Exhibit 10.4
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EXECUTIVE SEVERANCE COMPENSATION AGREEMENT
This AGREEMENT (the "Agreement") is made and entered into effective as of
the day of April 12,1999, by and between Eurobank, a Puerto Rico banking
corporation, with main offices in San Xxxx, Puerto Rico (the "Bank"), and XXXXXX
XXXXXXX, of legal age, married, a key employee and officer of the Bank, and
resident of San Xxxx, Puerto Rico (the "Executive").
WITNESSETH:
WHEREAS, Bank considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of Bank and its stockholders;
WHEREAS, Bank recognizes that the possibility of a Change in Control (as
hereinafter defined) may exist, and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of Bank and its
stockholders;
WHEREAS, Executive is willing to continue to serve Bank but desires
assurance that in the event of any Change in Control of Bank, he/she will
continue to have the responsibility and stature he/she has earned within the
Bank, or in the alternative, if terminated that he/or she be adequately
compensated as herein provided;
WHEREAS, the Bank and the Executive now desire to enter into this
Agreement to establish the terms and conditions upon which such payments will be
made.
NOW, THEREFORE, in consideration of the mutual undertakings set forth in
this Agreement, and for other good and valuable consideration, the receipt and
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sufficiency of which are hereby acknowledged, the Bank and the Executive agree
as follows:
ARTICLE ONE
DEFINITIONS
1. "Beneficiary" shall mean the person(s) described in Article Four of this
Agreement.
2. "Board" shall mean the Board of Directors of the Bank.
3. "Change in Control" shall mean and shall be deemed to have occurred for
purposes of this Agreement if and when:
(i) any entity, person or group of persons acting in concert becomes
beneficial owner (within the meaning of Section 13(d) of the
Securities and Exchange Act of 1934), directly or indirectly, of
securities of the Bank representing more than twenty-five percent
(25%) of the combined voting power of the Bank or any successor; or
(ii) the effective date of a merger or consolidation of the Bank with one
or more other corporations or banks as a result of which the holders
of the outstanding voting stock of the Bank immediately prior to the
merger hold less than sixty-six percent (66%) of the combined voting
power of the surviving or resulting corporation or bank;
(iii) the effective date of a transfer of all or substantially all of the
property of the Bank other than to an entity of which the Bank owns
at least eighty percent (80%) of the combined voting power; or
(iv) as a result, or in connection with, any cash, render or exchange
after merger, contested election, or other business combination, or
any combination of the foregoing, the services of the Executive are
no longer required in his present capacity.
4. "Compensation" shall mean the Executive's base annual salary (which is
intended to be total base salary without proration for actual months
worked) (herein "Base Compensation") plus the highest performance or
incentive based remuneration (herein the "Performance Compensation"), as
reported by the Bank on 499-R
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2/W-2 Form (or its equivalent) in any of the four fiscal years prior to
the termination of employment.
6. "Constructive Termination" shall mean that the Executive resigns from his
position(s) with the Bank as a result of any of the following:
(i) Without his express written consent, the detrimental assignment to
the Executive of any duties inconsistent with his positions, duties,
and responsibilities with the Bank as in effect immediately before a
Change in Control;
(ii) A reduction of the Executive's overall Compensation without the
prior written consent of the Executive, which is not remedied within
thirty (30) calendar days after receipt by the Bank of written
notice from the Executive of such reduction;
(iii) A determination by the Executive made in good faith that as a result
of a Change in Control, he has been rendered unable to carry out, or
has been substantially hindered in the performance of, any of the
authorities, powers, functions, responsibilities or duties attached
to his position with Bank's successor, which situation is not
remedied within thirty (30) calendar days after receipt by the Bank
of written notice from the Executive of such determination;
(iv) Failure by the Bank to require and/or obtain in writing from any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Bank, an agreement in form and
substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same
extent that the Bank would be required to perform it if no such
succession had taken place:
(v) Executive's "Disability" as such term is defined in the Bank's long
term disability plan, or if the Bank has no long term disability
plan in effect at the time of the Executive's disability, shall have
the meaning provided in the Internal Revenue Code, of the United
States (the "Code"), Section 22(e)(3). (Provided, however, if
Executive is covered by Disability Insurance at the time of such
disability, he shall then be entitled to such
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insurance coverage as his/her only benefit instead of that provided
in Article Two hereof).
7. "Director" or "Directors" shall mean any member, or members of the Board
of Directors of the Bank.
