Cash Election Shares (other than any
shares of Company Common Stock owned by Cathay), pro rata to the
holders of Cash Election Shares in accordance with their respective
numbers of Cash Election Shares, a sufficient number of Cash Election
Shares so that the sum of such number, the number of all Stock
Election Shares and the number of all Undesignated Shares equals as
closely as practicable the Minimum Stock Conversion Number, and each
such allocated Cash Election Share (each, a "Converted Cash Election
Share") will be, as of the Effective Time, converted into the Per
Share Stock Consideration, and
(D) each Undesignated Share that is not a Stock-Selected
Undesignated Share and each Cash Election Share that is not a
Converted Cash Election Share will be, as of the Effective Time,
converted into the right to receive the Per Share Cash Consideration.
(ii) NUMBER OF STOCK ELECTIONS IS GREATER THAN THE MAXIMUM STOCK
CONVERSION NUMBER. If the aggregate number of Stock Election Shares (on
the basis of valid Election Forms received by the Election Deadline) is
greater than the Maximum Stock Conversion Number, then
(A) each Cash Election Share and Undesignated Share will be, as
of the Effective Time, converted into the right to receive the Per
Share Cash Consideration,
A-7
(B) the Exchange Agent will allocate from among the Stock
Election Shares, pro rata to the holders of Stock Election Shares in
accordance with their respective numbers of Stock Election Shares, a
sufficient number of Stock Election Shares ("Converted Stock Election
Shares") so that the difference of (x) the number of Stock Election
Shares less (y) the number of Converted Stock Election Shares equals
as closely as practicable the Maximum Stock Conversion Number, and
each Converted Stock Election Share will be, as of the Effective
Time, converted into the right to receive the Per Share Cash
Consideration, and
(C) each Stock Election Share that is not a Converted Stock
Election Share will be, as of the Effective Time, converted into the
Per Share Stock Consideration.
(iii) NUMBER OF STOCK ELECTIONS IS GREATER THAN OR EQUAL TO THE
MINIMUM STOCK CONVERSION NUMBER AND LESS THAN OR EQUAL TO THE MAXIMUM
STOCK CONVERSION NUMBER. If the aggregate number of Stock Election Shares
(on the basis of Election Forms received by the Election Deadline) is
greater than or equal to the Minimum Stock Conversion Number and less than
or equal to the Maximum Stock Conversion Number, then
(A) each Stock Election Share will be, as of the Effective
Time, converted into the Per Share Stock Consideration, and
(B) each Cash Election Share and Undesignated Share will be, as
of the Effective Time, converted into the right to receive the Per
Share Cash Consideration.
(iv) Notwithstanding any other provision of this Agreement, after
application of the allocation rules set forth in the preceding subsections
of this Section 2.2(c), Cathay shall be authorized to reallocate cash and
shares of Cathay Common Stock among the holders of the Company Capital
Stock in good faith and in such a manner as Cathay reasonably determines
to be fair and equitable, or to vary the number of shares of Cathay Common
Stock to be issued in the Merger, if and to the extent necessary in
Cathay's reasonable discretion to secure the Tax opinions described in
Section 8.2(g) and Section 8.3(e), in all cases subject to the Company's
prior consent (which consent will not be unreasonably withheld).
(v) Notwithstanding any other provision of this Agreement (other than
Section 2.2(c)(iii) hereof), all shares of Company Capital Stock which are
outstanding immediately prior to the Effective Time and that have ceased
to be Dissenting Shares shall be deemed "Undesignated Shares."
(d) The calculations required by Section 2.2(c) above shall be prepared by
Cathay prior to the Effective Time and shall be set forth in a certificate
executed by the Chief Financial Officer of Cathay and furnished to the Company
at least two (2) business days prior to the Effective Time showing the manner of
calculation in reasonable detail. Any calculation of a
A-8
portion of a share of Cathay Common Stock shall be rounded to the nearest
ten-thousandth of a share, and any cash payment shall be rounded to the nearest
cent.
(e) No dividends or other distributions of any kind which are declared
payable to holders of record of Cathay Common Stock after the Effective Time
will be paid to persons entitled to receive certificates representing such
Cathay Common Stock until such persons surrender their Certificates. Upon
surrender of such Certificates, the holders thereof shall be paid, without
interest, any dividends or other distributions with respect to shares of Cathay
Common Stock as to which the record date and payment date occurred after the
Effective Time and on or before the date of surrender.
(f) All dividends or distributions, and any cash to be paid pursuant to
Section 1.5(b) hereof in lieu of fractional shares, held by the Exchange Agent
for payment or delivery to the holders of unsurrendered Certificates and
unclaimed at the end of one year from the date of the Effective Time, shall
(together with any interest earned thereon) at such time be paid or redelivered
by the Exchange Agent to the Surviving Corporation, and after such time any
holder of a Certificate who has not surrendered such Certificate to the Exchange
Agent shall, subject to applicable law, only have the rights of a general
creditor of the Surviving Corporation for payment or delivery by the Surviving
Corporation of such dividends or distributions or cash, as the case may be.
Cathay, the Company or the Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement such cash amounts as Cathay, the Company or the Exchange Agent are
required to deduct and withhold under the Code, or any provision of state, local
or foreign law with respect to such payment. To the extent the amounts are so
withheld by Cathay, the Company or the Exchange Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of shares of the Company Capital Stock in respect of whom such deduction
and withholding was made by Cathay, the Company or the Exchange Agent. Any
amounts properly withheld shall be remitted by the withholding entity to the
Government Entity.
2.3 FURTHER TRANSFERS OF COMPANY CAPITAL STOCK. From and after the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Capital Stock theretofore outstanding shall
thereafter be made. If, after the Effective Time, Certificates representing such
shares are presented for transfer to the Surviving Corporation or the Exchange
Agent, they shall be cancelled and exchanged for the Merger Consideration as
provided in this Article II.
2.4 DISSENTING SHARES. Any Dissenting Shares of Company Capital Stock held
by persons who have perfected their rights with respect to such dissenting
shares under Section 262 of the DGCL shall not be converted pursuant to this
Agreement, but the holders thereof shall be entitled to such rights as are
granted them by Section 262 of the DGCL. Each holder of Dissenting Shares who is
entitled to payment for such holder's shares of Company Capital Stock pursuant
to Section 262 of the DGCL shall only receive payment from the Surviving
Corporation in an amount as determined pursuant to the procedures set forth in
Section 262 of the DGCL.
2.5 ALTERNATIVE METHOD. Notwithstanding any provision of this Agreement to
the contrary, upon written notice to the Company, Cathay may, at any time prior
to the Effective Time, to the extent permitted by law without a further vote of
the stockholders of the Company,
A-9
change the method of effecting the Merger or the making of Merger Consideration
available to the Company's shareholders if, and to the extent, it deems such
change to be necessary, appropriate or desirable; provided, however, that no
such change shall alter or change the Merger Consideration or prevent the Merger
from qualifying as a "reorganization" within the meaning of section 368(a) of
the Code.
ARTICLE III
DISCLOSURE SCHEDULES; REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
CATHAY
3.1 DISCLOSURE SCHEDULE. Prior to the execution and delivery of this
Agreement, the Company has delivered to Cathay, and Cathay has delivered to the
Company, a schedule (in the case of the Company, the "Company Disclosure
Schedule," and in the case of Cathay, the "Cathay Disclosure Schedule") setting
forth, among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement contained in
a provision hereof or as an exception to one or more of such party's
representations or warranties contained in Article IV, in the case of the
Company, or Article V, in the case of Cathay, or to one or more of such party's
covenants contained in Article VI.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule, the Company hereby
represents and warrants to Cathay, as of the date hereof and as of the Closing
Date, as follows:
4.1 CORPORATE ORGANIZATION.
(a) The Company is duly organized, validly existing and in good standing
under the corporate laws of the State of Delaware. NAB is an Illinois state
chartered bank and a member of the Federal Reserve System and is duly organized,
validly existing and in good standing under the laws of the State of Illinois.
The deposit accounts of NAB are insured by the FDIC through the Bank Insurance
Fund to the fullest extent permitted by law, and all premiums and assessments
required to be paid in connection therewith have been paid when due. True and
correct copies of the Certificate of Incorporation and Bylaws of the Company and
charter and bylaws of NAB as in effect on the date of this Agreement have
previously been made available to Cathay.
(b) The Company and NAB (i) have all requisite corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and (ii) is duly licensed or qualified to
do business in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary.
(c) The minutes of the Company and its Subsidiaries, as set forth in the
Company's board packages, contain true, correct, complete and accurate records
of all meetings and other corporate actions of its shareholders and Board of
Directors (including committees of its Board of Directors) held or taken since
the Company's or such Subsidiaries' incorporation.
A-10
(d) For purposes of assessment of FDIC premiums, NAB's category is 1A.
4.2 CAPITALIZATION. (a) The authorized capital stock of the Company
consists of 1,000,000 shares of Company Capital Stock. As of June 15, 2006,
there are (i) 719,762 shares of Company Capital Stock outstanding, (ii) no
shares of Company Capital Stock held as treasury stock by the Company, and (iii)
no shares of Company Capital Stock reserved for issuance upon exercise of
outstanding stock options or otherwise. All of the issued and outstanding shares
of Company Capital Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. The Company does not have and is
not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of Company Capital Stock or any other equity security of the
Company or any securities representing the right to purchase or otherwise
receive any shares of Company Capital Stock (or a cash payment based on the
value of a share of Company Capital Stock) or any other equity security of the
Company. The share journal and stock transfer ledger of the Company as of the
date of this Agreement accurately reflect the shareholders of record of the
Company.
(b) The authorized capital stock of NAB consists of 400,000 shares of
common stock, $4.00 par value per share, 354,884 of which are outstanding. All
of the outstanding shares of such common stock of NAB are duly authorized,
validly issued, fully paid and nonassessable, are free of preemptive rights and
are owned of record and beneficially by the Company free and clear of any liens
or encumbrances, with no personal liability attaching to the ownership thereof.
NAB does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of its capital stock or any other equity
security or any securities representing the right to purchase or otherwise
receive any shares of its capital stock or any other equity security.
(c) The authorized and outstanding capital stock of each of the Company's
Subsidiaries other than NAB is as described in the Company Disclosure Schedule.
All of the outstanding shares of such capital stock are duly authorized, validly
issued, fully paid and nonassessable and are owned of record and beneficially by
the Company or NAB or a Subsidiary of the Company or NAB free and clear of any
liens or encumbrances and free of preemptive rights, with no personal liability
attaching to the ownership thereof. None of the Company's Subsidiaries has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of its capital stock or any other equity security or any securities representing
the right to purchase or otherwise receive any shares of its capital stock or
any other equity security.
(d) Other than the Subsidiaries set forth in the Company Disclosure
Schedule, the Company does not have any other Subsidiaries and does not own,
directly or indirectly (except as a pledgee pursuant to loans or upon
acquisition in satisfaction of debt previously contracted), the outstanding
stock or equity or other voting interest (or any securities convertible into
stock, equity or other voting interest) in any person.
A-11
4.3 AUTHORITY; NO VIOLATION.
(a) The Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Company. Except for the approval of the shareholders
of the Company at a meeting to be convened to consider and act upon this
Agreement and the transactions contemplated hereby (collectively, the
"Consents"), no other corporate proceedings on the part of the Company are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company, and (assuming due authorization, execution and
delivery by Cathay) this Agreement constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by the Company,
nor the consummation by the Company and NAB of the transactions contemplated
hereby (including the Subsequent Merger), nor compliance by the Company with any
of the terms or provisions hereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of the Company, or (ii) assuming that the
Consents and the consents and approvals referred to in Section 4.4 hereof are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to the Company, its
Subsidiaries or to any of their respective properties or assets, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance (a "Lien") upon any of the properties or assets of the Company or
its Subsidiaries under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, contract, agreement or
other instrument or obligation to which the Company or its Subsidiaries is a
party, or by which the Company or its Subsidiaries or any of their respective
properties or assets may be bound or affected, except (in the case of clause
(ii) above) for such violations, conflicts, breaches, or defaults which either
individually or in the aggregate will not have a Material Adverse Effect on the
Company or any of the Company Subsidiaries, taken as a whole.
4.4 CONSENTS AND APPROVALS.
(a) Except for (i) the filing by Cathay of any necessary application with
the FRB under the Bank Holding Company Act of 1956, as amended (the "FRB
Application"), and approval or waiver of such application, (ii) the filing of an
application with the FDIC under the Bank Merger Act and the Interstate Act (the
"FDIC Application") and approval of such application, (iii) the filing of
applications and/or notices, as applicable, with the Illinois Department of
Financial and Professional Regulation, and the California Department of
Financial Institutions, (the "State Banking Approvals and Notices"), (iv) the
filing by Cathay of the S-4 Registration Statement with the SEC and
effectiveness of the S-4 Registration Statement, (v) the filing of the Plan and
Agreement of Merger, Delaware Certificate and other required
A-12
filings with the State of Delaware, (vi) such filings, authorizations or
approvals as may be set forth in Section 4.4 of the Company Disclosure Schedule
and (vii) the approval and adoption of this Agreement and the Merger by the
holders of not less than a majority of the outstanding shares of Company Capital
Stock under applicable law (the "Shareholder Approval"), no consents or
approvals of or filings or registrations with any court, administrative agency
or commission or other governmental authority or instrumentality (each, a
"Governmental Entity") or with any third party are necessary in connection with
the execution and delivery by the Company of this Agreement or the consummation
by the Company of the Merger and the other transactions contemplated hereby.
(b) Except for the filings identified above in Section 4.4(a) above, the
Company has taken all action required to be taken by it in order to exempt this
Agreement and the transactions contemplated hereby from, and this Agreement and
the transactions contemplated hereby are exempt from, the requirements of any
applicable "moratorium," "control share," "fair price," "affiliate transaction,"
"business combination" or other anti-takeover laws and regulations of any state
(collectively, "Takeover Laws"). The Company has taken all action required to be
taken by it in order to make this Agreement and the transactions contemplated
hereby comply with, and this Agreement and the transactions contemplated hereby
do comply with, the requirements of any provision in its Organization
Certificate or Bylaws concerning "business combination," "fair price," "voting
requirement," "constituency requirement" or other related provisions
(collectively, "Takeover Provisions").
4.5 REGULATORY REPORTS.
(a) Each of the Company and its Subsidiaries has timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that it was required to file since December 31, 2003 with
(i) the FRB and the FDIC and (ii) the Illinois Department of Financial and
Professional Regulation and any other state banking commission or any other
state regulatory authority (each a "Regulatory Agency") and has paid all fees
and assessments due and payable in connection therewith, except where the
failure to file said report, registration, statement or to pay such fees and
assessments either individually or in the aggregate, will not have a Material
Adverse Effect on the Company. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of the Company and,
except as disclosed on Schedule 4.5(a), no Regulatory Agency has initiated any
proceeding or, to the knowledge of the Company, any investigation into the
business or operations of the Company since December 31, 2003. There is no
unresolved violation, criticism, or exception by any Regulatory Agency other
than as may be set forth in any report or statement relating to any examinations
of the Company or its Subsidiaries, which is likely, either individually or in
the aggregate, to have a Material Adverse Effect on the Company.
(b) Schedule 4.5(b) sets forth each communication mailed by the Company to
its shareholders since December 31, 2003, copies of which the Company has
previously made available to Cathay, and no such communication (when mailed)
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. The Company has not registered any capital stock or transactions
with the SEC under the Securities Act, and the Company is not required to file
any reports with the SEC under
A-13
Sections 13 or 15 of the Exchange Act. No enforcement action has been initiated
against the Company by the SEC or the FRB relating to disclosures contained in
any communication to the Company's shareholders.
4.6 FINANCIAL STATEMENTS; METHODS OF ACCOUNTING. The Company has
previously made available to Cathay copies of the consolidated balance sheets of
the Company as of December 31 for the fiscal years 2002 through 2005 and the
related consolidated statements of income, statement of changes in shareholders'
equity and statement of cash flows for the fiscal years 2002 through 2005, in
each case accompanied by the audit report of the Company's independent public
accountants or independent registered public accountants, as applicable. The
December 31, 2005 consolidated balance sheet of the Company (including the
related notes, where applicable) fairly presents the financial position of the
Company as of the date thereof, and the other financial statements referred to
in this Section 4.6 (including the related notes, where applicable) fairly
present (subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount) the results of the operations and
financial position of the Company and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of such
statements, (including the related notes, where applicable) complies, and any
financial statements of the Company to be provided by the Company for inclusion
in the S-4 Registration Statement will comply, with applicable accounting
requirements; and each of such statements (including the related notes, where
applicable) has been prepared in accordance with GAAP consistently applied
during the periods involved, except as indicated in the notes thereto. The books
and records of the Company and its Subsidiaries have been, and are being,
maintained in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions. The non-audited,
Company-prepared consolidated financial statements of the Company as of May 31,
2006 fairly present the financial condition of the Company and its Subsidiaries
as of that date (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount). Neither the Company nor its
Subsidiaries has changed its respective methods of accounting in effect at
December 31, 2005, except as required by changes in GAAP or regulatory
accounting principles as concurred to by the Company's independent public
accountants or independent registered public accountants, as applicable.
4.7 BROKER'S FEES. Neither the Company, its Subsidiaries nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement, except that the
Company has engaged, and will pay a fee or commission to, Hovde Financial LLC
("Company Advisor") in accordance with the terms of an agreement dated May 13,
2004 between Company Advisor and the Company, a true and correct and complete
copy of which has been previously delivered by the Company to Cathay.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since December 31, 2005, there has been no change or development or
combination of changes or developments which, individually or in the aggregate,
has had or is reasonably likely to have a Material Adverse Effect on the
Company.
A-14
(b) Without limiting the generality of Section 4.8(a) hereof, except as
set forth on the Company Disclosure Schedule, since December 31, 2005, the
Company has conducted its business only in the ordinary course of business
consistent with past practice and there has not been any:
(i) change in the Company's authorized or issued capital stock; grant
by the Company of any stock option or right to purchase shares of Company
Capital Stock; issuance of any security convertible into shares of Company
Capital Stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any shares of Company
Capital Stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of Company Capital Stock;
(ii) amendment to the Certificate of Incorporation or Bylaws of the
Company or any of its Subsidiaries;
(iii) increase in the wages, salaries, compensation, pension, or other
fringe benefits or perquisites payable to any employee, stockholder,
officer or director of the Company or any of its Subsidiaries from the
amount thereof in effect as of December 31, 2005 (which amounts have been
previously disclosed to Cathay), grant of any severance or termination
pay, entry into any contract to make or grant any severance or termination
pay, or payment of any bonus (except for salary increases, bonus payments
and severance payments made in the ordinary course of business consistent
with past practice to employees other than officers or directors);
(iv) adoption of, or increase in the payments to or benefits under,
any profit-sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any
employees of the Company or any of its Subsidiaries;
(v) damage to or destruction or loss of any asset or property of the
Company or any of its Subsidiaries, whether or not covered by insurance,
materially and adversely affecting the business, results of operations or
financial condition of the Company or any of its Subsidiaries;
(vi) entry into, termination of, or receipt of notice of termination
of (I) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (II) any contract or transaction
involving a total remaining commitment by or to the Company or any of its
Subsidiaries of at least $50,000;
(vii) sale (other than sales of inventory in the ordinary course of
business consistent with past practice), lease, or other disposition of
any asset or property of the Company or any of its Subsidiaries or
mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the Company or any of its Subsidiaries;
(viii) cancellation or waiver of any claims or rights with a value to
the Company or any of its Subsidiaries in excess of $50,000;
A-15
(ix) strike, work stoppage, slow-down or other labor disturbance, or
union organizing activities;
(x) entry into a collective bargaining agreement, contract or other
agreement or understanding with a labor union or organization; or
(xi) agreement, whether oral or written, by the Company or any of its
Subsidiaries to do or assist with any of the foregoing.
