Document:

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                                                                    EXHIBIT 10.3

                                                                    NO. 00-_____

                              EUROBANCSHARES, INC.
                   NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

                                     PART I

OPTIONEE: __________________________________________

GRANT DATE: ________________________________________

AGGREGATE NUMBER OF OPTION SHARES: _________________

EXERCISE PRICE PER SHARE: ______________

Vesting Schedule: ______________________         ___% per year (______ Shares)
                                                 commencing one year from the
                                                 Grant Date

      Part II of this Agreement is attached hereto and incorporated herein for
      all purposes.

         EXECUTED to be effective as of the Grant Date set forth above.

                                        EUROBANCSHARES, INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        OPTIONEE

                                        ________________________________________
                                        _______________________

                                        Address:

                                        ________________________________________

                                        ________________________________________

                                 PART II-Page 1
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                                     PART II

      This NON-QUALIFIED OPTION AWARD AGREEMENT (this "AGREEMENT") is made and
entered into by and between the EUROBANCSHARES, INC., a corporation organized
under the laws of the Commonwealth of Puerto Rico (the "COMPANY"), and the
OPTIONEE named on Part I (the "OPTIONEE"), as of the date set forth on Part I
(the "GRANT DATE").

                                    RECITALS:

      The Company has adopted the EuroBancshares, Inc. Stock Option Plan dated
May ___, 2002 (the "PLAN") to provide an incentive for employees and directors
of the Company to remain in the service of the Company, to extend to them the
opportunity to acquire a proprietary interest in the Company so that they will
apply their best efforts for the benefit of the Company, and to aid the Company
in attracting able persons to enter the service of the Company; and

      The Board of Directors of the Company (or the Committee of the Company, if
one has been authorized to administer the Plan by the Company's Board of
Directors (the "COMMITTEE")), believes that the granting of the stock options
herein described to the Optionee is consistent with the purposes for which the
Plan was adopted.

      NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth in this Agreement and for other good and valuable consideration, the
Company and the Optionee agree as follows:

      1.    Grant of the Option. The Company hereby grants to the Optionee the
right and option (the "OPTION") to purchase the aggregate number of shares set
forth in Part I (such number being subject to adjustment as provided herein) of
common stock, $0.01 par value per share, of the Company (the "SHARES") on the
terms and conditions set forth in this Agreement. The Option awarded under this
Agreement may be exercised in whole or in part and from time to time, subject to
the terms and conditions of this Agreement and of the Plan. The Option granted
under this Agreement is not intended to qualify as an "incentive stock option"
under Section 1046 of the Code and shall be so construed.

      2.    Exercise Price. The price at which the Optionee shall be entitled to
purchase the Shares covered by the Option shall be the price per Share set forth
in Part I subject to adjustment as provided in Paragraph 9 of this Agreement
(the "EXERCISE PRICE").

      3.    Vesting and Term of the Option.

            (a)   General. The right to exercise the Option shall vest in the
hands of the Optionee in accordance with the provisions of Part I. Shares which
have vested shall be referred to as "VESTED SHARES." Shares which shall have not
vested shall be referred to as "NONVESTED SHARES." The respective numbers of
Vested and Nonvested Shares shall adjust proportionately in accordance with any
adjustments to the number of Shares pursuant to Paragraph 9 of this Agreement.
In addition, Shares may become Vested Shares in accordance with Paragraph 7 of

                                 PART II-Page 1
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this Agreement or Paragraphs 6.4 and 6.6 of the Plan. In general, Nonvested
Shares may become Vested Shares in accordance with the vesting schedule but only
if the Optionee has been continuously employed as a full-time employee of the
Company from the Grant Date to and including the last date of the month with
respect to which such Shares may vest pursuant to Part I.

            (b)   Exercisable for Vested Shares Only. Subject to the relevant
provisions and limitations contained herein, the Optionee may exercise the
Option to purchase some or all of whole Vested Shares. In no event shall the
Optionee be entitled to exercise the Option with respect to Nonvested Shares or
a fraction of a Vested Share.

            (c)   Expiration. Notwithstanding any other provision contained
herein to the contrary, the unexercised portion of the Option, if any, will
automatically and without notice terminate upon the earlier of: (i) ten (10)
years following the Grant Date (provided, however, that any portion of the
Option which shall not become exercisable until the tenth anniversary of the
Grant Date may be exercisable for a period of thirty (30) days preceding the
tenth anniversary of the Grant Date); or (ii) the date determined pursuant to
paragraph 7 of this Agreement. The Option will cease to be exercisable with
respect to a Share when the Optionee purchases the Share.

            (d)   Change in Control. Upon a Change in Control (as defined in the
Plan), all remaining Nonvested Shares shall become Vested Shares and shall
become subject to the provisions of Paragraph 6.6 of the Plan.

      4.    Method of Exercising Option. The Optionee may exercise the Option at
any time prior to the termination of the Option with respect to all or any part
of the Vested Shares. Subject to the terms and conditions of this Agreement, the
Option may be exercised by timely delivery to the Company of a written notice in
the form attached hereto as Exhibit A (the "EXERCISE NOTICE"), which Exercise
Notice shall be effective, subject to the requirements of this Agreement and of
the Plan, on the date received by the Company. The Exercise Notice shall state
the Optionee's election to exercise the Option, the number of Vested Shares in
respect of which an election to exercise has been made, the method of payment
elected (see Paragraph 5), the exact name or names in which the Vested Shares
then being purchased will be registered and the social security number of the
Optionee. The Exercise Notice must be signed by the Optionee and must be
accompanied by payment of the aggregate Exercise Price of the Vested Shares then
being purchased, determined in accordance with Paragraph 2 of this Agreement. If
the Option must be exercised by a person or persons other than the Optionee
pursuant to paragraph 7, the Exercise Notice must be signed by such other person
or persons and must be accompanied by proof acceptable to the Company of the
legal right of such person or persons to exercise the Option. If the Option is
exercised by a person other than the Optionee, the Vested Shares issued upon
such exercise shall be subject to the limitations applicable to such Vested
Shares in the hands of the Optionee. All Vested Shares delivered by the Company
upon exercise of the Option as provided in this Agreement shall be fully paid
and nonassessable upon delivery. Unless the Vested Shares issued upon the
exercise of the Option are then the subject of a registration statement
effective under the Securities Act (and, if required, there is available for
delivery a prospectus meeting the requirements of section 10(a)(3) of the
Securities Act), the delivery of the

                                 PART II-Page 2
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Exercise Notice shall be deemed to be the making by the person delivering such
Exercise Notice of the representations, acknowledgments and agreements which
would be contained in the Investment Letter referred to in paragraph 10.

