**Exhibit 10.2****EMPLOYMENT AGREEMENT**          AGREEMENT between DORAL FINANCIAL CORPORATION, a corporation organized under the laws of theCommonwealth of Puerto Rico (together with its successors and assigns, the “Company”), and CalixtoJ. Garcia-Velez (the “Executive”) dated as of August 21, 2006.          WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in thebest interests of the Company to employ the Executive on the terms set forth herein;          WHEREAS, the Executive has agreed to be employed by the Company on the terms set forth herein;          WHEREAS, the Executive and the Company wish to set forth the terms and conditions of theExecutive’s employment in this Agreement;          NOW THEREFORE, in consideration of the mutual promises and covenants made herein and themutual benefits to be derived from this Agreement, the parties hereto agree as follows:     1. **Employment Period**. Subject to the terms of this Agreement, the Company herebyagrees to employ the Executive, and the Executive hereby agrees to serve the Company and itsaffiliates, for the period commencing on the Commencement Date (as defined herein) and ending onthe second anniversary of the Commencement Date; provided that the Executive’s employment by theCompany will automatically be extended by twelve (12) additional months on the second anniversaryof the Commencement Date and each annual anniversary thereafter unless either party provideswritten notice to the other party no less than one hundred and eighty (180) days prior to the dateof any such scheduled extension of its or his intention not to extend the term of the Executive’semployment (the original employment term plus any extension thereof being referred to herein as the“Employment Period”). For purposes hereof, the Commencement Date means the date the Executivecommences employment with the Company which in all events shall be no later than September 15,2006. Notwithstanding the foregoing, the Employment Period shall end on the date on which theExecutive’s employment is terminated by either party in accordance with the provisions of thisAgreement.     2. **Position and Duties**.          (a) During the Employment Period, the Executive shall serve as President of the ConsumerBanking Division at Doral Financial Corporation and Chairman and CEO of Doral Bank, and shall havesuch duties and responsibilities as are commensurate with such positions. During the EmploymentPeriod, the Executive shall report directly to the Chief Executive Officer of the Company or theBoard. The “Consumer Banking Division” includes, without limitation, the following businesssegments of the Company and Doral Bank: mortgage sales and operations, retail banking, consumercredit and SME (small to medium enterprise).
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          (b) The Executive’s principal work location, subject to travel on Company business, shall bethe Company’s headquarters in Puerto Rico. Beginning no later than December 31, 2006, and at alltimes thereafter during the Employment Period, the primary place of residence of the Executive andhis family shall be Puerto Rico.          (c) During the Employment Period, and excluding any periods of vacation and sick leave towhich the Executive is entitled, the Executive agrees to devote his full business attention andtime to the business and affairs of the Company, and to use his best efforts to perform faithfullyand efficiently such responsibilities. During the Employment Period, the Executive shall beentitled to engage in charitable and educational activities and to manage his personal and familyinvestments, to the extent such activities are not competitive with the business of the Company orits affiliates and do not interfere in any way, in the reasonable judgment of the Board (or acommittee thereof), with the performance of his duties for the Company and are otherwise consistentwith the Company’s governance policies.     3. **Compensation**.          (a) Annual Base Salary. During the Employment Period, the Executive shall receive anannual base salary (“Annual Base Salary”) at a rate of $600,000.00, payable in accordance with theCompany’s normal payroll policies. The Executive’s Annual Base Salary shall be prorated for 2006and for any other partial year of employment during the Employment Period based upon the portion ofthe year that the Executive is employed by the Company. The Executive’s Annual Base Salary shallbe subject to review for increase in the sole discretion of the Board (or a committee thereof).Annual Base Salary, however, shall not be subject to reduction without the Executive’s priorwritten consent.          (b) Annual Bonus. With respect to each fiscal year completed during the EmploymentPeriod, the Executive shall have a target annual bonus opportunity equal to 100% of his Annual BaseSalary (“Target Bonus”); provided that the maximum bonus payable for any fiscal year shall notexceed 200% of Target Bonus. The Board shall establish, in its sole discretion, the performanceand payment conditions applicable to such annual bonuses. Notwithstanding the foregoing, (i) forremainder of 2006: Executive’s bonus shall be $500,000 payable on normal cycle following close ofthe fiscal year (12/31/06), but no later than March 31, 2007; and (ii) for 2007 and beyond: Atarget bonus of 100% of base salary with a range of 0 – 200% of target with a minimum of $400,000guaranteed for 2007.          (c) Stock Options. Effective as of the Commencement Date, the Company shall grant theExecutive 300,000 options at market (the “Stock Option Award”) upon joining. The Stock Option Awardwill vest at the rate of 25% (75,000 shares) per year, but may vest sooner as provided in Sections5 and 6 below. Subsequent grants will be awarded at the discretion of the Board .
