Exhibit 10.7

 

LOGO [g41867ex10_71.jpg]

 

777 NORTH BROADWAY

LOS ANGELES, CALIFORNIA 90012

 

March 22, 2005

 

Mr. Dunson K. Cheng

Chairman of the Board, President,

and Chief Executive Officer

Cathay General Bancorp

777 North Broadway

Los Angeles, CA 90012

 

Dear Mr. Cheng:

 

On November 20, 2003, you were granted an option (the “Option”) to purchase
638,670 shares of the common stock of Cathay General Bancorp (the “Company”)
under the Company’s Equity Incentive Plan (the “Plan”) at an exercise price of
$24.80 per share. It was recently determined that the grant of the Option, when
taken together with a grant to you of an option to purchase 153,060 shares of
the Company’s common stock on January 16, 2003, exceeded by 391,730 shares a
limitation in the Plan as to the number of shares that could be subject to
awards made to any one participant in any calendar year. (All numbers of shares
and the exercise price in this letter have been adjusted to reflect the stock
split in the form of a 100% stock dividend in September 2004.)

 

It is our understanding that you will permit the Company, effective as of the
date of this letter, to cancel the Option as to the 391,730 excess shares, and
that you will waive all rights that you may have to purchase such excess shares
on exercise of the Option. Accordingly, the Option is hereby cancelled as to the
391,730 excess shares, and you hereby agree to waive all rights that you may
have to purchase such excess shares on exercise of the Option. From and after
the date hereof, the Option will cover a total of 246,940 shares, of which
49,388 shares are vested and exercisable on the date hereof and, assuming
continued employment with the Company, an additional 49,388 shares will become
vested on each of the next four anniversary dates of the date of grant, and will
continue to have such other terms as pertained to the original grant.

 

In addition, you are to be granted an option to purchase a total of 245,060
shares of common stock of the Company under the Plan at an exercise price equal
to the market price of the common stock on the Nasdaq National Market the date
hereof, March 22, 2005, exercisable to the extent of 30% immediately and the
balance as follows: 10% of the Shares on November 20, 2005, 20% of the Shares on
November 20, 2006, 20% of the Shares on November 20, 2007, and the remaining 20%
of the Shares on November 20, 2008, subject to early termination on termination
of employment, disability or death, and having a term of 10 years.

 

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Finally, it is understood that in determining your compensation for 2005 and
possibly future years, including granting awards under the Cathay General
Bancorp 2005 Incentive Plan if approved by the Company’s stockholders, the
Executive Compensation Committee will take into account that you have waived
your rights to purchase the 391,730 excess shares under the Option, but no
agreement or determination has been made as to how or to what extent this might
be done.

 

If this reflects your understanding, please execute and return a copy of this
letter, whereupon this shall constitute a binding agreement between us in
accordance with its terms.

 

Very truly yours,

CATHAY GENERAL BANCORP

By

 

/s/ PETER WU

   

Peter Wu

   

Executive Vice Chairman of the Board and Chief Operating Officer

 

AGREED TO AND APPROVED:

/s/ DUNSON K. CHENG

Dunson K. Cheng

 

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