      5.    Method of Payment for Options. Unless otherwise permitted by the
Board of Directors or the Committee in accordance with the Plan, the full
Exercise Price for the Vested Shares purchased upon the exercise of the Option
(i.e., the number of Vested Shares being purchased multiplied by the Exercise
Price per Share) must be made in cash or cash equivalent funds. The Company will
accept payment by cashier's check or by personal check, provided that if such
personal check is returned for insufficient funds, payment for the Shares and
for any applicable taxes required to be withheld shall be deemed not to have
occurred. In addition, the Option shall not be deemed to be exercised until the
Optionee has provided payment for any withholding taxes which may be due with
respect to such exercise.

      6.    Delivery of Shares. No Shares shall be delivered to the Optionee
upon exercise of the Option until: (i) the Exercise Price for such Shares being
purchased is paid in full in the manner provided in this Agreement and required
under applicable law; (ii) all the applicable taxes required to be withheld have
been paid or withheld in full; (iii) approval of any governmental authority
(together with the expiration of any mandatory waiting periods) required in
connection with the Option, or the issuance of Shares pursuant to this Agreement
has been received by the Company; and (iv) if required by the Committee, the
Optionee has delivered to the Committee an Investment Letter in form and content
satisfactory to the Company as provided in Paragraph 10 of this Agreement.

      7.    Termination of Employment. If the Optionee's employment relationship
with the Company is terminated for any reason other than: (a) the Optionee's
death; (b) the Optionee's Disability (as defined in Paragraph 1.13 of the Plan),
or (c) Cause (as defined in Paragraph 1.08 of the Plan), then any and all
Options held pursuant to this Agreement as of the date of the termination that
are not yet exercisable shall become null and void as of the date of such
termination; provided, however, that the portion, if any, of such Options that
are exercisable as of the date of termination shall be exercisable for a period
of the lesser of: (a) the remainder of the term of the Option; or (b) the date
that is ninety (90) days after the date of termination. Any portion of an Option
not exercised upon the expiration of the lesser of the periods specified above
shall be null and void unless the Optionee dies during such period, in which
case the provisions of Paragraph 7(a) below shall govern.

            (a)   Death. Upon the death of the Optionee, any and all Options
held by the Optionee pursuant to this Agreement that are not yet exercisable as
of the date of the Optionee's death shall become exercisable as provided below
as of the date of death; provided, however, that the Options held by the
Optionee as of the date of death shall be exercisable by that Optionee's legal
representatives, heirs, legatees, or distributees for a period of twelve (12)
months following the date of the Optionee's death. Any portion of an Option not
exercised upon the expiration of such period shall be null and void. Except as
expressly provided in this paragraph, no Option held by an Optionee shall be
exercisable after the death of that Optionee.

                                 PART II-Page 2
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            (b)   Disability. If the Optionee's employment relationship is
terminated by reason of the Optionee's Disability, then the portion, if any, of
any and all Options held by the Optionee that are not yet exercisable as of the
date of that termination for Disability shall become exercisable as provided
below as of the date of termination; provided, however, that the Options held by
the Optionee as of the date of that termination shall be exercisable by the
Optionee, his guardian or his legal representative for a period of twelve (12)
months following the date of such termination. Any portion of an Option not
exercised upon the expiration of such period shall be null and void unless the
Optionee dies during such period, in which event the provisions of Paragraph
7(a) shall govern.

            (c)   Cause. In the event an Optionee is terminated or removed by
the Company for Cause, the Option granted hereunder shall terminate immediately
and any unexpired Options shall be forfeited.

      8.    Nontransferability. The Option granted by this Agreement shall be
exercisable only during the period specified in Paragraph 3 and, except as
provided in Paragraph 7, only by the Optionee during his or her lifetime and
while an employee of the Company. No Option granted by this Agreement is
transferable by the Optionee other than by testament or pursuant to applicable
laws of descent and distribution. The Option, and any rights and privileges in
connection therewith, cannot be transferred, assigned, pledged or hypothecated
by the Optionee, or by any other person or persons, in any way, whether by
operation of law, or otherwise, and may not be subject to execution, attachment,
garnishment or similar process. In the event of any such occurrence, this
Agreement and the Options granted hereunder will automatically terminate and
will thereafter be null and void.

      9.    Adjustments. If there is any change in the capital structure of the
Company through merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination of shares or similar event ("RESTRUCTURING")
or by reason of a spin-off of a part of the Company into a separate entity, or
due to an acquisition by the Company of a separate entity, the rights of the
Optionee shall be adjusted as provided in Paragraph 6.6 of the Plan. Nothing in
this Agreement or in the Plan shall affect in any way the right or power of the
Company to make or authorize any Restructuring.

      10.   Securities Act. The Company will not be required to deliver any
Shares pursuant to the exercise of all or any part of the Option if, in the
opinion of counsel for the Company, such issuance would violate the Securities
Act or any other applicable federal or state securities laws or regulations. The
Committee may require that the Optionee, prior to the issuance of any such
Shares pursuant to exercise of the Option, sign and deliver to the Company a
written statement (an "INVESTMENT LETTER") stating that: (a) the Optionee is
purchasing the Shares for his own account and not with a view to, or for sale in
connection with, any distribution thereof, he has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof and he does not currently have any reason
to anticipate a change in the foregoing; (b) the Optionee understands that the
Shares have not been registered under the Securities Act or any applicable state
securities laws or regulations and, therefore, cannot be offered or resold
unless the Shares are so registered or an applicable exemption from registration
is available; and (c) the Optionee agrees that the certificates

                                 PART II-Page 4
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representing the Shares may bear a legend to the effect set forth in clause (b)
above. The Investment Letter must be in form and substance acceptable to the
Committee in its sole discretion.