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          (d) Additional Compensation:     (i) Car Allowance: The Company will provide the Executive with a monthly carallowance under the Company’s policy of $630.00 per month to be used to lease orpurchase an automobile for use in the affairs and business of the Company and tocover related gasoline and insurance expenses related to the use of such automobile.     (ii) The Executive will receive a one time signing bonus of $550,000.00 in alump sum payment upon his hiring date.     (iii) The Company will assume payment responsibility on the Executive’s behalf,for the liability and tax consequences on the Supplemental Relocation Payment (SRP)and “Clawback” of the Executive’s 2005 relocation expenses with previous employer.          (e) Long-Term Incentive Plans. During the Employment Period, the Executive shall beeligible to participate in the ongoing equity and other long-term awards and programs of theCompany as determined in the sole discretion of the Board or a committee thereof.          (f) Other Benefits and Perquisites. During the Employment Period, the Executive shallbe entitled to participate in the Company’s employee benefit plans, programs and arrangements(including, without limitation, life, medical and dental insurance, 401(k), and disabilityinsurance, vacation and sick leave programs) and perquisite programs and arrangements, if any, ineach case, on the same basis as generally provided to other similarly-situated executives of theCompany. In all events, during the Employment Period, the Executive shall be entitled to four (4)weeks of paid vacation per calendar year (pro-rated for any partial year of employment).          (g) Certain Expenses.     (i) The Company shall reimburse the Executive for all appropriatebusiness expenses in accordance with the terms of the Company’s policies andprocedures in effect from time to time.     (ii) The Company shall reimburse the Executive for the followingrelocation expenses: (1) cost of moving household goods and autos from hiscurrent residence to Puerto Rico, (2) cost of two (2) trips from currentresidence to Puerto Rico for the Executive and his family to find suitablehousing, (3) cost of temporary living expenses in Puerto Rico until theExecutive finds suitable housing, but in no event longer than three (3)months, (4) commissions, fees and closing costs on sale of primaryresidence, (5) fees and expenses associated with purchase of home in PuertoRico, including mortgage points and other closing costs,
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and (6) any federal, Puerto Rico and other taxes payable by Executiveon the foregoing or on the fees paid pursuant to subsection (iii) below.     (iii) Subject to review of time entries and other documentation, theCompany shall pay reasonable legal fees incurred by the Executive inconnection with the negotiation and documentation of this Agreement (and thepreceding term sheet) up to a maximum of $15,000.00.     4. **Termination of Employment**.          (a) Death or Disability. The Executive’s employment shall terminate automaticallyupon the Executive’s death during the Employment Period. In the event of the Executive’sDisability (as defined in Exhibit A attached hereto), the Company may provide the Executive withwritten notice in accordance with Section 12(c) of this Agreement of its intention to terminate theExecutive’s employment due to Disability. In such event, the Executive’s employment with theCompany shall terminate effective on the date the Company sends such notice to the Executive (the“Disability Commencement Date”); provided that the Executive’s employment hereunder shallimmediately terminate on the first date the Executive incurs a Disability as defined in clause (i)of the definition of Disability set forth on Exhibit A.          (b) With or Without Cause. The Executive is an employee at will and the Company mayterminate the Executive’s employment either with or without Cause (as defined in Exhibit A attachedhereto). For purposes of this Agreement, a termination “without Cause” shall mean a termination bythe Company of the Executive’s employment other than due to Cause, death or Disability.          (c) With or Without Good Reason. The Executive’s employment may be terminated by theExecutive voluntarily with or without Good Reason (as defined in Exhibit A attached hereto).          (d) Notice of Termination. Any termination of the Executive’s employment by theCompany or the Executive (other than death) shall be communicated by Notice of Termination to theother party hereto given in accordance with Section 12(c) of this Agreement. For purposes of thisAgreement, a “Notice of Termination” means a written notice which (i) indicates the specifictermination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth inreasonable detail the facts and circumstances claimed to provide a basis for termination of theExecutive’s employment under the provision so indicated and (iii) if necessary, specifies the Dateof Termination consistent with this Agreement (which date shall be not more than thirty (30) daysafter the giving of such notice). The failure by the Executive or the Company to set forth in theNotice of Termination any fact or circumstance which contributes to a showing of Good Reason orCause shall not waive any right of the Executive or the Company, respectively, hereunder orpreclude the Executive or the Company, respectively,
