EMPLOYMENT AGREEMENT
Exhibit
10.4
AGREEMENT entered into and effective as of February 15, 2006 by and between FIRST BANCORP
PUERTO RICO (the “Company”) and Xxxxxxxx Xxxxx (or “X. Xxxxx”).
WHEREAS, the Company wishes to retain the services of X. Xxxxx and the retention of X. Xxxxx’x
services for and on behalf of the Company and FirstBank Puerto Rico (the “Bank”) is of material
importance to the preservation and enhancement of the value of the Company’s and the Bank’s
business;
WHEREAS, this Employment Agreement is being executed together with a certain Services
Agreement with the law firm of Xxxxxxxx Xxxxx & Calabria at which X. Xxxxx is a senior partner, and
pursuant to which said law firm is to be compensated for the services to be rendered by X. Xxxxx
hereunder;
WHEREAS, the Board of Directors of the Company has approved and authorized the execution of
this Agreement with X. Xxxxx to take effect as of the date above written.
WHEREAS, the Compensation Committee of the Board of Directors of the Company has approved the
granting to X. Xxxxx of an amount of options to purchase stock of the Company (the “Initial Stock
Option Grant”), as provided in Section 6 herein, as partial consideration for entering into this
Agreement, which will become effective upon execution of this Agreement.
WHEREAS, the parties desire to enter into this Agreement setting forth the terms and
conditions of the employment relationship of the Company, the Bank and X. Xxxxx;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
herein, the parties agree as follows:
1. Employment. The Company agrees to employ X. Xxxxx and X. Xxxxx agrees to the employment by
the Company for the period stated in Section 4 hereof and subject the other terms and conditions
herein provided.
2. Position and Responsibilities. The Company hereby employs X. Xxxxx as Executive Vice
President and General Counsel, X. Xxxxx shall carry out and render to the Company and to the Bank
such services as are customarily performed by persons holding a similar position. X. Xxxxx shall
also perform such other related duties as he may from time to time be reasonably directed in
writing to perform,
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including, but not limited to performing duties for the Company, the Bank and other subsidiaries of
the Company. X. Xxxxx shall report to the President and Chief Executive Officer of the Company.
In the absence of the President and Chief Executive Officer of the Company, X. Xxxxx shall report
to the Board of Directors, through such Director as may be designated by the Board of Directors.
Notwithstanding the foregoing, the Board of Directors of the Bank may delegate or assign specific
tasks to X. Xxxxx, provided that the assignment clearly sets for the priority of the task, and
whether it takes precedence over other duties and obligations of X. Xxxxx.
3. Duties. During the period of employment hereunder, and except for illness, vacation
periods, and leaves of absence, the Executive shall devote his business time, attention, skill, and
efforts to the faithful performance of his duties as provided herein as is customary for an
executive holding a similar position in a financial institution of comparable size. The Company
acknowledges that X. Xxxxx shall remain a partner at the law firm of Xxxxxxxx, Xxxxx & Calabria
(the “Law Firm”) during the term of his employment with the Company. In this connection, the
Company acknowledges that, from time to time, during the term of his employment with the Company,
X. Xxxxx may continue to render legal services to a select and limited group of clients of the Law
Firm, provided that no such client has a direct adversity with the Company and X. Xxxxx
periodically advises the Company of the identities of such clients. Additionally, the Company
acknowledges that X. Xxxxx, during the term of his employment with the Company, will be
participating in administrative meetings at the Law Firm. X. Xxxxx hereby represents that any
such endeavors with or on behalf of the Law Firm shall be of a limited nature and shall not
interfere, nor constitute a conflict of interest with the duties of X. Xxxxx required under this
Agreement. In addition, X. Xxxxx hereby represents that he is not subject to any agreement that
would interfere with his performance of the duties contemplated by this Agreement.
The parties to this Agreement acknowledge that the Law Firm has been retained by the Board of
Directors to serve as corporate and bank regulatory counsel to the Company and to FirstBank Puerto
Rico. Accordingly, the Company further acknowledges that as General Counsel, X. Xxxxx may need to
consider referring legal matters to the Law Firm in accordance with its retention for those matters
by the Company.
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X. Xxxxx agrees that, during the term of his employment hereunder, except with the express
consent of the Board of Directors, he will not, directly or indirectly, engage or participate,
become director of, or render advisory or other services for, or in connection with, or become
interested in, or make any financial investment in any firm, corporation, business entity or
business enterprise that directly competes with the Company or its subsidiaries in Puerto Rico;
provided, however, that X. Xxxxx shall not thereby be precluded or prohibited from owning passive
investments, including investments in the securities of other financial institutions so long as
such ownership does not require him to devote substantial time to the management or control of the
business or activities of any such firm, corporation, business entity or enterprise.