      11.   Notice. All notices required or permitted under this Agreement,
including an Exercise Notice, must be in writing and personally delivered or
sent by mail and shall be deemed to be delivered on the date on which actually
received by the Company properly addressed to the person who is to receive it.
An Exercise Notice shall be effective when actually received by the Company, in
writing and in conformance with this Agreement and the Plan. Until changed in
accordance herewith, the Company and the Optionee specify their respective
addresses as set forth below:

                  Company:              EuroBancshares, Inc.
                                        270 Munoz Rivera Avenue
                                        Hato Rey, Puerto Rico 00918
                                        Attention:  President

                  Optionee:             As indicated on Part I hereto.

      12.   Information Confidential. As partial consideration for the granting
of this Option, the Optionee agrees that he will keep confidential all
information and knowledge that he or she has relating to the manner and amount
of his participation in the Plan; provided, however, that such information may
be disclosed as required by law and may be given in confidence to the Optionee's
spouse, tax and financial advisors, or a financial institution to the extent
that such information is necessary to obtain a loan.

      13.   Definitions; Copy of Plan. To the extent not specifically provided
in this Agreement or otherwise required by context, all capitalized terms used
in this Agreement but not defined herein shall have the same meanings ascribed
to them in the Plan. By the execution of this Agreement, the Optionee
acknowledges that he has received and reviewed a copy of the Plan.

      14.   Administration. This Agreement is subject to the terms and
conditions of the Plan. The Plan will be administered by the Board of Directors
and by the Committee in accordance with its terms. The Committee has sole and
complete discretion with respect to all matters reserved to it by the Board of
Directors of the Company and by the Plan, and decisions of the Board of
Directors and of the Committee with respect to the Plan and this Agreement shall
be final and binding upon the Optionee. If a conflict between the terms and
conditions of this Agreement and the Plan exists, the provisions of the Plan
shall control.

      15.   Arbitration. Any legal or equitable claims or disputes arising out
of or in connection with the Plan and this Agreement (other than a suit for
injunctive relief) will be resolved exclusively by binding arbitration.

      The arbitration proceedings shall be conducted in Hato Rey, Puerto Rico in
accordance with the Employment Dispute Resolution Rules ("EDR RULES") of the
American Arbitration

                                 PART II-Page 5
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Association ("AAA") in effect at the time a demand for arbitration is made.
Optionee is entitled to representation by an attorney throughout the proceedings
at his own expense; however, the Company agrees not to use an attorney in the
arbitration hearing if the Optionee agrees to the same.

      One arbitrator shall be used and shall be chosen by mutual agreement of
the parties. If, within 30 days after the Optionee notifies the Company of an
arbitrable dispute, no arbitrator has been chosen, an arbitrator shall be chosen
from a list or lists of proposed arbitrators submitted by the AAA pursuant to
its EDR Rules, except that (i) the number of preemptory strikes shall not be
limited, and (ii) if the parties fail to select an arbitrator from one or more
lists, AAA shall not have the power to appoint the arbitrator but shall continue
to submit lists until the arbitrator has been selected. The arbitrator shall
coordinate, and limit as appropriate, all pre-arbitral discovery, which shall
include document production, information requests, and depositions. The
arbitrator shall issue a written decision and award stating the reasons
therefor. The decision and award shall be final and binding on both parties,
their heirs, executors, administrators, successors, and assigns. The costs and
expenses of the arbitration shall be borne evenly by the parties.

      16.   Continuation of Employment. This Agreement shall not be construed to
confer upon the Optionee any right to continue in the employ of the Company and
shall not limit the right of the Company, in their sole discretion, to terminate
the employment of the Optionee at any time, with or without cause.

      17.   No Obligation to Exercise. The Optionee shall have no obligation to
exercise any Option granted by this Agreement.

      18.   Governing Law; Construction. THIS AGREEMENT SHALL BE GOVERNED BY THE
LAWS OF THE COMMONWEALTH OF PUERTO RICO WITHOUT REGARD TO CHOICE OF LAW AND
CONFLICTS OF LAW PRINCIPLES. Titles and headings are for case of reference only
and shall not be considered in construing this Agreement. Pronouns shall be
deemed to include the masculine, feminine, neuter, singular and plural as the
context may require. References to paragraphs and exhibits are to Paragraphs and
Exhibits of this Agreement unless otherwise indicated. All such Exhibits are
incorporated in this Agreement by reference and are a part hereof.

      19.   Amendments. This Agreement may be amended only by a written
agreement executed by the Company and the Optionee.

      20.   Proprietary Information. In consideration of the Company's grant of
this Option and the Company's agreement to provide Optionee with confidential
information of the Company, Optionee agrees to keep confidential and not to use
or to disclose to others at any time during the term of this Agreement or after
its termination, except as expressly consented to in writing by the Company or
required by law, any secrets or confidential technology or proprietary
information of the Company, including, without limitation, any customer list,
marketing plans or materials, or other trade secrets of the Company, or any
matter or thing ascertained by Optionee through Optionee's affiliation with the
Company, the use or disclosure of which matter or thing might reasonably be
construed to be contrary to the best interests of the Company or to give any
other party a competitive advantage to the Company. Optionee further agrees that
should

                                 PART II-Page 6
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Optionee leave the employment of the Company, Optionee will neither take nor
retain, without prior written authorization from the Company, any documents
pertaining to the Company (other than paycheck stubs, benefit information, offer
letters, or other materials pertaining to his salary or benefits with the
Company). Without limiting the generality of the foregoing, Optionee agrees that
he will not retain, use or disclose any papers, customer lists, marketing
materials or information, books, records, files, or other documents, copies
thereof, or notes or other materials derived therefrom, or other confidential
information of any kind belonging to the Company pertaining to the Company's
business, sales, financial condition, or products. Without limiting other
possible remedies to the Company for the breach of this covenant, Optionee
agrees that injunctive or other equitable relief shall be available to enforce
this covenant, such relief to be without the necessity of posting a bond, cash,
or otherwise. Optionee further agrees that if any restriction contained in this
paragraph is held by any court to be unenforceable or unreasonable, a lesser
restriction shall be enforced in its place and remaining restrictions contained
herein shall be enforced independently of each other. Optionee's obligations
under this Paragraph apply to all confidential information of the Company.