4.9 LEGAL PROCEEDINGS.
(a) Except as set forth on Section 4.9 of the Company Disclosure Schedule,
neither the Company nor its Subsidiaries is a party to any, and there are no
pending or, to the Company's knowledge, threatened legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against the Company of any of its Subsidiaries
which, individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the Company, or challenging the validity or propriety of the
transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon the Company or any of its Subsidiaries or any of their
respective assets which is material to the Company or such Subsidiary and which
is not of general application to companies like the Company and banks like NAB.
4.10 TAXES.
(a) All material Tax Returns that are required to be filed (taking into
account any extensions of time within which to file) by or with respect to the
Company and its Subsidiaries have been duly and timely filed, and all such Tax
Returns are complete and accurate in all material respects, (b) all Taxes shown
to be due on the Tax Returns referred to in clause (a) and any Taxes that are
otherwise due and payable with respect to the Company and its Subsidiaries have
been paid in full, (c) to the knowledge of the Company when required to do so
the Company has properly withheld all Taxes that the Company and its
Subsidiaries is obligated to withhold on all non-resident deposit accounts or
from amounts owing to any employee, creditor or third party and, to the extent
due and payable, Company has duly paid over to the proper Governmental Entity in
a timely manner all such Taxes withheld, and (d) no extensions or waivers of
statutes of limitation have been given by or requested with respect to any Taxes
of the Company or any of its Subsidiaries. No deficiencies for any Taxes have
been proposed or assessed in writing with respect to the Company or any of its
Subsidiaries. There is no audit of any Tax Return of the Company or any of its
Subsidiaries in progress, and no Governmental Entity has notified the Company or
any of its Subsidiaries in writing that it intends to audit any Tax Return of
the Company or any of its Subsidiaries. There are no matters under discussion
with any Governmental Entity with respect to Taxes that could result in an
additional amount of Taxes, and there is no action, assessment, suit,
proceeding, investigation, audit, or claim for or relating to Taxes of the
Company or any of its Subsidiaries either pending or threatened in writing. No
Liens for Taxes exist with respect to any of the Company's assets or properties
except for statutory Liens for Taxes not yet due and payable.
A-16
(b) The Company and its Subsidiaries has paid in full or made adequate
provision in the financial statements of the Company and its Subsidiaries (in
accordance with GAAP) for all Taxes, and the charges, accruals, and reserves
with respect to Taxes on the books of the Company and its Subsidiaries are based
upon estimates made by the Company in good faith (as determined in accordance
with GAAP).
(c) Neither the Company nor any of its Subsidiaries has been a party to
any distribution occurring during the two-year period prior to the date of this
Agreement, or otherwise as part of a plan (or series of related transactions) of
which the Merger is a part, in which the parties to such distribution treated
the distribution as one to which Section 355 of the Code applied.
(d) The Company is not now and has never been a member of any affiliated,
combined, unitary or similar group filing a consolidated, combined, unitary or
similar federal or state income Tax Return (other than a group the common parent
of which was the Company) and the Company has no liability for the Taxes of any
person or entity (other than the Company) under Treasury Regulations ss.
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise. Neither the Company nor any
of its Subsidiaries is a party to any agreement or arrangement relating to the
apportionment, sharing, assignment or allocation of any Tax (other than such an
agreement or arrangement exclusively between or among the Company and its
Subsidiaries). There exists no tax sharing agreement that will require any
payment by the Company after the date of this Agreement.
4.11 EMPLOYEE BENEFIT PLANS.
(a) Section 4.11(a) of the Company Disclosure Schedule sets forth a true
and correct and complete list of: (i) each incentive compensation plan, deferred
compensation plan and equity compensation plan; (ii) each "welfare" plan, fund
or program (within the meaning of Section 3(1) of ERISA); (iii) each "pension"
plan, fund or program (within the meaning of Section 3(2) of ERISA); and (iv)
each employment, termination or severance agreement as well as each other
employee benefit plan, fund, program, agreement or benefit arrangement
(collectively, the "Plans"), which is sponsored or maintained, or to which
contributions are made or required to be made, by the Company or any of its
Subsidiaries, or by any trade or business (whether incorporated or not) which is
a member of a controlled group of corporations with the Company as defined in
Section 414(b) or (c) of the Code, or an affiliated service group with the
Company as defined in Section 414(m) or (o) of the Code (an "ERISA Affiliate"),
for the benefit of any current or former employee, director or consultant of the
Company or its Subsidiaries or any of their ERISA Affiliates.
(b) The Company has heretofore provided or made available to Cathay true
and correct and complete copies of each of the Plans (or, with respect to any
Plan that is unwritten, a detailed written description of such Plan) and each of
the following documents, if applicable: (i) the actuarial report for each such
Plan for each of the last three (3) years, (ii) the most recent determination
letter from the Internal Revenue Service for each such Plan, (iii) a copy of the
most recent summary plan description required for each such Plan under ERISA,
(iv) a copy of the Form 5500 (with attachments) filed with the Internal Revenue
Service for each such Plan for each of the last three years, (v) the most recent
summary annual report for each Plan, (vi) all trust
A-17
agreements, insurance contracts, or funding instruments related to each Plan,
(vii) all rulings, no-action letters, or advisory opinions from any governmental
authority with respect to any Plan, and (viii) all summary material
modifications and employee handbooks regarding the Plans.
(c) Except as set forth on Section 4.11(c) of the Company Disclosure
Schedule, (i) each of the Plans is in compliance in all material respects with
the applicable provisions of the Code and ERISA (including, but not limited to
the Health Insurance Portability and Accountability Act of 1996, the Uruguay
Round Agreements Act, the Small Business Job Protection Act of 1996, the
Uniformed Services Employment, Reemployment Rights Act of 1994, the Taxpayer
Relief Act of 1997, the Internal Revenue Service Restructuring and Reform Act of
1998, the Community Renewal Tax Relief Act of 2000, the Economic Growth and Tax
Relief Reconciliation Act of 2001, and the American Jobs Creation Act of 2005);
(ii) each of the Plans intended to be "qualified" within the meaning of Section
401(a) of the Code, or the prototype plan on which any such Plan is based, has
received a favorable determination or opinion letter, as applicable from the
IRS; (iii) no Plan has a material accumulated or waived funding deficiency
within the meaning of Section 412 of the Code; (iv) neither the Company nor any
of its Subsidiaries nor any of their ERISA Affiliates has incurred or is
reasonably expected to incur, directly or indirectly, any material liability to
or on account of a Plan pursuant to Title IV of ERISA (other than Pension
Benefit Guaranty Corporation premiums); (v) no proceedings have been instituted
by the Pension Benefit Guaranty Corporation to terminate any Plan that is
subject to Title IV of ERISA; (vi) no "reportable event," as such term is
defined in Section 4043(c) of ERISA, has occurred with respect to any Plan
(other than a reportable event with respect to which the thirty (30)-day notice
period has been waived within the 60-month period preceding the date of this
Agreement); (vii) no condition exists that presents a material risk to the
Company or any of its Subsidiaries of incurring a liability to or on account of
a Plan pursuant to Title IV of ERISA; (viii) no Plan is a multiemployer plan
(within the meaning of Section 4001(a)(3) of ERISA) and no Plan is a multiple
employer plan (as defined in Section 413 of the Code); and (ix) there are no
pending or, to the knowledge of the Company, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of or against any of the
Plans or any trusts related thereto. All contributions (including all employer
contributions and employee contributions) that have been required to have been
paid with respect to each Plan have been paid within the time required by such
Plan or the Code. The consummation of the transactions contemplated by this
Agreement will not accelerate the time of vesting or the time of payment, or
increase the amount, of compensation due to any employee, or director of the
Company, under any Plan. No Plan provides for any payment or funding for the
continuation of medical, dental, life or disability coverage for any employee or
former employee of the Company or any of its Subsidiaries for any period of time
beyond the employee's termination of employment (except for coverage required
under the Consolidated Omnibus Budget Reconciliation Act).
4.12 DISCLOSURE CONTROLS AND PROCEDURES. None of the Company's or its
Subsidiaries records, systems, controls, data or information are recorded,
stored, maintained, operated or otherwise wholly or partly dependent on or held
by any means (including any electronic, mechanical or photographic process,
whether computerized or not) which (including all means of access thereto and
therefrom) are not under the exclusive ownership and direct control of the
Company or its accountants, except as would not reasonably be expected to have a
materially adverse effect on the system of internal accounting controls
described in the next sentence. The
A-18
Company and its Subsidiaries have devised and maintained systems of internal
accounting controls sufficient to provide reasonable assurances regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP.
4.13 COMPANY INFORMATION. The information relating to the Company and its
Subsidiaries that is provided to Cathay by the Company and its Subsidiaries or
its representatives for inclusion in any document filed with any Governmental
Entity in connection herewith will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances in which they are made, not misleading.
4.14 COMPLIANCE WITH APPLICABLE LAW. Each of the Company and its
Subsidiaries:
(a) is in compliance in all material respects, in the conduct of its
business, with all applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, permits, licenses, franchises, certificates of
authority, rules, judgments, orders or decrees applicable thereto or to the
employees conducting such businesses, including, if and to the extent
applicable, the Sarbanes-Oxley Act of 2002, the Bank Holding Company Act of
1956, as amended, the Equal Credit Opportunity Act, the Fair Housing Act, the
Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy
Act, the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA PATRIOT
Act"), and all other applicable fair lending and fair housing laws or other laws
relating to discrimination (including, without limitation, anti-redlining, equal
credit opportunity and fair credit reporting), truth-in-lending, real estate
settlement procedures, adjustable rate mortgages disclosures or consumer credit
(including, without limitation, the federal Consumer Credit Protection Act, the
federal Truth-in Lending Act and Regulation Z thereunder, the federal Real
Estate Settlement Procedures Act of 1974 and Regulation X thereunder, and the
federal Equal Credit Opportunity Act and Regulation B thereunder) or with
respect to the Flood Disaster Protection Act, and, as of the date hereof, NAB
has a Community Reinvestment Act rating of "satisfactory" or better;
(b) has all permits, licenses, franchises, certificates, orders, and
approvals of, and has made all filings, applications, and registrations with,
Governmental Entities that are required in order to permit the Company and its
Subsidiaries to carry on its business as currently conducted, except where the
failure to hold such permit, license, franchise, certificate, order, approval
and make such filings, applications and registrations would not, individually or
in the aggregate, have a Material Adverse Effect on the Company;
(c) except as set forth in the Company Disclosure Schedule, has, since
December 31, 2003, received no notification or communication from any
Governmental Entity (i) asserting that the Company or any of its Subsidiaries is
not in compliance with any statutes, regulations or ordinances, (ii) threatening
to revoke any permit, license, franchise, certificate of authority or other
governmental authorization, or (iii) threatening or contemplating revocation or
limitation of, or which would have the effect of revoking or limiting, NAB's
FDIC deposit insurance; and
A-19
(d) except as set forth in the Company Disclosure Schedule, is not a party
to or subject to any order, decree, agreement, memorandum of understanding or
similar arrangement with, or a commitment letter, supervisory letter, resolution
of the Company's Board of Directors, or similar submission to, any Governmental
Entity charged with the supervision or regulation of depository institutions or
depository institution holding companies or engaged in the insurance of deposits
(including, the FRB, FDIC and the Illinois Department of Financial and
Professional Regulation) or the supervision or regulation of the Company or any
of its Subsidiaries, and neither the Company nor any of its Subsidiaries has
been advised in writing by any such Governmental Entity that such Governmental
Entity is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter, supervisory letter or similar
submission.
4.15 CONTRACTS.
(a) Except as set forth in the Company Disclosure Schedule and except for
agreements relating to Loans and deposits entered into in the ordinary course of
business, neither the Company nor its Subsidiaries is a party to or bound by any
contract, arrangement, commitment or understanding (whether written or oral) (i)
with respect to the employment of any directors, officers, employees or
consultants, (ii) which, upon the consummation of the transactions contemplated
by this Agreement, will (either alone or upon the occurrence of any additional
acts or events) result in (x) any payment or benefits (whether of severance pay
or otherwise) becoming due, or any increase in the amount of or acceleration or
vesting of any rights to any payment or benefits, from Cathay, any of its
Subsidiaries, or the Company, to any director, officer, employee or consultant
thereof (other than payment of the Merger Consideration with respect to their
shares of Company Capital Stock) or (y) the invalidity, unenforceability or
discontinuation of any such contract, arrangement, commitment or understanding,
whether in whole or in part, (iii) which is not terminable without cause on
sixty (60) days or less notice or involves the payment of more than $25,000 per
annum, (iv) which materially restricts the conduct of any line of business by
the Company or any of its Subsidiaries, or (v) provides recourse to the Company
or any of its Subsidiaries or any former Subsidiary of the Company in connection
with the sale of any loan or other extension of credit (excluding customary
short-term rights of recourse for fraudulent application statements in
connection with the sale of conforming residential mortgage loans). Each
contract, arrangement, commitment or understanding of the type described in this
Section 4.15(a) (excluding agreements relating to Loans and deposits entered
into in the ordinary course of business), whether or not set forth in Section
4.15(a) of the Company Disclosure Schedule, is referred to herein as a "Company
Contract." The Company has previously delivered or made available to Cathay true
and correct and complete copies of each Company Contract.
(b) (i) Each Company Contract is a valid and binding obligation of the
Company and is in full force and effect, (ii) the Company and its Subsidiaries
has performed all obligations required to be performed by it to date under each
Company Contract, (iii) no event or condition exists which constitutes, or after
notice or lapse of time or both would constitute, a default on the part of the
Company or any of its Subsidiaries under any Company Contract, except where any
such default, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, and (iv) no other party to such Company Contract
is, to the knowledge of the Company, in default in any respect thereunder.
A-20
(c) Except as set forth in the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has entered into a confidentiality agreement
or other similar agreement with any third party (other than Cathay) pursuant to
which the Company or any of its Subsidiaries has contemplated the disclosure of
confidential information of the Company or any of its Subsidiaries.
(d) To the Company's knowledge, there are not any (i) shareholder
agreements, voting trusts, proxies or other agreements or understandings
relating to the voting of any shares of the Company (other than the shareholders
voting agreements with Cathay) or (ii) agreements or understandings relating to
the sale or transfer (including agreements imposing transfer restrictions) of
any shares of the Company.
4.16 ENVIRONMENTAL MATTERS. Subject to Section 7.9 hereof:
(a) Except as set forth in the Company Disclosure Schedule, the Company,
its Subsidiaries and each of the Participation Facilities and the Loan
Properties is and has been in compliance in all material respects with all
applicable federal, state and local laws, including common law, regulations and
ordinances, and with all applicable decrees, orders and contractual obligations
relating to pollution or the discharge of or exposure to Hazardous Materials in
the environment or workplace (collectively, "Environmental Laws"), such that any
violations thereof, individually or in the aggregate, have not had and would not
be reasonably likely to have a Material Adverse Effect on the Company.
(b) Except as set forth in the Company Disclosure Schedule, there is no
suit, claim, action or proceeding pending or, to the knowledge of the Company,
threatened, before any Governmental Entity or other forum in which the Company,
its Subsidiaries, any of the Company's former Subsidiaries, any Participation
Facility or any Loan Property, has been or, with respect to threatened
proceedings, may be, named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Laws or (ii) relating to
the release, threatened release or exposure of any Hazardous Material, whether
or not occurring at or on a site owned, leased or operated by the Company, any
of the Company's former Subsidiaries, any Participation Facility or any Loan
Property.
(c) Except as set forth in the Company Disclosure Schedule, to the
knowledge of the Company, during the period of (i) the Company's or any of its
former Subsidiaries' ownership or operation of any of its current or former
properties, (ii) the Company's or any of its former Subsidiaries' participation
in the management of any Participation Facility, or (iii) the Company's or any
of its former Subsidiaries' interest in a Loan Property, there has been no
release of Hazardous Materials in, on, under or affecting any such property such
that releases had or would be expected to have a Material Adverse Effect. To the
knowledge of the Company, prior to the period of (x) the Company's, or any of
its Subsidiaries' ownership or operation of any of its current properties, (y)
the Company's, or any of its Subsidiaries' participation in the management of
any Participation Facility, or (z) the Company's, its Subsidiaries' or any of
former its Subsidiaries' interest in a Loan Property, there was no release or
threatened release of Hazardous Materials in, on, under or affecting any such
property or Participation Facility such that such releases had or would be
expected to have a Material Adverse Effect.
A-21
4.17 DERIVATIVE TRANSACTIONS. Except as set forth in the Company
Disclosure Schedule, as of the date hereof, neither the Company nor its
Subsidiaries has any outstanding Derivative Transaction for its own account or
for the account of any of its customers.
4.18 OPINION. Prior to the execution of this Agreement, the Company has
received, and provided to Cathay a copy of, a written opinion from the Company
Advisor to the effect that, as of the date thereof, and based upon and subject
to the matters set forth in such written opinion, the Merger Consideration to be
received by the shareholders of the Company is fair to such shareholders from a
financial point of view. Such opinion has not been amended or rescinded as of
the date of this Agreement.
4.19 APPROVALS. As of the date of this Agreement, the Company knows of no
reason applicable to it why all regulatory approvals from any Governmental
Entity required for the consummation of the transactions contemplated by this
Agreement should not be obtained.
4.20 LOANS AND DEPOSITS.
(a) Except as set forth in the Company Disclosure Schedule, as of May 31,
2006, neither the Company nor its Subsidiaries is a party to any written or oral
(i) loan, loan agreement, note or borrowing arrangement (including, without
limitation, leases, credit enhancements, commitments, guarantees and
interest-bearing assets) (collectively, "Loans") over ninety (90) days
delinquent in payment of principal or interest or in violation of a material
non-monetary covenant or obligation, or (ii) Loan with any director, executive
officer or five percent (5%) or greater shareholder of the Company or any
person, corporation or enterprise controlling, controlled by or under common
control with any of the foregoing. Section 4.20(a) of the Company Disclosure
Schedule sets forth (x) all of the Loans of NAB that as of May 31, 2006 were
classified by any internal or external examiner as "Other Loans Specially
Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," "Classified,"
"Criticized," "Credit Risk Assets," "Concerned Loans," "Watch List" or words of
similar import, together with the principal amount of and accrued and unpaid
interest on each such Loan and the identity of the borrower thereunder, (y) by
category of Loan (i.e., commercial, consumer, etc.) all of the Loans of NAB
which were classified as of May 31, 2006, and (z) each asset of NAB that as of
December 31, 2005, was classified as "Other Real Estate Owned" and the book
value thereof.
(b) Each Loan (i) is evidenced by notes, written agreements or other
written evidences of indebtedness that are true, correct, complete and what they
purport to be, (ii) to the extent secured, has been secured by valid Liens which
have been perfected, and (iii) is the legal, valid and binding obligation of the
obligor named therein, enforceable, in all material respects, in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
(c) Deposits in NAB of shareholders, directors and executive officers of
the Company or its Subsidiaries amount to no more than $6,000,000 and such
deposits earn interest at rates comparable to those on other deposits of
comparable size and maturity. Within seven (7) calendar days of the date of this
Agreement, the Company will provide Cathay with verification
A-22
of the accuracy of the foregoing figure as of the date of this Agreement,
including a list of such accounts and deposits as of the date of this Agreement.