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from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rightshereunder.          (e) Date of Termination. “Date of Termination” means (i) if the Executive’semployment is terminated by the Company for Cause, the date of receipt of the Notice of Terminationor any later date specified therein within thirty (30) days of such notice, as the case may be;provided that if the event giving rise to a termination for Cause is pursuant to clauses (i), (iv),(v) or (vi) of the definition of Cause, the date on which there is delivered to the Executivewritten notice of the requisite Board vote as set forth in the definition of “Cause” in Exhibit A,(ii) if the Executive’s employment is terminated by the Company without Cause, the date of receiptof the Notice of Termination or any later date specified therein within thirty (30) days of suchnotice, as the case may be, (iii) if the Executive’s employment is terminated by the Executive forGood Reason, 30 days after the Company receives the Notice of Termination unless the Company hascured the alleged grounds for such termination within 30 days after such receipt or if theExecutive’s employment is terminated by the Executive without Good Reason, 30 days after theCompany receives the Notice of Termination, provided however, in either case the Company mayaccelerate the Date of Termination to an earlier date by providing the Executive notice of suchaction, and (iv) if the Executive’s employment is terminated by reason of death or Disability, thedate of the Executive’s death or the Disability Commencement Date, as the case may be.          (f) Resignation. Upon termination of the Executive’s employment for any reason, theExecutive agrees to resign, effective as of the Date of Termination, from any positions that theExecutive holds with the Company and its affiliates, the Board (and any committees thereof) and theboard of directors (and any committees thereof) of any of the Company’s affiliates. The Executivehereby agrees to execute any and all documentation of such resignations upon request by theCompany, but he shall be treated for all purposes as having so resigned upon termination of hisemployment, regardless of when or whether he executes any such documentation, or Executive isterminated due to his death or Disability, .     5. **Obligations of the Company upon Termination of Employment**.          (a) Good Reason; Without Cause. If, during the Employment Period, the Companyterminates the Executive’s employment without Cause, or the Executive terminates his employment forGood Reason, or if the Company fails to renew or extend this Agreement upon expiration of theEmployment Period, the Company shall have no further obligations to the Executive under thisAgreement or otherwise other than to pay or provide to the Executive the following amounts andbenefits (provided the Executive has executed, delivered to the Company and not revoked a generalrelease of claims against the Company in a form satisfactory to the Company (the “Release”) andsubject to Section 8(h) hereof):     (i) An amount equal to Executive’s unpaid Annual Base Salary forservices through the Date of Termination;
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     (ii) an amount equal to two (2) times his compensation (salary andbonus) during the preceding year (the “Severance Payment”), and if suchtermination occurs in the first year of employment, the Severance Paymentshall be $2.2 million dollars;     (iii) full vesting as of the Date of Termination of Executive’s StockOption Awards (as defined in Section 3(c) hereof) and any other equityawards granted to Executive, with continued exercisability of theoutstanding options for twelve (12) months following the Date of Termination(but in no event beyond the original term of the options);     (iv) continued participation until the second anniversary of the Dateof Termination in all Company medical and dental plans in which theExecutive and his eligible dependents were participating immediately priorto the Date of Termination (subject to offset as set forth in Section 8hereof);     (v) as long as the Executive uses such services prior to the firstanniversary of the Date of Termination, up to $25,000 in outplacementservices; and     (vi) payment of other amounts, entitlements or benefits, if any, inaccordance with applicable plans, programs, arrangements or other agreementsof the Company.          (b) Death or Disability. If the Executive’s employment is terminated by reason of theExecutive’s death or Disability during the Employment Period, the Company shall have no furtherobligations to the Executive or his legal representatives, as applicable, under this Agreement orotherwise other than for the payment of the amounts and provision of the benefits set forth below:     (i) payment of Annual Base Salary through the end of the month in whichthe Executive’s Date of Termination occurs;     (ii) payment of the Severance Payment provided in subsection (a)(ii)above;     (iii) full vesting as of the Date of Termination of the Stock OptionAward (as defined in Section 3(c) hereof), and any other equity awardsgranted to Executive, with continued exercisability of the outstandingoptions for twelve (12) months following the Date of Termination (but in noevent beyond the end of the original term of the options);
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     (iv) except in the case of Executive’s death, continued participationuntil the second anniversary of the Date of Termination in all Companymedical and dental plans in which the Executive and his eligible dependentswere participating immediately prior to the Date of Termination (subject tooffset as set forth in Section 8 hereof); and     (v) payment of other amounts, entitlements or benefits, if any, inaccordance with applicable plans, programs, arrangements or other agreementsof the Company.          (c) Cause or Voluntary Resignation Without Good Reason. If the Executive’s employmentshall be terminated by the Company for Cause or by the Executive for any reason other than GoodReason at any time during the Employment Period, the Company shall have no further obligations tothe Executive under this Agreement or otherwise other than for the payment of the amounts andprovision of the benefits set forth below:     (i) an amount equal to the Executive’s unpaid Annual Base Salary forservices through the Date of Termination;     (ii) for a voluntary resignation (without Good Reason), continuedexercisability for 90 days following the Date of Termination for the portionof the Stock Option Award or any other equity awards, if any, that wasvested and outstanding as of the Date of Termination (but in no event beyondthe expiration of the original term of the award);     (iii) for a termination for Cause, forfeiture and cancellation of theStock Option Award and any other equity awards (whether vested or unvested)as of the Date of Termination;     (iv) forfeiture and cancellation of the unvested portion of the StockOption Award and any other equity awards as of the Date of Termination; and     (v) payment of other amounts, entitlements or benefits, if any, inaccordance with applicable plans, programs, arrangements or other agreementsof the Company.