      21.   Right to Repurchase. The receipt by Optionee of Shares upon his
exercise of Options shall be subject to the following terms and conditions:

            (a)   Restriction on Transfer. Optionee shall not sell, exchange,
transfer, assign, encumber, or otherwise dispose of any of the Shares to any
person, corporation, partnership, joint venture, trust or other entity without
the prior written consent of the Board of Directors of the Company. Any
transferee shall take the Shares subject to the terms and provisions of this
Paragraph 21, and shall, as a condition to the transfer of the Shares, sign a
Joinder Agreement attached as Exhibit B agreeing to be bound by the provisions
of this Paragraph 21.

            (b)   Grant of Repurchase Right. The Company (or its assigns) is
hereby granted the right (the "REPURCHASE RIGHT"), exercisable upon the death,
total physical or mental disability of Optionee, or upon the termination of
Optionee's employment with the Company, to repurchase at the Purchase Price (as
hereinafter defined) all or any portion of the Shares.

                  (i)   Exercise of Repurchase Right. The Repurchase Right shall
be exercisable by written notice delivered by the Company (or its assigns) to
the Owner (as defined in Paragraph 21(c)) prior to the expiration of the sixty
(60) day period commencing on the death, total physical or mental disability of
Optionee or the termination of Optionee's employment with the Company, provided,
however, in the event that Optionee has not exercised any Options granted
hereunder prior to the death, Disability of Optionee or the termination of
Optionee's employment with the Company, then the Repurchase Right shall be
exercisable by written notice delivered by the Company (or its assigns) to the
Owner (as defined in Paragraph 21(c)) prior to the expiration of the sixty (60)
day period commencing on the date such options are exercised pursuant to Section
7 of this Agreement. The notice shall indicate the number of Shares to be
repurchased and the date on which the repurchase is to be effected, such date to
be not more than thirty (30) days after the receipt of any and all necessary
approvals from any governmental authority (together with the expiration of any
mandatory waiting periods) required in connection with the exercise of the
Repurchase Right by the Company. To the extent one or more

                                 PART II-Page 7
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certificates representing Shares may have been previously delivered to the
Owner, then Owner shall, prior to the close of business on the date specified
for the repurchase, deliver to the Secretary of the Company the certificates
representing the Shares to be repurchased, each certificate to be properly
endorsed for transfer. The Company (or its assigns) shall, concurrently with the
receipt of such stock certificates, pay to Owner in cash or cash equivalents
(including the cancellation of any purchase-money indebtedness), an amount equal
to the Purchase Price.

                  (ii)  Termination of Repurchase Right. The Repurchase Right
shall terminate automatically with respect to any Shares for which the
Repurchase Right is not timely exercised under Paragraph 21(b)(i). In addition,
the Repurchase Right shall terminate on the consummation by the Company of an
underwritten initial public offering of its common stock, registered under the
Securities Act.

            (c)   Definition of Owner. For purposes of this Paragraph 21 of this
Agreement, the term "OWNER" shall include the Optionee and all subsequent
holders of the Shares who derive their chain of ownership through a permitted
transfer from the Optionee in accordance with Paragraph 21(a).

            (d)   Agreement Applicable to Community Interests. Any right or
interest of a spouse as an Owner in Shares, whether such right or interest is
created by law (including community property laws) or otherwise, shall for all
purposes hereof be included in, deemed a part of and bound by the same terms
hereof as the Shares to which such right or interest relates or appertains, and
any action taken, offer made or purchase right exercisable hereunder with
reference to Shares owned by an Owner shall be applicable to any right or
interest which the spouse of such Owner may have or be entitled to have therein.

            (e)   Purchase of Spouse's Interest in Shares. In the event of the
death of an Owner's spouse, or the divorce of an Owner and his or her spouse,
such Owner shall have the right to purchase all or any part of the Shares to
which such spouse (or the estate of such spouse) is or may be entitled at a
purchase price equal to the Purchase Price. Such purchase shall be effected on
the following terms and conditions:

                  (i)   The Owner's right to purchase his or her spouse's
interest in the Shares shall continue for a period of thirty (30) days from the
date of entry of the divorce decree or from the date of qualification of the
personal representative of the spouse in the event of death, as the case may be,
and shall be considered exercised by such Owner when written notice of such
exercise has been delivered or mailed, properly addressed, to such spouse or the
personal representative of such spouse.

                  (ii)  If the Owner shall fail to exercise his or her right in
its entirety in the manner and time prescribed, then the spouse or the personal
representative of the spouse, as the case may be, shall so notify the Company in
writing, which notice shall state the address of such spouse or personal
representative and the number of Shares owned by such spouse or the estate of
such spouse. Thereupon the Company shall have the right to purchase all Shares
not purchased by such Owner for a period of sixty (60) days following the
receipt by the Company

                                 PART II-Page 8
<PAGE>

of such notice. The purchase right shall be exercisable by the Company in the
manner set forth in Paragraph 21(b) of this Agreement.

                  (iii) The purchase right set forth in this Paragraph 21(e)
shall terminate with respect to any Shares for which the purchase right is not
timely exercised under paragraph 21(e)(i) and (ii). In addition, the purchase
right shall terminate on the consummation by the Company of an underwritten
initial public offering of its Common Stock, registered under the Securities
Act.

