Unassociated Document


    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 Juan, Puerto Rico (the “Bank”), and Rafael
      Arrillaga, a key employee and officer of the Bank and the Company, and a
      resident of San Juan, Puerto Rico (the “Executive”), provides as
      follows:

    


    WITNESSETH:

    


    WHEREAS,
      Executive is currently the Chairman, CEO and President 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 $1,500,000 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 $1,500,000 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 $1,500,000 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:

    


    
      	 	 	
              (A)

            	
              any
                payment to the Executive under Article Two hereof;
                or

            


    

    
      	 	 	
              (B)

            	
              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 Juan,
      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 14th day of March,
      2007,
      and that, upon execution, each has received a conforming copy.

     

     

    
      	EXECUTIVE:	 	 	THE COMPANY:
	 	 	 	 
	 	 	 	EuroBancshares, Inc.
	 	 	 	 
	/s/ Rafael
              Arrillaga 	 	 	/s/ Ricardo
              Levy  
	
              
Rafael
              Arrillaga 	 	 	
              
Ricardo
              Levy  
	 	 	 	President
              Compensation Committee
	 	 	 	 
	 	 	 	 


    

    
      	 	 	 	 
	/s/ Wanda
              I. Miranda	 	 	 
	
              
Witness	 	 	
            
	 	 	 	 


    

    
      	 	 	 	 

              THE
                BANK:

            
	 	 	 	 
	 	 	 	Eurobank
	 	 	 	 
	 	 	 	/s/ Ricardo
              Levy
	
            	 	 	
              
Ricardo
              Levy
	 	 	 	President
              Compensation Committee


    

     

    
      
         

      

      
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