8. "Disability" shall be as such term is defined in the Bank's long term
disability plan, or if the Bank has no long term disability plan in effect
at the time of the Executive's disability, shall have the meaning provided
in Code section 22(e)(3).
9. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
10. "Termination for Cause" shall mean that the Executive, is involuntarily
terminated from employment with the Bank based upon his commission of any
of the following:
(i) a felony; or
(ii) any intentional act on the part of the Executive, involving personal
profit, which causes material damage to the Bank.
For the purpose of this Agreement, no act, or failure to act, on the part
of the Executive shall be deemed "intentional" unless done, or omitted to
be done, by the Executive not in good faith and without reasonable belief
that his action or omission was in the best interest of the Bank.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for "Cause" hereunder unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of a majority of the Directors then in office (with the
Executive abstaining if a Director) at a meeting of the Board called and
held for such purpose (after at least ten (10) days' notice of the
Executive and an opportunity for the Executive, together with his counsel,
to be heard before the Board), finding that in the good faith opinion of
the Board, the Executive had committed an act set forth above and
specifying the particulars thereof in detail. The number of votes needed
to constitute a majority shall be determined based on the total number of
Directors then serving, including any abstaining Director. Nothing herein
shall limit the right of the Executive or his Beneficiary to contest the
validity or propriety of any such determination.
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ARTICLE TWO
BENEFITS
1. Nature of Benefits. The benefits under this Agreement provided to the
Executive are in the nature of a fringe benefit and shall in no event be
construed to affect or limit the Executive's current or prospective salary
increases, cash bonuses, profit sharing distribution or credits, or any
other benefit. Notwithstanding the foregoing, the terms and conditions of
this Agreement shall govern, control and supersede any and all contrary or
conflicting provisions contained in any other agreement or contract
between the Bank and Executive, including without limitation any
employment agreement between the Executive and the Bank.
2. Termination of Employment. (i) The Board of Directors may, without
cause, terminate this Agreement at any time, by giving ninety days (90)
written notice to the Executive. In such event, the Executive, if
requested by the Board of Directors, shall continue to render his/her
services, and shall be paid his/her regular salary up to the date of
termination. In addition, the Executive shall be paid on the date of
termination a severance payment equivalent to two (2) year(s) of
Compensation and in addition accrued vacation and those other benefits
referred to in Section 5 of this Article Two. (ii) Notwithstanding the
above, the Executive may, without cause, terminate the Agreement by giving
thirty days (30) written notice to the Board of Directors.
3. Severance Payment Upon Termination After Change in Control. Executive
shall have the right to continued Compensation, subsequent to the
execution of a definitive agreement ("Definitive Agreement") which will
result in a Change in Control. In the event Executive's employment is
terminated by the Bank for any reason including his Constructive
Termination (other than a Termination for Cause) after the Change in
Control, Executive shall be entitled to receive a cash lump sum payment
equal to that provided for in Section (2) (i) of this Article Two and in
addition accrued vacation and those other benefits referred to in Section
5 of this Article Two. Payment of such Compensation shall
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be made under this Article Two, Section 3 within five (5) days of
Executive's termination.
4. Reduction in Compensation Proscribed After Change in Control. During
the Term of this Agreement and after a Change in Control, Executive shall
receive as compensation, while still employed by Bank or its successor, a
base salary equal to at least his Base Compensation as of the date of the
Change in Control (herein the "Minimum Annual Compensation") which shall
be payable in equal monthly installments. In addition, during such period,
the Bank or its successor shall pay and provide the Executive at no cost
to the Executive, all of his then-current fringe benefits, including but
not limited to health, disability, dental, life insurance, bank automobile
and country club memberships, if any, all of which shall be at levels and
amounts no less favorable than levels and amounts in effect as of the date
of Change in Control.
5. Additional Benefits Upon Termination After Change in Control. In
addition to the Severance Payment under Article Two, Sections 2 and 3 of
this Agreement, for a period of two (2) years from the date of
Termination, (the "Benefits Period"), the Executive shall continue to be
eligible to participate in (and the Bank shall continue contributions on
his behalf to) all health, dental, long term disability, accident and life
insurance plans or arrangements made available by the Bank in which he or
his dependents were participating immediately prior to the date of his
termination, as if he continued to be an employee of the Bank and to the
extent that participation in any one or more of such plans and
arrangements is possible under the terms thereof, provided that if the
Executive obtains employment with another employer during the Benefits
Period, such coverage shall be provided only to the extent that the
coverage exceeds the coverage of any substantially similar plan provided
by his new employer. Furthermore, the Executive shall not be required to
exercise any options previously granted under the Bank's Stock Option Plan
within the three (3) months established for termination due to Retirement,
Voluntary Termination or Involuntary Terminations. The term to exercise
such options shall automatically continue to be that stipulated in the
Option, as if the Executive had continued in Bank's employment.
