Document:

EX-10.3 EMPLOYMENT AGREEMENT-MARANGAL I. DOMINGOZ

 

Exhibit 10.3

EMPLOYMENT AGREEMENT

          AGREEMENT between DORAL FINANCIAL CORPORATION, a corporation organized under the laws of the
Commonwealth of Puerto Rico (together with its successors and assigns, the “Company”), and Marangal
I. Domingo (the “Executive”) dated as of September 25, 2006.

          WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the
best 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 the
Executive’s employment in this Agreement;

          NOW THEREFORE, in consideration of the mutual promises and covenants made herein and the
mutual 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 hereby
agrees to employ the Executive, and the Executive hereby agrees to serve the Company and its
affiliates, for the period commencing on the Commencement Date (as defined herein) and ending on
the second anniversary of the Commencement Date; provided that the Executive’s employment by the
Company will automatically be extended by twelve (12) additional months on the second anniversary
of the Commencement Date and each annual anniversary thereafter unless either party provides
written notice to the other party no less than one hundred and eighty (180) days prior to the date
of any such scheduled extension of its or his intention not to extend the term of the Executive’s
employment (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 Executive
commences employment with the Company which in all events shall be no later than September 30,
2006. Notwithstanding the foregoing, the Employment Period shall end on the date on which the
Executive’s employment is terminated by either party in accordance with the provisions of this
Agreement.

     2. Position and Duties.

          (a) During the Employment Period, the Executive shall serve as EVP- Chief Investment Officer
and Treasurer, and shall have such duties and responsibilities as are commensurate with such
positions and consistent with the Company’s Certificate of Incorporation and By-Laws. The
Investment and Treasury areas include, without limitation, the following: balance sheet, all
investment decisions, ALCO, dividend policy, fund raising, deposit strategies, product pricing
strategies, secondary markets, etc.

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          (b) During the Employment Period, the Executive shall report directly to the Chief Executive
Officer of the Company or the Board.

     3. The Executive’s principal work location, subject to travel on Company business, shall be
the Company’s headquarters in Puerto Rico. Beginning no later than September 30, 2006, and at all
times thereafter during the Employment Period, the primary place of residence of the Executive
shall be Puerto Rico.

          (a) During the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote his full business attention and
time to the business and affairs of the Company, and to use his best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period, the Executive shall be
entitled to engage in charitable and educational activities and to manage his personal and family
investments, to the extent such activities are not competitive with the business of the Company or
its affiliates and do not interfere in any way, in the reasonable judgment of the Board (or a
committee thereof), with the performance of his duties for the Company and are otherwise consistent
with the Company’s governance policies.

     4. Compensation.

          (a) Annual Base Salary. During the Employment Period, the Executive shall receive an
annual base salary (“Annual Base Salary”) at a rate of $500,000.00, payable in accordance with the
Company’s normal payroll policies. The Executive’s Annual Base Salary shall be prorated for 2006
and for any other partial year of employment during the Employment Period based upon the portion of
the year that the Executive is employed by the Company. The Executive’s Annual Base Salary shall
be subject to review in accordance to the Company’s annual compensation program. Annual Base
Salary, however, shall not be subject to reduction without the Executive’s prior written consent.

          (b) Annual Bonus. With respect to each fiscal year completed during the Employment
Period, the Executive shall have a target annual bonus opportunity equal to 100% of his Annual Base
Salary (“Target Bonus”). The Board shall establish, in its sole discretion, the performance and
payment conditions applicable to such annual bonuses. The Company will grant for the year 2006
payable in 2007 a guaranteed amount of 60% equal to $300,000.00, of the Executive’s base salary.
The years after, 100% of his base pay if the Employee meets the target in her assignment to reward
business goals accomplishments. Shall the employee leave the Company for any reason before the
conclusion of the period herein stated, this bonus will not be paid.

          (c) Stock Options. Effective as of the Commencement Date, the Company shall grant the
Executive 150,000 options at market (the “Stock Option Award”) upon joining. The Stock Option Award
will vest at the rate of 25% per year. Notwithstanding anything to the contrary in this Agreement,
the granting, vesting and exercise of these stock options shall be subject to the granting of such
options by the Compensation Committee pursuant to the terms

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and conditions of the Doral Financial Corporation Omnibus Incentive Plan. Subsequent grants
will be awarded at the discretion of the Board.

          (d) Additional Compensation:

          (i) Car Allowance: The Company will provide the Executive with a monthly car
allowance under the Company’s policy of $630.00 per month to be used to lease or
purchase an automobile for use in the affairs and business of the Company and to
cover related gasoline and insurance expenses related to the use of such automobile.

          (ii) The Executive will receive a one time signing bonus of $250,000.00 in a
lump sum payment upon his hiring date.

          (e) Long-Term Incentive Plans. During the Employment Period, the Executive shall be
eligible to participate in the ongoing equity and other long-term awards and programs of the
Company as determined in the sole discretion of the Board or a committee thereof.

          (f) Other Benefits and Perquisites. During the Employment Period, the Executive shall
be entitled to participate in the Company’s employee benefit plans, programs and arrangements
(including, without limitation, life, medical and dental insurance, 401(k), and disability
insurance, vacation and sick leave programs) and perquisite programs and arrangements, if any, in
each case, on the same basis as generally provided to other similarly-situated executives of the
Company. 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 appropriate
business expenses in accordance with the terms of the Company’s policies and
procedures in effect from time to time.

          (ii) The Company shall reimburse the Executive for the following
relocation expenses: (1) cost of moving household goods and autos from his
current residence to Puerto Rico, (2) cost of up to two (2) trips from
current residence to Puerto Rico for the Executive and his family to find
suitable housing, (3) cost of approved temporary living expenses in Puerto
Rico until the Executive finds suitable housing, but in no event longer than
three (3) months, (4) commissions, fees and closing costs on sale of
residence when sold during the first one year period from commencement, (5)
fees and expenses associated with purchase of home in Puerto Rico, including
mortgage points and other closing costs.

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          (iii) The Company shall reimburse the Executive for cost of housing in
the amount of $4,000.00 per month, from commencement date but in no event
longer than twelve (12) months.

     5. Termination of Employment.

          (a) Death or Disability. The Executive’s employment shall terminate automatically
upon the Executive’s death during the Employment Period. In the event of the Executive’s
Disability (as defined in Exhibit A attached hereto), the Company may provide the Executive with
written notice in accordance with Section 12(c) of this Agreement of its intention to terminate the
Executive’s employment due to Disability. In such event, the Executive’s employment with the
Company 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 shall
immediately 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 may
terminate the Executive’s employment either with or without Cause (as defined in Exhibit A attached
hereto). For purposes of this Agreement, a termination “without Cause” shall mean a termination by
the 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 the
Executive 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 the
Company or the Executive (other than death) shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 12(c) of this Agreement. For purposes of this
Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated and (iii) if necessary, specifies the Date
of Termination consistent with this Agreement (which date shall be not more than thirty (30) days
after the giving of such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive’s or the Company’s rights hereunder.

          (e) Date of Termination. “Date of Termination” means (i) if the Executive’s
employment is terminated by the Company for Cause, the date of receipt of the Notice of Termination
or any later date specified therein within thirty (30) days of such notice, as the case

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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 Executive written 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 receipt of the Notice of Termination or any later date specified therein within thirty (30)
days of such notice, as the case may be, (iii) if the Executive’s employment is terminated by the
Executive for Good Reason, 30 days after the Company receives the Notice of Termination unless the
Company has cured the alleged grounds for such termination within 30 days after such receipt or if
the Executive’s employment is terminated by the Executive without Good Reason, 30 days after the
Company receives the Notice of Termination, provided however, in either case the Company may
accelerate the Date of Termination to an earlier date by providing the Executive notice of such
action, and (iv) if the Executive’s employment is terminated by reason of death or Disability, the
date 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, the
Executive agrees to resign, effective as of the Date of Termination, from any positions that the
Executive holds with the Company and its affiliates, the Board (and any committees thereof) and the
board of directors (and any committees thereof) of any of the Company’s affiliates. The Executive
hereby agrees to execute any and all documentation of such resignations upon request by the
Company, but he shall be treated for all purposes as having so resigned upon termination of his
employment, regardless of when or whether he executes any such documentation, or Executive is
terminated due to his death or Disability, .