4.21 PROPERTY.
(a) Except as set forth in the Company Disclosure Schedule, the Company
and its Subsidiaries own, with good and marketable title in the case of real
property (other than real property classified as "Other Real Estate Owned"),
subject only to the matters permitted by the following sentence, all the
properties and assets (whether real, personal, or mixed and whether tangible or
intangible) located in the facilities owned or operated by the Company and its
Subsidiaries and reflected as owned in the books and records of the Company and
its Subsidiaries, including all of the properties and assets reflected in the
balance sheet of the Company as of March 31, 2006 and interim unaudited balance
sheets that have been delivered to Cathay prior to the date of this Agreement
(except for assets held under capitalized leases identified in the Company
Disclosure Schedule and personal property sold since December 31, 2005 in the
ordinary course of the Company's business consistent with past practice), and
all of the properties and assets purchased or otherwise acquired by the Company
and its Subsidiaries since December 31, 2005 (except for personal property
acquired and sold since such date in the ordinary course of the Company's
business consistent with past practice). All material properties and assets
(other than property classified as "Other Real Estate Owned") reflected in the
balance sheet of the Company as of December 31, 2005 and subsequent interim
unaudited balance sheets that have been delivered to Cathay prior to the date of
this Agreement are free and clear of all Liens and are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with respect to
all such properties and assets, (i) mortgages or security interests shown on the
consolidated balance sheet of the Company as of December 31, 2005 and interim
unaudited balance sheets as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (ii) mortgages or security interests
incurred in connection with the purchase of property or assets after December
31, 2005 (such mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists, (iii) Liens
for Taxes not yet due, and (iv) with respect to real property, (A) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of the Company or its Subsidiaries, and (B)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto. Except with respect to property
classified as "Other Real Estate Owned," all buildings, plants, and structures
owned by the Company and its Subsidiaries lie wholly within the boundaries of
the real property owned by the Company and its Subsidiaries and do not encroach
upon the property of, or otherwise conflict with the property rights of, any
other person. All leases pursuant to which the Company or its Subsidiaries, as
lessee, leases real or personal property are valid and enforceable in accordance
with their respective terms, and neither the Company, its Subsidiaries nor, to
the knowledge of the Company, any other party thereto is in default thereunder.
(b) The buildings, plants, structures and equipment of the Company and its
Subsidiaries used in the conduct of its business are structurally sound, are in
good operating condition and repair, and are adequate for the uses to which they
are being put, and none of such
A-23
buildings, plants, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of the Company
and its Subsidiaries are sufficient for the continued conduct of the Company's
and its Subsidiaries' business after the Effective Time in substantially the
same manner as conducted prior to the Effective Time.
4.22 LABOR MATTERS.
(a) There is no application or petition for certification of a collective
bargaining agent or for union representation pending or, to the knowledge of the
Company, threatened in writing against the Company or its Subsidiaries, and none
of the Company's or its Subsidiaries employees are or have been since December
31, 2005 represented by any union or other bargaining representative. To the
knowledge of the Company, since December 31, 2005, no union has attempted to
organize any group of the employees of the Company or its Subsidiaries, and no
group of the Company's employees or its Subsidiaries' employees has sought at
any time during the last three (3) years to organize themselves into a union or
similar organization for the purpose of collective bargaining. To the knowledge
of the Company, there are no pending or threatened strikes, slowdowns, pickets
or work stoppage by any employees of the Company or its Subsidiaries.
(b) There are no pending or, to the knowledge of the Company, threatened
material unfair labor practice charges or employee grievance charges with the
National Labor Relations Board or any comparable state or local agency against
the Company or its Subsidiaries.
(c) With respect to the Company's and its Subsidiaries business, there
have not been in the past five (5) years any investigations, inspections or
material citations for violations of OSHA, any of the regulations promulgated
pursuant to OSHA, or any other statute, ordinance, rule or regulations
establishing standards of workplace safety, and no such investigations,
inspections or citations are pending or, to the knowledge of the Company,
threatened.
4.23 INSURANCE. The Company and its Subsidiaries are and continuously
since its inception have been, insured with reputable insurers against all risks
normally insured against by banks. Schedule 4.23 of the Company Disclosure
Schedule lists and describes each insurance policy maintained by or on behalf of
the Company or its Subsidiaries with respect to its properties, assets and
business, together with a claims history for the past two (2) years. In the best
judgment of the management of the Company, such insurance coverage is adequate
for the Company and its Subsidiaries, and all material claims under the policies
listed on Schedule 4.23 of the Company Disclosure Schedule have been filed in
due and timely fashion. All of such insurance policies are in full force and
effect, and neither the Company nor its Subsidiaries have, since January 1,
2003, been (i) in default with respect to its obligations under any such
insurance policies or (ii) denied insurance coverage. Since December 31, 2005,
there has not been any damage to, destruction of, or loss of any assets of the
Company or its Subsidiaries not covered by insurance that could have a Material
Adverse Effect on the Company. Except as set forth on Schedule 4.23, neither the
Company nor its Subsidiaries have any self-insurance or co-insurance programs,
and the reserves set forth on the consolidated balance sheet of the Company as
of December 31, 2005 are adequate to cover all anticipated liabilities with
respect to any such self-insurance or co-insurance programs.
A-24
4.24 ABSENCE OF UNDISCLOSED LIABILITIES. Subject to Section 7.9 hereof:
Except for items for which reserves have been established in the Company's
most recent audited consolidated balance sheets and interim unaudited
consolidated balance sheets, which have been delivered to Cathay and which do
not reflect any overstated assets, neither the Company nor its Subsidiaries has
incurred, and is not legally obligated with respect to, any indebtedness,
liability (including, without limitation, a liability arising out of an
indemnification, guarantee, hold harmless or similar arrangement) or obligation
(accrued or contingent, whether due or to become due, and whether or not
subordinated to the claims of its general creditors), that alone or when
combined with all similar liabilities, has had, or could reasonably be expected
to have, a Material Adverse Effect on the Company. No agreement pursuant to
which any loans or other assets have been or will be sold by the Company or its
Subsidiaries entitles the buyer of such loans or other assets, unless there is a
material breach of a representation or covenant by the Company or its
Subsidiaries, to cause the Company or its Subsidiaries to repurchase such loan
or other asset or to pursue any other form of recourse against the Company or
its Subsidiaries (other than customary short term rights of recourse for
fraudulent application statements in connection with the sale of conforming
residential mortgage loans). Neither the Company nor its Subsidiaries has
knowingly made and shall not make any representation or covenant in any such
agreement that contained or shall contain any untrue statement of a material
fact or omitted or shall omit to state a material fact necessary in order to
make the statements contained therein, in light of the circumstances under which
such representations and/or covenants were made or shall be made, not
misleading. Other than any regular annual dividend by the Company, no cash,
stock or other dividend or any other distribution with respect to Company
Capital Stock has been declared, set aside or paid, nor has any of the Company
Capital Stock been repurchased, redeemed or otherwise acquired, directly or
indirectly, by the Company since December 31, 2005.
4.25 QUALIFICATION AS REORGANIZATION. Neither the Company nor its
Subsidiaries have taken or agreed to take any action or failed to take any
action that would reasonably be expected to prevent either the Merger or the
Subsequent Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code. The Company is not aware of any fact, condition or
other circumstance that would reasonably be expected to prevent either the
Merger or the Subsequent Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
4.26 TAKEOVER LAWS. The Company and the Board of Directors of the Company
have taken all action required to be taken by them in order to exempt this
Agreement, the Support Agreements and the transactions contemplated hereby and
thereby from, and this Agreement, the Support Agreements and the transactions
contemplated hereby and thereby are exempt from, the requirements of any
"moratorium," "control share," "fair price," "supermajority," "affiliate
transactions," "business combination" or other state antitakeover laws and
regulations, including Section 203 of the DGCL of the Company's certificate of
incorporation.
4.27 FULL DISCLOSURE. The representations and warranties contained in this
Article IV do not contain any untrue statement of any material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article IV not misleading.
A-25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CATHAY
Except as set forth in the Cathay Disclosure Schedule, Cathay hereby
represents and warrants to the Company, as of the date hereof and as of the
Closing Date, as follows:
5.1 CORPORATE ORGANIZATION. Cathay is a corporation duly organized,
validly existing and in good standing under the laws of Delaware. Cathay (i) has
all requisite corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and (ii) is duly licensed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not (i) prevent or delay Cathay from performing its obligations hereunder,
(ii) adversely affect the ability of Cathay to consummate the transactions
contemplated hereby or (iii) have a Material Adverse Effect on Cathay. Cathay is
supervised by the FRB as a bank holding company under the Bank Holding Company
Act of 1956, as amended. True and correct copies of the Certificate of
Incorporation of Cathay and the Bylaws of Cathay as in effect as of the date of
this Agreement, have previously been made available to the Company.
5.2 AUTHORITY; NO VIOLATION.
(a) Cathay has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Cathay pursuant to applicable law, and no other corporate
proceedings on the part of Cathay are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Cathay and (assuming due authorization,
execution and delivery by the Company) this Agreement constitutes a valid and
binding obligation of Cathay, enforceable against Cathay in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally.
(b) Neither the execution and delivery of this Agreement by Cathay nor the
consummation by Cathay of the transactions contemplated hereby (including the
Subsequent Merger), nor compliance by Cathay with any of the terms or provisions
hereof, will (i) violate any provision of the Certificate of Incorporation or
Bylaws of Cathay or the organizational documents of any of Cathay's
Subsidiaries, or (ii) assuming that the consents and approvals referred to in
Section 5.3 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Cathay,
its Subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the
A-26
creation of any Lien upon, any of the respective properties or assets of Cathay
or any of its Subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, contract,
agreement or other instrument or obligation to which Cathay or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected except (in the case of clause (y) above) for
such violations, conflicts, breaches or defaults which either individually or in
the aggregate would not (i) prevent or delay Cathay from performing its
obligations hereunder or (ii) adversely affect the ability of Cathay to
consummate the transactions contemplated hereby.
5.3 CONSENTS AND APPROVALS. Except for (a) the filing of the FDIC
Application and FRB Application and approval or waivers of such applications,
(b) the filing of the State Banking Approvals and Notices, (c) the filing of the
Plan and Agreement of Merger, Delaware Certificate, and other required filings
with the State of Delaware, and (d) the Securities Laws Filings and Approvals,
no consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary in connection with the execution
and delivery by Cathay of this Agreement or the consummation by Cathay of the
Merger and the other transactions contemplated hereby. No vote of any
shareholders of Cathay is required to approve this Agreement or to consummate
the transactions contemplated hereby.
5.4 BROKER'S FEES. Neither Cathay nor any of its Subsidiaries, nor any of
their respective officers or directors, has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement which are
or would be an obligation of the Company or any of its Subsidiaries.
5.5 CATHAY INFORMATION. The information relating to Cathay and its
Subsidiaries, including Cathay Bank, to be contained in any document filed with
any other Governmental Entity, including but not limited to the SEC, or provided
to the Company's shareholders in connection herewith (including, without
limitation, the Proxy Statement) will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances in which they are made, not misleading.
5.6 ACCESS TO FUNDS. Cathay has, and on the Closing Date will have,
sufficient funds and available shares of Cathay Common Stock authorized to
enable it to consummate the Merger and to pay the aggregate Merger Consideration
pursuant to the terms of this Agreement.
5.7 APPROVALS. As of the date of this Agreement, Cathay knows of no reason
applicable to it why all regulatory approvals from any Governmental Entity
required for the consummation of the transactions contemplated hereby
(including, without limitation, the Merger) should not be obtained or obtained
on a timely basis.
5.8 LEGAL PROCEEDINGS. Neither Cathay nor its Subsidiaries is a party to
any, and there are no pending or, to Cathay's knowledge, threatened legal,
administrative, or arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Cathay or its
Subsidiaries that, individually or in the aggregate, (i) would delay or prevent
Cathay from performing its obligations hereunder or (ii) would adversely affect
the ability of Cathay to consummate the transactions contemplated hereby.
A-27
5.9 COMPLIANCE WITH APPLICABLE LAW. Cathay and each of its Subsidiaries,
including Cathay Bank, except as disclosed in any Cathay Reports filed prior to
the date of this Agreement:
(a) is in compliance in all material respects in the conduct of its
business, with all applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, permits, licenses, franchises, certificates of
authority, rules, judgments, orders or decrees applicable thereto or to the
employees conducting such businesses, including, if and to the extent
applicable, the Sarbanes-Oxley Act of 2002, the Bank Holding Company Act of
1956, as amended, the Equal Credit Opportunity Act, the Fair Housing Act, the
Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy
Act, the USA PATRIOT Act, and all other applicable fair lending and fair housing
laws or other laws relating to discrimination (including, without limitation,
anti-redlining, equal credit opportunity and fair credit reporting),
truth-in-lending, real estate settlement procedures, adjustable rate mortgages
disclosures or consumer credit (including, without limitation, the federal
Consumer Credit Protection Act, the federal Truth-in Lending Act and Regulation
Z thereunder, the federal Real Estate Settlement Procedures Act of 1974 and
Regulation X thereunder, and the federal Equal Credit Opportunity Act and
Regulation B thereunder) or with respect to the Flood Disaster Protection Act,
and, as of the date hereof, Cathay Bank has a Community Reinvestment Act rating
of "satisfactory" or better;
(b) has all permits, licenses, franchises, certificates, orders, and
approvals of, and has made all filings, applications, and registrations with,
Governmental Entities that are required in order to permit Cathay and each of
its Subsidiaries to carry on its business as currently conducted;
(c) has, since December 31, 2003, received no notification or
communication from any Governmental Entity (i) asserting that Cathay or any of
its Subsidiaries, including Cathay Bank, is not in compliance with any statutes,
regulations or ordinances, (ii) threatening to revoke any permit, license,
franchise, certificate of authority or other governmental authorization, or
(iii) threatening or contemplating revocation or limitation of, or which would
have the effect of revoking or limiting, Cathay Bank's FDIC deposit insurance;
and
(d) is not a party to or subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter,
supervisory letter, resolution of the Board of Directors of Cathay or any of its
Subsidiaries, or similar submission to, any Governmental Entity charged with the
supervision or regulation of depository institutions or engaged in the insurance
of deposits (including, the FDIC) or the supervision or regulation of Cathay or
any of its Subsidiaries, including Cathay Bank, and neither Cathay nor any of
its Subsidiaries has been advised in writing by any such Governmental Entity
that such Governmental Entity is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, commitment letter, supervisory
letter or similar submission.
5.10 REGULATORY REPORTS. Cathay and each of its Subsidiaries, including
Cathay Bank, has timely filed all reports, registrations and statements,
together with any amendments required to be made with respect thereto, that they
were required to file since December 31, 2003 with any Regulatory Agency
(collectively, the "Cathay Reports") and have paid all fees and
A-28
assessments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of Cathay and its Subsidiaries, no Regulatory Agency has initiated any
proceeding or, to the knowledge of Cathay, investigation into the business or
operations of Cathay or any of its Subsidiaries, including Cathay Bank, since
December 31, 2003. There is no unresolved material violation, criticism, or
exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of Cathay or any of its Subsidiaries.
5.11 FULL DISCLOSURE. The representations and warranties contained in this
Article V do not contain any untrue statement of any fact or omit to state any
fact necessary in order to make the statements and information contained in this
Article V not misleading.
5.12 CAPITALIZATION.
(a) The authorized capital stock of Cathay consists of 100,000,000 shares
of Cathay Common Stock and 10,000,000 shares of Cathay Preferred Stock. As of
May 31, 2006, there were (i) 51,510,924 shares of Cathay Common Stock issued and
outstanding, (ii) no shares of Cathay Preferred Stock outstanding, and (iii)
4,942,805 shares of Cathay Common Stock reserved for issuance pursuant to Cathay
stock option plans ("Cathay Option Plans"). All of the issued and outstanding
shares of Cathay Common Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. The shares of Cathay Common Stock
issuable pursuant to the Merger have been duly authorized and, when issued in
accordance with this Agreement, such shares will be validly issued and fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except as disclosed in Cathay's Annual
Report for the fiscal year ending December 31, 2005 on Form 10-K (including
exercise rights disclosed therein), Cathay does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Cathay
Capital Stock or any other equity security of Cathay or any securities
representing the right to purchase or otherwise receive any shares of Cathay
Capital Stock or any other equity security of Cathay other than the Rights
Agreement dated as of November 16, 2000 between Cathay and American Stock
Transfer and Trust Company, pursuant to which Rights Agreement Cathay granted
the right to holders of certain shares of Cathay Common Stock to purchase one
one-thousandth (1/1000) of a share of Series A Participating Preferred Stock of
Cathay having the rights, powers and preferences set forth in the form of
Certificate of Designation, Preferences and Rights attached to such Rights
Agreement as Exhibit A.
5.13 FINANCIAL STATEMENTS. Cathay has previously made available to Company
copies of the consolidated balance sheets of Cathay as of December 31 for the
fiscal years 2002 through 2005, inclusive, and the related consolidated
statements of operations, changes in shareholders' equity and comprehensive
income and cash flows for the fiscal years 2003 through 2005, inclusive, as
reported in Cathay's Annual Reports on Form 10-K for the fiscal years ended
December 31, 2004 and 2005 filed with the SEC under the Exchange Act, in each
case accompanied by the audit report of Cathay's independent public accountants
or independent registered public accountants, as applicable. The December 31,
2005 balance sheet of Cathay (including the related notes, where applicable)
fairly presents the financial position of Cathay as
A-29
of the date thereof, the other financial statements referred to in this Section
5.13 (including the related notes, where applicable) fairly present (subject, in
the case of the unaudited statements, to audit adjustments normal in nature and
amount) the results of the operations and financial position of Cathay for the
respective fiscal periods or as of the respective dates therein set forth, other
than as may be affected by such relevant items as have been disclosed in any
Cathay Report.
5.14 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as disclosed in any Cathay Reports filed prior to the date of
this Agreement, since December 31, 2005, there has been no change or development
or combination of changes or developments which, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
Cathay.
(b) Except as disclosed in any Cathay Report, since December 31, 2005,
each of Cathay has carried on its business only in the ordinary and usual course
consistent with its past practice.
5.15 TAXES.
(a) Cathay has (i) duly and timely filed (including applicable extensions
granted without penalty) all material Tax Returns required to be filed at or
prior to the Effective Time, and such Tax Returns are true and correct and
complete in all material respects, and (ii) paid in full or made adequate
provision in the consolidated financial statements of Cathay (in accordance with
GAAP) for all Taxes, with such provisions being based on estimates made by
Cathay in good faith. No deficiencies for any Taxes have been proposed or
assessed in writing with respect to Cathay, other than amounts which have been
otherwise provided for or which are immaterial to the financial statements of
Cathay; provided, however, Cathay has pending a corporate income tax audit by
the State of California that may result in an assessment of taxes that in the
aggregate would not be material to Cathay (collectively, the "Audit"). There are
no Liens for Taxes upon the assets of Cathay except for Liens that may result
from the Audit and except for statutory liens for current Taxes not yet due.
Cathay has not requested any extension of time within which to file any Tax
Returns in respect of any fiscal year which have not since been filed and no
request for waivers of the time to assess any Taxes are pending or outstanding.
Cathay is not a party to any agreement providing for the allocation or sharing
of Taxes (other than such an agreement exclusively between or among Cathay and
its Subsidiaries).
(b) To the knowledge of Cathay, when required to do so, Cathay Bank has
properly withheld Taxes on all non-resident deposit accounts.
5.16 DISCLOSURE CONTROLS AND PROCEDURES. None of Cathay's or its
Subsidiaries' records, systems, controls, data or information are recorded,
stored, maintained, operated or otherwise wholly or partly dependent on or held
by any means (including any electronic, mechanical or photographic process,
whether computerized or not) which (including all means of access thereto and
therefrom) are not under the exclusive ownership and direct control of Cathay or
its accountants, except as would not reasonably be expected to have a materially
adverse effect on the system of internal accounting controls described in the
next sentence. Cathay and
A-30
its Subsidiaries have devised and maintained systems of internal accounting
controls sufficient to provide reasonable assurances regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP.
5.17 ABSENCE OF UNDISCLOSED LIABILITIES. To the knowledge of Cathay, and
except for items for which reserves have been established in Cathay's most
recent audited consolidated balance sheets and interim unaudited consolidated
balance sheets, which have been delivered to the Company and which do not
reflect any overstated assets, neither Cathay nor its Subsidiaries has incurred,
and is not legally obligated with respect to, any material indebtedness,
liability (including, without limitation, a liability arising out of an
indemnification, guarantee, hold harmless or similar arrangement) or obligation
(accrued or contingent, whether due or to become due, and whether or not
subordinated to the claims of its general creditors), that alone or when
combined with all similar liabilities has, had, or could reasonably be expected
to have, a Material Adverse Effect on Cathay. Cathay has not knowingly made nor
shall make any representation or covenant in any agreement pursuant to which any
loans or other assets have been or will be sold by Cathay that contained or
shall contain any untrue statement of a material fact or omitted or shall omit
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which such representations and/or
covenants were made or shall be made, not misleading. Other than any regular
quarterly dividend by Cathay, no cash, stock or other dividend or any other
distribution with respect to Cathay Capital Stock has been declared, set aside
or paid, nor has any of the Cathay Capital Stock been repurchased, redeemed or
otherwise acquired, directly or indirectly, by Cathay since March 31, 2006.
