CHANGE IN CONTROL AGREEMENT
This
Agreement, effective as of the date the agreement is entered into, by and
between EuroBancshares, Inc. (the “Company”), a registered bank holding company
which is the sole shareholder of Eurobank, a Puerto Rico banking corporation,
with main offices in San Xxxx, Puerto Rico (the “Bank”), and Xxxx X.
Xxxxxxx Xxxxx, Jr., a key employee and officer of the Bank and the Company, and
a resident of San Xxxx, Puerto Rico (the “Executive”), provides as
follows:
WITNESSETH:
WHEREAS,
Executive is currently the Executive Vice President and CLO of the Bank, serving
at the pleasure of the Board of Directors of the Bank; and
WHEREAS,
the Company desires to provide an incentive to the Executive to continue his
employment with the Bank; and
WHEREAS,
the Company recognizes that at some point in the future 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 the Company and its stockholders; and
WHEREAS,
Executive is willing to continue to serve the Bank but desires assurance that
in
the event of any Change in Control of the Company or the Bank, he will continue
to have the responsibility and stature he has earned within the Bank, or in
the
alternative, if terminated that he be adequately compensated as herein provided;
and
WHEREAS,
the Company desires to provide certain benefits to the Executive in the event
there is a Change in Control of the Company or the Bank; and
WHEREAS,
the Company 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
sufficiency of which are hereby acknowledged, the Company and the Executive
agree as follows:
ARTICLE
ONE — DEFINITIONS
1. “Bank
Board” shall mean the Board of Directors of the Bank.
2. “Beneficiary”
shall mean the person(s) described in Article Four of this
Agreement.
3. “Board”
shall mean the Board of Directors of the Company.
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4. “Change
in Control” shall mean and shall be deemed to have occurred for purposes of this
Agreement if and when:
(A) any
entity, person or group of persons acting in concert (other than the current
members of the Board of Directors of the Company or any of their descendants)
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 Company representing more than twenty-five percent (25%) of the combined
voting power of the Company or any successor corporation;
(B) any
entity, person or group of persons acting in concert (other than the current
members of the Board of Directors of the Company or any of their descendants)
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;
(C) the
effective date of a merger or consolidation of the Company or the Bank with
one
or more other corporations or banks, as a result of which the holders of the
outstanding voting stock of the Company 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; or
(D) the
effective date of a transfer of all or substantially all of the property of
the
Company or the Bank other than to an entity of which the Company or the Bank
owns at least eighty (80%) of the combined voting power.
Notwithstanding
the above, no Change in Control shall be deemed to occur for purposes of this
Agreement as a result of any transaction or series of transactions involving
only the Company, the Bank, any affiliate (within the meaning of
Section 23A of the Federal Reserve Act of 1913, as amended), or any of them
or their successors.
5. “Compensation”
shall mean the Executive’s base annual salary (which is intended to be total
base salary without proration for actual months worked), plus the highest
performance or incentive based remuneration, (herein the “Performance
Compensation”), as reported by the Bank on 499-R2/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
Company or the Bank as a result of any of the following:
(A) Without
his express written consent, the detrimental assignment to the Executive of
any
duties inconsistent with his positions, duties, responsibilities and status
with
the Bank or the Company as in effect immediately before a Change in Control
or
any removal of the Executive from or any failures to re-elect the Executive
to
any of such positions, except in connection with the termination of his
employment for Cause or as a result of his Disability or death; provided,
however that a change in title alone will not constitute a “constructive
termination” for purposes of this provision;
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(B) A
reduction of the Executive’s Compensation without the prior written consent of
the Executive, which is not remedied within thirty (30) calendar days after
receipt by the Company of written notice from the Executive of such
reduction;
(C) 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 hindered
in
the performance of, any of the authorities, powers, functions, responsibilities
or duties attached to his position with the successors of the Company or the
Bank, which situation is not remedied within thirty (30) calendar days after
receipt by the Company of written notice from the Executive of such
determination;
(D) The
Bank
shall relocate its principal executive offices or require Executive to have
as
his principal location of work any location which is outside the Commonwealth
of
Puerto Rico or to travel away from his office in the course of discharging
his
responsibilities or duties hereunder more than thirty (30) consecutive calendar
days or an aggregate of more than ninety (90) calendar days in any consecutive
three hundred sixty-five (365) calendar-day period without, in either, case
his
prior written consent; or
(E) Failure
by the Company to require 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 Company, by 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 Company would
be
required to perform it if no such succession had taken place.