     6. Obligations of the Company upon Termination of Employment.

          (a) Good Reason; Without Cause. If, during the Employment Period, the Company
terminates the Executive’s employment without Cause, or the Executive terminates his employment for
Good Reason, or if the Company fails to renew or extend this Agreement upon expiration of the
Employment Period, the Company shall have no further obligations to the Executive under this
Agreement or otherwise other than to pay or provide to the Executive the following amounts and
benefits (provided the Executive has executed, delivered to the Company and not revoked a general
release of claims against the Company in a form satisfactory to the Company (the “Release”) and
subject to Section 8(h) hereof):

          (i) An amount equal to Executive’s unpaid Annual Base Salary for
services through the Date of Termination;

          (ii) a termination of Employee’s employment by the Company, other than
for cause, shall not prejudice the Employee’s right to compensation or other
benefits under this Agreement. That is, if the Employee’s employment is
involuntarily terminated other than for cause, the Company shall pay the
Employee a Severance Payment equal to the amount of the Executive’s Annual
Base Salary and Target Bonus

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established in this agreement that is due for the remaining term of
this Agreement or for a period of 18 months whichever is greater, in lump
sum not later than 30 days after the Date of Termination;

          (iii) full vesting as of the Date of Termination of Executive’s Stock
Option Awards (as defined in Section 3(c) hereof) and any other equity
awards granted to Executive, with continued exercisability of the
outstanding options for twelve (12) months following the Date of Termination
(but in no event beyond the original term of the options);

          (iv) continued participation for eighteen (18) months from the Date of
Termination in all Company medical and dental plans in which the Executive
and his eligible dependents were participating immediately prior to the Date
of Termination (subject to offset as set forth in Section 7 hereof);

          (v) as long as the Executive uses such services prior to the first
anniversary of the Date of Termination, up to $25,000 in outplacement
services; and

          (vi) payment of other amounts, entitlements or benefits, if any, in
accordance with applicable plans, programs, arrangements or other agreements
of the Company.

          (b) Death or Disability. If the Executive’s employment is terminated by reason of the
Executive’s death or Disability during the Employment Period, the Company shall have no further
obligations to the Executive or his legal representatives, as applicable, under this Agreement or
otherwise 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 which
the 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 Option
Award (as defined in Section 3(c) hereof), and any other equity awards
granted to Executive, with continued exercisability of the outstanding
options for twelve (12) months following the Date of Termination (but in no
event beyond the end of the original term of the options);

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          (iv) except in the case of Executive’s death, continued participation
until the second anniversary of the Date of Termination in all Company
medical and dental plans in which the Executive and his eligible dependents
were participating immediately prior to the Date of Termination (subject to
offset as set forth in Section 7 hereof); and

          (v) payment of other amounts, entitlements or benefits, if any, in
accordance with applicable plans, programs, arrangements or other agreements
of the Company.

          (c) Cause or Voluntary Resignation Without Good Reason. If the Executive’s employment
shall be terminated by the Company for Cause or by the Executive for any reason other than Good
Reason at any time during the Employment Period, the Company shall have no further obligations to
the Executive under this Agreement or otherwise other than for the payment of the amounts and
provision of the benefits set forth below:

          (i) an amount equal to the Executive’s unpaid Annual Base Salary for
services through the Date of Termination;

          (ii) for a voluntary resignation (without Good Reason), continued
exercisability for 90 days following the Date of Termination for the portion
of the Stock Option Award or any other equity awards, if any, that was
vested and outstanding as of the Date of Termination (but in no event beyond
the expiration of the original term of the award);

          (iii) for a termination for Cause, forfeiture and cancellation of the
unexercised Stock Option Award as of the Date of Termination;

          (iv) forfeiture and cancellation of the unvested portion of the Stock
Option Award and any other equity awards as of the Date of Termination; and

          (v) payment of other amounts, entitlements or benefits, if any, in
accordance with applicable plans, programs, arrangements or other agreements
of the Company.

6. Change in Control Protections.

          (a) Upon the occurrence of a Change in Control (as defined in Exhibit A attached hereto), the
Stock Option Award (as defined in Section 3(c) hereof) and all other equity awards shall
immediately vest and become exercisable and all restrictions shall immediately lapse.

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          (b) In the event, during the Employment Period, the Company terminates the Executive’s
employment without Cause or the Executive terminates his employment for Good Reason, in both
cases upon or within two (2) years immediately following a Change in Control, the Company shall
have no further obligations to the Executive under the terms of this Agreement or otherwise other
than to pay or provide to the Executive the following amounts and benefits (provided the
Executive has executed, delivered to the Company and not revoked a general release of claims
against the Company in 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 which
the 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 Option
Award (as defined in Section 3(c) hereof), and any other equity awards
granted to Executive, with continued exercisability of the outstanding
options for twelve (12) months following the Date of Termination (but in no
event beyond the end of the original term of the options);

          (iv) continued participation until the second anniversary of the Date
of Termination in all Company medical and dental plans in which the
Executive and his eligible dependents were participating immediately prior
to the Date of Termination (subject to offset as set forth in Section 7
hereof); and

          (v) as long as the Executive uses such services prior to the first
anniversary of the Date of Termination, up to $25,000 in outplacement
services; and

          (vi) payments of other amounts, entitlements or benefits, if any, in
accordance with applicable plans, programs, arrangements or other agreements
of the Company.

	7.	 	No Duplication; No Mitigation. In no event shall the Executive be entitled to
duplicate payments or benefits under different provisions of this Agreement or pursuant to the
terms of any other plan, program or arrangement of the Company or its affiliates. In the
event of any termination of the Executive’s employment, the Executive shall be under no
obligation to seek other employment, and, there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration attributable to any subsequent
employment except with respect to the continuation of benefits under Sections 5(a)(iv), which
shall terminate immediately upon obtaining comparable coverage from another employer.

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	8.	 	Restrictive Covenants.

	 	a.	 	Confidentiality. During the Employment Period and thereafter, other
than in the ordinary course of performing his duties for the Company, the Executive
agrees that he shall not disclose to anyone or make use of any trade secret or
proprietary or confidential information of the Company or any affiliate of the Company,
including such trade secret or proprietary or confidential information of any customer
or other entity to which the Company owes an obligation not 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
so by a court of law, by any governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative body (including a
committee thereof) with apparent or actual jurisdiction to order him to divulge,
disclose or make accessible such information. In the event the Executive is requested
to disclose information as contemplated in the preceding sentence, the Executive
agrees, unless otherwise prohibited by law, to use his best efforts to give the
Company’s General Counsel prompt written notice of any request for disclosure in
advance of the Executive making such disclosure in order to permit the Company a
reasonable opportunity to challenge such disclosure. The foregoing shall not apply to
information that (i) was known to the public prior to its disclosure by the Executive,
or (ii) becomes known to the public through no wrongful disclosure by or act of the
Executive or any representative of the Executive.
	 
	 	b.	 	Property Rights. Whether during the Employment Period or thereafter,
the Executive agrees to hereby sell, assign and transfer to the Company all of his
right, title and interest 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 with others, and which are within or arise out
of any general field of the Company’s business or arise out 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 as available
all information known or possessed by him concerning any Rights, and upon request by
the Company and without any further remuneration in any form to him by the Company, but
at the expense of the Company, execute all applications for patents and for copyright
registration, assignments thereof and other instruments and do all things which the
Company may deem necessary to vest and maintain in it the entire right, title and
interest in and to all such Rights. The Executive agrees that at the time of the
termination of employment, whether at the instance of the Executive or the Company, and
regardless of the reasons therefore, he will promptly deliver to the Company’s General
Counsel, and not keep or deliver to anyone else, 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 office equipment and other Company
tangible property) and (ii) notes, files, memoranda, papers and, in general, any and
all physical matter and computer files