5.18 QUALIFICATION AS REORGANIZATION. Neither Cathay nor any of its
Subsidiaries has taken or agreed to take any action or failed to take any action
that would reasonably be expected to prevent either the Merger or the Subsequent
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code. Neither Cathay nor any of its Subsidiaries is aware of any fact,
condition or other circumstance that would reasonably be expected to prevent
either the Merger or the Subsequent Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
5.19 SEC DOCUMENTS As of their respective dates of filing with the SEC,
the Cathay SEC Documents complied in all material respects with the requirements
of the Securities Act, or the Exchange Act, as the case may be, and the rules
and regulations of the SEC thereunder applicable to such Cathay SEC Documents,
and did not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements of
Cathay included in the Cathay SEC Documents comply as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and with published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly present in all material respects the
consolidated financial position of Cathay and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of operations, changes in
stockholders' equity and cash flows of such companies for the periods then
ended. For purposes of this Agreement, Cathay SEC Documents means all reports,
A-31
schedules, registration statements and definitive proxy statements filed by
Cathay with the SEC since December 31, 2003 (as such documents have since the
time of their filing been amended).
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 COVENANTS OF THE COMPANY. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
Cathay, the Company and its Subsidiaries shall carry on its business in the
ordinary course consistent with past practice and, to the extent consistent
therewith, the Company will use its reasonable efforts to (i) preserve intact
the business organization of the Company and its Subsidiaries, (ii) keep
available to itself and Cathay the present services of the current officers and
employees of the Company and its Subsidiaries, (iii) preserve for itself and
Cathay the goodwill of the customers of the Company and its Subsidiaries and
others with whom business relationships exist, and (iv) maintain the deposits of
the Company and its Subsidiaries. Without limiting the generality of any of the
foregoing, and except as set forth in Section 6.1 of the Company Disclosure
Schedule or as otherwise contemplated by this Agreement or consented to in
writing by Cathay, the Company shall not and shall cause its Subsidiaries not
to:
(a) declare or pay any dividends on, or make other distributions in
respect of, any shares of their capital stock; provided that the Company will at
the request of Cathay cause NAB to, no later than the second Business Day prior
to the Closing Date, declare a special dividend in an amount equal to the lesser
of (I) the maximum permitted by applicable law or (II) the amount that together
with cash on hand at the Company will be sufficient to discharge all
indebtedness outstanding under the Credit Facility Agreement, dated September
27, 2005, between JPMorgan Chase Bank, N.A. and the Company, as it may be
amended or modified from time to time (the "Credit Facility"), and to pay any
related fees and expenses in connection therewith or in connection with this
Agreement and the transactions contemplated hereby;
(b) (i) split, combine or reclassify any shares of Company Capital Stock
or issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of Company Capital Stock; (ii)
repurchase, redeem or otherwise acquire any of shares of Company Capital Stock,
or any securities convertible into or exercisable for any shares of Company
Capital Stock; or (iii) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien or authorize or propose the issuance, delivery, sale, pledge
or encumbrance of or the imposition of any Lien on, any shares of Company
Capital Stock or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any shares of Company Capital Stock, or
enter into any agreement with respect to any of the foregoing;
(c) amend its Certificate of Incorporation, Bylaws or other similar
governing documents;
(d) make any capital expenditures other than those which (i) are made in
the ordinary course of business or are necessary to maintain existing assets in
good repair and (ii) in any event are in an amount of no more than $50,000
individually or $300,000 in the aggregate;
A-32
(e) enter into any new line of business;
(f) (i) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire any assets, including without limitation any loan portfolios or pools,
which would be material, individually or in the aggregate, to the Company, other
than in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of business
consistent with past practice; or (ii) open, close, sell or acquire any
branches;
(g) except as set forth in the Company Disclosure Schedule, incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for the obligations of any
person, or pledge or otherwise encumber or dispose of any assets of the Company
or its Subsidiaries, except in the ordinary course of business consistent with
past practice; provided, however, that in no event shall any such indebtedness
or obligations (excluding, however, NAB deposits) be for a period exceeding six
(6) months;
(h) take any action or fail to take any action that is intended or may
reasonably be expected to result in any of the conditions to the Merger set
forth in Article VIII not being satisfied;
(i) change its methods of accounting in effect at December 31, 2005,
including without limitation its methods of accounting for any expense, asset,
transaction, gain, income, Tax, loss, deposits or any other item that may be
properly taken into account in calculating Company net worth, loan and lease
losses and core deposits, except as required by changes in GAAP or regulatory
accounting principles as concurred to by the Company's independent auditors;
(j) (i) except as required by applicable law or as required to maintain
qualification pursuant to the Code or as contemplated by this Agreement, adopt,
amend, renew, enter into or terminate any employee benefit plan (including,
without limitation, any Plan) or any agreement, arrangement, plan or policy
between the Company or its Subsidiaries and any of their current or former
directors, officers or employees or any prospective director, officer or
employee; (ii) except for normal increases in the ordinary course of business
consistent with past practice (and only with respect to employees who are not
officers or directors), except as required by applicable law and except as set
forth in the Company Disclosure Schedule, increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay (or
accelerate the vesting of) any payment or benefit not required by any Plan or
agreement as in effect as of the date hereof, provided that permitted increases
in compensation or fringe benefits shall in no event be more than the lesser of
$5,000 per employee or 5.0% of the applicable employee's annual base salary;
(iii) make any equity or equity-based grants or allocations under any Plan
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares);
A-33
(k) other than in the ordinary course of business consistent with past
practice, purchase, acquire, sell, license, lease, encumber, assign or otherwise
dispose of, any loans, loan pools, loan portfolios, participation or other
interests in loans;
(l) other than in the ordinary course of business consistent with past
practice, purchase, acquire, sell, license, lease, encumber, assign or otherwise
dispose of any of the Company's or NAB's material assets, properties or other
material rights or agreements;
(m) file any application to establish, relocate or terminate the
operations of any banking office of the Company or NAB;
(n) create, renew, amend or terminate, fail to perform any material
obligations under, waive or release any material rights under or give notice of
a proposed renewal, amendment, waiver, release or termination of, any material
contract, agreement or lease for office space to which it is a party or by which
it or its properties is bound, other than the renewal in the ordinary course of
business of any lease the term of which expires prior to the Closing Date;
(o) except pursuant to written agreements in effect on the date hereof and
previously provided to Cathay, pay, loan or advance any amount to, or sell,
transfer or lease any properties or assets (real, personal or mixed, tangible or
intangible) to, or enter into any agreement or arrangement with, any of its
officers or directors or any of their immediate family members or any affiliates
or associates (as such terms are defined under the Exchange Act) of any of its
officers or directors other than compensation in the ordinary course of business
consistent with past practice;
(p) make, change or revoke any material election concerning Taxes (other
than an election that is required by law to be made periodically and is made
consistent with past practice and that does not materially increase any
liability for Taxes), file any amended Tax Return, enter into any closing
agreement with respect to a material amount of Taxes, settle any material Tax
claim or assessment, surrender any right to claim a refund of a material amount
of Taxes, obtain any Tax ruling or consent to any waiver or extension of the
statute of limitations for the assessment of Taxes;
(q) take any action, or omit to take any action, the taking or omission of
which would reasonably be expected to prevent either the Merger or the
Subsequent Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code;
(r) pay, discharge, settle, compromise or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), including taking any action to settle or compromise any material
litigation, other than the payment, discharge, settlement, compromise or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, its most recent consolidated financial statements (or
the notes thereto), or incurred since December 31, 2005 in the ordinary course
of business consistent with past practice; provided, however, that the Company
will at the request of Cathay cause NAB to, no later than the second Business
Day prior to the Closing Date, repay all indebtedness outstanding from the
Chicago Federal Home Loan Bank;
A-34
(s) enter into any transaction outside the ordinary course of business
consistent with past practice, including (i) the purchase of certificates of
deposit from brokers or other third parties, (ii) the offering or payment of
rates of interest on deposit accounts materially different than the Company's
past practice or current market rates, (iii) the entry into any material
contracts, and (iv) the purchase or sale of investment securities unless such
transaction (A) is prudent, necessary, consistent with the Company's written
investment policies and its 2005 budget, duly approved by senior management of
the Company, and, if involving a purchase, is limited to investment-grade
securities, (B) does not cause the weighted average duration of the Company's
investment securities portfolio to exceed that portfolio's weighted average
duration as of May 31, 2006, and (C) will not cause the balance of the Company's
investment securities portfolio to exceed the Company's May 31, 2006 reforecast
for the month of the Closing;
(t) except as required by law or permitted by this Agreement, disclose
confidential information of the Company or its Subsidiaries to a third party
without requiring such third party to be bound by customary confidentiality
obligations; or
(u) authorize, commit or agree to do any of the foregoing actions.
6.2 COVENANTS OF CATHAY. Except as otherwise contemplated by this
Agreement or consented to in writing by the Company, during the period from the
date of this Agreement to the Effective Time, Cathay shall not, and shall not
permit Cathay Bank or any of Cathay's other Subsidiaries to:
(a) take any action or fail to take any action that is intended or may
reasonably be expected to result in any of its representations and warranties
set forth in this Agreement being or becoming untrue in any material respect, or
in any of the conditions to the Merger set forth in Article VIII not being
satisfied;
(b) take any action or enter into any agreement that could reasonably be
expected to jeopardize or materially delay the receipt of any Requisite
Regulatory Approvals or the consummation of the Merger;
(c) take any action, or omit to take any action, the taking or omission of
which would reasonably be expected to prevent either the Merger or the
Subsequent Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code; or
(d) authorize, or commit or agree to do any of the foregoing.
6.3 COVENANTS OF BOTH THE COMPANY AND CATHAY.
(a) The Company and Cathay agree that they will report in their respective
federal income Tax Returns for the taxable period including the Closing Date
that the Merger qualified as a reorganization under Section 368(a) of the Code,
and will properly file with their federal income Tax Returns all information
required by Treasury Regulations Section 1.368-3. No party hereto, unless
required by law, will take any Tax reporting position inconsistent with the
characterization of the Merger as a reorganization under Section 368(a) of the
Code.
A-35
(b) No party will take any action that would cause the transactions
contemplated by this Agreement to be subject to requirements imposed by any
Takeover Law and each of them will take all necessary steps within its control
to exempt (or ensure the continued exemption of) those transactions from, or if
necessary challenge the validity or applicability of, any applicable Takeover
Law, as now or hereafter in effect. No party will take any action that would
cause the transactions contemplated by this Agreement not to comply with any
Takeover Provisions and each of them will take all necessary steps within its
control to make those transactions comply with (or continue to comply with) the
Takeover Provisions.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 REGULATORY MATTERS.
(a) Cathay shall prepare and file no later than thirty (30) days after the
date hereof such regulatory filings as are applicable to the Merger. The Company
shall take, in accordance with applicable law and its Certificate of
Incorporation and Bylaws, each as may be amended, all action necessary to
convene an appropriate meeting of shareholders of the Company to consider and
vote upon the approval of this Agreement and any other matters required to be
approved by the Company's shareholders for consummation of the Merger (including
any adjournment or postponement, the "Company Meeting"), as promptly as
practicable after the date hereof and after SEC review of the S-4 Registration
Statement has been completed and the S-4 Registration Statement has been
declared effective. The Company's Board of Directors shall recommend such
approval, and the Company shall take all reasonable lawful action to solicit
such approval by its shareholders, subject to the Board's fiduciary duties under
applicable law.
(b) Cathay shall file with the SEC no later than thirty (30) days
hereafter, the S-4 Registration Statement covering the Cathay Common Stock to be
issued pursuant to the Merger ("S-4 Registration Statement") and shall use its
reasonable best efforts to cause the same to become effective and thereafter,
until the Effective Time or termination of the Agreement, to keep the same
effective and, if necessary, amend and supplement the same. The S-4 Registration
Statement shall include a Proxy Statement / Prospectus ("Proxy Statement")
thereto reasonably acceptable to Cathay and the Company, prepared by Cathay,
with the assistance of the Company and the Company's counsel, for use in
connection with the meeting of shareholders of the Company referred to in
Section 7.1(a) of this Agreement, all in accordance with the rules and
regulations of the SEC. In advance of filing the S-4 Registration Statement,
Cathay shall provide the Company and its counsel with a copy of the S-4
Registration Statement and provide an opportunity to comment thereon, and
thereafter shall promptly advise the Company and its counsel of any material
communication received by Cathay or its counsel from the SEC with respect to the
S-4 Registration Statement. The description of Cathay and of the terms and
conditions of this Agreement contained in the Proxy Statement shall be subject
to consultation with Cathay. Each of the Company and Cathay shall cooperate and
shall instruct their respective agents, attorneys and accountants to cooperate
in the preparation and filing of the S-4 Registration Statement and Proxy
Statement. The Company shall distribute the Proxy Statement to its shareholders
not more than three (3) business days after the S-4 Registration Statement
becomes effective ("Proxy Statement Distribution Date").
A-36
(c) The Company and Cathay shall use reasonable efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement.
(d) Each of the Company and Cathay agrees, as to itself and its
Subsidiaries that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the S-4 Registration Statement
and the Proxy Statement shall, at the time the S-4 Registration Statement and
each amendment thereto, if any, becomes effective or any supplement thereto is
provided to Company's shareholders, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Proxy Statement and any supplement thereto will, at the date of mailing
to the Company's shareholders and at the time of the Company Meeting, contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which such statement is made, not misleading. Each of the Company and
Cathay further agrees that if it shall become aware prior to the Effective Time
of any information that would cause any of the statements in the S-4
Registration Statement or the Proxy Statement to be false or misleading with
respect to any material fact, or to omit to state any material fact necessary to
make the statements therein not false or misleading, to promptly inform the
other party thereof and to take the necessary steps to correct the S-4
Registration Statement or the Proxy Statement.
(e) Cathay shall advise the Company, promptly after Cathay receives notice
thereof, of the time when the S-4 Registration Statement has been declared
effective, of the issuance of any stop order or the suspension of a
qualification of the Cathay Common Stock for offering or sale in any
jurisdiction or of the S-4 Registration Statement, of the initiation or threat
of any proceeding for any such purpose, or of any request by the SEC for the
amendment or supplement of the S-4 Registration Statement or for additional
information.
(f) Without limiting the foregoing, the parties hereto shall cooperate
with each other and use their reasonable efforts to promptly prepare and file
all necessary documentation, to effect all applications, notices, petitions and
filings and to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all third parties or Governmental Entities that
are necessary or advisable to consummate the transactions contemplated by this
Agreement and to comply with the terms and conditions thereof. The Company and
Cathay shall have the right to review in advance, and to the extent practicable
each will consult the other on, in each case subject to applicable laws relating
to the exchange of information and the right of each party to withhold
information its Board of Directors reasonably determines in good faith should be
withheld for reasons of privacy, confidentiality or fiduciary duty, all the
information relating to the Company, its Subsidiaries, Cathay or Cathay's
Subsidiaries, including Cathay Bank, that appears in any filing made with, or
written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties or Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
consummation of the transactions contemplated hereby.
A-37
(g) Each of Cathay and the Company shall, upon request, subject to
applicable laws relating to the exchange of information and the right of each
party to withhold information its Board of Directors reasonably determines in
good faith should be withheld for reasons of privacy, confidentiality or
fiduciary duty, furnish each other with all information concerning itself and
its Subsidiaries, if any, directors, officers and shareholders and such other
matters as may be reasonably necessary or advisable in connection with the S-4
Registration Statement, the Proxy Statement or any other statement, filing,
notice or application made by or on behalf of Cathay, the Company, its
Subsidiaries or any of Cathay's Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
(h) Cathay and the Company shall promptly furnish each other with copies
of non-confidential written communications received by Cathay or the Company, as
the case may be, or any of Cathay's Subsidiaries, from, or delivered by any of
the foregoing to, any Governmental Entity in respect of the transactions
contemplated by this Agreement.
(i) Cathay has no obligation to file a registration statement with the SEC
with respect to the resale of the shares of Cathay Common Stock to be issued
hereunder by any person.
(j) Not later than the fifteenth (15th) day prior to the Proxy Statement
Distribution Date, the Company shall deliver to Cathay a schedule of each person
that, to the best of the Company's knowledge, is or is reasonably likely to be,
as of the date of the Company Meeting, deemed to be an "affiliate" of it (each,
a "Company Affiliate") as that term is used in Rule 145 under the Securities
Act. The Company shall use its reasonable efforts to cause each Company
Affiliate to execute and deliver to Cathay and the Company on or before the
Effective Time an affiliate agreement in substantially the form attached hereto
as Exhibit A.
(k) Certificates representing the shares of Cathay Common Stock to be
issued to Company Affiliates pursuant to this Agreement may be subject to stop
transfer orders and a restrictive legend which confirm and state that such
certificates representing such shares have been issued or transferred to the
registered holder as the result of a transaction to which Rule 145 under the
Securities Act applies, and that such shares may not be sold, hypothecated,
transferred or assigned, and the issuer or its transfer agent shall not be
required to give effect to any attempted sale, hypothecation, transfer or
assignment, except (i) pursuant to a then current effective registration
statement under the Securities Act, (ii) in a transaction permitted by Rule 145,
or (iii) in a transaction which, in an opinion of such holder's counsel in form
and substance reasonably satisfactory to Cathay, or as described in a "no
action" or interpretive letter from the staff of the SEC, is not required to be
registered under the Securities Act.
7.2 NO SOLICITATION BY THE COMPANY.
(a) The Company shall, and the Company shall direct and use its reasonable
efforts to cause the Company's affiliates, directors, officers, employees,
agents and representatives (including without limitation any investment banker,
financial advisor, attorney, accountant or other representative retained by the
Company) to, immediately cease any discussions or negotiations with any other
parties that may be ongoing with respect to the possibility or consideration of
any Acquisition Proposal. From the date of this Agreement through the Effective
Time or the earlier termination of this Agreement, the Company shall not, nor
shall it
A-38
authorize or permit any of the Company's directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly through another person,
(i) solicit, initiate or encourage (including by way of furnishing information
or assistance), or take any other action designed to facilitate or that is
likely to result in, any inquiries or the making of any proposal that
constitutes, or is reasonably likely to lead to, any Acquisition Proposal, (ii)
except in accordance with Section 9.1(f) hereof, enter into any agreement with
respect to an Acquisition Proposal, (iii) participate in any discussions or
negotiations regarding any Acquisition Proposal, or (iv) make or authorize any
statement, recommendation or solicitation in support of any Acquisition
Proposal; provided, however, that prior to the twentieth (20th) day after the
Proxy Distribution Date, if, and only to the extent that, the Board of Directors
of the Company determines in good faith, after consultation with its outside
legal and financial advisors, that the failure to do so would reasonably be
expected to breach the Board's fiduciary duties under applicable law, the
Company may, in response to a bona fide written Acquisition Proposal not
solicited in violation of this Section 7.2(a) that the Board of Directors of the
Company believes in good faith constitutes a Superior Proposal, subject to
providing forty-eight (48) hours prior written notice to Cathay of the Board's
decision to take such action and identifying the person making the proposal and
all the material terms and conditions of such proposal (the "Company Notice")
and compliance with Section 7.2(b) hereof, following delivery of the Company
Notice, (1) furnish information with respect to the Company to any person making
such a Superior Proposal pursuant to a customary confidentiality agreement (as
determined by the Company after consultation with its outside counsel) on terms
no more favorable to such person than the terms contained in any such agreement
between the Company and Cathay, and (2) participate in discussions or
negotiations regarding such a Superior Proposal.
(b) In addition to the obligations of the Company set forth in Section
7.2(a) hereof, the Company shall promptly advise Cathay orally and in writing of
any Acquisition Proposal (or any inquiry which could lead to an Acquisition
Proposal) and keep Cathay informed, on a current basis, of the continuing status
thereof and shall contemporaneously provide to Cathay all materials provided to
or made available to any third party by the Company which were not previously
provided to Cathay.