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     6. **Change in Control Protections**.          (a) Upon the occurrence of a Change in Control (as defined in Exhibit A attached hereto), theStock Option Award (as defined in Section 3(c) hereof) and all other equity awards shallimmediately vest and become exercisable.          (b) In the event, during the Employment Period, the Company terminates the Executive’semployment without Cause or the Executive terminates his employment for Good Reason, in both casesupon or within two (2) years immediately following a Change in Control, the Company shall have nofurther obligations to the Executive under the terms of this Agreement or otherwise other than topay or provide to the Executive the following amounts and benefits (provided the Executive hasexecuted, delivered to the Company and not revoked a general release of claims against the Companyin a form satisfactory to the Company (the “Release) and subject to Section 8(h) hereof):     (i) payment of Annual Base Salary through the end of the month in whichthe Executive’s Date of Termination occurs;     (ii) payment of the Severance Payment provided in Section (5)(a)(ii)above;     (iii) full vesting as of the Date of Termination of the Stock OptionAward (as defined in Section 3(c) hereof), and any other equity awardsgranted to Executive, with continued exercisability of the outstandingoptions for twelve (12) months following the Date of Termination (but in noevent beyond the end of the original term of the options);     (iv) continued participation until the second anniversary of the Dateof Termination in all Company medical and dental plans in which theExecutive and his eligible dependents were participating immediately priorto the Date of Termination (subject to offset as set forth in Section 7hereof); and     (v) as long as the Executive uses such services prior to the firstanniversary of the Date of Termination, up to $25,000 in outplacementservices; and     (vi) payments of other amounts, entitlements or benefits, if any, inaccordance with applicable plans, programs, arrangements or other agreementsof the Company.
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     7. **No Duplication; No Mitigation**. In no event shall the Executive be entitled toduplicate payments or benefits under different provisions of this Agreement or pursuant to theterms of any other plan, program or arrangement of the Company or its affiliates. In the event ofany termination of the Executive’s employment, the Executive shall be under no obligation to seekother employment, and, there shall be no offset against amounts due the Executive under thisAgreement on account of any remuneration attributable to any subsequent employment except withrespect to the continuation of benefits under Sections 5(a)(iii) and Section 6(b)(iv), which shallterminate immediately upon obtaining comparable coverage from another employer.     8. **Restrictive Covenants**.          (a) Confidentiality. During the Employment Period and thereafter, other than in theordinary course of performing his duties for the Company, the Executive agrees that he shall notdisclose to anyone or make use of any trade secret or proprietary or confidential information ofthe Company or any affiliate of the Company, including such trade secret or proprietary orconfidential information of any customer or other entity to which the Company owes an obligationnot to disclose such information, which he acquires during the course of his employment, including,but not limited to, records kept in the ordinary course of business, except when required to do soby a court of law, by any governmental agency having supervisory authority over the business of theCompany or by any administrative or legislative body (including a committee thereof) with apparentor actual jurisdiction to order him to divulge, disclose or make accessible such information. Inthe event the Executive is requested to disclose information as contemplated in the precedingsentence, the Executive agrees, unless otherwise prohibited by law, to use his best efforts to givethe Company’s General Counsel prompt written notice of any request for disclosure in advance of theExecutive making such disclosure in order to permit the Company a reasonable opportunity tochallenge such disclosure. The foregoing shall not apply to information that (i) was known to thepublic prior to its disclosure by the Executive, or (ii) becomes known to the public through nowrongful disclosure by or act of the Executive or any representative of the Executive.          (b) Property Rights. Whether during the Employment Period or thereafter, theExecutive agrees to hereby sell, assign and transfer to the Company all of his right, title andinterest in and to all inventions, discoveries, improvements and copyrightable subject matter (the“Rights”) which during the period of his employment are made or conceived by him, alone or withothers, and which are within or arise out of any general field of the Company’s business or ariseout of any work he performs, or information he receives regarding the business of the Company,while employed by the Company. The Executive shall fully disclose to the Company as promptly asavailable all information known or possessed by him concerning any Rights, and upon request by theCompany and without any further remuneration in any form to him by the Company, but at the expenseof the Company, execute all applications for patents and for copyright registration, assignmentsthereof and other instruments and do all things which the Company may deem necessary to vest andmaintain in it the entire right, title and interest in and to all such Rights. The Executiveagrees that at the time of the termination of employment, whether at the instance of the Executiveor the Company, and regardless of the reasons therefor,