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	 	 	 	containing confidential or proprietary information of the Company or any of its
affiliates, including any and all documents relating to the conduct of the business of
the Company or any of its affiliates and any and all documents containing confidential
or proprietary information of the customers of the Company or any of its affiliates,
except for (x) any documents for which the Company’s General Counsel has given written
consent to removal at the time of termination of the Executive’s employment and (y) any
information necessary for the Executive to retain for his tax purposes.
	 
	 	c.	 	Non-Competition. The Executive acknowledges that in his capacity in
management the Executive has had or will have a great deal of exposure and access of
the Company’s trade secrets and confidential and proprietary information. Therefore,
during the Executive’s employment and for twelve (12) months following termination of
such employment (whether during the Employment Period or thereafter) (the “Restricted
Period") (i) the Executive shall protect the Company’s trade secrets and other
confidential and proprietary information, and (ii) the Executive agrees that he shall
not, other than in the ordinary course of performing his duties hereunder or as agreed
by the Company in writing, engage in a “Competitive Business,” directly or indirectly,
as an individual, partner, shareholder, director, officer, principal, agent, employee,
trustee, consultant, or in any relationship or capacity. The Executive shall not be
deemed to be in violation of this Section 9(c) by reason of the fact that he owns or
acquires, solely as an investment, two percent (2%) or less 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 to purchase the
stock or assets of the Company or its affiliates or (y) any financial institution with
a substantial presence in the mortgage origination business in Puerto Rico.
Notwithstanding the foregoing, if the Company provides the Executive with notice that
it is not renewing the Employment Period in accordance with Section 1 hereof, the
provisions of this Section 9(c) shall no longer be effective upon the expiration of the
Employment Period.
	 
	 	d.	 	Non-Interference. The Executive acknowledges that information
regarding the Company’s business and financial relations with its vendors and customers
is Confidential Information and proprietary to the Company and that any interference
with such relations based directly or indirectly on the use of such information would
cause irreparable damage to the Company. The Executive acknowledges that by virtue of
his employment with the Company, he has gained 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 to draw on
this Vendor Information and Customer Information and on other Confidential Information
if he were to solicit or service the Company’s vendors or customers on behalf of a
competing business enterprise. Accordingly, and subject to the immediately following
sentence, the Executive agrees that, other than in the ordinary course of performing
his duties for the Company, during the Restricted

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	 	 	 	Period, the Executive will not, on behalf of himself or any other person or entity,
directly or indirectly seek to encourage or induce any vendor or customer of the Company
to cease doing business with, or lessen its business with, the Company, or otherwise
interfere with or damage (or attempt to interfere with or damage) any of the Company’s
relationships with its vendors and customers. No action by another person or entity
shall be deemed to be a breach of this provision unless the Executive directly or
indirectly assisted, encouraged or otherwise counseled such person or entity to engage
in such activity.
	 
	 	e.	 	No Hire; Non-Solicitation. The Executive agrees that, during the
Restricted Period (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 of the Company or any of its affiliates who is then
an employee of the Company or such affiliate or was an employee during the prior six
(6) month period, or (ii) solicit or encourage any such employee to leave the employ of
the Company or such affiliate, as the case may be. No action by another person or
entity shall be deemed to be a breach of this provision unless the Executive directly
or indirectly assisted, encouraged or otherwise counseled such person or entity to
engage in such activity.
	 
	 	f.	 	Public Comment. Following the Employment Period, the Executive shall
not at any time (i) make any public derogatory comment concerning the Company or its
affiliates or anyone whom the Executive knows to be a current or former director,
officer, stockholder or employee of the Company or (ii) without the prior written
consent of the Company, which consent shall not be unreasonably 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 whom the
Executive knows to be a current or former director, officer, stockholder or employee;
provided that no such consent shall be necessary for an academic work relating to
Executive’s employment with the Company. Following the Employment Period, the Company
shall not at any time make any public derogatory comment concerning the Executive.
Notwithstanding the foregoing, nothing in this Section 8(f) shall prohibit any person
from (x) responding publicly to incorrect, disparaging or derogatory public statements
about the Company or the Executive relating to his employment with the Company, (y)
providing truthful testimony in any judicial or administrative matter, or (z) making
truthful statements required by law, by any regulatory authority or organization, or in
connection with any public filing required by the Securities and Exchange Commission or
any other regulatory authority.
	 
	 	g.	 	Blue Penciling. If any restrictions on competitive or other activities
contained in this Section 8 shall for any reason be held by a court of competent
jurisdiction to be excessively broad as to duration, geographical scope, activity or
subject, such restrictions shall be construed so as thereafter to be limited or reduced
to be enforceable to the extent compatible with the applicable law; it being understood
that

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	 	 	 	by the execution of this Agreement, (i) the parties hereto regard such restrictions as
reasonable and compatible with their respective rights and (ii) the Executive
acknowledges and agrees that the restrictions will not prevent him from obtaining
gainful employment subsequent to the termination of his employment.
	 
	 	h.	 	Remedies; Injunctive Relief.

(i) The Executive acknowledges and agrees that the covenants
and obligations of the Executive set forth in this Section 8
relate to special, unique and extraordinary services rendered
by the Executive to the Company and that a violation of any
of the terms of such covenants and obligations will cause the
Company irreparable injury for which adequate remedies are
not available at law. Therefore, the Executive agrees that
the Company shall be entitled to seek an injunction,
restraining order or other temporary or permanent equitable
relief (without the requirement to post bond) restraining the
Executive from committing any violation of the covenants and
obligations contained herein. These injunctive remedies are
cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity. The
existence of any claim or cause of action by the Executive
against the Company shall not constitute a defense to the
enforcement by the Company of the foregoing restrictive
covenants, but such claim or cause of action shall be
determined separately.

(ii) If at any time the Executive materially breaches any of
the covenants in Section 8, and fails to cure such breach
within ten (10) days after receipt of written notice from the
Company, then (x) the Company shall have the right to cease
to pay or provide to the Executive any payment, benefit or
entitlement due (or accrued) under this Agreement and (y) the
Executive shall be required to repay to the Company the net
after-tax amount (such after-tax amount to be determined
after taking into account tax deductions, tax credits, and
the like attributable to the repayment) of any severance
paid to the Executive under this Agreement. Such repayment to
be made within 15 days after written notice from the Company
to the Executive requesting such repayment.

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(iii) If at any time following the Restricted Period but
prior to the second anniversary of the termination of the
Executive’s employment, the Executive takes any action or
engages in any conduct that would have constituted a material
breach of Section 8(d) or 8(e) if it had occurred during 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 breach had occurred during the Restricted
Period.

	 	i.	 	Survival. The provisions of this Section 8 shall remain in full force
and effect until the expiration of the periods specified herein notwithstanding the
earlier termination of the Executive’s employment hereunder or the expiration of the
Employment Period. For purposes of this Section 8, “Company” shall mean the Company
and any affiliate of the Company or any successor thereto.

	9.	 	Mandatory Arbitration. Except to the extent necessary to enforce the provisions of
Section 8 hereof in accordance with Section 8(g) or 8(h), the Executive (on behalf of himself
and his beneficiaries) and the Company agree that any controversy or claim arising out of, or
relating to this Agreement, or the breach thereof, or the Executive’s employment with the
Company or any affiliate, or any termination of such employment, shall be settled by
confidential arbitration in Puerto Rico in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. Any award entered shall be final, binding and
nonreviewable except on such limited grounds for review of arbitration awards as may be
permitted by applicable law. Judgment upon the award 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 the Company shall not be assignable by the Executive. This Agreement shall
inure to the benefit of and be 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 its successors and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company without the Executive’s prior
written consent except that such rights or obligations may be assigned or transferred
pursuant to a merger or consolidation in which the Company is not the continuing
entity, or a sale, liquidation or other disposition of all or substantially all of the
assets of the Company, provided that the assignee or transferee is the successor 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 of law.

13

 

	11.	 	Miscellaneous.

	 	a.	 	The Executive represents and warrants that he has the free and unfettered right
to enter into this Agreement and to perform his obligations under it and that he knows
of no agreement between him and any other person, firm or organization, or any law or
regulation, that would be violated by the performance of his obligations under this
Agreement. The Executive agrees that he will not use or disclose any confidential or
proprietary information of any prior employer in the course 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 to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives. In the event of any conflict or inconsistency between the provisions
of this Agreement and any other Company plan, program, policy or agreement, the
provisions of this Agreement shall control.
	 