7. “Director”
or “Directors” shall mean any member, or members, of either the Board or the
Bank Board, as applicable.
8. “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
9. “Termination
for Cause” shall mean that the Executive is involuntarily terminated from
employment based upon his commission of any of the following:
(A) a
felony;
(B) an
intentional act of fraud, embezzlement or theft in connection with his duties
or
in the course of his employment with the Company or the Bank;
(C) the
removal of Executive from the performance of his duties by any bank regulatory
authority;
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(D) the
assessment of civil money penalties against Executive by any bank regulatory
authority as a result of a violation of any rule, regulation or statute other
than laws focused primarily upon consumer lending;
(E) intentional
breach of fiduciary duty owed to the Bank or to the Company, as applicable,
involving personal profit by Executive; and
(F) appointment
of a conservator or receiver for the Bank by applicable bank regulatory
authorities, unless the cause of such appointment is fraud committed upon the
Bank by a person or person(s) other than Executive.
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 Company or 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 at a meeting of either the Board or
the
Bank Board, as applicable, called and held for such purpose (after at least
ten
(10) days’ notice to the Executive and an opportunity for the Executive,
together with his counsel, to be heard before such board), finding that in
the
good faith opinion of either the Board or the Bank Board, as applicable, 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.
ARTICLE
TWO — BENEFITS
1. Nature
of Benefits.
The
following benefits provided by the Company and the Bank 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 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 Agreement or Employment Prior to a Change in Control.
The
Board may, without cause, terminate this Agreement at any time prior to a Change
in Control by giving ninety (90) days written notice to Executive. In such
event, the Executive, if requested by the Board, shall continue to render his
services, and shall be paid his Compensation up to the date of his termination.
In addition, the Executive shall be paid on the date of his termination of
employment, if prior to a Change in Control, due to either (i) his Constructive
Termination, or (ii) his involuntary termination by the Bank, provided that
such
involuntary termination was not a Termination for Cause, a severance payment
in
an amount equal to $500,000 and, in addition, accrued vacation and those other
benefits referred to in Section 1 of this Article Two. If the Executive
voluntarily terminates employment with the Company and the Bank prior to a
Change in Control, no benefits will be provided under this
Agreement.
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3. Severance
Payment Upon Termination After Change in Control.
(A) Executive
(or his Beneficiaries, if applicable) shall have the right to receive a cash
lump sum payment equal to $500,000 paid by the Company and the Bank upon a
“Triggering Termination,” which shall mean the Executive’s termination of
employment with the Bank on or within two (2) years after a Change in Control
due to either (i) his Constructive Termination, or (ii) his involuntary
termination by the Bank, provided that such involuntary termination was not
a
Termination for Cause. Payment shall be made within thirty (30) days of the
Triggering Termination date.
(B) In
the
event that Executive continues in the employment of the Bank for the period
commencing on the date of the Change in Control and ending on the six-month
anniversary of the Change in Control (the “Stay Put Period”), then Executive (or
his Beneficiaries, if applicable) shall have the right to receive a cash lump
sum payment equal to $500,000 paid by the Company and the Bank upon Executive’s
voluntary termination of employment with the Bank within thirty days following
the expiration of the Stay Put Period. Payment shall be made within thirty
(30)
days of the expiration of the Stay Put Period.
4. Additional
Benefits Upon Termination After Change in Control.
For a
period of two (2) years from the date of a Change in Control (the “Benefits
Period”), the Executive shall continue to be eligible to participate in (and the
Company or Bank shall continue contributions on his behalf to) all health,
dental, disability, accident and life insurance plans or arrangements made
available by the Company or 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 Company and the Bank, to the extent that
participation in any one or more of such plans and arrangements is possible
under the terms thereof and 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 plans provided by his new employer.
ARTICLE
THREE — RESTRICTIONS UPON FUNDING
The
Company shall have no 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 Company in the same manner as any other creditor having
a general unsecured claim.