X. Xxxxx shall provide the Company’s President and Chief Executive Officer with monthly
reports of any and all matters referred to the Xxxxxxxx Xxxxx & Calabria law firm.
4. Term. The initial term of employment under this Agreement shall be for a period of four
(4) years, commencing on the date hereof and terminating on February 14, 2010. On each anniversary
of the date of commencement of this Agreement, the term of the employment hereunder shall
automatically be extended for an additional one (1) year period beyond the then effective
expiration date, 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 term of employment hereunder.
5. Standards. X. Xxxxx shall perform his duties and responsibilities under this Agreement in
accordance with such reasonable standards as established, from time to time, by the Board of
Directors and/or management of the Company and conveyed in writing to X. Xxxxx as well as all
policies and procedures of the Company and its subsidiaries. The reasonableness of such standards
shall be measured against standards for executive performance generally prevailing in the financial
industry (in Puerto Rico).
Notwithstanding anything to the contrary, nothing in this Agreement will be interpreted in any
manner which would tend to limit or interfere with the authority or oversight duties and discretion
of the Board of Directors to establish adequate guidelines for the effective management of the
Company.
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6. Initial Stock Option Grant. In consideration for entering into this Employment Agreement,
the Company hereby grants X. Xxxxx options to purchase up to 100,000 shares of common stock of the
Company (the “Initial Stock Options”) with a strike price of $12.64 and under the terms and
conditions of the 1997 Stock Option Plan (a copy of which forms a part of this Agreement).
7. Compensation and Reimbursement of Expenses.
a) Compensation
The Company agrees to pay X. Xxxxx during the term of this Agreement a base salary of not less
than $100.00 a year. The base salary provided herein shall be paid in one installment and upon
each of the anniversary date of this Agreement.
b) Performance Bonus
In addition to the base salary set forth above, the performance of X. Xxxxx during each year
of employment shall be evaluated on the basis of his achievement of the predetermined business
objectives contained in the Company’s annual business plan in connection with the areas of endeavor
assigned to X. Xxxxx. The contribution of X. Xxxxx to the achievement of the Company’s annual
business objectives and his performance in such other functions as may be reasonably assigned under
his charge, will be evaluated by the President and Chief Executive Officer who will recommend to
the Compensation Committee payment of a performance bonus in an amount which the Compensation
Committee, and ultimately the Board of Directors, may determine at their discretion.
c) Stock Options
X. Xxxxx shall be entitled to participate in and receive the benefits of any stock
option, profit sharing, or other plans, benefits and privileges granted to employees and executives
of the Company or its subsidiaries and affiliates which now exist or may come into existence
hereafter, to the extent commensurate with his then assigned duties and responsibilities, as
recommended by the Compensation Committee and approved by the Board of Directors. The terms and
conditions of such stock options will be within the parameters set forth in the employee stock
option plan of the Company and/or its subsidiaries or other similar plan under which a benefit or
privilege is made available to X. Xxxxx. Notwithstanding the above, the Company agrees that the
Initial Stock Option Grant is independent from,
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and shall never be taken into consideration in the determination and approval of the participating
rights to be granted to X. Xxxxx, with respect to all or any of the benefits referred to in this
subsection (c).
d) Automobile Expenses
(i) The Company shall provide X. Xxxxx with a company owned automobile. Such automobile will
be furnished in accordance with the existing Company’s executive automobile policy as approved by
the Board of Directors. All expenses, including but not limited to insurance, maintenance,
repairs, fuel, and lubrication services, shall be provided by the Company.
(ii) The Company agrees that on a monthly basis, but never more than thirty (30) days after
the expenses are incurred by X. Xxxxx, it shall pay or reimburse X. Xxxxx for any gasoline, oil and
maintenance or repair expenses incurred by him in the operation of the automobile provided
hereunder.
e) Reimbursement of Expenses
Not less frequently than monthly, the Company shall pay or reimburse X. Xxxxx for all
reasonable travel and other expenses incurred by X. Xxxxx in the performance of his duties under
this Agreement.
f) Office
The Company shall furnish X. Xxxxx with a private office, a private secretary and such other
assistance and accommodations as shall be suitable to the character of X. Xxxxx’x position with the
Company and adequate for the performance of his duties hereunder.