	 	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 receipt requested or (iii) two (2) days after being sent by
overnight courier (provided that a written acknowledgement of receipt is obtained by
the overnight courier), with any such notice duly addressed 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 Counsel

or to such other address as either party shall have furnished to the other in writing in
accordance herewith.

	 	d.	 	The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity 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 any applicable law or regulation. In addition, this Agreement is intended
to comply with the requirements of Section 409A of the Code and the regulations

14

 

	 	 	 	promulgated thereunder (“Section 409A”) so as not to subject the Executive to the
payment of interest or any additional tax under Section 409A. In furtherance thereof,
if payment or provision of any amount or benefit hereunder at the time specified in this
Agreement would subject such amount or benefit to any additional tax under Section 409A,
the payment or provision of such amount or benefit shall be postponed to the earliest
commencement date on which the payment or the provision of such amount or benefit could
be made without incurring such additional tax (including paying any severance that is
delayed in a lump 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 or after the expiration of the Employment Period), upon reasonable request of
the Company, the Executive shall cooperate with the Company or any of its affiliates
with respect to any legal or investigatory proceeding, including any government or
regulatory investigation, or any litigation or other dispute relating to matters in
which he was involved or had knowledge (or reasonably should have had knowledge) during
his employment with the Company, subject to his reasonable personal and business
schedules. The Company shall reimburse the Executive for all reasonable out-of-pocket
travel and meal expenses associated with any cooperation provided hereunder.
	 
	 	g.	 	No waiver shall be valid unless in writing signed by the party against whom the
waiver is being enforced (that is, by the Executive or an authorized officer of the
Company, as the case may be).
	 
	 	h.	 	This Agreement contains the entire agreement between the parties concerning the
subject matter hereof and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the parties with
respect thereto (including, without limitation, the term sheet previously negotiated by
the parties). In the event of any inconsistency between the provisions of this
Agreement and the provisions of any other agreement or plan relating to the Stock
Option Award or any other equity award granted to Executive, the provisions of this
Agreement shall control. Any provision of this Agreement, to the extent necessary to
carry out the intent of such provision, shall survive after the expiration of the
Employment Period.
	 
	 	i.	 	The Executive shall be entitled to indemnification in connection with any
litigation or proceeding arising out of the Executive’s acting as EVP — Chief
Investment Officer & Treasurer or as an employee, officer or director of the Company,
to the fullest extent permitted under the Company’s charter and by-laws and by
applicable law. In addition, the Executive shall, during the Employment Period and for
ten (10) years thereafter, be entitled to liability insurance coverage pursuant to a
Company-purchased directors’ and officers’ liability insurance policy on the same basis
as other directors and officers of the Company to whom such coverage (if any) is then
provided.

15

 

	 	j.	 	Notwithstanding any other provision of this Agreement or otherwise, the Company
will make no payment pursuant to this Agreement or otherwise which would be prohibited
by 12 USC Section 1828(k) or any implementing regulations thereunder.
	 
	 	k.	 	This Agreement may be executed in one or more counterparts, each of which shall
be deemed to 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.

16

 

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of
the day and year first above written.

	 	 	 	 	 	 	 
	 	 	DORAL FINANCIAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Lesbia Blanco	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Lesbia Blanco	 	 
	 	 	Title: Executive Vice President — Corporate HR Director	 	 
	 
	 
	 	/s/ Marangal I. Domingo	 	 
	 	 	 	 	 
	 	 	Marangal I. Domingo	 	 

 

 

EXHIBIT A

     For all purposes of this Agreement, the following terms shall have the meanings set forth
below:

     “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-term
disability policy provided by the Company or (ii) the Executive has been unable, due to physical or
mental illness or incapacity, to substantially perform the essential duties of his employment with
reasonable accommodation for a continuous period of ninety (90) days or an aggregate of one-hundred
eighty (180) days during any consecutive twelve (12)-month period.

     “Cause” shall mean:

	 	i.	 	the Executive’s act of fraud, misappropriation, or
embezzlement with respect to the Company or any material affiliate;
	 
	 	ii.	 	the Executive’s indictment for, conviction of, or
plea of guilty or no contest to any felony (other than a minor
traffic violation);
	 
	 	iii.	 	the Executive’s admission of liability of, or a
finding by a court or the applicable regulatory agency or body of
liability for, the violation of any “Securities Laws” (but excluding
any technical violations of any Securities Laws which are not
criminal in nature) or the violation of any “Banking Laws” (but
excluding any technical violations of any Banking Laws which are not
criminal in nature); as used herein, the term “Securities Laws” means
any federal or state law, rule or regulation governing the issuance
or exchange of securities, including without limitation the
Securities Act of 1933, the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder and “Banking Laws” means
any federal or state banking law, rule or regulation governing the
Company or its affiliates;
	 
	 	iv.	 	the Executive engages in conduct that constitutes
willful gross neglect or willful misconduct, in either case,
resulting in significant harm to the Company’s or its affiliates’
business or reputation;
	 
	 	v.	 	the Executive’s intentional failure after
reasonable prior written notice from the Company to comply with any
valid and legal directive of the Board; or

 

 

	 	vi.	 	the Executive’s material breach of any covenant set
forth in Section 8 of this Agreement.

     For purposes of this definition of “Cause,” an action or failure to act by the Executive shall
not be considered “willful” if the Executive believed in good faith that his action or failure to
act 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 terminated
for “Cause” within the meaning of clauses (i), (iv), (v) or (vi) above, unless the Executive has
been given written notice by the Board stating the basis for such termination and he is given
fifteen (15) days to cure the neglect or conduct that is the basis of any such claim and, if he
fails to cure such conduct, or such conduct cannot be cured, the Executive has an opportunity to be
heard before the full Board and after such hearing, the Board gives the Executive written notice
confirming that in the judgment of a majority of the members of the Board (other than the
Executive, if applicable) “Cause” for terminating the Executive’s employment exists.

     “Good Reason” shall mean the occurrence of any of the following without the Executive’s
written consent:

(i) a reduction in the Executive’s then current Annual Base Salary
or target bonus opportunity;

(ii) a material diminution in the Executive’s positions, duties or
authorities as EVP — Chief Investment Officer & Treasurer,
including, without limitation, removing him from such positions;
provided, that Good Reason shall also exist if at any time following
a Change in Control involving an entity of smaller or similar size
to the Company (measured on the basis of assets), Executive does not
hold the positions set forth above at the ultimate parent entity
resulting from such Change in Control;

(iii) Executive’s principal work location is moved more than
twenty-five (25) miles from San Juan, Puerto Rico;

(iv) a change in reporting structure so that the Executive reports
to someone other than the Chief Executive Officer of the Company or
the Board; or

(v) the failure of any successor to all or substantially all of the
Company’s assets to assume this Agreement, whether in writing or by
operation of law.

19

 

     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 not
cure the event or events giving rise to Good Reason prior to the expiration of such thirty (30)-day
notice 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) and
Section 13(d) of the Securities Exchange Act of 1934) other than the
Company or any employee benefit plan of the Company or any of its
subsidiaries, (x) becomes the “beneficial owner” (as such term is
used in Rule 13d-3 promulgated under the Securities Exchange Act of
1934) of Company securities having more than 50% of the combined
voting power of the then outstanding securities of the Company that
may be cast for the election of directors of the Company (other than
as a result of the issuance of securities initiated by the Company
in the ordinary course of business) (“Voting Securities”) or (y)
becomes the “beneficial owner” of Company of 25% or more of the
Voting Securities of the Company and such person has the power to
appoint or elect a majority of the members of the Board; or

(ii) persons who, as of the effective date of this Agreement
constitute the Board (the “Incumbent Directors”) cease for any
reason, including without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least
a majority thereof, provided that any person becoming a director of
the Company subsequent to the effective date of this Agreement shall
be considered an Incumbent Director if such person’s election or
nomination for election was approved by a vote of at least 50% of
the Incumbent Directors; but provided further, that any such
person whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of
members of the Board or other actual or threatened solicitation of
proxies or consents by or on behalf of a “person” (as defined in
Section 13(d) and 14(d) of the Exchange Act) other than the Board,
including by reason of agreement intended to avoid or settle any
such actual or threatened contest or solicitation, shall not be
considered an Incumbent Director; or

(iii) as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, or any
combination of the foregoing transactions, the holders of all the

20

 

Company’s securities entitled to vote generally in the election of
directors of the Company immediately prior to such transaction
constitute, following such transaction, less than a majority of the
combined voting power of the then-outstanding securities of the
surviving entity (or in the event each entity survives, the ultimate
parent entity resulting from such transaction) (the “Surviving
Entity”) entitled to vote generally in the election to elect
directors of the Surviving Entity after such transaction.