            (f)   Definition of Purchase Price. The "PURCHASE PRICE" as used
herein shall refer to the fair market value of the Shares, as reasonably
determined by the Board of Directors of the Company.

      22.   Termination. The Company may terminate the Plan at any time;
however, such termination will not modify the terms and conditions of the Option
awarded under this Agreement without the Optionee's consent.

      23.   No Rights as a Shareholder. Optionee shall not by virtue of this
Agreement, have any rights as a shareholder until the date of the issuance to
the Optionee of Shares pursuant to a valid Exercise Notice.

                                    * * * * *

                                 PART II-Page 9
<PAGE>

                                    EXHIBIT A

                                 EXERCISE NOTICE

      Notice is hereby given to the Company of Optionee's election to exercise
Options as follows:

Name of Optionee (please print):___________________________________

Optionee's Social Security Number:_________________________________

A.       Number of Vested Shares to be exercised:

B.       Exercise Price per Share:                                       $

C.       Cash Payment from Optionee                                      $

D.       Exercise Price tendered herewith:  (A x B)                      $

E.       Market Price per share on date of Exercise:                     $

F.       Difference Between Market Price and Exercise Price
         (E - D):                                                        $

G.       Total Difference (F x A):                                       $

H.       Withholding Tax:                                                _____*

I.       Amount of Tax withholding tendered herewith (G x H):            $

J.       Total Amount Due on Exercise (D + I):                           $

*Upon exercise of Options, the Company is required to collect a withholding tax
determined in accordance with the tables or computational procedures prescribed
by the Puerto Rico Secretary of the Treasury.

<PAGE>

Exact name(s) for Share certificate(s):
________________________________________________________________________________

________________________________________________________________________________

Date: ______________________________

                                                   _____________________________
                                                   Signature of Optionee

             PLEASE COMPLETE AND SIGN THIS NOTICE AND RETURN IT TO:

                  EuroBancshares, Inc.
                  270 Munoz Rivera Avenue
                  Hato Rey, Puerto Rico 00918
                  Attn: President

<PAGE>

                                    EXHIBIT B

                                JOINDER AGREEMENT

      For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned, by execution of this Joinder
Agreement, agrees to become a party to the Non-Qualified Stock Option Award
Agreement dated as of ________________, 20___, by and between EuroBancshares,
Inc., a corporation organized under the laws of the Commonwealth of Puerto Rico
(the "COMPANY"), and ____________________________, Optionee thereunder (the
"AGREEMENT"), a copy of which is attached hereto as Exhibit A to the extent and
as provided by this Joinder Agreement. The undersigned acknowledges that by his
execution of this Joinder Agreement he will become a party to the Agreement for
purposes of Paragraph 22 (and only with respect to such paragraph), such
paragraph providing for the Company's repurchase right with respect to Shares
issued on exercise of Options granted in the Agreement. The undersigned
represents and warrants that he has read and consents to, agrees to be bound by,
the repurchase right provisions of the Agreement.

      EXECUTED to be effective the _____ day of __________________, 20___.

                                        ________________________________________

                                        Name: __________________________________

                                 SPOUSAL CONSENT

      I, spouse of __________________, have read and am aware of, understand and
fully consent and agree to the provisions of the Agreement attached hereto and
its binding effect upon any interest, community or otherwise, I may own now or
hereafter in any Shares, and agree that the termination of my marriage to
________________ for any reason shall not have the effect of removing any Shares
otherwise subject to the Agreement from the coverage thereof. I hereby evidence
such awareness, understanding, consent and agreement by joining in the Agreement
and by executing this Joinder Agreement below.

                                        _______________________________________
                                        Signature of Spouse

                                        Printed Name: __________________________

                                        Address:

                                        ________________________________________

                                        ________________________________________<PAGE>

                                                                    Exhibit 10.4

                                                                          Page 1

                   EXECUTIVE SEVERANCE COMPENSATION AGREEMENT

      This AGREEMENT (the "Agreement") is made and entered into effective as of
the day of April 12,1999, by and between Eurobank, a Puerto Rico banking
corporation, with main offices in San Juan, Puerto Rico (the "Bank"), and YADIRA
MERCADO, of legal age, married, a key employee and officer of the Bank, and
resident of San Juan, Puerto Rico (the "Executive").

                                   WITNESSETH:

      WHEREAS, Bank considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of Bank and its stockholders;

      WHEREAS, Bank recognizes that the possibility of a Change in Control (as
hereinafter defined) may exist, and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of Bank and its
stockholders;

      WHEREAS, Executive is willing to continue to serve Bank but desires
assurance that in the event of any Change in Control of Bank, he/she will
continue to have the responsibility and stature he/she has earned within the
Bank, or in the alternative, if terminated that he/or she be adequately
compensated as herein provided;

      WHEREAS, the Bank and the Executive now desire to enter into this
Agreement to establish the terms and conditions upon which such payments will be
made.

      NOW, THEREFORE, in consideration of the mutual undertakings set forth in
this Agreement, and for other good and valuable consideration, the receipt and

<PAGE>

                                                                          Page 2

sufficiency of which are hereby acknowledged, the Bank and the Executive agree
as follows:

                                   ARTICLE ONE
                                   DEFINITIONS

1.    "Beneficiary" shall mean the person(s) described in Article Four of this
      Agreement.

2.    "Board" shall mean the Board of Directors of the Bank.