(c) Notwithstanding anything herein to the contrary, the Company and its
Board of Directors shall be permitted to comply with Rule 14d-9 and Rule 14e-2
promulgated under the Exchange Act.
7.3 ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, the Company shall afford to the officers, employees,
accountants, counsel and other representatives of Cathay, access, during normal
business hours during the period commencing on the date hereof and prior to the
Effective Time, to all of the Company's and its Subsidiaries' properties, books,
contracts, loan files, commitments, records, officers, employees, accountants,
counsel and other representatives, and, during such period, the Company shall
make available to Cathay all information concerning the Company's and its
Subsidiaries' businesses, properties and personnel as Cathay may reasonably
request and shall provide Cathay with such assistance as Cathay may reasonably
request in planning and implementing transition arrangements
A-39
(including with respect to the retention of officers and employees). The Company
shall not be required to provide access to or to disclose information where such
access or disclosure would violate or prejudice the rights of the Company's or
its Subsidiaries' customers, jeopardize any attorney-client privilege or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of this Agreement, provided
that the Company delivers to Cathay a written log notifying Cathay of the
existence of, and the basis for the Company's withholding of, such information.
The parties hereto will make appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding sentence apply.
(b) From and after the date hereof until the Effective Time or the earlier
termination of this Agreement, the Company shall (i) invite a suitable
representative of Cathay, at Cathay's sole expense, to observe all
non-confidential portions of the Company's and NAB's Board of Directors (and
audit committee thereof) and shareholders meetings (and shall provide such
representative notice of such meetings and, subject to the restrictions set
forth in Section 7.3(a), copies of any materials distributed to directors,
committee members and shareholders relating to non-confidential portions of such
meetings) and, subject to the prior written consent of any applicable regulatory
authority, any regulatory examination exit briefings, and (ii) cause one or more
of its designated representatives to confer on a regular and frequent basis with
representatives of Cathay and to report the general status of the ongoing
operations of the Company and its Subsidiaries. In connection therewith, Cathay
shall have the right of full review on any new loan extended by the Company or
NAB in a principal amount in excess of $750,000. Cathay and the Company, as the
case may be, will promptly notify the other party of any material change in the
normal course of business or in the operation of their respective properties and
of the existence or progress in resolution of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of significant litigation
involving them, and will keep the other party fully informed of such events,
including without limitation, the exit briefing at the conclusion of any
regulatory examination.
(c) No investigation by Cathay or its representatives shall affect the
representations, warranties, covenants or agreements of the Company set forth
herein.
7.4 CONFIDENTIALITY. All confidential information furnished to the parties
in connection with the transactions contemplated hereby shall be subject to, and
the recipient of such information shall hold all such information in strictest
confidence.
7.5 NOTIFICATION OF CERTAIN MATTERS. Each of Cathay and the Company shall
give prompt notice to the other (and subsequently keep the other party informed
on a current basis) upon its becoming aware of the occurrence or existence of
any fact, event or circumstance that (i) is reasonably likely to result in any
Material Adverse Effect with respect to it, or (ii) would cause or constitute a
material breach of any of its representations, warranties, covenants or
agreements contained herein; provided, however, that the delivery of any notice
pursuant to this Section 7.5 shall not have any effect for the purpose of
determining the satisfaction of the conditions set forth in Article VIII of this
Agreement or otherwise limit or affect the remedies available to any such party
hereunder.
A-40
7.6 EMPLOYEE BENEFIT PLANS.
(a) For two years following the Closing, Cathay shall not reduce the
salary, base hourly wage rate, or bonus opportunity of any employee of the
Company or its Subsidiaries below the rate in effect immediately prior to the
Closing; provided, however, that nothing contained herein shall require Cathay
or any of its Subsidiaries to employ any employee of the Company or its
Subsidiaries following the Closing or limit Cathay and its Subsidiaries ability
to terminate the employment of any employee of the Company or its Subsidiaries.
(b) As soon as practicable after the Closing, employees of the Company and
the Subsidiaries shall become eligible to participate in Cathay's Plans, on the
same terms and conditions that apply to Cathay's similarly situated employees.
Cathay will:
(i) waive all pre-existing condition requirements, evidence of
insurability provisions, waiting period requirements or any similar
provisions under any Plan (which is a welfare plan under ERISA Section
3(1)) for such employees after the Closing Date to the extent such
employees would not have been subject to such requirements or provisions
under the Company's Plans;
(ii) either (x) use commercially reasonable efforts to cause its
insurers to apply toward any deductible requirements and out-of-pocket
maximum limits under its Plans any similar amounts paid (or accrued) by
each employee under the Company's or its Subsidiaries' Plans during the
current plan year or (y) if the actions described in (x) are not possible,
continue to maintain the Company's or its Subsidiaries' Plans and provide
these benefits for the remainder of such Plans' current plan year;
(iii) recognize for purposes of participation, eligibility and vesting
(but not for purposes of benefit accrual) under its Plans, including
vacation, paid-time-off and severance plans, the service of any employee
with the Company or its Subsidiaries prior to the Closing Date; and
(iv) be responsible for satisfying obligations under ERISA Section 601
et seq. and Code Section 4980B to provide continuation coverage to any
employee with respect to any qualifying event which occurs on or after the
Closing Date.
(c) If Cathay terminates the employment of any individual employed by the
Company or its Subsidiaries on the Closing (other than Benjamin Wong or Lloyd
Gibson) for other than Cause within one year following the Closing, Cathay shall
provide such individual with the severance pay as described in Cathay's
severance policy in effect on the Closing. The Company agrees that if requested
by Cathay it will, immediately prior to the Effective Time, terminate without
Cause those individuals identified by Cathay and any of those individuals shall
be entitled to the same severance from Cathay pursuant to this Section 7.6(c) as
if they had been terminated by Cathay after the Closing. For this purpose,
"Cause" means the employee's material misconduct, inability or refusal to
perform his or her job responsibilities, or conviction of a felony.
(d) Cathay shall honor the existing agreements and arrangements set forth
on Section 7.6(d) of the Company Disclosure Schedule.
A-41
(e) Nothing in this Section is intended to confer upon any person (other
than the parties hereto or thereto) any rights or remedies hereunder.
7.7 INDEMNIFICATION.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer of the Company or its Subsidiaries (the "Indemnified
Parties") is, or is threatened to be, made a party based in whole or in part on,
or arising in whole or in part out of, or pertaining to (i) the fact that he is
or was a director or officer of the Company or its Subsidiaries or any of their
predecessors or affiliates, or (ii) this Agreement or any of the transactions
contemplated hereby, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their best efforts
to defend against and respond thereto. It is understood and agreed that after
the Effective Time, Cathay shall indemnify and hold harmless, as and to the
fullest extent permitted by law, each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation, and in
the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Cathay; provided, however, that (1) Cathay shall have the
right to assume the defense thereof and upon such assumption Cathay shall not be
liable to any Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by any Indemnified Party in connection with
the defense thereof, except that if Cathay elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises Cathay that there are
issues which raise conflicts of interest between Cathay and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them after consultation with Cathay, and Cathay shall pay the reasonable fees
and expenses of such counsel for the Indemnified Parties, (2) Cathay shall
advance funds and in all cases be obligated pursuant to this paragraph to pay
for only one firm of counsel for all Indemnified Parties, provided however that
Cathay shall advance funds to multiple counsel if one firm of counsel cannot
represent multiple Indemnified Parties because of conflicts of interest, (3)
Cathay shall not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld), and (4) Cathay shall
have no obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and nonappealable, that indemnification of such Indemnified
Party in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim Indemnification under this Section 7.7, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify Cathay thereof, provided that the failure to so notify shall not
affect the obligations of Cathay under this Section 7.7 except to the extent
such failure to notify prejudices Cathay. Cathay's obligations under this
Section 7.7 shall continue in full force and effect for an unlimited period of
time following the Effective Time.
A-42
(b) Prior to Closing, NAB may purchase a "tail policy" covering persons
serving as officers and directors of the Company or its Subsidiaries immediately
prior to the Effective Time for a period of up to five (5) years from the
Effective Time with respect to acts or omissions occurring prior to the
Effective Time which were committed by such officers and directors in their
capacity as such (the "D&O Policy").
(c) In the event Cathay or its successors or assigns (i) consolidates with
or merges into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers or
conveys all or substantially all of its properties and assets to any person,
then, and in each such case, to the extent necessary, proper provision shall be
made so that the successors and assigns of Cathay assume the obligations set
forth in this Section 7.7.
(d) The provisions of this Section 7.7 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
7.8 REASONABLE EFFORTS; ADDITIONAL AGREEMENTS.
(a) Subject to the terms and conditions of this Agreement, each of Cathay
and the Company agrees to cooperate fully with each other and to use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective, at the time and in the manner contemplated by this Agreement,
the Merger and the other transactions contemplated by this Agreement, including
using reasonable efforts to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
Merger and the other transactions contemplated by this Agreement.
(b) The Company agrees to use its reasonable efforts from the date of this
Agreement to the Closing to assist Cathay and Cathay Bank in retaining all
employees and customers of the Company and its Subsidiaries.
(c) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the parties to the Merger, the
officers and directors of each party to this Agreement and their respective
Subsidiaries, if any, shall take all such necessary action as may be reasonably
requested by Cathay.
(d) The Company agrees to use commercially reasonable efforts to cooperate
with Purchaser to, if requested in writing by Purchaser, (a) form or cause NAB
to form, on or prior to the Closing, one or more new wholly-owned Subsidiaries
and (b) executing any documents, agreements and instruments and taking such
other actions as may be reasonably required to transfer such loans or other
assets or liabilities of NAB to such Subsidiaries all in such order, form and
substance as reasonably requested by Purchaser.
7.9 ENVIRONMENTAL/UNDISCLOSED LIABILITIES POOL. Notwithstanding anything
herein to the contrary, to the extent that the representations and warranties in
Sections 4.16 and 4.24, as qualified by the Company Disclosure Schedule, contain
any untrue statements, and the potential
A-43
liability of the Company or its Subsidiaries (or, following the Merger, Cathay)
based on the subject of such untrue statements is not reasonably likely to
exceed $250,000 in the aggregate, such representations and warranties shall be
deemed to be true and correct and the Company shall not be deemed to have
breached them. This Section 7.9 shall apply for all purposes of this Agreement,
including for purposes of Section 8.2(a) and Article IX.
7.10 LISTING OF SHARES. Cathay shall use all reasonable efforts to cause
the shares of Cathay Common Stock issuable in the Merger to be approved for
listing on the Nasdaq National Market.
7.11 FILING AND OTHER FEES. All filing and other fees paid to the SEC or
any Government Entity in connection with the Merger and the transactions
contemplated by this Agreement and the costs and expenses of printing and
mailing the Proxy Statement shall be borne by Cathay.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to consummate the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) SHAREHOLDER APPROVAL. The Company shall have obtained the Shareholder
Approval.
(b) REGULATORY APPROVALS. All regulatory approvals and the Securities Laws
Filings and Approvals required to consummate the Merger or other transactions
contemplated hereby (but specifically excluding the Subsequent Merger) shall
have been obtained and shall remain in full force and effect, and all statutory
waiting periods in respect thereof shall have expired (all such approvals and
the expiration of all such waiting periods being referred to herein as the
"Requisite Regulatory Approvals").
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No judgment, order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or other transactions contemplated hereby shall be in
effect. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any Governmental Entity that
prohibits, restricts or makes illegal the consummation of the Merger or the
other transactions contemplated hereby.
8.2 CONDITIONS TO OBLIGATIONS OF CATHAY. The obligation of Cathay to
consummate the Merger is also subject to the satisfaction or waiver by Cathay at
or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company set forth in this Agreement shall be true and correct as of the date
of this Agreement and as of the Effective Time as though made at and as of the
Effective Time (except that
A-44
representations and warranties that by their terms speak specifically as of the
date of this Agreement or some other date shall be true and correct as of such
date), and Cathay shall have received a certificate, dated the Closing Date,
signed on behalf of the Company by either the Chief Executive Officer, the Chief
Financial Officer or Chairman of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Cathay shall have
received a certificate signed on behalf of the Company by the Chief Executive
Officer and the Chief Financial Officer of the Company to such effect.
(c) CONSENTS UNDER AGREEMENTS. All consents and approvals of all persons
(other than the Governmental Entities) required for consummation of the Merger
and the other transactions contemplated hereby shall have been obtained and
shall be in full force and effect, unless the failure to obtain any such consent
or approval would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company or Cathay. For the avoidance
of doubt, it shall be a condition to Closing that the Company obtain the
necessary consents and approvals to repay the Credit Facility at the Closing
without premium or penalty, which consents and approvals shall be in full force
and effect.
(d) COMPANY NET WORTH. At the Closing, the net worth of the Company shall
be not less than the Company Closing Net Worth. For purposes of this condition,
the net worth of the Company shall exclude (i) the after-tax effect of any
expense related to the Agreement and the transactions contemplated hereby, (ii)
the after-tax effect of any gain or loss from the sale of assets by the Company
in 2005 or 2006 in the ordinary course of business consistent with its past
practices, and (iii) any change in the "Accumulated Other Comprehensive Income
(Loss), Net of Tax" line on the Company's balance sheet after May 31, 2006, all
as set forth in a balance sheet of the Company as of the end of the month
preceding the Closing Date, prepared in accordance with GAAP, and the format of
such balance sheet of the Company to be delivered as of the end of the month
preceding the Closing Date is attached hereto as Schedule 8.2(d).
(e) CORE DEPOSITS. The balance of core deposits at Closing shall be no
less than $78,800,000 in the aggregate. Core deposits for purposes of this
Section 8.2(e) is defined as non-interest bearing, interest bearing checking,
money-market, savings, and certificates of deposit (which are less than $100,000
and the owners of whom reside in NAB's market area) accounts, and excludes real
estate tax escrow accounts.
(f) TAX OPINION. Cathay shall have received from its counsel, Wachtell,
Lipton, Rosen & Katz, an opinion dated as of the Closing Date to the effect
that, on the basis of the facts, representations and assumptions set forth or
referred to in such opinion, the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code. The parties to this Agreement
agree to execute and deliver to such counsel representation letters containing
such reasonable representations as may be requested by such counsel for the
purpose of rendering such opinion, and the receipt of such representation
letters by such counsel shall be a condition to the issuance of its opinion.
A-45
(g) NO PENDING GOVERNMENTAL ACTIONS. No proceeding initiated by any
Governmental Entity seeking an Injunction preventing the consummation of the
Merger or other transactions contemplated hereby shall be pending.
(h) EMPLOYMENT AGREEMENT. Cathay or Cathay Bank shall have entered into an
employment agreement with Mr. Benjamin Wong in form and substance satisfactory
to Cathay, reflecting the terms contained in the term sheet attached hereto as
Exhibit B.
8.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to consummate the Merger is also subject to the satisfaction or waiver
by the Company at or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Cathay set forth in this Agreement shall be true and correct as of the date of
this Agreement and as of the Effective Time as though made at and as of the
Effective Time (except that representations and warranties that by their terms
speak specifically as of the date of this Agreement or some other date shall be
true and correct as of such date), and the Company shall have received a
certificate, dated the Closing Date, signed on behalf of Cathay by the Chief
Executive Officer and the Chief Financial Officer of Cathay to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF CATHAY. Cathay shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of Cathay by the Chief Executive Officer and the
Chief Financial Officer of Cathay to such effect.
(c) CONSENTS UNDER AGREEMENTS. All consents and approvals of all persons
(other than the Governmental Entities) required for consummation of the Merger,
the Subsequent Merger and the other transactions contemplated hereby shall have
been obtained and shall be in full force and effect, unless the failure to
obtain any such consent or approval would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
Cathay.
(d) NO PENDING GOVERNMENTAL ACTIONS. No proceeding initiated by any
Governmental Entity seeking an Injunction preventing the consummation of the
Merger or other transactions contemplated hereby shall be pending.
(e) TAX OPINION. The Company shall have received from its counsel, Schiff
Hardin LLP, an opinion dated as of the Closing Date to the effect that, on the
basis of the facts, representations and assumptions set forth or referred to in
such opinion, the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code. The parties to this Agreement agree to execute
and deliver to such counsel representation letters containing such reasonable
representations as may be requested by such counsel for the purpose of rendering
such opinion, and the receipt of such representation letters by such counsel
shall be a condition to the issuance of its opinion.
8.4 FRUSTRATION OF CLOSING CONDITIONS. Neither Cathay nor the Company may
rely on the failure of any condition set forth in Section 8.1, 8.2 or 8.3, as
the case may be, to be satisfied if such failure was caused by such party's
failure to use its reasonable efforts to consummate the
A-46
Merger or the other transactions contemplated by this Agreement, as required by
and subject to Section 7.8(a).
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the shareholders of the
Company of the matters presented in connection with the Merger:
(a) by mutual consent of Cathay and the Company;
(b) by either Cathay or the Company upon written notice to the other party
(i) thirty (30) days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the request
or recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the thirty (30)-day period following such
denial or withdrawal a petition for rehearing or an amended application has been
filed with the applicable Governmental Entity, (ii) after Cathay and the Company
have performed their respective obligations under Section 7.1 of this Agreement
with respect to the Securities Laws Filings and Approvals, the SEC informs
Cathay that the SEC will not declare effective the S-4 Registration Statement,
or (iii) any Governmental Entity of competent jurisdiction shall have issued a
final nonappealable order enjoining or otherwise prohibiting the Merger;
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 9.1(b) if such denial, request,
recommendation for withdrawal, SEC position, order, injunction or prohibition
shall be due to the failure of the party seeking to terminate this Agreement to
perform or observe the covenants and agreements of such party set forth herein.
(c) by either Cathay or the Company if the Merger shall not have been
consummated on or before the Final Date, unless the failure of the Closing to
occur by such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the covenants and agreements of such party
set forth herein;
(d) by either Cathay or the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material breach of
any of the representations or warranties set forth in this Agreement by the
other party, which breach is not cured within thirty (30) days following written
notice to the party committing such breach, or which breach, by its nature,
cannot be cured prior to the Closing; provided, however, that neither Cathay nor
the Company shall have the right to terminate this Agreement pursuant to this
Section 9.1(d) unless the breach of representation or warranty, together with
all other such breaches, would entitle the party receiving such representation
not to consummate the transactions contemplated hereby under Section 8.2(a) (in
the case of a breach of a representation or warranty by the Company) or Section
8.3(a) (in the case of a breach of a representation or warranty by Cathay);
A-47
(e) by either Cathay or the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material breach of
any of the covenants or agreements set forth in this Agreement on the part of
the non-terminating party, which breach shall not have been cured within thirty
(30) days following receipt by the breaching party of written notice of such
breach from the other party hereto, or which breach, by its nature, cannot be
cured prior to the Closing;
(f) by the Company prior to the twenty-fifth (25th) calendar day following
the Proxy Statement Distribution Date in the event that the Board of Directors
of the Company determines in good faith, after consultation with outside
counsel, that in light of a Superior Proposal it is necessary to terminate this
Agreement in order to comply with its fiduciary duties to the Company and to the
Company's shareholders under applicable law; provided, however, that the Board
of Directors of the Company may terminate this Agreement pursuant to this
Section 9.1(f) solely to concurrently enter into a definitive acquisition
agreement or other similar agreement related to a Superior Proposal; and
provided further, however, that this Agreement may be terminated pursuant to
this Section 9.1(f) only after the fifth (5th) day following Cathay's receipt of
written notice advising Cathay that the Board of Directors of the Company is
prepared to accept a Superior Proposal, and only if, during such five (5)-day
period, if Cathay so elects, the Company and its advisors shall have negotiated
in good faith with Cathay to make such adjustments in the terms and conditions
of this Agreement as would enable Cathay to proceed with the transactions
contemplated herein on such adjusted terms.
(g) by Cathay, if the Company does not obtain the Shareholder Approval at
the Company Meeting.