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he will promptly deliver to the Company’s General Counsel, and not keep or deliver to anyoneelse, any and all of the following which is in his possession or control: (i) Company property(including, without limitation, credit cards, computers, communication devices, home officeequipment and other Company tangible property) and (ii) notes, files, memoranda, papers and, ingeneral, any and all physical matter and computer files containing confidential or proprietaryinformation of the Company or any of its affiliates, including any and all documents relating tothe conduct of the business of the Company or any of its affiliates and any and all documentscontaining confidential or proprietary information of the customers of the Company or any of itsaffiliates, except for (x) any documents for which the Company’s General Counsel has given writtenconsent to removal at the time of termination of the Executive’s employment and (y) any informationnecessary for the Executive to retain for his tax purposes.          (c) Non-Competition. The Executive acknowledges that in his capacity in managementthe Executive has had or will have a great deal of exposure and access of the Company’s tradesecrets and confidential and proprietary information. Therefore, during the Executive’s employmentand for twelve (12) months following termination of such employment (whether during the EmploymentPeriod or thereafter) (the “Restricted Period”**)**(i) the Executive shall protect the Company’s tradesecrets and other confidential and proprietary information, and (ii) the Executive agrees that heshall not, other than in the ordinary course of performing his duties hereunder or as agreed by theCompany in writing, engage in a “Competitive Business,” directly or indirectly, as an individual,partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in anyrelationship or capacity. The Executive shall not be deemed to be in violation of this Section9(c) by reason of the fact that he owns or acquires, solely as an investment, two percent (2%) orless of the outstanding equity securities (measured by value) of any publicly traded company.“Competitive Business” shall mean (x) the Executive’s participation in any unsolicited offer topurchase the stock or assets of the Company or its affiliates or (y) any financial institution witha substantial presence in the mortgage origination business in Puerto Rico. Notwithstanding theforegoing, if the Company provides the Executive with notice that it is not renewing the EmploymentPeriod in accordance with Section 1 hereof, the provisions of this Section 9(c) shall no longer beeffective upon the expiration of the Employment Period.          (d) Non-Interference. The Executive acknowledges that information regarding theCompany’s business and financial relations with its vendors and customers is ConfidentialInformation and proprietary to the Company and that any interference with such relations baseddirectly or indirectly on the use of such information would cause irreparable damage to theCompany. The Executive acknowledges that by virtue of his employment with the Company, he hasgained or may gain knowledge of such information concerning the Company’s vendors and customers(respectively “Vendor Information” or “Customer Information”), and that he would inevitably have todraw on this Vendor Information and Customer Information and on other Confidential Information ifhe were to solicit or service the Company’s vendors or customers on behalf of a competing businessenterprise. Accordingly, and subject to the immediately following sentence, the Executive agreesthat, other than in the ordinary course of performing his duties for the Company, during theRestricted Period, the Executive will not, on behalf of
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himself or any other person or entity, directly or indirectly seek to encourage or induce anyvendor or customer of the Company to cease doing business with, or lessen its business with, theCompany, or otherwise interfere with or damage (or attempt to interfere with or damage) any of theCompany’s relationships with its vendors and customers. No action by another person or entityshall be deemed to be a breach of this provision unless the Executive directly or indirectlyassisted, encouraged or otherwise counseled such person or entity to engage in such activity.          (e) No Hire; Non-Solicitation. The Executive agrees that, during the RestrictedPeriod (other than in the ordinary course of performing his duties for the Company), he will not,without the prior written consent of the Company, directly or indirectly, (i) hire any employee ofthe Company or any of its affiliates who is then an employee of the Company or such affiliate orwas an employee during the prior six (6) month period, or (ii) solicit or encourage any suchemployee to leave the employ of the Company or such affiliate, as the case may be. No action byanother person or entity shall be deemed to be a breach of this provision unless the Executivedirectly or indirectly assisted, encouraged or otherwise counseled such person or entity to engagein such activity.          (f) Public Comment. Following the Employment Period, the Executive shall not at anytime (i) make any public derogatory comment concerning the Company or its affiliates or anyone whomthe Executive knows to be a current or former director, officer, stockholder or employee of theCompany or (ii) without the prior written consent of the Company, which consent shall not beunreasonably withheld, publish or produce any information or write any book, article, screenplay,teleplay or similar type of publication relating to the Company or its affiliates or anyone whomthe Executive knows to be a current or former director, officer, stockholder or employee; providedthat no such consent shall be necessary for an academic work relating to Executive’s employmentwith the Company. Following the Employment Period, the Company shall not at any time make anypublic derogatory comment concerning the Executive. Notwithstanding the foregoing, nothing in thisSection 8(f) shall prohibit any person from (x) responding publicly to incorrect, disparaging orderogatory public statements about the Company or the Executive relating to his employment with theCompany, (y) providing truthful testimony in any judicial or administrative matter, or (z) makingtruthful statements required by law, by any regulatory authority or organization, or in connectionwith any public filing required by the Securities and Exchange Commission or any other regulatoryauthority.          (g) Blue Penciling. If any restrictions on competitive or other activities containedin this Section 8 shall for any reason be held by a court of competent jurisdiction to beexcessively broad as to duration, geographical scope, activity or subject, such restrictions shallbe construed so as thereafter to be limited or reduced to be enforceable to the extent compatiblewith the applicable law; it being understood that by the execution of this Agreement, (i) theparties hereto regard such restrictions as reasonable and compatible with their respective rightsand (ii) the Executive acknowledges and agrees that the restrictions will not prevent him fromobtaining gainful employment subsequent to the termination of his employment.          (h) Remedies; Injunctive Relief.