21EX-10.4 EMPLOYMENT AGREEMENT-OLGA MAYORAL-WILSON

 

Exhibit 10.4

EMPLOYMENT AGREEMENT

          AGREEMENT between DORAL FINANCIAL CORPORATION, a corporation organized under the laws of the
Commonwealth of Puerto Rico (together with its successors and assigns, the “Company”), and OLGA
MAYORAL-WILSON (the “Executive”) dated as of September 18, 2006.

          WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the
best 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 the
Executive’s employment in this Agreement;

          NOW THEREFORE, in consideration of the mutual promises and covenants made herein and the
mutual 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 hereby
agrees to employ the Executive, and the Executive hereby agrees to serve the Company and its
affiliates, for the period commencing on the Commencement Date (as defined herein) and ending on
the second anniversary of the Commencement Date; provided that the Executive’s employment by the
Company will automatically be extended by twelve (12) additional months on the second anniversary
of the Commencement Date and each annual anniversary thereafter unless either party provides
written notice to the other party no less than one hundred and eighty (180) days prior to the date
of any such scheduled extension of its or his intention not to extend the term of the Executive’s
employment (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 Executive
commences employment with the Company which in all events shall be no later than September 18,2006.
Notwithstanding the foregoing, the Employment Period shall end on the date on which the
Executive’s employment is terminated by either party in accordance with the provisions of this
Agreement.

     2. Position and Duties.

          (a) During the Employment Period, the Executive shall serve as Executive Vice President —
Chief Communications Officer at Doral Financial Corporation, and shall have such duties and
responsibilities as are commensurate with such positions. During the Employment Period, the
Executive shall report directly to the Chief Executive Officer of the Company or the Board. The
“Communications Division” includes, without limitation, the following business segments of the
Company: Corporate Affairs; External/Internal Communications; Investors Relations; .Marketing
Media.

1

 

          (b) The Executive’s principal work location, subject to travel on Company business, shall be
the Company’s headquarters in Puerto Rico. Beginning no later than September 18,, 2006, and at all
times thereafter during the Employment Period, the primary place of residence of the Executive and
his family shall be Puerto Rico.

          (c) During the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote his full business attention and
time to the business and affairs of the Company, and to use his best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period, the Executive shall be
entitled to engage in charitable and educational activities and to manage his personal and family
investments, to the extent such activities are not competitive with the business of the Company or
its affiliates and do not interfere in any way, in the reasonable judgment of the Board (or a
committee thereof), with the performance of his duties for the Company and are otherwise consistent
with the Company’s governance policies.

     3. Compensation.

          (a) Annual Base Salary. During the Employment Period, the Executive shall receive an
annual base salary (“Annual Base Salary”) at a rate of $300,000.00, payable in accordance with the
Company’s normal payroll policies. The Executive’s Annual Base Salary shall be prorated for 2006
and for any other partial year of employment during the Employment Period based upon the portion of
the year that the Executive is employed by the Company. The Executive’s Annual Base Salary shall
be 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 prior
written consent.

          (b) Annual Bonus. With respect to each fiscal year completed during the Employment
Period, the Executive shall have a target annual bonus opportunity equal to 60% of his Annual Base
Salary (“Target Bonus”); provided that the maximum bonus payable for any fiscal year shall not
exceed 200% of Target Bonus. The Board shall establish, in its sole discretion, the performance
and payment conditions applicable to such annual bonuses. Notwithstanding the foregoing, (i) for
remainder of 2006: Executive’s bonus shall be $180,000 payable on normal cycle following close of
the fiscal year (12/31/06), but no later than March 31, 2007; and (ii) for 2007 and beyond: A
target bonus of 60% of base salary with a range of 0 — 200% of target with a minimum of
$180,000.00 guaranteed for 2007.

          (c) Stock Options. Effective as of the Commencement Date, the Company shall grant the
Executive 50,000 options at market (the “Stock Option Award”) upon joining. The Stock Option Award
will vest at the rate of 25% (12,500 shares) per year, but may vest sooner as provided in Sections
5 and 6 below. Subsequent grants will be awarded at the discretion of the Board .

          
2

 

          (d) Additional Compensation:

          (i) Car Allowance: The Company will provide the Executive with a monthly car
allowance under the Company’s policy of $630.00 per month to be used to lease or
purchase an automobile for use in the affairs and business of the Company and to
cover related gasoline and insurance expenses related to the use of such automobile.

          (ii) The Executive will receive a one time signing bonus of $100,000.00 in a
lump sum payment upon his hiring date.

          (e) Long-Term Incentive Plans. During the Employment Period, the Executive shall be
eligible to participate in the ongoing equity and other long-term awards and programs of the
Company as determined in the sole discretion of the Board or a committee thereof.

          (f) Other Benefits and Perquisites. During the Employment Period, the Executive shall
be entitled to participate in the Company’s employee benefit plans, programs and arrangements
(including, without limitation, life, medical and dental insurance, 401(k), and disability
insurance, vacation and sick leave programs) and perquisite programs and arrangements, if any, in
each case, on the same basis as generally provided to other similarly-situated executives of the
Company. 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 appropriate
business expenses in accordance with the terms of the Company’s policies and
procedures in effect from time to time.

     4. Termination of Employment.

          (a) Death or Disability. The Executive’s employment shall terminate automatically
upon the Executive’s death during the Employment Period. In the event of the Executive’s
Disability (as defined in Exhibit A attached hereto), the Company may provide the Executive with
written notice in accordance with Section 12(c) of this Agreement of its intention to terminate the
Executive’s employment due to Disability. In such event, the Executive’s employment with the
Company 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 shall
immediately 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 may
terminate the Executive’s employment either with or without Cause (as defined in Exhibit A attached
hereto). For purposes of this Agreement, a termination “without Cause” shall

3

 

mean a termination by the 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 the
Executive 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 the
Company or the Executive (other than death) shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 12(c) of this Agreement. For purposes of this
Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated and (iii) if necessary, specifies the Date
of Termination consistent with this Agreement (which date shall be not more than thirty (30) days
after the giving of such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive’s or the Company’s rights hereunder.

          (e) Date of Termination. “Date of Termination” means (i) if the Executive’s
employment is terminated by the Company for Cause, the date of receipt of the Notice of Termination
or 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 Executive
written 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 receipt
of the Notice of Termination or any later date specified therein within thirty (30) days of such
notice, as the case may be, (iii) if the Executive’s employment is terminated by the Executive for
Good Reason, 30 days after the Company receives the Notice of Termination unless the Company has
cured the alleged grounds for such termination within 30 days after such receipt or if the
Executive’s employment is terminated by the Executive without Good Reason, 30 days after the
Company receives the Notice of Termination, provided however, in either case the Company may
accelerate the Date of Termination to an earlier date by providing the Executive notice of such
action, and (iv) if the Executive’s employment is terminated by reason of death or Disability, the
date 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, the
Executive agrees to resign, effective as of the Date of Termination, from any positions that the
Executive holds with the Company and its affiliates, the Board (and any committees thereof) and the
board of directors (and any committees thereof) of any of the Company’s affiliates. The

4

 