9.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by any party as provided
in Section 9.1, this Agreement shall forthwith become null and void and have no
effect except that (i) Sections 7.4, 9.2 and 10.3 hereof shall survive any
termination of this Agreement, and (ii) notwithstanding anything to the contrary
contained in this Agreement, no party shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
(b) (i) If Cathay terminates this Agreement under Section 9.1(d) or 9.1(e)
hereof for a willful material breach of this Agreement by the Company, and
Cathay is not itself in material breach of this Agreement or the Company
terminates this Agreement under Section 9.1(f), the Company shall pay to Cathay
a termination fee equal to $1,650,000 by wire transfer of same day immediately
available funds on the date of such termination. The Company and Cathay agree
that the agreement contained in this Section 9.2(b)(i) is an integral part of
the transactions contemplated by this Agreement and constitutes liquidated
damages and not a penalty.
9.3 AMENDMENT. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto; provided, however, that after any approval
of the transactions
A-48
contemplated by this Agreement by the Company's shareholders, there may not be,
without further approval of such shareholders, any amendment of this Agreement
which reduces the amount or changes the form of the consideration to be
delivered to the Company shareholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed by duly authorized representatives on behalf of each of the
parties hereto.
9.4 EXTENSION; WAIVER. At any time prior to the Effective Time, each of
the parties hereto, by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto, and (c) waive compliance by
the other party with any of its agreements contained herein, or waive compliance
with any of the conditions to its obligations hereunder. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed by duly authorized representatives on
behalf of such party, but such extension or waiver or failure to insist on
strict compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE X
GENERAL PROVISIONS
10.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective Time.
10.2 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
10.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Cathay, to:
Cathay General Bancorp
777 N. Broadway
Los Angeles, CA 90012
Attention: Corporate Secretary
with copies (which shall not constitute notice to Cathay) to:
A-49
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Edward D. Herlihy, Esq.
Craig M. Wasserman, Esq.
(b) if to the Company, to:
New Asia Bank
222 West Cermack Road
Chicago, IL 60616
Attention: Mr. Benjamin Wong, Chairman
with copies (which shall not constitute notice to the Company) to:
Schiff Hardin LLP
6600 Sears Tower
Chicago, Illinois 60606
Attention: Christopher J. Zinski, Esq.
10.4 INTERPRETATION. Whenever the term "person" is used in this Agreement,
it shall be construed broadly to include any person or entity of any kind.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever the term "knowledge" is used in this Agreement, it means
the actual knowledge of after reasonable inquiry of Ben Wong (Chairman), Lloyd
Gibson (President) or Ed Sevik (Chief Financial Officer). The terms, "Section,"
"Schedule" and "Exhibit" refer to sections and schedules exhibits attached to,
this Agreement, respectively. The terms "hereof," "herein" and "hereunder" and
words of similar import refer to this Agreement as a whole, including all
exhibits and schedules hereto. The phrases "the date of this Agreement," "the
date hereof" and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to the date set forth in the introductory paragraph of
this Agreement. Terms defined in the singular have a comparable meaning when
used in the plural and vice versa. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
10.5 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party hereto and delivered to the
other party, it being understood that all parties need not sign the same
counterpart.
10.6 ENTIRE AGREEMENT. This Agreement, together with all exhibits,
schedules and other attachments hereto (including the documents and the
instruments referred to herein and therein, constitutes the entire agreement and
supersedes all prior agreements and understandings,
A-50
both written and oral, between the parties with respect to the subject matter
hereof. Notwithstanding the foregoing, any provision of any other document or
instrument referred to herein that conflicts with any provision of this
Agreement shall be superseded by the provisions hereof.
10.7 GOVERNING LAW. The formation, construction, and performance of this
Agreement, including the rights and duties of the parties hereunder, shall be
construed, interpreted, governed, applied and enforced in accordance with the
laws of the State of Delaware applicable to agreements entered into and
performed entirely in the State of Delaware by residents thereof, without regard
to any provisions thereof relating to conflicts of laws among different
jurisdictions. Each of the parties consents that all such service of process may
be made by delivery of the summons and complaint by certified or registered
mail, return receipt requested, or by messenger, directed to it at the address
of its agent set forth herein, and that service so made shall be deemed to have
been made as of the date of the receipt indicated in the certification, signed
and returned postal receipt, or other proof of service applicable to the method
of service employed.
10.8 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in Section 7.4 of
this Agreement were not performed in accordance with its specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of Section 7.4 of this
Agreement and to enforce specifically the terms and provisions thereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
10.9 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.10 PUBLICITY. Except as otherwise required by law or by the rules of
the Nasdaq Stock Market's National Market, so long as this Agreement is in
effect, neither Cathay nor the Company shall, nor shall Cathay or the Company
permit any of their respective Subsidiaries to, issue or cause the publication
of any press release or other public announcement with respect to, or otherwise
make any public statement concerning, the transactions contemplated by this
Agreement without the consent of the other parties hereto, which consent shall
not be unreasonably withheld, delayed or conditioned.
10.11 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement (including the documents and
instruments referred to
A-51
herein) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
10.12 FAX SIGNATURES. Any signature page hereto delivered by a fax machine
or telecopy machine shall be binding to the same extent as an original signature
page, with regard to any agreement subject to the terms hereof or any amendment
thereto. Any party who delivers such a signature page agrees to later deliver an
original counterpart to any party that requests it.
[remainder of page intentionally left blank]
A-52
IN WITNESS WHEREOF, Cathay and the Company have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
CATHAY GENERAL BANCORP
By: /s/ Dunson Cheng
Name: Dunson Cheng
Title: President
NEW ASIA BANCORP, INC.
By: /s/ Benjamin Wong
Name: Benjamin Wong
Title: Chairman
A-53
APPENDIX I
DEFINITIONS
As used in this Agreement, the following terms shall have the definitions
set forth herein:
(a) "Acquisition Proposal" means any inquiry, proposal or offer, filing of
any regulatory application or notice (whether in draft or final form) or
disclosure of an intention to do any of the foregoing from any person relating
to any (i) direct or indirect acquisition or purchase of a business that
constitutes a substantial portion of the net revenues, net income or assets of
the Company or any of its Subsidiaries, (ii) direct or indirect acquisition or
purchase of any class of equity securities representing ten percent (10%) or
more of the voting power of the Company, (iii) tender offer or exchange offer
that if consummated would result in any person beneficially owning a substantial
interest in any class of equity securities of the Company, or (iv) merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any of its Subsidiaries, other
than the transactions contemplated by this Agreement.
(b) "Acquisition Transaction" means a (i) direct or indirect acquisition
or purchase of a business that constitutes a substantial portion of the net
revenues, net income or assets of the Company or its Subsidiaries, (ii) direct
or indirect acquisition or purchase of any class of equity securities
representing ten percent (10%) or more of the voting power of the Company, (iii)
tender offer or exchange offer that if consummated would result in any person
beneficially owning a substantial interest in any class of equity securities of
the Company, or (iv) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries, other than the transactions contemplated by
this Agreement.
(c) Audit" has the meaning given such term in Section 5.15(a) hereof.
(d) "Average Closing Price" means the average of the daily closing price
of a share of Cathay Common Stock as reported on the Nasdaq National Market
during the ten (10) consecutive trading days preceding the fifth (5th) business
day prior to the Effective Time.
(e) "Cash Election Shares" means shares of Company Capital Stock with
respect to which a Cash Election or Combination Cash Election has been made and
any shares of Company Capital Stock owned by Cathay immediately prior to the
Effective Time.
(f) "Cash Election" has the meaning given such term in Section 2.2(a)
hereof.
(g) "Cathay" means Cathay General Bancorp, a Delaware corporation.
(h) "Cathay Capital Stock" means Cathay Common Stock and Cathay Preferred
Stock, collectively.
(i) "Cathay Common Stock" means common stock of Cathay, par value $0.01
per share.
(j) "Cathay Disclosure Schedule" has the meaning given such term in
Section 3.1 hereof.
(k) "Cathay Reports" has the meaning given such term in Section 5.10
hereof.
(l) "Certificate" has the meaning given such term in Section 2.1(b)
hereof.
(m) "Closing" has the meaning given such term in Section 1.3(a) hereof.
(n) "Closing Date" has the meaning given such term in Section 1.3(a)
hereof.
(o) "Closing Net Worth" means $11,235,942.
(p) "Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
(q) "Combination Cash Election" has the meaning given such term in Section
2.2(a) hereof.
(r) "Combination Stock Election" has the meaning given such term in
Section 2.2(a) hereof.
(s) "Company Advisor" has the meaning given such term in Section 4.7
hereof.
(t) "Company Affiliate" has the meaning given such term in Section 7.1(k)
hereof.
(u) "Company Capital Stock" means the capital stock of the Company, par
value $5.00.
(w) "Company Contract" has the meaning given such term in Section 4.15(a)
hereof.
(x) "Company Disclosure Schedule" has the meaning given such term in
Section 3.1 hereof.
(y) "Company Meeting" has the meaning given such term in Section 7.1(a)
hereof.
(a) "Company Notice" has the meaning given such term in Section 7.2(a).
(aa) "Consents" has the meaning given such term in Section 4.3(a).
(bb) "Converted Cash Election Share" has the meaning given such term in
Section 2.2(c)(i)(C) hereof.
(cc) "Converted Stock Election Shares" has the meaning given such term in
Section 2.2(c)(ii)(B) hereof.
(dd) "DGCL" means the Delaware General Corporation Law.
(ee) "Delaware Certificate" has the meaning given such term in Section
1.3(b) hereof.
(ff) "Derivative Transaction" means any transaction involving a derivative
instrument within the scope of Financial Accounting Standards Board Statement
133, including without limitation any swap transaction, option, warrant, forward
purchase or sale transaction, futures
2
transaction, cap transaction, floor transaction or collar transaction relating
to one or more currencies, commodities, bonds, equity securities, loans,
interest rates, catastrophe events, weather-related events, credit-related
events or conditions or any indexes, or any other similar transaction (including
any option with respect to any of these transactions) or combination of any of
these transactions, including collateralized mortgage obligations or other
similar instruments or any debt or equity instruments evidencing or embedding
any such types of transactions, and any related credit support, collateral or
other similar arrangements related to such transactions.
(gg) "Dissenting Shares" has the meaning given such term in Section 1.5(d)
hereof.
(hh) "DPC Shares" has the meaning given such term in Section 1.5(c)
hereof.
(ii) "Effective Time" has the meaning given such term in Section 1.3(b)
hereof.
(jj) "Election" shall have the meaning given such term in Section 2.2(a)
hereof.
(kk) "Election Deadline" shall have the meaning given such term in Section
2.2(b) hereof.
(ll) "Election Form" shall have the meaning given such term in Section
2.2(a) hereof.
(mm) "Election Form Record Date" shall have the meaning given such term in
Section 2.2(a) hereof.
(nn) "Environmental Laws" has the meaning given such term in Section
4.16(a) hereof.
(oo) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(pp) "ERISA Affiliate" has the meaning given such term in Section 4.11(a)
hereof.
(qq) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(rr) "Exchange Agent" has the meaning given such term in Section 2.1(a).
(uu) "Exchange Ratio" means that number of shares of Cathay Common Stock
as shall be obtained by dividing the Per Share Cash Consideration by the Average
Closing Price, rounded to the nearest one-ten-thousandth (1/10,000).
(vv) "FDIC" means the Federal Deposit Insurance Corporation.
(ww) "FDIC Application" has the meaning given such term in Section 4.4
hereof.
(xx) "Final Date" means nine months from the date hereof.
(yy) "FRB" means the Federal Reserve Board.
(zz) "FRB Application" has the meaning given such term in Section 4.4
hereof.
3
(aaa) "GAAP" means generally accepted accounting principles.
(bbb) "Governmental Entity" has the meaning given such term in Section 4.4
hereof.
(ccc) "Hazardous Materials" means any chemicals, pollutants, contaminants,
wastes, toxic substances, petroleum or other regulated substances or materials.
(ddd) "Indemnified Parties" has the meaning given such term in Section
7.7(a) hereof.
(eee) "Injunction" has the meaning given such term in Section 8.1(c)
hereof.
(fff) "Lien" has the meaning given such term in Section 4.3(b) hereof.
(ggg) "Loan Property" means any property with respect to which the Company
or any of its Subsidiaries holds a security interest (as defined in 42 U.S.C.
ss. 9601(20)(G)(vi)), as collateral for a loan or other extension of credit,
and, where required by the context, said term means the owner or operator of
such property.
(hhh) "Loans" has the meaning given such term in Section 4.20(a) hereof.
(iii) "Mailing Date" has the meaning given such term in Section 2.2(a)
hereof.
(jjj) "Material Adverse Effect" means with respect to a person, an effect
which (i) is materially adverse to the business, results of operations or
financial condition of such person and its Subsidiaries taken as a whole, other
than any such effect attributable to or resulting from (A) any change in banking
or similar laws, rules, regulations or policies of general applicability or
interpretations thereof by courts or governmental authorities, (B) any change in
GAAP or regulatory accounting principles, in each case which affects banks,
thrifts or their holding companies generally, (C) events, conditions or trends
in economic, business or financial conditions generally or affecting banks,
thrifts or their holding companies specifically (including changes in the
prevailing level of interest rates), or (D) in the case of the Company, any
action or omission of the Company taken with the prior written consent of
Cathay, and in the case of Cathay, any action or omission of Cathay taken with
the prior written consent of the Company; or (ii) materially impairs the ability
of such person to consummate the transactions contemplated hereby.
(kkk) "Maximum Stock Conversion Number" means the product of .60 and the
number of outstanding shares of Company Capital Stock immediately prior to the
Effective Time; provided, however, if the Average Closing Price, subject to
adjustment for any split, combination, dividend or other distribution in Cathay
Common Stock that occurs between the date of the Agreement and the Effective
Time, is less than $30.92, then the Maximum Stock Conversion Number shall mean
the product of .45 and the number of outstanding shares of Company Capital Stock
immediately prior to the Effective Time.
(lll) "Merger Consideration" has the meaning given such term in Section
1.5(a) hereof.
(mmm) "Minimum Stock Conversion Number" means the product of .45 and the
number of outstanding shares of Company Capital Stock immediately prior to the
Effective Time.
4
(nnn) "OSHA" means the Occupational Safety and Health Act of 1970, 29
U.S.C. Section 651 et seq.
(ooo) "Participation Facility" means any property with respect to which
either (i) Company has "foreclosed" on a security interest held by it, or (ii)
has been deemed to have "participated in the management" of such property as
such terms are defined respectively in 42 U.S.C. ss. 9601(20)(E)(ii) and 42
U.S.C. ss. 9601(20)(F).
(ppp) "Per Share Cash Consideration" has the meaning given such term in
Section 1.5(a).
(qqq) "Per Share Stock Consideration" means that number of shares of
Cathay Common Stock equal to the Exchange Ratio.
(rrr) "Plan and Agreement of Merger" has the meaning given such term in
Section 1.3(b) hereof.
(sss) "Plans," as it refers to the Company, has the meaning given such
term in Section 4.11(a) hereof and is it refers to Cathay, means (i) each
incentive compensation plan, deferred compensation plan and equity compensation
plan; (ii) each "welfare" plan, fund or program (within the meaning of Section
3(1) of ERISA); (iii) each "pension" plan, fund or program (within the meaning
of Section 3(2) of ERISA); and (iv) each employment, termination or severance
agreement as well as each other employee benefit plan, fund, program, agreement
or benefit arrangement (collectively, the "Plans"), which is sponsored or
maintained, or to which contributions are made or required to be made, by Cathay
or any of its Subsidiaries, or by any trade or business (whether incorporated or
not) which is a member of a controlled group of corporations with Cathay as
defined in Section 414(b) or (c) of the Code, or an affiliated service group
with Cathay as defined in Section 414(m) or (o) of the Code (an "ERISA
Affiliate"), for the benefit of any current or former employee, director or
consultant of Cathay or its Subsidiaries or any of their ERISA Affiliates.
(ttt) "Proxy Statement" has the meaning given such term in Section 7.1(b)
hereof.
(uuu) "Proxy Statement Distribution Date" has the meaning given such term
in Section 7.1(b).
(vvv) "Regulatory Agency" has the meaning given such term in Section
4.5(a) hereof.
(www) "Requisite Regulatory Approvals" has the meaning given such term in
Section 8.1(b) hereof.
(xxx) "S-4 Registration Statement" has the meaning given such term in
Section 7.1(b) hereof.
(yyy) "SEC" means the U.S. Securities and Exchange Commission.
(zzz) "Securities Act" means the Securities Act of 1933, as amended.
(aaaa) "SRO" means self-regulatory organization.
5
(bbbb) "Securities Laws Filing and Approvals" means all filings to be made
with, hearings to be conducted before, approvals to be provided by, permits to
be issued by, and/or registrations to be made with the SEC in accordance with
and pursuant to the provisions of Section 7.1 of this Agreement.
(cccc) "State Banking Approvals and Notices" has the meaning given such
term in Section 4.4 hereof.
(dddd) "Stock Election" has the meaning given such term in Section 2.2(a)
hereof.
(eeee) "Stock Election Shares" means shares of Company Capital Stock with
respect to which a Stock Election or Combination Stock Election has been made.
(ffff) "Stock-Selected Undesignated Share" has the meaning given such term
in Section 2.2(c)(i)(B) hereof.
(gggg) "Subsidiary" means, with respect to any party, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time,
directly or indirectly, owned by such party.
(hhhh) "Superior Proposal" means any bona fide written proposal made by a
third party to acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, one hundred percent (100%)
of the combined voting power of the shares of capital stock of the Company then
outstanding or all or substantially all of the assets of the Company and
otherwise (i) on terms and conditions that the Board of Directors of the Company
determines in its good faith judgment, following consultation with the Company
Advisor, to be more favorable from a financial point of view to the Company's
shareholders than the Merger, (ii) that constitutes a transaction that, in such
Board of Directors' good faith judgment, is reasonably likely to be consummated
on the terms set forth, taking into account all legal, financial, regulatory and
other aspects of such proposal, and (iii) for which financing, to the extent
required, is then committed or which, in the good faith judgment of the Board of
Directors of the Company, is highly likely to be obtained by such third party.
(iiii) "Surviving Corporation" has the meaning given such term in Section
1.2 hereof.
(jjjj) "Takeover Laws" has the meaning given such term in Section 4.4(b)
hereof.
(kkkk) "Takeover Provisions" has the meaning given such term in Section
4.4(b) hereof.
(llll) "Tax Return" means any return, report, information return or other
document (including any election, declaration, disclosure, schedule, estimates
and related or supporting information) with respect to Taxes.
(mmmm) "Tax" and "Taxes" means all taxes, charges, fees, levies, penalties
or other assessments imposed by any United States federal, state, local or
foreign taxing authority,
6
including, but not limited to, income, excise, property, sales, transfer,
franchise, payroll, withholding, social security or other taxes, including any
interest, penalties or additions to tax and additional amounts attributable
thereto.
(nnnn) "Trust Account Shares" has the meaning given such term in Section
1.5(c) hereof.
(oooo) "Undesignated Shares" means those shares deemed to be Undesignated
Shares under Sections 2.2(a) and 2.2(c)(v) hereof.
(pppp) "USA PATRIOT Act" has the meaning given such term in Section
4.14(a) hereof.
7
NEW ASIA BANCORP, INC.
EXHIBIT A
FORM OF AFFILIATE AGREEMENT
Cathay General Bancorp
777 N. Broadway
Los Angeles, CA 90012
Ladies and Gentlemen:
The undersigned, a holder of __________ shares of common stock ("Company
Common Stock") of New Asia Bancorp, Inc., a Delaware corporation registered
under the Bank Holding Company Act of 1956 (the "Company"), is entitled to
receive ___________ shares of common stock, par value $0.01 per share ("Cathay
Common Stock"), of Cathay General Bancorp, a Delaware corporation registered
under the Bank Holding Company Act of 1956, as amended ("Cathay"), in connection
with the merger (the "Merger") of the Company and with and into Cathay pursuant
to and in compliance with that certain Agreement and Plan of Merger by and
between Cathay and the Company, dated as of July 6, 2006 (the "Merger
Agreement"). The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
by the Securities and Exchange Commission (the "SEC"), although nothing
contained herein should be construed as an admission of such fact, nor as a
waiver of any right the undersigned may have to object to any claim that the
undersigned is such an affiliate on or after date of this letter agreement.