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     (i) The Executive acknowledges and agrees that the covenants andobligations of the Executive set forth in this Section 8 relate to special,unique and extraordinary services rendered by the Executive to the Companyand that a violation of any of the terms of such covenants and obligationswill cause the Company irreparable injury for which adequate remedies arenot available at law. Therefore, the Executive agrees that the Companyshall be entitled to seek an injunction, restraining order or othertemporary or permanent equitable relief (without the requirement to postbond) restraining the Executive from committing any violation of thecovenants and obligations contained herein. These injunctive remedies arecumulative and are in addition to any other rights and remedies the Companymay have at law or in equity. The existence of any claim or cause of actionby the Executive against the Company shall not constitute a defense to theenforcement by the Company of the foregoing restrictive covenants, but suchclaim or cause of action shall be determined separately.     (ii) If at any time the Executive materially breaches any of thecovenants in Section 8, and fails to cure such breach within ten (10) daysafter receipt of written notice from the Company, then (x) the Company shallhave the right to cease to pay or provide to the Executive any payment,benefit or entitlement due (or accrued) under this Agreement and (y) theExecutive shall be required to repay to the Company the net after-tax amount(such after-tax amount to be determined after taking into account taxdeductions, tax credits, and the like attributable to the repayment) of anyseverance paid to the Executive under this Agreement. Such repayment to bemade within 15 days after written notice from the Company to the Executiverequesting such repayment.     (iii) If at any time following the Restricted Period but prior to thesecond anniversary of the termination of the Executive’s employment, theExecutive takes any action or engages in any conduct that would haveconstituted a material breach of Section 8(d) or 8(e) if it had occurredduring the Restricted Period, then clauses (x) and (y) of Section 8(h)(ii) — as limited by Section 8(h)(ii) — shall apply as if such material breachhad occurred during the Restricted Period.     (i) Survival. The provisions of this Section 8 shall remain in full force and effectuntil the expiration of the periods specified herein notwithstanding the earlier termination of theExecutive’s employment hereunder or the expiration of the Employment Period. For purposes of thisSection 8, “Company” shall mean the Company and any affiliate of the Company or any successorthereto.
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     9. **Mandatory Arbitration**. Except to the extent necessary to enforce the provisions ofSection 8 hereof in accordance with Section 8(g) or 8(h), the Executive (on behalf of himself andhis beneficiaries) and the Company agree that any controversy or claim arising out of, or relatingto this Agreement, or the breach thereof, or the Executive’s employment with the Company or anyaffiliate, or any termination of such employment, shall be settled by confidential arbitration inPuerto Rico in accordance with the Commercial Arbitration Rules of the American ArbitrationAssociation. Any award entered shall be final, binding and nonreviewable except on such limitedgrounds for review of arbitration awards as may be permitted by applicable law. Judgment upon theaward rendered by the arbitrator(s) may be entered into any court having jurisdiction thereof.     10. **Successors**.          (a) This Agreement is personal to the Executive and without the prior written consent of theCompany shall not be assignable by the Executive. This Agreement shall inure to the benefit of andbe enforceable by the Executive’s legal representatives, heirs or legatees.          (b) This Agreement shall inure to the benefit of and be binding upon the Company and itssuccessors and assigns. No rights or obligations of the Company under this Agreement may beassigned or transferred by the Company without the Executive’s prior written consent except thatsuch rights or obligations may be assigned or transferred pursuant to a merger or consolidation inwhich the Company is not the continuing entity, or a sale, liquidation or other disposition of allor substantially all of the assets of the Company, provided that the assignee or transferee is thesuccessor to all or substantially all of the assets of the Company and assumes the liabilities,obligations and duties of the Company under this Agreement, either contractually or as a matter oflaw.     11. **Miscellaneous**.          (a) The Executive represents and warrants that he has the free and unfettered right to enterinto this Agreement and to perform his obligations under it and that he knows of no agreementbetween him and any other person, firm or organization, or any law or regulation, that would beviolated by the performance of his obligations under this Agreement. The Executive agrees that hewill not use or disclose any confidential or proprietary information of any prior employer in thecourse of performing his duties for the Company or any of its affiliates.          (b) This Agreement shall be governed by and construed in accordance with its express terms,and otherwise in accordance with the laws of the Commonwealth of Puerto Rico, without reference toprinciples of conflict of laws. The captions of this Agreement are not part of the provisionshereof and shall have no force or effect. This Agreement may not be amended or modified otherwisethan by a written agreement executed by the parties hereto or their respective successors and legalrepresentatives. In the event of any conflict or inconsistency between the provisions of thisAgreement and any other Company plan, program, policy or agreement, the provisions of thisAgreement shall control.