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ARTICLE THREE
CONFIDENTIALITY
1. Recognizing that the knowledge and information about, or relationships
with, the business associates, customers, clients, and agents of the Bank
and the business methods, systems, plans, and policies of the Bank, which
the Executive has heretofore and shall receive, obtain, or establish as an
employee of the Bank or otherwise are valuable and unique assets of the
Bank, the Executive agrees that, during the continuance of this Agreement
and thereafter, he/she shall not otherwise than pursuant to his/her duties
hereunder, disclose without the written consent of the Bank, any material
or substantial, confidential, or proprietary know-how, data or information
pertaining to the Bank, or its business, personnel, or plans to any
persons, firm, corporation, or other entity, for any reason or purpose
whatsoever.
2. The Executive hereby acknowledges that the services rendered or to be
rendered by him/her are special, unique, and extraordinary character and,
in connection with such services, he/she will have access to Confidential
Information covering the Bank's business.
ARTICLE FOUR
RESTRICTIONS UPON FUNDING
The Bank shall not have any obligation to set aside, earmark or entrust
any fund or money with which to pay its obligations under this Agreement. The
Executive, his Beneficiary or any successor-in-interest to him shall be and
remain simply a general creditor of the Bank in the same manner as any other
creditor having a general unsecured claim.
For purposes of the Code, the Bank intends this Agreement to be an
unfunded, unsecured promise to pay on the part of the Bank. For purposes of
ERISA, the Bank intends that this Agreement not be subject to ERISA. If it is
deemed subject to ERISA, it
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is intended to be an unfunded arrangement for the benefit of a select member of
management, who is a highly compensated employee of the Bank for the purpose of
qualifying this Agreement for the "top hat" plan exception under sections
201(2), 301(a)(3) and 401(a)(1) of ERISA.
At no time shall the Executive have or be deemed to have any lien or
right, title or interest in or to any specific investment or to any assets of
the Bank; rather the Executive shall remain a general unsecured creditor of the
Bank. If the Bank elects to invest in a life insurance, disability or annuity
policy upon the life of Executive, the Executive shall freely submit to a
physical examination and supply such additional information necessary to obtain
such insurance or annuities.
ARTICLE FIVE
DESIGNATION OF BENEFICIARIES
Should the Executive die prior to full payment of amounts due under
Article Two, payment of all remaining vested payments shall be made to his
Beneficiaries. The Executive's written designation of one or more persons or
entities as his Beneficiary(ies) shall operate to designate the Executive's
Beneficiary under this Agreement. The Executive shall file with the Bank a copy
of his Beneficiary designation on the form supplied to the Executive by the
Bank. The last such designation form received by the Bank shall be controlling,
and no designation, or change or revocation of a designation shall be effective
unless received by the Bank prior to the Executive's death.
If no Beneficiary designation is in effect at the time of an Executive's
death, if no designated Beneficiary survives the Executive or if the otherwise
applicable Beneficiary designation conflicts with applicable law, the
Executive's estate shall be the Beneficiary.
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ARTICLE SIX
INTERPRETATION AND AMENDMENT
The Board shall have the exclusive power and authority to interpret
and construe the Agreement. The Board may appoint a Committee to administer this
Agreement. The Board may engage agents or experts to assist it and may engage
legal counsel, who may or not be the regular counsel to the Bank. The Agreement
may be amended, suspended or terminated, in whole or in part, only by a written
instrument signed by a duly authorized officer of the Bank and by the Executive.
ARTICLE SEVEN
TERMINATION AND RENEWAL
1. Termination. This Agreement shall terminate on the earliest of:
(i) (a) the second anniversary of the first event that constitutes a
Change in Control, or
(b) the third (3rd) anniversary of the date of execution of this
Agreement, in the event it has been automatically extended pursuant
to Section 2 of this Article Seven, whichever occurs last.
2. Renewal. On each anniversary of the date of execution of this
Agreement, the term hereunder for purposes of this Article Seven,
Section 1 (i)(b) above shall automatically be extended for an
additional one (1) year period beyond the then effective expiration
date solely therein, unless either party receives written notice,
not less than 90 days prior to the anniversary date, advising the
other party that this Agreement shall not be further extended. Any
such written notice shall not affect any prior extensions of the
terms of employment hereunder.