8. Participation in Benefit Plans. The payment and benefits provided in this Agreement are
independent and separate of any payment and benefits to which X. Xxxxx may be or may become
entitled to under any other present or future group employee benefit plan or insurance programs of
the Company for which executives of the Company and or its subsidiaries are or shall become
eligible, and X. Xxxxx shall be eligible to receive all benefits and entitlements for which said
executives are eligible under every such plan or program.
9. Voluntary Absences; Vacations and Sick Leave. X. Xxxxx shall be entitled, without loss of
pay, to absent himself voluntarily for reasonable periods of time from the performance of his
duties and
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responsibilities under this Agreement. All such voluntary absences shall count either as paid
vacation time or sick leave, unless otherwise provided by the Board of Directors. X. Xxxxx shall be
entitled to an annual paid vacation of fifteen (15) working days per every twelve (12) month
period, or such longer periods as the Board of Directors may approve, which vacations shall be
scheduled by X. Xxxxx with the prior approval of the President and Chief Executive Officer, taking
into account the needs of the Company. X. Xxxxx may accumulate unused paid vacation time from
twelve (12) month period to the next; provided that such accumulation shall not exceed twenty (20)
working days of unused vacation time from prior twelve (12) month periods. X. Xxxxx shall be
entitled to up to fifteen (15) non-cumulative working days of paid sick leave for each twelve (12)
month period or such longer non-cumulative working days as the Board of Directors may approve.
Upon termination of employment with or without cause, or for any reason, the Company shall pay X.
Xxxxx all accrued and unused vacation days, at the highest rate of salary earned by the Executive,
during his tenure.
10. Benefits Payable Upon Disability or Death. The Company shall, at all times, maintain in
effect disability and death benefits insurance for the benefit of X. Xxxxx in an amount at least
equal to that maintained for executives of similar rank and which will not be less than that
maintained by the Company for all officers and employees. Provided that the Company may increase
but never decrease the benefits which X. Xxxxx and/or the Executive’s heirs would be entitled to
thereunder.
11. Termination of Employment.
(a) Without cause. The Board of Directors may, without cause, terminate this
Agreement at any time, by giving ninety (90) days written notice to the Executive. In such event,
the Executive, if requested by the Board of Directors, shall continue to render his services, and
shall be paid his regular salary up to the date of termination. In addition, the Executive shall be
paid from the date of termination a severance payment of four (4) times $450,000 (less all amounts
required to be withheld and deducted) such payment to be made in substantially equal semimonthly
installments on the fifteenth and last days of each month, or if these days are nonbusiness days,
the immediately preceding business day, commencing with the month in which the date of termination
occurs and continuing for twelve (12) consecutive semimonthly payment dates.
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X. Xxxxx may, without cause, terminate the Agreement by giving ninety (90) days written notice
to the Board of Directors. In such event, the Executive shall continue to render his services and
shall be paid his regular salary up to the date of termination, but shall not receive any severance
payment.
(b) With
Cause. The Board of Directors may, at any time, terminate this Agreement for
cause. In such event, X. Xxxxx shall not be entitled to receive any further compensation from the
date of notice of termination. The notice of termination shall be in writing, shall set forth the
date of delivery to X. Xxxxx, and the effect of termination shall not be retroactive to a date
prior to delivery of such notice. For the purpose of this Agreement, “termination for cause” shall
include any act or omission on the part of X. Xxxxx which involves personal dishonesty, willful
misconduct, material breach of fiduciary duty, a material violation of any law, rule or regulation
relating to the banking industry or a material breach of any provision of this Agreement, such as
the willful and continued failure of X. Xxxxx to perform the duties herein set forth. No act or
failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be
done, other than in good faith and without reasonable belief that his action or omission was in the
best interest of the Company. For purposes of this paragraph, any act or omission to act on the
part of X. Xxxxx in reliance upon an opinion of counsel, outside auditor or advisor to the Company
or to X. Xxxxx shall not be deemed to be willful or without reasonable belief that the act or
omission to act was in the best interest of the Company.
X. Xxxxx may, with cause, terminate this Agreement. For purposes of this section, termination
with cause shall mean a failure of the Company to comply with any material provision of this
Agreement, which failure has not been cured within fifteen (15) days of receipt of a written notice
by X. Xxxxx of such noncompliance by the Company.
Either party may submit for arbitration, as provided in Section 23 of this Agreement, among
other matters, any controversy that may arise with regard to the cause for termination that is set
forth in the written notice of termination provided by the Board of Directors or the Executive, as
the case may be.