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          (c) All notices and other communications hereunder shall be in writing and shall be given (i)when delivered personally (provided that a written acknowledgement of receipt is obtained), (ii)three (3) days after being sent by certified or registered mail, postage prepaid, return receiptrequested or (iii) two (2) days after being sent by overnight courier (provided that a writtenacknowledgement of receipt is obtained by the overnight courier), with any such notice dulyaddressed to the party concerned at the address indicated below:   If to the Executive: At the most recent address on file at the Company   If to the Company: At the address of its principal executive offices  Attention: General Counselor to such other address as either party shall have furnished to the other in writing inaccordance herewith.          (d) The invalidity or unenforceability of any provision of this Agreement shall not affect thevalidity or enforceability of any other provision of this Agreement.          (e) The Company may withhold from any amounts payable under this Agreement such federal,Puerto Rico, state, local or foreign taxes as shall be required to be withheld pursuant to anyapplicable law or regulation. In addition, this Agreement is intended to comply with therequirements of Section 409A of the Code and the regulations promulgated thereunder (“Section409A”) so as not to subject the Executive to the payment of interest or any additional tax underSection 409A. In furtherance thereof, if payment or provision of any amount or benefit hereunderat the time specified in this Agreement would subject such amount or benefit to any additional taxunder Section 409A, the payment or provision of such amount or benefit shall be postponed to theearliest commencement date on which the payment or the provision of such amount or benefit could bemade without incurring such additional tax (including paying any severance that is delayed in alump sum upon the earliest possible payment date which is consistent with Section 409A).          (f) Following the Executive’s termination of employment for any reason (whether during orafter the expiration of the Employment Period), upon reasonable request of the Company, theExecutive shall cooperate with the Company or any of its affiliates with respect to any legal orinvestigatory proceeding, including any government or regulatory investigation, or any litigationor other dispute relating to matters in which he was involved or had knowledge (or reasonablyshould have had knowledge) during his employment with the Company, subject to his reasonablepersonal and business schedules. The Company shall reimburse the Executive for all reasonableout-of-pocket travel and meal expenses associated with any cooperation provided hereunder.
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          (g) No waiver shall be valid unless in writing signed by the party against whom the waiver isbeing enforced (that is, by the Executive or an authorized officer of the Company, as the case maybe).          (h) This Agreement contains the entire agreement between the parties concerning the subjectmatter hereof and supersedes all prior agreements, understandings, discussions, negotiations andundertakings, whether written or oral, between the parties with respect thereto (including, withoutlimitation, the term sheet previously negotiated by the parties). In the event of anyinconsistency between the provisions of this Agreement and the provisions of any other agreement orplan relating to the Stock Option Award or any other equity award granted to Executive, theprovisions of this Agreement shall control. Any provision of this Agreement, to the extentnecessary to carry out the intent of such provision, shall survive after the expiration of theEmployment Period.          (i) The Executive shall be entitled to indemnification in connection with any litigation orproceeding arising out of the Executive’s acting as President of the Company’s Consumer BankingDivision and of Doral Bank or as an employee, officer or director of the Company, to the fullestextent permitted under the Company’s charter and by-laws and by applicable law. In addition, theExecutive shall, during the Employment Period and for ten (10) years thereafter, be entitled toliability insurance coverage pursuant to a Company-purchased directors’ and officers’ liabilityinsurance policy on the same basis as other directors and officers of the Company to whom suchcoverage (if any) is then provided.          (j) Notwithstanding any other provision of this Agreement or otherwise, the Company will makeno payment pursuant to this Agreement or otherwise which would be prohibited by 12 USC Section1828(k) or any implementing regulations thereunder.          (k) This Agreement may be executed in one or more counterparts, each of which shall be deemedto be an original but all of which together shall constitute one and the same instrument.Signatures delivered by facsimile shall be effective for all purposes.