For
purposes of the Code, the Company intends this Agreement to be an unfunded,
unsecured promise to pay on the part of the Company. For purposes of ERISA,
the
Company intends that this Agreement not be subject to ERISA. If it is deemed
subject to ERISA, it 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.
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At
no
time shall the Executive have or be deemed to have any lien nor right, title
or
interest in or to any specific investment or to any assets of the Company;
rather the Executive shall remain a general unsecured creditor of the Company.
If the Company elects to invest in a life insurance, disability or annuity
policy upon the life of Executive, the Executive shall assist the Company by
freely submitting to a physical examination and supplying such additional
information necessary to obtain such insurance or annuities.
ARTICLE
FOUR — DESIGNATION OF BENEFICIARIES
Should
the Executive die prior to full payment of amounts due under Article Two,
payment shall be made to his Beneficiaries. The Executive’s written designation
of one or more persons or entities as his Beneficiary shall operate to designate
the Executive’s Beneficiary under this Agreement. The Executive shall file with
the Company a copy of his Beneficiary designation on the form supplied to the
Executive by the Company. The last such designation form received by the Company
shall be controlling, and no designation, or change or revocation of a
designation shall be effective unless received by the Company 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.
ARTICLE
FIVE — INTERPRETATION, AMENDMENT AND TERMINATION
The
Company shall have the exclusive power and authority to interpret and construe
the Agreement. The Board may engage agents to assist it and may engage legal
counsel, who may be counsel to the Company or 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 Company and by
Executive.
ARTICLE
SIX — TERMINATION
This
Agreement shall terminate on the earlier of:
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(A)
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any
payment to the Executive under Article Two hereof;
or
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(B)
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the
fifth (5th) anniversary of the first event that constitutes a Change
in
Control.
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ARTICLE
SEVEN — 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, judgments, 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. 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.
3. 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 Company’s or the Bank’s existing or future
compensation structure.
4. Section
409A.
To the
extent necessary, this Agreement will be amended, without any reduction in
the
value of the payments and benefits hereunder, to exclude all such compensation
from the definition of “deferred compensation” within the meaning of Section
409A of the Code.
5. Legal
Fee Reimbursement.
The
Company will reimburse the Executive the full amount of all legal fees
reasonably incurred in asserting his rights hereunder, regardless of the outcome
of the dispute.
6. Headings.
Headings and Subheadings in this Agreement are inserted for reference and
convenience only and shall not be deemed a part of this Agreement.
7. Applicable
Law.
The
validity and interpretation of this Agreement shall be governed by the laws
of
the Commonwealth of Puerto Rico.
8. No
Employment Agreement.
No
provision of this Agreement shall be deemed or construed to create specific
employment rights to the Executive nor limit the right of the Company or the
Bank to discharge the Executive at any time with or without cause. In a similar
fashion, no provision shall limit the Executive’s rights to voluntarily sever
his employment at any time.
9. Withholding
of Taxes.
The
Company shall deduct from the amount of any payment made pursuant to this
Agreement any amounts required to be paid or withheld by the Company with
respect to federal or state taxes. By executing this Agreement, the Executive
agrees to all such deductions.
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10. 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.
11. 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 licensed to practice law in the Commonwealth
of
Puerto Rico and 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 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 losing party or
parties.
(C) The
arbitration provisions in this section are subject to the Federal Arbitration
Act 9 U.S.C. §§ 1 et
seq.
(West
1998) (or any successor provisions) and may be specifically enforced by any
party, and submission to 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.
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ARTICLE
8 — 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.
IN
WITNESS WHEREOF, the parties hereto acknowledge that each has carefully read
this Agreement and executed the original thereon on the 8th day of May, 2008,
and that, upon execution, each has received a conforming copy.
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EXECUTIVE:
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THE
COMPANY:
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EuroBancshares,
Inc.
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/s/
Xxxx X. Xxxxxxx Xxxxx
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/s/
Xxxxxxx Xxxx
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Xxxx
X. Xxxxxxx Xxxxx, Jr.
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Xxxxxxx
Xxxx
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President
Compensation Committee
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/s/
Xxxxxx Rom
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Witness
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THE
BANK:
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Eurobank
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/s/
Xxxxxxx Xxxx
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Xxxxxxx
Xxxx
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President
Compensation Committee
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