(c) If X. Xxxxx is suspended and/or prohibited from participating in the conduct of the
Company’s affairs by a notice or order served under Section 8(e)(3),(e)(4) or (g)(1) of the Federal
Deposit
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Insurance Act [12 USC 1818(e)(3), (e)(4) and (g)(1)], or any other similar provision of state or
federal law now in place or enacted in the future, the Company’s obligations under this Agreement
shall be suspended as of the date of service, unless such prohibition and/or suspension is stayed
by appropriate proceedings. If after a hearing is held and upon judicial review, the notice or
order suspending and/or prohibiting X. Xxxxx from participating in the affairs of the Company is
confirmed, then this Agreement shall be terminated with cause. If the charges in the notice or
order are dismissed, the Company shall: (i) pay X. Xxxxx all the compensation withheld while the
contractual obligations were suspended and (ii) reinstate, in whole or in part, any of the
obligations which were suspended.
(d) If the Company is in default, defined to mean an adjudication or other official
determination by a court of competent jurisdiction, the appropriate Federal banking agency or other
public authority pursuant to which a conservator, receiver or other legal custodian is appointed
for the Company or the Bank for the purpose of liquidation, all obligations under this Agreement
shall terminate as of the date of default, but the rights of the Executive to compensation earned
as of the date of termination shall not be affected.
(e) In the event that X. Xxxxx is terminated or he terminates this Agreement, in a manner
which violates the provisions of this Section 11, as determined by the arbitration procedure
provided in Section 22, X. Xxxxx or the Company, as the case may be, shall be entitled to
reimbursement for all reasonable costs, including attorney’s fees, incurred by X. Xxxxx or the
Company, as the case may be, in challenging such termination.
12. Change
in Control.
(a) If during the term of this Agreement there is “change in control” of the Company, as such
term is defined in Sub-section (c) hereunder, X. Xxxxx shall be entitled to receive from the
Company a severance payment in consideration of having bound himself to employment by the Company
and having foregone other business or professional opportunities, actual or potential. The
severance payment shall be a lump sum cash payment equal to four (4) times $450,000, plus four (4)
times the highest cash Performance Bonus paid to X. Xxxxx in any of the four (4) fiscal years
prior to the date of the change in control, and (ii) the value of any other benefits provided to X.
Xxxxx during the year in which the
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change in control occurs which are listed and attached hereto as Exhibit A, as it may be amended
from time to time. Payment of the amounts set forth in this Section 12(a) shall be on or before
the fifth day following the date on which the change of control occurs.
(c) The term “change in control” shall be deemed to have taken place if: (i) a third person,
including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes
the beneficial owner of shares of the Company having 25% or more of the total number of votes which
may be cast for the election of directors of the Company or which, by cumulative voting, if
permitted by the Company’s charter or bylaws, would enable such third person to elect 50% or more
of the directors of the Company; or (ii) as the result of, or in connection with, any cash tender
or exchange offer, merger or any other business combination, sales of assets or contested election,
or any combination of the foregoing transactions, the person who were directors of the Company
before such transaction shall cease to constitute a majority of the Board of the Company or any
successor institution.
(d) Any payments made to X. Xxxxx pursuant to this Agreement are subject to and conditioned
upon their compliance with 12 USC 1828(k) and any regulations promulgated thereunder. The Company
through the Bank shall in good faith seek to obtain, if necessary or required, any consents or
approvals from the FDIC or any other applicable regulatory agency and any successors thereto with
respect to any payments to be made or any benefits to be provided to X. Xxxxx pursuant to the terms
of this Agreement.
13. Confidentiality;
Injunctive Relief. Recognizing that the knowledge and information
about, or relationships with, the business associates, customers, clients, and agents of the
Company and its affiliated companies and the business methods, systems, plans, and policies of the
Company and of its affiliated companies which X. Xxxxx will receive, obtain, or establish as an
employee of the Company or otherwise are valuable and unique assets of the Company, X. Xxxxx agrees
that, during the continuance of this Agreement and thereafter, he shall not (otherwise than
pursuant to his duties hereunder) disclose without the written consent of the Company, any material
or substantial, confidential, or proprietary know-how, data, or information pertaining to the
Company, or its business, personnel, or plans, to any person, firm, corporation, or other entity,
for any reason or purpose whatsoever. X. Xxxxx acknowledges and
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agrees that all memoranda, notes, records, and other documents made or compiled by X. Xxxxx or made
available to X. Xxxxx concerning the Company’s business shall be the Company’s exclusive property
and shall be delivered by X. Xxxxx to the Company upon expiration or termination of this Agreement
or at any other time upon the request of the Company.