3.    "Change in Control" shall mean and shall be deemed to have occurred for
      purposes of this Agreement if and when:

      (i)   any entity, person or group of persons acting in concert becomes
            beneficial owner (within the meaning of Section 13(d) of the
            Securities and Exchange Act of 1934), directly or indirectly, of
            securities of the Bank representing more than twenty-five percent
            (25%) of the combined voting power of the Bank or any successor; or

      (ii)  the effective date of a merger or consolidation of the Bank with one
            or more other corporations or banks as a result of which the holders
            of the outstanding voting stock of the Bank immediately prior to the
            merger hold less than sixty-six percent (66%) of the combined voting
            power of the surviving or resulting corporation or bank;

      (iii) the effective date of a transfer of all or substantially all of the
            property of the Bank other than to an entity of which the Bank owns
            at least eighty percent (80%) of the combined voting power; or

      (iv)  as a result, or in connection with, any cash, render or exchange
            after merger, contested election, or other business combination, or
            any combination of the foregoing, the services of the Executive are
            no longer required in his present capacity.

4.    "Compensation" shall mean the Executive's base annual salary (which is
      intended to be total base salary without proration for actual months
      worked) (herein "Base Compensation") plus the highest performance or
      incentive based remuneration (herein the "Performance Compensation"), as
      reported by the Bank on 499-R

<PAGE>

                                                                          Page 3

      2/W-2 Form (or its equivalent) in any of the four fiscal years prior to
      the termination of employment.

6.    "Constructive Termination" shall mean that the Executive resigns from his
      position(s) with the Bank as a result of any of the following:

      (i)   Without his express written consent, the detrimental assignment to
            the Executive of any duties inconsistent with his positions, duties,
            and responsibilities with the Bank as in effect immediately before a
            Change in Control;

      (ii)  A reduction of the Executive's overall Compensation without the
            prior written consent of the Executive, which is not remedied within
            thirty (30) calendar days after receipt by the Bank of written
            notice from the Executive of such reduction;

      (iii) A determination by the Executive made in good faith that as a result
            of a Change in Control, he has been rendered unable to carry out, or
            has been substantially hindered in the performance of, any of the
            authorities, powers, functions, responsibilities or duties attached
            to his position with Bank's successor, which situation is not
            remedied within thirty (30) calendar days after receipt by the Bank
            of written notice from the Executive of such determination;

      (iv)  Failure by the Bank to require and/or obtain in writing from any
            successor (whether direct or indirect, by purchase, merger,
            consolidation or otherwise) to all or substantially all of the
            business and/or assets of the Bank, an agreement in form and
            substance satisfactory to the Executive, expressly to assume and
            agree to perform this Agreement in the same manner and to the same
            extent that the Bank would be required to perform it if no such
            succession had taken place:

      (v)   Executive's "Disability" as such term is defined in the Bank's long
            term disability plan, or if the Bank has no long term disability
            plan in effect at the time of the Executive's disability, shall have
            the meaning provided in the Internal Revenue Code, of the United
            States (the "Code"), Section 22(e)(3). (Provided, however, if
            Executive is covered by Disability Insurance at the time of such
            disability, he shall then be entitled to such

<PAGE>

                                                                          Page 4

            insurance coverage as his/her only benefit instead of that provided
            in Article Two hereof).

7.    "Director" or "Directors" shall mean any member, or members of the Board
      of Directors of the Bank.

8.    "Disability" shall be as such term is defined in the Bank's long term
      disability plan, or if the Bank has no long term disability plan in effect
      at the time of the Executive's disability, shall have the meaning provided
      in Code section 22(e)(3).

9.    "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
      amended.

10.   "Termination for Cause" shall mean that the Executive, is involuntarily
      terminated from employment with the Bank based upon his commission of any
      of the following:

      (i)   a felony; or

      (ii)  any intentional act on the part of the Executive, involving personal
            profit, which causes material damage to the Bank.

      For the purpose of this Agreement, no act, or failure to act, on the part
      of the Executive shall be deemed "intentional" unless done, or omitted to
      be done, by the Executive not in good faith and without reasonable belief
      that his action or omission was in the best interest of the Bank.
      Notwithstanding the foregoing, the Executive shall not be deemed to have
      been terminated for "Cause" hereunder unless and until there shall have
      been delivered to the Executive a copy of a resolution duly adopted by the
      affirmative vote of a majority of the Directors then in office (with the
      Executive abstaining if a Director) at a meeting of the Board called and
      held for such purpose (after at least ten (10) days' notice of the
      Executive and an opportunity for the Executive, together with his counsel,
      to be heard before the Board), finding that in the good faith opinion of
      the Board, the Executive had committed an act set forth above and
      specifying the particulars thereof in detail. The number of votes needed
      to constitute a majority shall be determined based on the total number of
      Directors then serving, including any abstaining Director. Nothing herein
      shall limit the right of the Executive or his Beneficiary to contest the
      validity or propriety of any such determination.

<PAGE>

                                                                          Page 5

                                   ARTICLE TWO
                                    BENEFITS

      1. Nature of Benefits. The benefits under this Agreement provided to the
      Executive are in the nature of a fringe benefit and shall in no event be
      construed to affect or limit the Executive's current or prospective salary
      increases, cash bonuses, profit sharing distribution or credits, or any
      other benefit. Notwithstanding the foregoing, the terms and conditions of
      this Agreement shall govern, control and supersede any and all contrary or
      conflicting provisions contained in any other agreement or contract
      between the Bank and Executive, including without limitation any
      employment agreement between the Executive and the Bank.

      2. Termination of Employment. (i) The Board of Directors may, without
      cause, terminate this Agreement at any time, by giving ninety days (90)
      written notice to the Executive. In such event, the Executive, if
      requested by the Board of Directors, shall continue to render his/her
      services, and shall be paid his/her regular salary up to the date of
      termination. In addition, the Executive shall be paid on the date of
      termination a severance payment equivalent to two (2) year(s) of
      Compensation and in addition accrued vacation and those other benefits
      referred to in Section 5 of this Article Two. (ii) Notwithstanding the
      above, the Executive may, without cause, terminate the Agreement by giving
      thirty days (30) written notice to the Board of Directors.