Executive hereby agrees to execute any and all documentation of such resignations upon request
by the Company, but he shall be treated for all purposes as having so resigned upon termination of
his employment, regardless of when or whether he executes any such documentation, or Executive is
terminated 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 Company
terminates the Executive’s employment without Cause, or the Executive terminates his employment for
Good Reason, or if the Company fails to renew or extend this Agreement upon expiration of the
Employment Period, the Company shall have no further obligations to the Executive under this
Agreement or otherwise other than to pay or provide to the Executive the following amounts and
benefits (provided the Executive has executed, delivered to the Company and not revoked a general
release of claims against the Company in a form satisfactory to the Company (the “Release”) and
subject to Section 8(h) hereof):

          (i) An amount equal to Executive’s unpaid Annual Base Salary for
services through the Date of Termination;

          (ii) an amount equal to two (2) times his compensation (salary and
bonus) during the preceding year (the “Severance Payment”), and if such
termination occurs in the first year of employment, the Severance Payment
shall be $960,000.00 dollars;

          (iii) full vesting as of the Date of Termination of Executive’s Stock
Option Awards (as defined in Section 3(c) hereof) and any other equity
awards granted to Executive, with continued exercisability of the
outstanding 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 Date
of Termination in all Company medical and dental plans in which the
Executive and his eligible dependents were participating immediately prior
to the Date of Termination (subject to offset as set forth in Section 8
hereof);

          (v) as long as the Executive uses such services prior to the first
anniversary of the Date of Termination, up to $25,000 in outplacement
services; and

          (vi) payment of other amounts, entitlements or benefits, if any, in
accordance with applicable plans, programs, arrangements or other agreements
of the Company.

5

 

          (b) Death or Disability. If the Executive’s employment is terminated by reason of the
Executive’s death or Disability during the Employment Period, the Company shall have no further
obligations to the Executive or his legal representatives, as applicable, under this Agreement or
otherwise 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 which
the 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 Option
Award (as defined in Section 3(c) hereof), and any other equity awards
granted to Executive, with continued exercisability of the outstanding
options for twelve (12) months following the Date of Termination (but in no
event beyond the end of the original term of the options);

          (iv) except in the case of Executive’s death, continued participation
until the second anniversary of the Date of Termination in all Company
medical and dental plans in which the Executive and his eligible dependents
were participating immediately prior to the Date of Termination (subject to
offset as set forth in Section 8 hereof); and

          (v) payment of other amounts, entitlements or benefits, if any, in
accordance with applicable plans, programs, arrangements or other agreements
of the Company.

          (c) Cause or Voluntary Resignation Without Good Reason. If the Executive’s employment
shall be terminated by the Company for Cause or by the Executive for any reason other than Good
Reason at any time during the Employment Period, the Company shall have no further obligations to
the Executive under this Agreement or otherwise other than for the payment of the amounts and
provision of the benefits set forth below:

          (i) an amount equal to the Executive’s unpaid Annual Base Salary for
services through the Date of Termination;

          (ii) for a voluntary resignation (without Good Reason), continued
exercisability for 90 days following the Date of Termination for the portion
of the Stock Option Award or any other equity awards, if any, that was
vested and outstanding as of the Date of Termination (but in no event beyond
the expiration of the original term of the award);

6

 

          (iii) for a termination for Cause, forfeiture and cancellation of the
Stock 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 Stock
Option Award and any other equity awards as of the Date of Termination; and

          (v) payment of other amounts, entitlements or benefits, if any, in
accordance with applicable plans, programs, arrangements or other agreements
of the Company.

          6. Change in Control Protections.

          (a) Upon the occurrence of a Change in Control (as defined in Exhibit A attached hereto), the
Stock Option Award (as defined in Section 3(c) hereof) and all other equity awards shall
immediately vest and become exercisable.

          (b) In the event, during the Employment Period, the Company terminates the Executive’s
employment without Cause or the Executive terminates his employment for Good Reason, in both cases
upon or within two (2) years immediately following a Change in Control, the Company shall have no
further obligations to the Executive under the terms of this Agreement or otherwise other than to
pay or provide to the Executive the following amounts and benefits (provided the Executive has
executed, delivered to the Company and not revoked a general release of claims against the Company
in 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 which
the 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 Option
Award (as defined in Section 3(c) hereof), and any other equity awards
granted to Executive, with continued exercisability of the outstanding
options for twelve (12) months following the Date of Termination (but in no
event beyond the end of the original term of the options);

          (iv) continued participation until the second anniversary of the Date
of Termination in all Company medical and dental plans in which the
Executive and his eligible dependents were participating immediately prior
to the Date of Termination (subject to offset as set forth in Section 7
hereof); and

7

 

          (v) as long as the Executive uses such services prior to the first
anniversary of the Date of Termination, up to $25,000 in outplacement
services; and

          (vi) payments of other amounts, entitlements or benefits, if any, in
accordance with applicable plans, programs, arrangements or other agreements
of the Company.

     7. No Duplication; No Mitigation. In no event shall the Executive be entitled to
duplicate payments or benefits under different provisions of this Agreement or pursuant to the
terms of any other plan, program or arrangement of the Company or its affiliates. In the event of
any termination of the Executive’s employment, the Executive shall be under no obligation to seek
other employment, and, there shall be no offset against amounts due the Executive under this
Agreement on account of any remuneration attributable to any subsequent employment except with
respect to the continuation of benefits under Sections 5(a)(iii) and Section 6(b)(iv), which shall
terminate immediately upon obtaining comparable coverage from another employer.

     8. Restrictive Covenants.

          (a) Confidentiality. During the Employment Period and thereafter, other than in the
ordinary course of performing his duties for the Company, the Executive agrees that he shall not
disclose to anyone or make use of any trade secret or proprietary or confidential information of
the Company or any affiliate of the Company, including such trade secret or proprietary or
confidential information of any customer or other entity to which the Company owes an obligation
not 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 so
by a court of law, by any governmental agency having supervisory authority over the business of the
Company or by any administrative or legislative body (including a committee thereof) with apparent
or actual jurisdiction to order him to divulge, disclose or make accessible such information. In
the event the Executive is requested to disclose information as contemplated in the preceding
sentence, the Executive agrees, unless otherwise prohibited by law, to use his best efforts to give
the Company’s General Counsel prompt written notice of any request for disclosure in advance of the
Executive making such disclosure in order to permit the Company a reasonable opportunity to
challenge such disclosure. The foregoing shall not apply to information that (i) was known to the
public prior to its disclosure by the Executive, or (ii) becomes known to the public through no
wrongful disclosure by or act of the Executive or any representative of the Executive.

          (b) Property Rights. Whether during the Employment Period or thereafter, the
Executive agrees to hereby sell, assign and transfer to the Company all of his right, title and
interest 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 with
others, and which are within or arise out of any general field of the Company’s business or arise
out of any work he performs, or information he receives regarding the business of the

8

 

Company, while employed by the Company. The Executive shall fully disclose to the Company as
promptly as available all information known or possessed by him concerning any Rights, and upon
request by the Company and without any further remuneration in any form to him by the Company, but
at the expense of the Company, execute all applications for patents and for copyright registration,
assignments thereof and other instruments and do all things which the Company may deem necessary to
vest and maintain in it the entire right, title and interest in and to all such Rights. The
Executive agrees that at the time of the termination of employment, whether at the instance of the
Executive or the Company, and regardless of the reasons therefor, he will promptly deliver to the
Company’s General Counsel, and not keep or deliver to anyone else, 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 office equipment and other Company tangible property)
and (ii) notes, files, memoranda, papers and, in general, any and all physical matter and computer
files containing confidential or proprietary information of the Company or any of its affiliates,
including any and all documents relating to the conduct of the business of the Company or any of
its affiliates and any and all documents containing confidential or proprietary information of the
customers of the Company or any of its affiliates, except for (x) any documents for which the
Company’s General Counsel has given written consent to removal at the time of termination of the
Executive’s employment and (y) any information necessary for the Executive to retain for his tax
purposes.