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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as ofthe day and year first above written.         DORAL FINANCIAL CORPORATION           By: /s/ Glen Wakeman           Name: Glen Wakeman           Title:President & CEO           /s/ Calixto J. Garcia-Velez         Calixto J. Garcia-Velez  
 

 
**EXHIBIT A**     For all purposes of this Agreement, the following terms shall have the meanings set forthbelow:     “**affiliate**” of a person or other entity shall mean a person or other entity controlled by,controlling or under common control with the person or other entity specified.     “**Disability**” shall mean (i) the Executive becomes eligible for full benefits under a long-termdisability policy provided by the Company or (ii) the Executive has been unable, due to physical ormental illness or incapacity, to substantially perform the essential duties of his employment withreasonable accommodation for a continuous period of ninety (90) days or an aggregate of one-hundredeighty (180) days during any consecutive twelve (12)-month period.     “**Cause**” shall mean:     (i) the Executive’s act of fraud, misappropriation, or embezzlementwith respect to the Company or any material affiliate;     (ii) the Executive’s indictment for, conviction of, or plea of guiltyor no contest to any felony (other than a minor traffic violation);     (iii) the Executive’s admission of liability of, or a finding by acourt or the applicable regulatory agency or body of liability for, theviolation of any “Securities Laws” (but excluding any technical violationsof any Securities Laws which are not criminal in nature) or the violation ofany “Banking Laws” (but excluding any technical violations of any BankingLaws which are not criminal in nature); as used herein, the term “SecuritiesLaws” means any federal or state law, rule or regulation governing theissuance or exchange of securities, including without limitation theSecurities Act of 1933, the Securities Exchange Act of 1934 and the rulesand regulations promulgated thereunder and “Banking Laws” means any federalor state banking law, rule or regulation governing the Company or itsaffiliates;     (iv) the Executive engages in conduct that constitutes willful grossneglect or willful misconduct, in either case, resulting in significant harmto the Company’s or its affiliates’ business or reputation;     (v) the Executive’s intentional failure after reasonable prior writtennotice from the Company to comply with any valid and legal directive of theBoard; or
 

 
          (vi) the Executive’s material breach of any covenant set forth inSection 8 of this Agreement.     For purposes of this definition of “Cause,” an action or failure to act by the Executive shallnot be considered “willful” if the Executive believed in good faith that his action or failure toact was in, or not opposed to, the best interests of the Company and its affiliates.     Anything notwithstanding to the contrary, the Executive’s employment shall not be terminatedfor “Cause” within the meaning of clauses (i), (iv), (v) or (vi) above, unless the Executive hasbeen given written notice by the Board stating the basis for such termination and he is givenfifteen (15) days to cure the neglect or conduct that is the basis of any such claim and, if hefails to cure such conduct, or such conduct cannot be cured, the Executive has an opportunity to beheard before the full Board and after such hearing, the Board gives the Executive written noticeconfirming that in the judgment of a majority of the members of the Board (other than theExecutive, if applicable) “Cause” for terminating the Executive’s employment exists.     “**Good Reason**” shall mean the occurrence of any of the following without the Executive’swritten consent:(i) a reduction in the Executive’s then current Annual Base Salaryor target bonus opportunity;(ii) a material diminution in the Executive’s positions, duties orauthorities as President of the Company’s Consumer Banking Divisionor President of Doral Bank, including, without limitation, removinghim from such positions; provided, that Good Reason shall also existif at any time following a Change in Control involving an entity ofsmaller or similar size to the Company (measured on the basis ofassets), Executive does not hold the positions set forth above atthe ultimate parent entity resulting from such Change in Control;(iii) Executive’s principal work location is moved more thantwenty-five (25) miles from San Juan, Puerto Rico;(iv) a change in reporting structure so that the Executive reportsto someone other than the Chief Executive Officer of the Company orthe Board; or(v) the failure of any successor to all or substantially all of theCompany’s assets to assume this Agreement, whether in writing or byoperation of law.
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     Anything notwithstanding to the contrary, the Executive may only terminate his employment for“Good Reason” upon thirty (30) days’ written notice to the Company (provided the Company does notcure the event or events giving rise to Good Reason prior to the expiration of such thirty (30)-daynotice period).     “**Change in Control**” will be deemed to have taken place if:(i) any “person” (as such term is used in Sections 3(a)(9) andSection 13(d) of the Securities Exchange Act of 1934) other than theCompany or any employee benefit plan of the Company or any of itssubsidiaries, (x) becomes the “beneficial owner” (as such term isused in Rule 13d-3 promulgated under the Securities Exchange Act of1934) of Company securities having more than 50% of the combinedvoting power of the then outstanding securities of the Company thatmay be cast for the election of directors of the Company (other thanas a result of the issuance of securities initiated by the Companyin the ordinary course of business) (“Voting Securities”) or (y)becomes the “beneficial owner” of Company of 25% or more of theVoting Securities of the Company and such person has the power toappoint or elect a majority of the members of the Board; or(ii) persons who, as of the effective date of this Agreementconstitute the Board (the “Incumbent Directors”) cease for anyreason, including without limitation, as a result of a tender offer,proxy contest, merger or similar transaction, to constitute at leasta majority thereof, provided that any person becoming a director ofthe Company subsequent to the effective date of this Agreement shallbe considered an Incumbent Director if such person’s election ornomination for election was approved by a vote of at least 50% ofthe Incumbent Directors; but provided further, that any suchperson whose initial assumption of office is in connection with anactual or threatened election contest relating to the election ofmembers of the Board or other actual or threatened solicitation ofproxies or consents by or on behalf of a “person” (as defined inSection 13(d) and 14(d) of the Exchange Act) other than the Board,including by reason of agreement intended to avoid or settle anysuch actual or threatened contest or solicitation, shall not beconsidered an Incumbent Director; or(iii) as the result of, or in connection with, any cash tender orexchange offer, merger or other business combination, or anycombination of the foregoing transactions, the holders of all the
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Company’s securities entitled to vote generally in the election ofdirectors of the Company immediately prior to such transactionconstitute, following such transaction, less than a majority of thecombined voting power of the then-outstanding securities of thesurviving entity (or in the event each entity survives, the ultimateparent entity resulting from such transaction) (the “SurvivingEntity”) entitled to vote generally in the election to electdirectors of the Surviving Entity after such transaction.
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