If, in fact, the undersigned were such an affiliate under the Securities
Act, the undersigned's ability to sell, assign or transfer the shares of Cathay
Common Stock received by the undersigned in the Merger may be restricted unless
such transaction is registered under the Securities Act or an exemption from
such registration is available. The undersigned understands that such exemptions
are limited and, to the extent the undersigned felt or feels it necessary, the
undersigned has obtained or will obtain advice of counsel as to the nature and
conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d) promulgated
under the Securities Act.
The undersigned hereby represents to and covenants with Cathay that the
undersigned will not sell, assign, transfer or otherwise dispose of publicly or
privately any of the shares of Cathay Common Stock received by the undersigned
in the Merger pursuant to the Merger Agreement except (i) pursuant to an
effective registration statement under the Securities Act, (ii) in conformity
with the volume and other limitations of Rule 145(d) under the Securities Act,
or (iii) in a transaction which, in the opinion of the general counsel of
Cathay, or other counsel reasonably satisfactory to Cathay, or as described in a
"no-action" or interpretive letter from the staff of the SEC specifically issued
with respect to a transaction to be engaged in by the undersigned, is not
required to be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned of shares
of Cathay Common Stock pursuant to Rule 145(d), the undersigned will supply
Cathay with evidence of com-
pliance with such rule, in the form of a letter in form and substance reasonably
satisfactory to Cathay. The undersigned understands that if Cathay has reasons
to believe that the undersigned has not complied with Rule 145(d), it may
instruct its transfer agent to withhold the transfer of any shares of Cathay
Common Stock disposed of by the undersigned, but that upon receipt of such
evidence of compliance, of which a legal opinion from legal counsel of Cathay or
other counsel reasonably satisfactory to Cathay shall be conclusive, Cathay
shall cause the transfer agent to effectuate the transfer of shares of Cathay
Common Stock sold as indicated in such letter. Notwithstanding the foregoing,
Cathay shall revoke the stop transfer instructions with respect to any shares of
Cathay Common Stock held by the undersigned or a transferee of the undersigned
as to which the legend referred to below has been removed.
The undersigned acknowledges and agrees that the legend set forth below
will be placed on certificates representing any shares of Cathay Common Stock
received by the undersigned in connection with the Merger pursuant to the Merger
Agreement or held by a transferee thereof, which legend will be removed by
delivery of substitute certificates (i) upon the transfer by the undersigned of
shares of Cathay Common Stock in a sale made in conformity within the provisions
of Rule 145(d) or pursuant to an effective registration statement under the
Securities Act, or (ii) upon receipt of an opinion in form and substance
reasonably satisfactory to Cathay from independent counsel reasonably
satisfactory to Cathay to the effect that such legends are no longer required
for purposes of the Securities Act.
There will be placed on certificates for shares of Cathay Common Stock
issued to the undersigned, or, except as otherwise provided herein, any
substitutions therefore, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
APPLIES. THE SHARES MAY NOT BE SOLD, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO A REGISTRATION STATEMENT
UNDER, OR IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF, THE ACT."
It is understood and agreed that certificates with the legend set forth in
the preceding paragraph will be substituted by delivery of certificates without
such legend if: (i) one year shall have elapsed from the date the undersigned
acquired the shares of Cathay Common stock received in the Merger pursuant to
the Merger Agreement and the provisions of Rule 145(d)(2) are then available to
the undersigned; (ii) two years shall have elapsed from the date the undersigned
acquired the shares of Cathay Common Stock received in the Merger pursuant to
the Merger Agreement and the provisions of Rule 145(d)(3) are then applicable to
the undersigned; (iii) Cathay has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Cathay, or a "no action"
letter obtained by the undersigned from the staff of the SEC, to the effect that
the restrictions imposed by Rule 145 under the Securities Act no longer apply to
the undersigned; or (iv) any registration statement registering the resale of
the shares of
Cathay Common Stock issued to the undersigned is declared effective by the SEC
or automatically becomes effective.
For so long as and to the extent necessary to permit the undersigned to
sell its shares of Cathay Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Securities Act, Cathay shall take all such
actions as reasonably available to file, on a timely basis, all reports and data
required to be filed with the SEC by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), referred to in paragraph
(c)(1) of Rule 144 (or, if applicable, Cathay shall use reasonable efforts to
make publicly available the information regarding itself referred to in
paragraph (c)(2) of Rule 144), furnish to the undersigned upon request a written
statement as to whether Cathay has complied with such reporting requirements
during the twelve months preceding any proposed sale under Rule 145, and
otherwise take all such actions as reasonably available to permit such sales
pursuant to Rule 145 and Rule 144. Cathay has filed, on a timely basis, all
reports required to be filed with the SEC under Section 13 of the Exchange Act
during the preceding twelve months.
The undersigned acknowledges that the undersigned has carefully read this
letter agreement and understands and agrees to the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other disposition
of shares of Cathay Common Stock.
Very truly yours,
________________________
Name:
Dated: ______________, 2006
Accepted:__________, 2006
Cathay General Bancorp.
By:_______________________
Name:
Title:
APPENDIX B
DELAWARE GENERAL CORPORATION LAW
262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss.251 (other than a merger effected pursuant to ss.251(g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 of this title:
1. PROVIDED, HOWEVER, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and FURTHER PROVIDED that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of ss.251 of this title.
2. Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to ss.ss.251, 252, 254, 257,
258, 263 and 264 of this title to accept for such stock anything except:
i. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
ii. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
iii. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph;
or
iv. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
3. In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under ss.253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
B-1
(d) Appraisal rights shall be perfected as follows:
1. If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
2. If the merger or consolidation was approved pursuant to ss.228 or ss.253
of this title, then either a constituent corporation before the effective date
of the merger or consolidation or the surviving or resulting corporation within
10 days thereafter shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights of
the approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the effective
date of the merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders of
any class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or (ii)
the surviving or resulting corporation shall send such a second notice to all
such holders on or within 10 days after such effective date; PROVIDED, HOWEVER,
that if such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is required
to give either notice that such notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than 10
days prior to the date the notice is given, PROVIDED, that if the notice is
given on or after the effective date of the merger or consolidation, the record
date shall be such effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation, or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
B-2
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by one or more publications at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware, or such publication
as the Court deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs thereof shall be borne
by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings, and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); PROVIDED, HOWEVER, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
B-3
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
B-4
APPENDIX C
FAIRNESS OPINION OF HOVDE FINANCIAL, INC.
July 6, 2006
Board of Directors
New Asia Bancorp, Inc.
222 West Cermak Road
Chicago, IL 60616
Dear Members of the Board:
We understand that New Asia Bancorp, Inc., a Delaware corporation,
registered under the Bank Holding Company Act of 1956, as amended (the
"COMPANY"), and Cathay General Bancorp, a Delaware corporation, registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended
("CATHAY"), are about to enter into an Agreement and Plan of Merger (the
"AGREEMENT"), to be dated on or about July 6, 2006, pursuant to which Company
will merge with and into Cathay, the separate legal existence of the Company
will cease, and Cathay will be the surviving entity (the "MERGER"). In
connection with the Merger, in accordance with the provisions of the Agreement,
at the Effective Time, each share of the Company Capital Stock issued and
outstanding immediately prior to the Effective Time (other than (a) any shares
of Company Capital Stock held directly or indirectly by the Company or Cathay
(except for Trust Account Shares and DPC Shares) and (b) Dissenting Shares)
shall by virtue of the Agreement and without any action on the part of the
holder thereof, be cancelled and cease to exist and be converted into the right
to receive, at the election of the holder thereof as provided in Section 2.2 of
the Agreement, either (i) that number of shares of Cathay Common Stock equal to
the Exchange Ratio, (ii) an amount in cash, without interest, equal to $32.60
(the "PER SHARE CASH CONSIDERATION"), or (iii) a combination of cash and shares
of Cathay Common Stock (valued at the Average Closing Price) having an aggregate
value equal to the Per Share Cash Consideration (collectively, the "MERGER
CONSIDERATION"), subject to the limitations set forth in Section 2.2(c) of the
Agreement on the aggregate number of shares of Cathay Common Stock issued and
the aggregate amount of cash paid in exchange for all shares of Company Capital
Stock. Capitalized terms used, but not otherwise defined, herein shall have the
same meaning ascribed to them in the Agreement. In connection with the Merger
and the Agreement, you have requested our opinion as to the fairness, from a
financial point of view, of the Merger Consideration to be paid to the
shareholders of the Company.
Hovde Financial, Inc. ("HOVDE"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bidding, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
We were retained by the Company to act as its financial advisor in
connection with the Agreement and the Merger. We will receive compensation from
the Company in connection with our services, a significant portion of which is
contingent upon the consummation of the Merger. Additionally, the Company has
agreed to indemnify us for certain liabilities arising out of our engagement.
During the course of our engagement and for the purposes of the opinion
set forth herein, we have:
(i) reviewed the Agreement and all attachments thereto;
(ii) reviewed certain historical publicly available business and
financial information concerning the Company and Cathay;
C-1
(iii) reviewed certain internal financial statements and other financial
and operating data concerning the Company and Cathay;
(iv) analyzed certain financial projections prepared by the managements
of the Company and Cathay;
(v) held discussions with members of the senior managements of the
Company and Cathay for the purpose of reviewing the future
prospects of the Company and Cathay, including financial forecasts
related to the respective businesses, earnings, assets,
liabilities and the amount and timing of cost savings (the
"SYNERGIES") expected to be achieved as a result of the Merger;
(vi) reviewed historical market prices and trading volumes of Cathay
Common Stock;
(vii) reviewed the terms of recent merger and acquisition transactions,
to the extent publicly available, involving banks and bank holding
companies that we considered relevant;
(viii) evaluated the PRO FORMA ownership of Cathay Common Stock by the
holders of the Company Capital Stock relative to the PRO FORMA
contribution of the Company's assets, liabilities, equity and
earnings to the combined company;
(ix) analyzed the PRO FORMA impact of the Merger on the combined
company's earnings per share, consolidated capitalization
and financial ratios; and
(x) performed such other analyses and considered such other factors as
we have deemed appropriate.
We also took into account our assessment of general economic, market and
financial conditions and our experience in other transactions, as well as our
knowledge of the banking industry and our general experience in securities
valuations.
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the materials provided to us by the
Company and Cathay in the discussions with the managements of the Company and
Cathay. In that regard, we have assumed that the financial forecasts, including,
without limitation, the Synergies and projections regarding underperforming and
nonperforming assets and net charge-offs have been reasonably prepared on a
basis reflecting the best currently available information and judgments and
estimates of the Company and Cathay and that such forecasts will be realized in
the amounts and at the times contemplated thereby. We are not experts in the
evaluation of loan and lease portfolios for purposes of assessing the adequacy
of the allowances for losses with respect thereto and have assumed that such
allowances made by the subsidiaries of the Company and Cathay are in the
aggregate adequate to cover such losses. We were not retained to and did not
conduct a physical inspection of any of the properties or facilities of the
Company, Cathay or their respective subsidiaries. In addition, we have not
reviewed individual credit files, nor have we made an independent evaluation or
appraisal of the assets and liabilities of the Company, Cathay or any of their
respective subsidiaries, and we were not furnished with any such evaluations or
appraisals.
We have assumed that the Merger will be consummated substantially in
accordance with the terms set forth in the Agreement. We have further assumed
that the Merger will be accounted for as a purchase under generally accepted
accounting principles. We have assumed that the Merger is, and will be, in
compliance with all laws and regulations that are applicable to the Company,
Cathay and their subsidiaries. In rendering this opinion, we have assumed that
there are no factors that would impede any necessary regulatory or governmental
approval of the Merger, and we have further assumed that, in the course of
obtaining the necessary regulatory and governmental approvals, no restriction
will be imposed on Cathay or the surviving corporations that would have a
material adverse effect on the surviving corporations or the contemplated
benefits of the Merger. We have also assumed that no change in applicable law or
regulation would occur that would cause a material adverse change in the
prospects or operations of Cathay or any of the surviving corporations after the
Merger.
C-2
Our opinion is based solely upon the information available to us and the
economic, market and other circumstances, as they exist as of the date hereof.
Events occurring and information that becomes available after the date hereof
could materially affect the assumptions and analyses used in preparing this
opinion. We have not undertaken to reaffirm or revise this opinion or otherwise
comment upon any events occurring or information that becomes available after
the date hereof, except as otherwise agreed in our engagement letter.
We are not expressing any opinion herein as to the prices at which Cathay
Common Stock issued in the Merger may trade if and when they are issued or at
any future time, nor does our opinion constitute a recommendation to any holder
of the Company Capital Stock as to how such holder should vote with respect to
the Agreement at any meeting of holders of the Company Capital Stock.
This letter is solely for the information of the Board of Directors of the
Company and is not to be used, circulated, quoted or otherwise referred to for
any other purpose, nor is it to be filed with, included in or referred to in
whole or in part in any registration statement, proxy statement or any other
document, except in each case in accordance with our prior written consent which
shall not be unreasonably withheld; PROVIDED, HOWEVER, that we hereby consent to
the inclusion and reference to this letter in any registration statement, proxy
statement, information statement or tender offer document to be delivered to the
holders of the Company Capital Stock in connection with the Merger if and only
if this letter is quoted in full or attached as an exhibit to such document and
this letter has not been withdrawn prior to the date of such document.
Subject to the foregoing and based on our experience as investment
bankers, our activities and assumptions as described above and other factors we
have deemed relevant, we are of the opinion as of the date hereof that the
Merger Consideration to be paid to the shareholders of the Company pursuant to
the Agreement is fair, from a financial point of view.
Sincerely,
/s/ HOVDE FINANCIAL, INC.
C-3
APPENDIX D
FORM OF VOTING AGREEMENT
VOTING AND IRREVOCABLE PROXY AGREEMENT
THIS VOTING AND IRREVOCABLE PROXY AGREEMENT (this "VOTING AGREEMENT") is
made and entered into as of July 6, 2006, between Cathay General Bancorp, a
Delaware corporation that is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended ("CATHAY"), and the undersigned
stockholder ("STOCKHOLDER") of New Asia Bancorp, Inc., a bank holding company
registered under the Bank Holding Company Act of 1956, as amended ("NAB").
RECITALS
A. Concurrently with the execution of this Voting Agreement, Cathay and NAB
are entering into an Agreement and Plan of Merger (the "MERGER AGREEMENT"),
which provides for the merger of NAB with and into Cathay, with Cathay being the
surviving entity.
B. Cathay is willing to enter into the Merger Agreement in consideration of,
among other things, the Stockholder agreeing to enter into this Voting
Agreement.
C. Pursuant to and as a condition precedent to Cathay's obligations under the
Merger Agreement, Cathay and Stockholder wish to enter into this Voting
Agreement to provide for the voting of Stockholder's shares of capital stock of
NAB, on the terms and subject to the conditions set forth in this Voting
Agreement.
AGREEMENT
In consideration of the above recitals and the promises set forth in this Voting
Agreement, the parties agree as follows:
1. AGREEMENT TO RETAIN SHARES.
1.1 TRANSFER AND ENCUMBRANCE. Stockholder agrees not to transfer, sell,
exchange, pledge or otherwise dispose of or encumber any and all shares of
capital stock of NAB (i) owned or (ii) beneficially held by Stockholder (the
latter to the fullest extent within the control of Stockholder), as of the date
first written above (the "SHARES"), or any New Shares (as defined in Section 1.2
below), except (a) transfers by will or by operation of law, in which case this
Agreement shall bind the transferee, (b) transfers in connection with estate and
tax planning purposes, including transfers to relatives, trust and charitable
organizations, subject to the transferee agreeing in writing to be bound by the
terms of this Agreement, and (c) transfers to any person who does not
beneficially own (after giving effect to such transfer), individually or as a
member of a group, shares of NAB common stock in excess of the greater of (i) 5%
of the then outstanding shares of NAB common stock or (ii) the number of Shares
held by the Stockholder, subject in all cases to the transferee agreeing in
writing to be bound by the terms of this Agreement, and Stockholder further
agrees not to make any offer or agreement relating to either the Shares or any
New Shares, at any time prior to the Expiration Date. As used in this Voting
Agreement, the term "EXPIRATION DATE" means the earlier to occur of (a) the
Effective Time (as defined in the Merger Agreement), (b) nine months from the
date hereof or (c) the date on which the Merger Agreement is terminated in
accordance with the terms and conditions of the Merger Agreement (i) by NAB due
to a breach by Cathay or (ii) by Cathay or NAB due to failure of Cathay or NAB
to have received the Requisite Regulatory Approvals (as defined in the Merger
Agreement).
1.2 NEW SHARES. Stockholder agrees that the terms and conditions of this
Voting Agreement shall apply to, and Stockholder agrees to be bound by the terms
and conditions of this Voting Agreement with respect to Stockholder's interest
in, (a) the Shares and (b) any and all shares of capital stock of NAB that (i)
Stockholder purchases or acquires, or (ii) with respect to which Stockholder
otherwise acquires beneficial ownership (the latter to the fullest extent within
the control of the Stockholder) after the date first written above and prior to
the Expiration Date ("NEW SHARES").
D-1
2. AGREEMENT TO VOTE SHARES.
2.1 AGREEMENT TO VOTE. Until the Expiration Date, at every meeting of the
stockholders of NAB (or holders of any series or class of stock of NAB) called
with respect to any of the following, and on every action or approval by written
consent of the stockholders of NAB (or holders of any series or class of stock
of NAB) with respect to any of the following, Stockholder agrees to vote the
Shares and any New Shares (i) in favor of approval of the Merger, the Merger
Agreement and the transactions contemplated by the Merger Agreement, and any
matter that could reasonably be expected to facilitate the Merger, (ii) against
approval of any proposal made in opposition to or competition with consummation
of the Merger, (iii) against any merger, consolidation, sale of assets,
reorganization or recapitalization, with any party other than with Cathay and
its affiliates, and (iv) against any liquidation or winding up of NAB (each of
Sections 2(b)(ii), 2(b)(iii) and 2(b)(iv), an "OPPOSING PROPOSAL"). Stockholder
further agrees that prior to the Expiration Date Stockholder will not, directly
or indirectly, solicit or encourage any offer from any party concerning the
possible disposition of all or any substantial portion of NAB's business, assets
or capital stock. In the event NAB's board of directors does not call a
stockholders meeting (or a meeting of the holders of any series or class of
stock of NAB) to approve the Merger, Stockholder agrees to, at the request of
Cathay, take all action necessary within Stockholder's control and to cooperate
with other stockholders of NAB, as necessary, to call a stockholder meeting (or
a meeting of the holders of any series or class of stock of NAB) to approve the
Merger or to approve the Merger by written consent. Stockholder shall retain the
right to vote the Shares and any New Shares on any matter not related to the
Merger, the Merger Agreement or the transactions contemplated by the Merger
Agreement, and to make any Election (as defined in the Merger Agreement) with
respect to the Shares and any New Shares, in each case in Stockholder's sole
discretion.
3. APPOINTMENT OF PROXY. To secure Stockholder's obligation to vote
Stockholder's Shares and any New Shares in accordance with the provisions of
Section 2 of this Voting Agreement, Stockholder does hereby irrevocably
constitute and appoint Cathay, or any nominee of Cathay, with full power of
substitution, from the date of this Voting Agreement until the Expiration Date,
as its true and lawful proxy, for and in its name, place and stead, including
the right to sign its name (as stockholder) to any consent, certificate or other
document relating to NAB that applicable law may permit or require, to cause the
Shares and any New Shares to be voted in the manner contemplated by Section 2 of
this Voting Agreement. Stockholder hereby revokes all other proxies and powers
of attorney with respect to the Shares and any New Shares that Stockholder may
have appointed or granted. Stockholder will not give a subsequent proxy or power
of attorney (and if given, any such subsequent proxy or power of attorney will
not be effective) or enter into any other voting agreement with respect to the
Shares and any New Shares prior to the Expiration Date. Cathay agrees that it
will not exercise its right to act as Stockholder's proxy unless and until
Cathay has requested that Stockholder vote the Shares and any New Shares in the
manner contemplated by Section 2(b) of this Voting Agreement and Stockholder has
failed to do so.