          (c) Non-Competition. The Executive acknowledges that in his capacity in management
the Executive has had or will have a great deal of exposure and access of the Company’s trade
secrets and confidential and proprietary information. Therefore, during the Executive’s employment
and for twelve (12) months following termination of such employment (whether during the Employment
Period or thereafter) (the “Restricted Period") (i) the Executive shall protect the Company’s trade
secrets and other confidential and proprietary information, and (ii) the Executive agrees that he
shall not, other than in the ordinary course of performing his duties hereunder or as agreed by the
Company in writing, engage in a “Competitive Business,” directly or indirectly, as an individual,
partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any
relationship or capacity. The Executive shall not be deemed to be in violation of this Section
9(c) by reason of the fact that he owns or acquires, solely as an investment, two percent (2%) or
less 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 to
purchase the stock or assets of the Company or its affiliates or (y) any financial institution with
a substantial presence in the mortgage origination business in Puerto Rico. Notwithstanding the
foregoing, if the Company provides the Executive with notice that it is not renewing the Employment
Period in accordance with Section 1 hereof, the provisions of this Section 9(c) shall no longer be
effective upon the expiration of the Employment Period.

          (d) Non-Interference. The Executive acknowledges that information regarding the
Company’s business and financial relations with its vendors and customers is Confidential
Information and proprietary to the Company and that any interference with such relations based
directly or indirectly on the use of such information would cause irreparable damage to the

9

 

Company. The Executive acknowledges that by virtue of his employment with the Company, he has
gained 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 to
draw on this Vendor Information and Customer Information and on other Confidential Information if
he were to solicit or service the Company’s vendors or customers on behalf of a competing business
enterprise. Accordingly, and subject to the immediately following sentence, the Executive agrees
that, other than in the ordinary course of performing his duties for the Company, during the
Restricted Period, the Executive will not, on behalf of himself or any other person or entity,
directly or indirectly seek to encourage or induce any vendor or customer of the Company to cease
doing business with, or lessen its business with, the Company, or otherwise interfere with or
damage (or attempt to interfere with or damage) any of the Company’s relationships with its vendors
and customers. No action by another person or entity shall be deemed to be a breach of this
provision unless the Executive directly or indirectly assisted, encouraged or otherwise counseled
such person or entity to engage in such activity.

          (e) No Hire; Non-Solicitation. The Executive agrees that, during the Restricted
Period (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 of
the Company or any of its affiliates who is then an employee of the Company or such affiliate or
was an employee during the prior six (6) month period, or (ii) solicit or encourage any such
employee to leave the employ of the Company or such affiliate, as the case may be. No action by
another person or entity shall be deemed to be a breach of this provision unless the Executive
directly or indirectly assisted, encouraged or otherwise counseled such person or entity to engage
in such activity.

          (f) Public Comment. Following the Employment Period, the Executive shall not at any
time (i) make any public derogatory comment concerning the Company or its affiliates or anyone whom
the Executive knows to be a current or former director, officer, stockholder or employee of the
Company or (ii) without the prior written consent of the Company, which consent shall not be
unreasonably 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 whom
the Executive knows to be a current or former director, officer, stockholder or employee; provided
that no such consent shall be necessary for an academic work relating to Executive’s employment
with the Company. Following the Employment Period, the Company shall not at any time make any
public derogatory comment concerning the Executive. Notwithstanding the foregoing, nothing in this
Section 8(f) shall prohibit any person from (x) responding publicly to incorrect, disparaging or
derogatory public statements about the Company or the Executive relating to his employment with the
Company, (y) providing truthful testimony in any judicial or administrative matter, or (z) making
truthful statements required by law, by any regulatory authority or organization, or in connection
with any public filing required by the Securities and Exchange Commission or any other regulatory
authority.

          (g) Blue Penciling. If any restrictions on competitive or other activities contained
in this Section 8 shall for any reason be held by a court of competent jurisdiction to be

10

 

excessively broad as to duration, geographical scope, activity or subject, such restrictions
shall be construed so as thereafter to be limited or reduced to be enforceable to the extent
compatible with the applicable law; it being understood that by the execution of this Agreement,
(i) the parties hereto regard such restrictions as reasonable and compatible with their respective
rights and (ii) the Executive acknowledges and agrees that the restrictions will not prevent him
from obtaining gainful employment subsequent to the termination of his employment.

          (h) Remedies; Injunctive Relief.

          (i) The Executive acknowledges and agrees that the covenants and
obligations of the Executive set forth in this Section 8 relate to special,
unique and extraordinary services rendered by the Executive to the Company
and that a violation of any of the terms of such covenants and obligations
will cause the Company irreparable injury for which adequate remedies are
not available at law. Therefore, the Executive agrees that the Company
shall be entitled to seek an injunction, restraining order or other
temporary or permanent equitable relief (without the requirement to post
bond) restraining the Executive from committing any violation of the
covenants and obligations contained herein. These injunctive remedies are
cumulative and are in addition to any other rights and remedies the Company
may have at law or in equity. The existence of any claim or cause of action
by the Executive against the Company shall not constitute a defense to the
enforcement by the Company of the foregoing restrictive covenants, but such
claim or cause of action shall be determined separately.

          (ii) If at any time the Executive materially breaches any of the
covenants in Section 8, and fails to cure such breach within ten (10) days
after receipt of written notice from the Company, then (x) the Company shall
have the right to cease to pay or provide to the Executive any payment,
benefit or entitlement due (or accrued) under this Agreement and (y) the
Executive shall be required to repay to the Company the net after-tax amount
(such after-tax amount to be determined after taking into account tax
deductions, tax credits, and the like attributable to the repayment) of any
severance paid to the Executive under this Agreement. Such repayment to be
made within 15 days after written notice from the Company to the Executive
requesting such repayment.

          (iii) If at any time following the Restricted Period but prior to the
second anniversary of the termination of the Executive’s employment, the
Executive takes any action or engages in any conduct that would have
constituted a material breach of Section 8(d) or 8(e) if it had occurred
during the Restricted Period, then clauses (x) and (y) of

11

 

Section 8(h)(ii) — as limited by Section 8(h)(ii) — shall apply as if
such material breach had occurred during the Restricted Period.

          (i) Survival. The provisions of this Section 8 shall remain in full force and effect
until the expiration of the periods specified herein notwithstanding the earlier termination of the
Executive’s employment hereunder or the expiration of the Employment Period. For purposes of this
Section 8, “Company” shall mean the Company and any affiliate of the Company or any successor
thereto.

     9. Mandatory Arbitration. Except to the extent necessary to enforce the provisions of
Section 8 hereof in accordance with Section 8(g) or 8(h), the Executive (on behalf of himself and
his beneficiaries) and the Company agree that any controversy or claim arising out of, or relating
to this Agreement, or the breach thereof, or the Executive’s employment with the Company or any
affiliate, or any termination of such employment, shall be settled by confidential arbitration in
Puerto Rico in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Any award entered shall be final, binding and nonreviewable except on such limited
grounds for review of arbitration awards as may be permitted by applicable law. Judgment upon the
award 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 the
Company shall not be assignable by the Executive. This Agreement shall inure to the benefit of and
be 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 its
successors and assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company without the Executive’s prior written consent except that
such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in
which the Company is not the continuing entity, or a sale, liquidation or other disposition of all
or substantially all of the assets of the Company, provided that the assignee or transferee is the
successor 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 of
law.

     11. Miscellaneous.

          (a) The Executive represents and warrants that he has the free and unfettered right to enter
into this Agreement and to perform his obligations under it and that he knows of no agreement
between him and any other person, firm or organization, or any law or regulation, that would be
violated by the performance of his obligations under this Agreement. The Executive agrees that he
will not use or disclose any confidential or proprietary information of any prior employer in the
course of performing his duties for the Company or any of its affiliates.

12

 

          (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 to
principles of conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their respective successors and legal
representatives. In the event of any conflict or inconsistency between the provisions of this
Agreement and any other Company plan, program, policy or agreement, the provisions of this
Agreement shall control.

          (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 receipt
requested or (iii) two (2) days after being sent by overnight courier (provided that a written
acknowledgement of receipt is obtained by the overnight courier), with any such notice duly
addressed 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 Counsel

or to such other address as either party shall have furnished to the other in writing in
accordance herewith.