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ARTICLE EIGHT
MISCELLANEOUS
1. Alienability and Assignment Prohibition. Neither the Executive, his
spouse nor any other Beneficiary under this Agreement shall have any
power or right to transfer, assign, anticipate, hypothecate,
mortgage, commute, modify or otherwise encumber in advance any of
the benefits payable hereunder nor shall any of said benefits be
subject to seizure for the payment of any debts, judgements, alimony
or separate maintenance owed by the Executive or his Beneficiary,
nor be transferable by operation of law in the event of bankruptcy,
insolvency or otherwise.
2. Revocation. It is agreed by and between the parties hereto that,
during the lifetime of the Executive, this Agreement may be amended
or revoked at any time or times, in whole or in part, by the mutual
written assent of the Executive and the Bank.
3. Gender. Whenever in this Agreement words are used in the masculine
or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
4. Effect on Other Corporate Benefit Plans. Nothing contained in this
Agreement shall affect the right of the Executive to participate in
or be covered by any qualified or non-qualified pension, profit
sharing, group, bonus or other supplemental compensation or fringe
benefit plan constituting a part of the Bank's existing or future
compensation structure.
5 Headings. Headings and Subheadings in this Agreement are inserted
for reference and convenience only and shall not be deemed a part of
this Agreement.
6. Applicable Law. The validity and interpretation of this Agreement
shall be governed by the laws of the Commonwealth of Puerto Rico.
7. No employment Agreement. No provision of this Agreement shall be
deemed or construed to create specific employment rights to the
Executive or otherwise to limit the right of the Bank to discharge
the Executive at any time with or without cause. In a similar
fashion, no
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provision shall limit the Executive's rights to voluntarily sever
his employment from the Bank at any time.
8. Withholding of Taxes. The Bank shall deduct from the amount of any
payment made pursuant to this Agreement any amounts required to be
paid or withheld by the Bank with respect to federal or state taxes.
By executing this Agreement, the Executive agrees to all such
deductions.
9. Severability. In case any one or more of the provisions contained in
this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions in this Agreement shall not in any way be affected or
impaired.
10. Arbitration.
a. In the event of any claim or controversy arising out of or
relating to this Agreement or the breach of this Agreement,
the parties agree that all such claims or controversies shall
be resolved by final and binding arbitration in San Xxxx,
Puerto Rico, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in effect on the
date when the claim or controversy first arises. Either party
must communicate its request for arbitration under this
section in writing ("Arbitration Notice") to the other party
within one hundred twenty (120) days from the date the claim
or controversy first arises. Failure to communicate
Arbitration Notice within one hundred twenty (120) days shall
constitute a waiver of any such claim or controversy.
b. All claims or controversies subject to arbitration under this
section shall be submitted to an arbitration hearing within
thirty (30) days from the date Arbitration Notice is
communicated by either party. All claims or controversies
submitted to arbitration under this section shall be resolved
by a panel of three (3) arbitrators who are experienced in the
arbitration of employment disputes. These arbitrators shall be
selected in accordance with the applicable Commercial
Arbitration Rules or by agreement of the parties. Either party
may request that the arbitration proceeding be
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stenographically recorded by a Certified Shorthand Reporter.
The arbitrators shall issue a decision on any claim or
controversy within thirty (30) days from the date the
arbitration hearing is completed. The parties shall have the
right to be represented by legal counsel at any arbitration
hearing. The costs of any arbitration hearing, including the
attorneys' fees incurred by both parties (including any costs,
expenses or attorneys' fees incurred in filing any lawsuit to
compel arbitration under subsection [c], if applicable), shall
be paid by the parties in the same proportion as the amount
granted under the arbitration decision to each party bears to
the aggregate claims interposed by each party in the
arbitration procedure.
c. The arbitration provisions in this section are subject to the
Federal Arbitration Act 9 U.S.C. Sections 1 et seq. (West
1998) (or any successor provisions) and may be specifically
enforced by any party, and submission or arbitration
proceedings compelled, by any Court of competent jurisdiction.
The decision of the arbitrators may be specifically enforced
by any party in any court of competent jurisdiction.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereon on the day and year first
written above.
EUROBANK THE EXECUTIVE
By: /s/ Xxxxxx Xxxxxxxxx Xxxxxxx, Xx. By: /s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxxxx Xxxxxxx, Xx. Xxxxxx Xxxxxxx