THE VOTING ARRANGEMENT IN THIS VOTING AGREEMENT IS IRREVOCABLE DURING THE TERM
OF THIS VOTING AGREEMENT. THE PROXIES AND POWERS GRANTED BY STOCKHOLDER PURSUANT
TO THIS SECTION 3 ARE COUPLED WITH AN INTEREST AND ARE GIVEN TO SECURE THE
PERFORMANCE OF STOCKHOLDER'S DUTIES UNDER THIS VOTING AGREEMENT, AND TO
FACILITATE THE PURCHASE OF THE SHARES AND ANY NEW SHARES AS CONTEMPLATED BY THE
MERGER AGREEMENT.
4. NO PROXY SOLICITATIONS. Stockholder will not, and will not permit any
entity under such Stockholder's control to, (a) solicit proxies or become a
"participant" in a "solicitation," as such terms are defined in Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), with
respect to an Opposing Proposal or otherwise encourage or assist any party in
taking or planning any action that would compete with, restrain or otherwise
serve to interfere with or inhibit the timely consummation of the Merger in
accordance with the terms of the Merger Agreement; (b) initiate a stockholder's
vote or action by consent of NAB stockholders with respect to an Opposing
Proposal; or (c) become a member of a "group" (as such term is used in Section
13(d) of the Exchange Act) with respect to any voting securities of NAB with
respect to an Opposing Proposal.
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder represents
and warrants to Cathay as follows:
D-2
5.1 Stockholder is the sole beneficial and record owner and holder of the
Shares and will be the sole and beneficial owner of any New Shares, which,
except as set forth in SCHEDULE 1, at the date of this Voting Agreement are, and
at all times through the Expiration Date will be, free and clear of any liens,
claims, options, charges, security interests, equities, options, warrants,
rights to purchase (including, without limitation, restrictions on rights of
disposition other than those imposed by applicable securities laws), third party
rights of any nature or other encumbrances, except as provided for in this
Voting Agreement and the Merger Agreement.
5.2 Stockholder either has been fully involved with the negotiations
between Cathay and NAB with respect to the Merger Agreement as a member of NAB's
board of directors or is an accredited investor (as defined in Regulation D
promulgated by the Securities and Exchange Commission) and a sophisticated
investor aware of and familiar with NAB's business affairs and financial
condition, and has acquired sufficient information with respect to the Merger
and the Merger Agreement to reach a knowledgeable and informed decision to
enter into this Voting Agreement. Stockholder has independently concluded in
Stockholder's capacity as an individual stockholder of NAB that it is in
Stockholder's best interest to execute, deliver and perform Stockholder's
obligations under this Voting Agreement.
5.3 Stockholder has full power, authority and legal capacity to make,
enter into and carry out the terms of this Voting Agreement and has duly
executed and delivered this Voting Agreement. This Voting Agreement
constitutes a valid and binding obligation of Stockholder.
5.4 Except as set forth on SCHEDULE 1, the Stockholder represents that
Stockholder beneficially owns the number of shares indicated opposite such
Stockholder's name on said SCHEDULE 1, and has sole and unrestricted voting
power with respect to such Shares.
6. TERMINATION. This Voting Agreement will terminate and will have no
further force or effect as of the Expiration Date.
7. NO LIABILITY FOR VOTES MADE. Stockholder acknowledges and agrees that
Cathay and its directors and officers shall not be liable to Stockholder with
respect to or in connection with any and all voting decision(s) made in
accordance with this Voting Agreement during the term of this Voting Agreement.
8. MISCELLANEOUS.
8.1 SEVERABILITY. If any term, provision, covenant or restriction of this
Voting Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions, covenants
and restrictions of this Voting Agreement will remain in full force and effect
and will in no way be affected, impaired or invalidated.
8.2 BINDING EFFECT AND ASSIGNMENT. This Voting Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Voting Agreement nor any of the rights, interests or obligations of the parties
hereto may be assigned by any of the parties without prior written consent of
the others, except that Cathay may assign its rights and obligations under this
Voting Agreement to an affiliate without the written consent of Stockholder.
8.3 AMENDMENTS AND MODIFICATION. This Voting Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties to this Voting
Agreement.
8.4 SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. Stockholder acknowledges that
Cathay will be irreparably harmed and that there will be no adequate remedy at
law for a violation of any of the covenants or agreements of Stockholder
contained in this Voting Agreement. Therefore, it is agreed that, in addition to
any other remedies that may be available to Cathay upon any such violation,
Cathay will have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available at law or in
equity.
D-3
8.5 GOVERNING LAW. This Voting Agreement will be governed by, construed
and enforced in accordance with, the internal laws of the State of Delaware as
such laws are applied to contracts entered into and to be performed entirely
within the State of Delaware.
8.6 ENTIRE AGREEMENT. This Voting Agreement contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
8.7 COUNTERPARTS. This Voting Agreement may be executed in several
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
8.8 EFFECT OF HEADINGS. The section headings contained in this Voting
Agreement are for convenience only and will not affect the construction or
interpretation of this Voting Agreement.
8.9 DELAYS OR OMISSIONS. No waiver by any party of any right, power,
default, misrepresentation or breach under this Voting Agreement, whether
intentional or not, will be deemed to extend to any prior or subsequent right,
power, default, misrepresentation or breach under this Voting Agreement. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Voting Agreement, or any waiver on the
part of any party of any provisions or conditions of this Voting Agreement, must
be in writing and will be effective only to the extent specifically set forth in
such writing.
8.10 ENFORCEMENT FEES AND COSTS. In the event legal action is required to
be taken or commenced by Cathay against Stockholder for the enforcement of any
of the covenants, terms or conditions of this Voting Agreement, Stockholder will
be liable for all reasonable attorneys' fees and costs incurred by Cathay in
connection with such legal action, provided Cathay is the prevailing party in
the legal action. If the stockholder prevails in the legal action, Cathay shall
pay and be liable for all reasonable attorneys' fees and costs incurred by
stockholder in connection with such legal action.
8.11 REPRESENTATION. Stockholder represents and acknowledges that
Stockholder has had the opportunity to seek and obtain the advice of legal
counsel with respect to this Voting Agreement.
8.12 LEGEND. As soon as practicable after the execution of this Voting
Agreement, if requested by Cathay, Stockholder shall cause the following legend
to be placed on all certificates representing the Shares, including certificates
evidencing any New Shares:
"The shares of common stock represented by this certificate are subject
to the terms of a Voting and Irrevocable Proxy Agreement, dated as of
, 2006, by and between the registered owner and the parties
thereto (the "Voting Agreement"), and are held and may not be
transferred, sold, exchanged, pledged or otherwise disposed of or
encumbered, except in accordance therewith. No registration or transfer
will be recorded on the books of New Asia Bancorp, Inc. unless the
transfer is made to a transferee who agrees to be bound by the Voting
Agreement."
[THE REMAINDER OF THIS PAGE IS BLANK. SIGNATURE PAGE FOLLOWS.]
D-4
The Parties have executed this Voting Agreement on the date first above
written.
CATHAY GENERAL BANCORP
------------------------------
By:
Name:
STOCKHOLDER
------------------------------
By:
Name:
D-5
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
CATHAY GENERAL BANCORP
Cathay's restated bylaws provide for indemnification of its officers,
directors, employees and agents to the fullest extent permitted by Delaware law.
Cathay's restated Certificate of Incorporation also contains a provision,
consistent with Delaware law, reducing or eliminating director liability in
certain circumstances.
Section 145 of the Delaware Corporation Law provides that corporations may
indemnify an individual made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative, because the individual is or was a director, officer, employee or
agent of the corporation, against liability incurred in the proceeding if the
person acted in good faith and reasonably believed his conduct was in the
corporation's best interest or was not opposed to the corporation's best
interest.
Section 145(c) further provides that a corporation shall indemnify an
individual who was fully successful on the merits or otherwise in any proceeding
to which the director or officer was a party because the individual was or is a
director or officer of the corporation, for reasonable expenses incurred by the
director in connection with the proceeding. Section 145(g) provides that a
corporation may purchase and maintain insurance on behalf of the corporation or
who, while a director, officer, employee or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against or incurred by
the individual in that capacity or arising from the individual's status as a
director, officer, employee or agent.
CATHAY BANK
Cathay Bank's bylaws provide for indemnification of its officers,
directors, employees and agents to the fullest extent permitted by the
California General Corporation Law (the "CGCL"). The CGCL provides a detailed
statutory framework covering limitation of liability of directors in certain
instances and indemnification of any officer or other agent of a corporation who
is made or threatened to be made a party to any legal proceeding by reason of
his or her services on behalf of such corporation.
With respect to limitation of liability, the CGCL permits a California
corporation to adopt a provision in its articles of incorporation reducing or
eliminating the liability of a director to the corporation or its stockholders
for monetary damages for breach of the fiduciary duty of care, provided that
such liability does not arise from certain proscribed conduct (including
intentional misconduct and breach of duty of loyalty). The CGCL in this regard
relates only to actions brought by stockholders on behalf of the corporation
(I.E., "derivative actions") and does not apply to claims brought by outside
parties.
With respect to indemnification, the CGCL provides that to the extent any
officer, director or other agent of a corporation is successful "on the merits"
in defense of any legal proceeding to which such person is a party or is
threatened to be made a party by reason of his or her service on behalf of such
corporation or in defense of any claim, issue or matter therein, such agent
shall be indemnified against expenses actually and reasonably incurred by the
agent in connection therewith, but does not require indemnification in any other
circumstance. The CGCL also provides that a corporation may indemnify any agent
of the corporation, including officers and directors, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in a third-party proceeding against such person by reason of his or her services
on behalf of the corporation, provided the person acted in good faith and in a
manner he or she reasonably believed to be in the best interests of such
corporation. The CGCL further provides that in derivative suits a corporation
may indemnify such a person against expenses incurred in such a proceeding,
provided such person acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the corporation and its stockholders.
Indemnification is not available in derivative actions (i) for amounts paid or
expenses incurred in connection with a matter that is settled or otherwise
disposed of without court approval or (ii) with respect to matters for which the
agent shall have been adjudged to be liable to the corporation unless the court
shall determine that such person is entitled to indemnification.
The CGCL permits the advancing of expenses incurred in defending any
proceeding against a corporate agent by reason of his or her service on behalf
of the corporation upon the giving of a promise to repay any such sums in the
event it is later determined that such person is not entitled to be indemnified.
Finally, the CGCL provides that the indemnification provided by the statute is
not exclusive of other rights to which those seeking indemnification
II-1
may be entitled, by bylaw, agreement or otherwise, to the extent additional
rights are authorized in a corporation's articles of incorporation. The law
further permits a corporation to procure insurance on behalf of its directors,
officers and agents against any liability incurred by any such individual, even
if a corporation would not otherwise have the power under applicable law to
indemnify the director, officer or agent for such expenses.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
Cathay General Bancorp and Cathay Bank currently maintain policies of
directors' and officers' liability insurance.
Under the Agreement and Plan of Merger, prior to the closing of the merger,
New Asia Bank may purchase a "tail policy" covering persons serving as officers
and directors of New Asia Bancorp or New Asia Bank immediately prior to the
effective time of the merger for a period of up to five years from the effective
time of the merger with respect to acts or omissions occurring prior to the
effective time of the merger which were committed by such officers and directors
in their capacity as such.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
2.1 Agreement and Plan of Merger by and among Cathay General
Bancorp and New Asia Bancorp, Inc. dated July 6, 2006
(Appendix A to the Proxy Statement/Prospectus)
3.1 Restated Certificate of Incorporation. Previously filed with Securities
and Exchange Commission as an exhibit to Bancorp's Annual Report on Form
10-K for the year ended December 31, 2003 and incorporated herein by
reference.
3.1.1 Amendment to Restated Certificate of Incorporation. Previously filed
with Securities and Exchange Commission as an exhibit to Bancorp's
Annual Report on Form 10-K for the year ended December 31, 2003 and
incorporated herein by reference.
3.2 Restated Bylaws. Previously filed with Securities and Exchange
Commission as an exhibit to Bancorp's Annual Report on Form 10-K for the
year ended December 31, 2003 and incorporated herein by reference.
3.2.1 Amendment to Restated Bylaws. Previously filed with Securities and
Exchange Commission as an exhibit to Bancorp's Annual Report on Form
10-K for the year ended December 31, 2003 and incorporated herein by
reference.
3.3 Certificate of Designation of Series A Junior Participating Preferred
Stock. Previously filed with the Securities and Exchange Commission as
an exhibit to the Bancorp's Annual Report on Form 10-K for the year
ended December 31, 2001, and incorporated herein by reference.
4.1 Rights Agreement. Previously filed with the Securities and Exchange
Commission as an exhibit to the Bancorp's Registration Statement on Form
8-A on December 20, 2000 and incorporated herein by reference.
5.1 Opinion of Wachtell, Lipton, Rosen & Katz as to the validity of the
shares of Cathay General Bancorp common stock
8.1 Tax Opinion and Consent of Schiff Hardin LLP
8.2 Tax Opinion and Consent of Wachtell, Lipton, Rosen & Katz
10.1 Voting and Irrevocable Proxy Agreement by and among Cathay
General Bancorp and certain stockholders of New Asia
Bancorp (Appendix D to the Proxy Statement/Prospectus)
23.1 Consent of Hovde Financial, Inc. (included in Exhibit 5.1)
23.2 Consent of KPMG LLP
23.3 Consent of Schiff Hardin LLP (included in Exhibit 8.1)
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1)
23.5 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.2)
99.1 Form of Proxy
99.2 Form of Election Form and Letter of Transmittal
99.3 Opinion and Consent of Hovde Financial, Inc. (Appendix C to the Proxy
Statement/Prospectus)
(B) FINANCIAL STATEMENT SCHEDULES
Cathay's financial statements are incorporated by reference in the proxy
statement/prospectus.
(C) NOT APPLICABLE.
ITEM 22. UNDERTAKINGS.
(a) Undertakings required by Item 512 of Regulation S-K:
(1) The undersigned registrant hereby undertakes as follows:
II-2
(A) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities
Act");
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(B) That, for the purpose of determining any liability under the
Securities Act, each such posteffective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(C) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(D) That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B:
(a) Each prospectus filed by the registrant pursuant to
Rule 424(b)(3) shall be deemed to be part of the
registration statement as of the date the filed
prospectus was deemed part of and included in the
registration statement; and
(b) Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5) or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii) or
(x) for the purpose of providing the information
required by section 10(a) of the Securities Act of
1933 shall be deemed to be part of and included in
the registration statement as of the earlier of the
date such form of prospectus is first used after
effectiveness or the date of the first contract of
sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that
date an underwriter, such date shall be deemed to be
a new effective date of the registration statement
relating to the securities in the registration
statement to which that prospectus relates, and the
offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Provided, however, that no statement made in a
registration statement or prospectus that is part of
the registration statement or made in a document
incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part
of the registration statement will, as to a purchaser
with a time of contract of sale prior to such
effective date, supersede or modify any statement
that was made in the registration statement or
prospectus that was part of the registration
statement or made in any such document immediately
prior to such effective date; or
(ii) If the registrant is subject to Rule 430C, each
prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other
than registration statements
II-3
relying on Rule 430B or other than prospectus filed in
reliance on Rule 430A, shall be deemed to be part of
and included in the registration statement as of the date
it is first used after effectiveness. Provided, however,
that no statement made in a registration statement or
prospectus that is part of the registration statement or
made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus
that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was
made in the registration statement or prospectus that was
part of the registration statement or made in any such
document immediately prior to such date of first use.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registration pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(5) The undersigned registrant hereby undertakes as follows: that,
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(6) The registrant undertakes that every prospectus that (i) is filed
pursuant to paragraph (4) immediately preceding or (ii) purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933, and is
used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents, by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
II-4
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that the
Registrant meets all of the requirements of filing on Form S-4 and authorized
this Registration Statement to be signed on its behalf by the undersigned, in
the City of Los Angeles, State of California on August 11, 2006.
CATHAY GENERAL BANCORP
By: /s/ Dunson K. Cheng
------------------------------------------
DUNSON K. CHENG
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Kelly L. Chan
-------------------------------
Kelly L. Chan Director August 11, 2006
/s/ Michael M. Y. Chang
-------------------------------
Michael M. Y. Chang Director and Secretary August 11, 2006
/s/ Dunson K. Cheng
-------------------------------
Dunson K. Cheng Chairman of the Board of August 11, 2006
Directors,
President and Chief
Executive Officer
/s/ Thomas C. T. Chiu
-------------------------------
Thomas C. T. Chiu Director August 11, 2006
/s/ Nelson Chung
-------------------------------
Nelson Chung Director August 11, 2006
/s/ Patrick S. D. Lee
-------------------------------
Patrick S. D. Lee Director August 11, 2006
/s/ Ting Y. Liu
-------------------------------
Ting Y. Liu Director August 11, 2006
/s/ Joseph C. H. Poon
-------------------------------
Joseph C. H. Poon Director August 11, 2006
/s/ Anthony M. Tang
-------------------------------
Anthony M. Tang Director August 11, 2006
/s/ Thomas G. Tartaglia
-------------------------------
Thomas G. Tartaglia Director August 11, 2006
/s/ Peter Wu
-------------------------------
Peter Wu Director, Executive Vice Chairman August 11, 2006
of the Board, and Chief Operating
Officer
II-6
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
-------------------------------------------------------------------------------
2.1 Agreement and Plan of Merger by and among Cathay General Bancorp and
New Asia Bancorp, Inc. dated July 6, 2006 (Appendix A to the Proxy
Statement/Prospectus)
3.1 Restated Certificate of Incorporation. Previously filed with Securities
and Exchange Commission as an exhibit to Bancorp's Annual Report on Form
10-K for the year ended December 31, 2003 and incorporated herein by
reference.
3.1.1 Amendment to Restated Certificate of Incorporation. Previously filed
with Securities and Exchange Commission as an exhibit to Bancorp's
Annual Report on Form 10-K for the year ended December 31, 2003 and
incorporated herein by reference.
3.2 Restated Bylaws. Previously filed with Securities and Exchange
Commission as an exhibit to Bancorp's Annual Report on Form 10-K for the
year ended December 31, 2003 and incorporated herein by reference.
3.2.1 Amendment to Restated Bylaws. Previously filed with Securities and
Exchange Commission as an exhibit to Bancorp's Annual Report on Form
10-K for the year ended December 31, 2003 and incorporated herein by
reference.
3.3 Certificate of Designation of Series A Junior Participating Preferred
Stock. Previously filed with the Securities and Exchange Commission as
an exhibit to the Bancorp's Annual Report on Form 10-K for the year
ended December 31, 2001, and incorporated herein by reference.
4.1 Rights Agreement. Previously filed with the Securities and Exchange
Commission as an exhibit to the Bancorp's Registration Statement on Form
8-A on December 20, 2000 and incorporated herein by reference.
5.1 Opinion of Wachtell, Lipton, Rosen & Katz as to the validity of the
shares of Cathay General Bancorp common stock
8.1 Tax Opinion and Consent of Schiff Hardin LLP
8.2 Tax Opinion and Consent of Wachtell, Lipton, Rosen & Katz
10.1 Voting and Irrevocable Proxy Agreement by and among Cathay General
Bancorp and certain stockholders of New Asia Bancorp (Appendix D to the
Proxy Statement/Prospectus)
23.1 Consent of Hovde Financial, Inc. (included in Exhibit 99.3)
23.2 Consent of KPMG LLP
23.3 Consent of Schiff Hardin LLP (included in Exhibit 8.1)
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 5.1)
23.5 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.2)
99.1 Form of Proxy
99.2 Form of Election Form and Letter of Transmittal
99.3 Opinion and Consent of Hovde Financial, Inc. (Appendix C to the Proxy
Statement/Prospectus)
II-7