The provision of this Section 13 shall survive the expiration or termination of this Agreement
or any part thereof, without regard to the reason therefor.
X. Xxxxx hereby acknowledges that the services to be rendered by him are of special, unique,
and extraordinary character and, in connection with such services, he will have access to
confidential information concerning the Company’s business. By reason of this, X. Xxxxx consents
and agrees that if he violates any of the provisions of this Agreement with respect to
confidentiality, the Company would sustain irreparable harm and, therefore, in addition to any
other remedies which the Company may have under this Agreement or otherwise, the Company will be
entitled to an injunction to be issued by any court of competent jurisdiction restraining X. Xxxxx
from committing or continuing any such violation of this Agreement. The term “Confidential
Information” means: (1) proprietary information of the Company; (2) information marked or
designated by the Company as confidential; (3) information, whether or not in written form and
whether or not designated as confidential, which is known to X. Xxxxx as treated by the Company as
confidential; and (4) information provided to the Company by third parties which the Company is
obligated to keep confidential, specifically including customer lists and information. Confidential
information does not include any information now or hereafter voluntarily disseminated by the
Company to the public, or which otherwise becomes part of the public domain through lawful means.
14. No Assignments. This Agreement is personal to each of the parties hereto. Neither party
may assign or delegate any of his or its rights or obligations hereunder without first obtaining
the written consent of the other party. However, in the event of the death of X. Xxxxx all his
rights to receive payments hereunder shall become rights of his estate.
15. Benefits. Any benefits due or provided hereunder to X. Xxxxx shall be in addition to, and
not in substitution of, any benefit to which X. Xxxxx is otherwise entitled to without regard to
the Agreement.
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16. Mitigation. X. Xxxxx shall not be obligated to seek other employment in mitigation of the
amounts payable or arrangements made under any provision of this Agreement, and the obtaining of
any such other employment shall in no event effect any reduction of the Company’s obligation to
make the payments and arrangements required to be made under this Agreement.
17. Notices. All notices required by this Agreement to be given by one party to the other
shall be in writing and shall be deemed to have been delivered either:
(a) When personally delivered to the Office of the Secretary of the Company at his regular
corporate office, or X. Xxxxx in person; or
(b) Five days after depositing such notice in the United States mails, certified mail with
return receipt requested and postage prepaid at:
| i. | the Company: |
|
c/o Office of the Secretary of the Company |
||
FirstBank Corp Puerto Rico |
||
XX Xxx 0000 |
||
Xxxxxxxx, XX 00000-0000 |
||
| ii. | X. Xxxxx: |
|
x/x Xxxxxxxx Xxxxx & Xxxxxxxx |
||
XX Xxx 000000 |
||
Xxx Xxxx, XX 00000-0000 |
or to such other address as either party may designate to the other by notice in writing in
accordance with the terms hereof.
18. Amendments or Additions; Action by Board of Directors. No amendments or additions to this
Agreement shall be binding unless in writing and signed by both parties. The prior approval by a
two-thirds affirmative vote of the full Board of Directors of the Company shall be required in
order for the Company to authorize any amendments or additions to this Agreement, to give any
consent or waivers of provisions of this Agreement, or to take any other action under this
Agreement including any termination of the employment of X. Xxxxx with or without cause under
Section 11 hereof.
19. Sections Headings. The Section headings used in this agreement are included solely for
convenience and shall not affect, or be used in connection with, the interpretation of this
Agreement.
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20. Severability. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereto.
21. Governing Law. This Agreement shall be governed by the laws of the Commonwealth of Puerto
Rico. Venue for the litigation of any and all matters arising under or in connection with this
Agreement shall be in the Court of First Instance, San Xxxx Superior Part for the Commonwealth of
Puerto Rico, in the case of state court jurisdiction, or in the U.S. District Court for the
District of Puerto Rico, in the case of federal court jurisdiction.
22. Arbitration. Any controversy as to the interpretation of this Agreement must be submitted
before three arbitrators to be appointed by the American Arbitration Association (“AAA”). The
rules and regulations of the AAA shall govern the procedures of said arbitration. The award of a
majority of arbitrators shall be binding and final on the parties.
23. The Company agrees to reimburse X. Xxxxx for all reasonable legal fees incurred by him in
connection with the negotiation, drafting and execution of this Agreement.
| FIRST BANCORP PUERTO RICO |
||||
| By: /s/ Xxxx Xxxxxxxxx | ||||
ATTEST :_________________________
| /s/ Xxxxxxxx Xxxxx | ||||
| Executive | ||||
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