      3. Severance Payment Upon Termination After Change in Control. Executive
      shall have the right to continued Compensation, subsequent to the
      execution of a definitive agreement ("Definitive Agreement") which will
      result in a Change in Control. In the event Executive's employment is
      terminated by the Bank for any reason including his Constructive
      Termination (other than a Termination for Cause) after the Change in
      Control, Executive shall be entitled to receive a cash lump sum payment
      equal to that provided for in Section (2) (i) of this Article Two and in
      addition accrued vacation and those other benefits referred to in Section
      5 of this Article Two. Payment of such Compensation shall

<PAGE>

                                                                          Page 6

      be made under this Article Two, Section 3 within five (5) days of
      Executive's termination.

      4. Reduction in Compensation Proscribed After Change in Control. During
      the Term of this Agreement and after a Change in Control, Executive shall
      receive as compensation, while still employed by Bank or its successor, a
      base salary equal to at least his Base Compensation as of the date of the
      Change in Control (herein the "Minimum Annual Compensation") which shall
      be payable in equal monthly installments. In addition, during such period,
      the Bank or its successor shall pay and provide the Executive at no cost
      to the Executive, all of his then-current fringe benefits, including but
      not limited to health, disability, dental, life insurance, bank automobile
      and country club memberships, if any, all of which shall be at levels and
      amounts no less favorable than levels and amounts in effect as of the date
      of Change in Control.

      5. Additional Benefits Upon Termination After Change in Control. In
      addition to the Severance Payment under Article Two, Sections 2 and 3 of
      this Agreement, for a period of two (2) years from the date of
      Termination, (the "Benefits Period"), the Executive shall continue to be
      eligible to participate in (and the Bank shall continue contributions on
      his behalf to) all health, dental, long term disability, accident and life
      insurance plans or arrangements made available by the Bank in which he or
      his dependents were participating immediately prior to the date of his
      termination, as if he continued to be an employee of the Bank and to the
      extent that participation in any one or more of such plans and
      arrangements is possible under the terms thereof, provided that if the
      Executive obtains employment with another employer during the Benefits
      Period, such coverage shall be provided only to the extent that the
      coverage exceeds the coverage of any substantially similar plan provided
      by his new employer. Furthermore, the Executive shall not be required to
      exercise any options previously granted under the Bank's Stock Option Plan
      within the three (3) months established for termination due to Retirement,
      Voluntary Termination or Involuntary Terminations. The term to exercise
      such options shall automatically continue to be that stipulated in the
      Option, as if the Executive had continued in Bank's employment.

<PAGE>

                                                                          Page 7

                                  ARTICLE THREE
                                 CONFIDENTIALITY

      1. Recognizing that the knowledge and information about, or relationships
      with, the business associates, customers, clients, and agents of the Bank
      and the business methods, systems, plans, and policies of the Bank, which
      the Executive has heretofore and shall receive, obtain, or establish as an
      employee of the Bank or otherwise are valuable and unique assets of the
      Bank, the Executive agrees that, during the continuance of this Agreement
      and thereafter, he/she shall not otherwise than pursuant to his/her duties
      hereunder, disclose without the written consent of the Bank, any material
      or substantial, confidential, or proprietary know-how, data or information
      pertaining to the Bank, or its business, personnel, or plans to any
      persons, firm, corporation, or other entity, for any reason or purpose
      whatsoever.

      2. The Executive hereby acknowledges that the services rendered or to be
      rendered by him/her are special, unique, and extraordinary character and,
      in connection with such services, he/she will have access to Confidential
      Information covering the Bank's business.

                                  ARTICLE FOUR
                            RESTRICTIONS UPON FUNDING

      The Bank shall not have any obligation to set aside, earmark or entrust
any fund or money with which to pay its obligations under this Agreement. The
Executive, his Beneficiary or any successor-in-interest to him shall be and
remain simply a general creditor of the Bank in the same manner as any other
creditor having a general unsecured claim.

      For purposes of the Code, the Bank intends this Agreement to be an
unfunded, unsecured promise to pay on the part of the Bank. For purposes of
ERISA, the Bank intends that this Agreement not be subject to ERISA. If it is
deemed subject to ERISA, it

<PAGE>

                                                                          Page 8

is intended to be an unfunded arrangement for the benefit of a select member of
management, who is a highly compensated employee of the Bank for the purpose of
qualifying this Agreement for the "top hat" plan exception under sections
201(2), 301(a)(3) and 401(a)(1) of ERISA.

      At no time shall the Executive have or be deemed to have any lien or
right, title or interest in or to any specific investment or to any assets of
the Bank; rather the Executive shall remain a general unsecured creditor of the
Bank. If the Bank elects to invest in a life insurance, disability or annuity
policy upon the life of Executive, the Executive shall freely submit to a
physical examination and supply such additional information necessary to obtain
such insurance or annuities.

                                  ARTICLE FIVE
                          DESIGNATION OF BENEFICIARIES

      Should the Executive die prior to full payment of amounts due under
Article Two, payment of all remaining vested payments shall be made to his
Beneficiaries. The Executive's written designation of one or more persons or
entities as his Beneficiary(ies) shall operate to designate the Executive's
Beneficiary under this Agreement. The Executive shall file with the Bank a copy
of his Beneficiary designation on the form supplied to the Executive by the
Bank. The last such designation form received by the Bank shall be controlling,
and no designation, or change or revocation of a designation shall be effective
unless received by the Bank prior to the Executive's death.

      If no Beneficiary designation is in effect at the time of an Executive's
death, if no designated Beneficiary survives the Executive or if the otherwise
applicable Beneficiary designation conflicts with applicable law, the
Executive's estate shall be the Beneficiary.

<PAGE>

                                                                          Page 9

                                   ARTICLE SIX
                          INTERPRETATION AND AMENDMENT

          The Board shall have the exclusive power and authority to interpret
and construe the Agreement. The Board may appoint a Committee to administer this
Agreement. The Board may engage agents or experts to assist it and may engage
legal counsel, who may or not be the regular counsel to the Bank. The Agreement
may be amended, suspended or terminated, in whole or in part, only by a written
instrument signed by a duly authorized officer of the Bank and by the Executive.