          (d) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity 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 any
applicable law or regulation. In addition, this Agreement is intended to comply with the
requirements of Section 409A of the Code and the regulations promulgated thereunder (“Section
409A”) so as not to subject the Executive to the payment of interest or any additional tax under
Section 409A. In furtherance thereof, if payment or provision of any amount or benefit hereunder
at the time specified in this Agreement would subject such amount or benefit to any additional tax
under Section 409A, the payment or provision of such amount or benefit shall be postponed to the
earliest commencement date on which the payment or the provision of such amount or benefit could be
made without incurring such additional tax (including paying any severance that is delayed in a
lump 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 or
after the expiration of the Employment Period), upon reasonable request of

13

 

the Company, the
Executive shall cooperate with the Company or any of its affiliates with respect to any legal or
investigatory proceeding, including any government or regulatory investigation, or
any litigation or other dispute relating to matters in which he was involved or had knowledge
(or reasonably should have had knowledge) during his employment with the Company, subject to his
reasonable personal and business schedules. The Company shall reimburse the Executive for all
reasonable out-of-pocket travel and meal expenses associated with any cooperation provided
hereunder.

          (g) No waiver shall be valid unless in writing signed by the party against whom the waiver is
being enforced (that is, by the Executive or an authorized officer of the Company, as the case may
be).

          (h) This Agreement contains the entire agreement between the parties concerning the subject
matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the parties with respect thereto (including, without
limitation, the term sheet previously negotiated by the parties). In the event of any
inconsistency between the provisions of this Agreement and the provisions of any other agreement or
plan relating to the Stock Option Award or any other equity award granted to Executive, the
provisions of this Agreement shall control. Any provision of this Agreement, to the extent
necessary to carry out the intent of such provision, shall survive after the expiration of the
Employment Period.

          (i) The Executive shall be entitled to indemnification in connection with any litigation or
proceeding arising out of the Executive’s acting as Executive Vice President of the Company’s
Communications Division or as an employee, officer or director of the Company, to the fullest
extent permitted under the Company’s charter and by-laws and by applicable law. In addition, the
Executive shall, during the Employment Period and for ten (10) years thereafter, be entitled to
liability insurance coverage pursuant to a Company-purchased directors’ and officers’ liability
insurance policy on the same basis as other directors and officers of the Company to whom such
coverage (if any) is then provided.

          (j) Notwithstanding any other provision of this Agreement or otherwise, the Company will make
no payment pursuant to this Agreement or otherwise which would be prohibited by 12 USC Section
1828(k) or any implementing regulations thereunder.

          (k) This Agreement may be executed in one or more counterparts, each of which shall be deemed
to 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.

14

 

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of
the day and year first above written.

	 	 	 	 	 	 	 
	 	 	DORAL FINANCIAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 /s/ Lesbia Blanco	 	 
	 

	 	 	 	 	 	 
	 
	 	 	Name:Lesbia Blanco	 	 
	 
	 	 	Title: Executive Vice President Chief Talent & Administration Officer	 	 
	 
	 
	 	/s/ Olga Mayoral-Wilson	 	 
	 	 	 	 	 
	 	 	Olga Mayoral-Wilson	 	 

 

 

EXHIBIT A

     For all purposes of this Agreement, the following terms shall have the meanings set forth
below:

     “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-term
disability policy provided by the Company or (ii) the Executive has been unable, due to physical or
mental illness or incapacity, to substantially perform the essential duties of his employment with
reasonable accommodation for a continuous period of ninety (90) days or an aggregate of one-hundred
eighty (180) days during any consecutive twelve (12)-month period.

     “Cause” shall mean:

     (i) the Executive’s act of fraud, misappropriation, or embezzlement
with respect to the Company or any material affiliate;

     (ii) the Executive’s indictment for, conviction of, or plea of guilty
or no contest to any felony (other than a minor traffic violation);

     (iii) the Executive’s admission of liability of, or a finding by a
court or the applicable regulatory agency or body of liability for, the
violation of any “Securities Laws” (but excluding any technical violations
of any Securities Laws which are not criminal in nature) or the violation of
any “Banking Laws” (but excluding any technical violations of any Banking
Laws which are not criminal in nature); as used herein, the term “Securities
Laws” means any federal or state law, rule or regulation governing the
issuance or exchange of securities, including without limitation the
Securities Act of 1933, the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder and “Banking Laws” means any federal
or state banking law, rule or regulation governing the Company or its
affiliates;

     (iv) the Executive engages in conduct that constitutes willful gross
neglect or willful misconduct, in either case, resulting in significant harm
to the Company’s or its affiliates’ business or reputation;

     (v) the Executive’s intentional failure after reasonable prior written
notice from the Company to comply with any valid and legal directive of the
Board; or

 

 

     (vi) the Executive’s material breach of any covenant set forth in
Section 8 of this Agreement.

     For purposes of this definition of “Cause,” an action or failure to act by the Executive shall
not be considered “willful” if the Executive believed in good faith that his action or failure to
act 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 terminated
for “Cause” within the meaning of clauses (i), (iv), (v) or (vi) above, unless the Executive has
been given written notice by the Board stating the basis for such termination and he is given
fifteen (15) days to cure the neglect or conduct that is the basis of any such claim and, if he
fails to cure such conduct, or such conduct cannot be cured, the Executive has an opportunity to be
heard before the full Board and after such hearing, the Board gives the Executive written notice
confirming that in the judgment of a majority of the members of the Board (other than the
Executive, if applicable) “Cause” for terminating the Executive’s employment exists.

     “Good Reason” shall mean the occurrence of any of the following without the Executive’s
written consent:

(i) a reduction in the Executive’s then current Annual Base Salary
or target bonus opportunity;

(ii) a material diminution in the Executive’s positions, duties or
authorities as Executive Vice President — Chief Communications
Officer, including, without limitation, removing him from such
positions; provided, that Good Reason shall also exist if at any
time following a Change in Control involving an entity of smaller or
similar size to the Company (measured on the basis of assets),
Executive does not hold the positions set forth above at the
ultimate parent entity resulting from such Change in Control;

(iii) Executive’s principal work location is moved more than
twenty-five (25) miles from San Juan, Puerto Rico;

(iv) a change in reporting structure so that the Executive reports
to someone other than the Chief Executive Officer of the Company or
the Board; or

(v) the failure of any successor to all or substantially all of the
Company’s assets to assume this Agreement, whether in writing or by
operation of law.

17

 

     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 not
cure the event or events giving rise to Good Reason prior to the expiration of such thirty (30)-day
notice 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) and
Section 13(d) of the Securities Exchange Act of 1934) other than the
Company or any employee benefit plan of the Company or any of its
subsidiaries, (x) becomes the “beneficial owner” (as such term is
used in Rule 13d-3 promulgated under the Securities Exchange Act of
1934) of Company securities having more than 50% of the combined
voting power of the then outstanding securities of the Company that
may be cast for the election of directors of the Company (other than
as a result of the issuance of securities initiated by the Company
in the ordinary course of business) (“Voting Securities”) or (y)
becomes the “beneficial owner” of Company of 25% or more of the
Voting Securities of the Company and such person has the power to
appoint or elect a majority of the members of the Board; or

(ii) persons who, as of the effective date of this Agreement
constitute the Board (the “Incumbent Directors”) cease for any
reason, including without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least
a majority thereof, provided that any person becoming a director of
the Company subsequent to the effective date of this Agreement shall
be considered an Incumbent Director if such person’s election or
nomination for election was approved by a vote of at least 50% of
the Incumbent Directors; but provided further, that any such
person whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of
members of the Board or other actual or threatened solicitation of
proxies or consents by or on behalf of a “person” (as defined in
Section 13(d) and 14(d) of the Exchange Act) other than the Board,
including by reason of agreement intended to avoid or settle any
such actual or threatened contest or solicitation, shall not be
considered an Incumbent Director; or

(iii) as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, or any
combination of the foregoing transactions, the holders of all the

18

 

Company’s securities entitled to vote generally in the election of
directors of the Company immediately prior to such transaction
constitute, following such transaction, less than a majority of the
combined voting power of the then-outstanding securities of the
surviving entity (or in the event each entity survives, the ultimate
parent entity resulting from such transaction) (the “Surviving
Entity”) entitled to vote generally in the election to elect
directors of the Surviving Entity after such transaction.

19

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