                                  ARTICLE SEVEN
                             TERMINATION AND RENEWAL

      1.    Termination. This Agreement shall terminate on the earliest of:

      (i)   (a) the second anniversary of the first event that constitutes a
            Change in Control, or

            (b) the third (3rd) anniversary of the date of execution of this
            Agreement, in the event it has been automatically extended pursuant
            to Section 2 of this Article Seven, whichever occurs last.

      2.    Renewal. On each anniversary of the date of execution of this
            Agreement, the term hereunder for purposes of this Article Seven,
            Section 1 (i)(b) above shall automatically be extended for an
            additional one (1) year period beyond the then effective expiration
            date solely therein, unless either party receives written notice,
            not less than 90 days prior to the anniversary date, advising the
            other party that this Agreement shall not be further extended. Any
            such written notice shall not affect any prior extensions of the
            terms of employment hereunder.

<PAGE>

                                                                         Page 10

                                  ARTICLE EIGHT
                                  MISCELLANEOUS

      1.    Alienability and Assignment Prohibition. Neither the Executive, his
            spouse nor any other Beneficiary under this Agreement shall have any
            power or right to transfer, assign, anticipate, hypothecate,
            mortgage, commute, modify or otherwise encumber in advance any of
            the benefits payable hereunder nor shall any of said benefits be
            subject to seizure for the payment of any debts, judgements, alimony
            or separate maintenance owed by the Executive or his Beneficiary,
            nor be transferable by operation of law in the event of bankruptcy,
            insolvency or otherwise.

      2.    Revocation. It is agreed by and between the parties hereto that,
            during the lifetime of the Executive, this Agreement may be amended
            or revoked at any time or times, in whole or in part, by the mutual
            written assent of the Executive and the Bank.

      3.    Gender. Whenever in this Agreement words are used in the masculine
            or neuter gender, they shall be read and construed as in the
            masculine, feminine or neuter gender, whenever they should so apply.

      4.    Effect on Other Corporate Benefit Plans. Nothing contained in this
            Agreement shall affect the right of the Executive to participate in
            or be covered by any qualified or non-qualified pension, profit
            sharing, group, bonus or other supplemental compensation or fringe
            benefit plan constituting a part of the Bank's existing or future
            compensation structure.

      5     Headings. Headings and Subheadings in this Agreement are inserted
            for reference and convenience only and shall not be deemed a part of
            this Agreement.

      6.    Applicable Law. The validity and interpretation of this Agreement
            shall be governed by the laws of the Commonwealth of Puerto Rico.

      7.    No employment Agreement. No provision of this Agreement shall be
            deemed or construed to create specific employment rights to the
            Executive or otherwise to limit the right of the Bank to discharge
            the Executive at any time with or without cause. In a similar
            fashion, no

<PAGE>

                                                                         Page 11

            provision shall limit the Executive's rights to voluntarily sever
            his employment from the Bank at any time.

      8.    Withholding of Taxes. The Bank shall deduct from the amount of any
            payment made pursuant to this Agreement any amounts required to be
            paid or withheld by the Bank with respect to federal or state taxes.
            By executing this Agreement, the Executive agrees to all such
            deductions.

      9.    Severability. In case any one or more of the provisions contained in
            this Agreement shall be invalid, illegal or unenforceable in any
            respect, the validity, legality and enforceability of the remaining
            provisions in this Agreement shall not in any way be affected or
            impaired.

      10.   Arbitration.

            a.    In the event of any claim or controversy arising out of or
                  relating to this Agreement or the breach of this Agreement,
                  the parties agree that all such claims or controversies shall
                  be resolved by final and binding arbitration in San Juan,
                  Puerto Rico, in accordance with the Commercial Arbitration
                  Rules of the American Arbitration Association in effect on the
                  date when the claim or controversy first arises. Either party
                  must communicate its request for arbitration under this
                  section in writing ("Arbitration Notice") to the other party
                  within one hundred twenty (120) days from the date the claim
                  or controversy first arises. Failure to communicate
                  Arbitration Notice within one hundred twenty (120) days shall
                  constitute a waiver of any such claim or controversy.

            b.    All claims or controversies subject to arbitration under this
                  section shall be submitted to an arbitration hearing within
                  thirty (30) days from the date Arbitration Notice is
                  communicated by either party. All claims or controversies
                  submitted to arbitration under this section shall be resolved
                  by a panel of three (3) arbitrators who are experienced in the
                  arbitration of employment disputes. These arbitrators shall be
                  selected in accordance with the applicable Commercial
                  Arbitration Rules or by agreement of the parties. Either party
                  may request that the arbitration proceeding be

<PAGE>

                                                                         Page 12

                  stenographically recorded by a Certified Shorthand Reporter.
                  The arbitrators shall issue a decision on any claim or
                  controversy within thirty (30) days from the date the
                  arbitration hearing is completed. The parties shall have the
                  right to be represented by legal counsel at any arbitration
                  hearing. The costs of any arbitration hearing, including the
                  attorneys' fees incurred by both parties (including any costs,
                  expenses or attorneys' fees incurred in filing any lawsuit to
                  compel arbitration under subsection [c], if applicable), shall
                  be paid by the parties in the same proportion as the amount
                  granted under the arbitration decision to each party bears to
                  the aggregate claims interposed by each party in the
                  arbitration procedure.

            c.    The arbitration provisions in this section are subject to the
                  Federal Arbitration Act 9 U.S.C. Sections 1 et seq. (West
                  1998) (or any successor provisions) and may be specifically
                  enforced by any party, and submission or arbitration
                  proceedings compelled, by any Court of competent jurisdiction.
                  The decision of the arbitrators may be specifically enforced
                  by any party in any court of competent jurisdiction.

      IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereon on the day and year first
written above.

EUROBANK                                      THE EXECUTIVE

By: /s/ Rafael Arrillaga Torrens, Jr.                By: /s/ Yadira Mercado
    ------------------------------------                ------------------------
    Rafael Arrillaga Torrens, Jr.                       Yadira Mercado

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