1
EXHIBIT 10.71
As of December 31, 1996
Xx. Xxxxxx Xxxxx
650 Mueoz Xxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx Xxxx 00000
Dear Xx. Xxxxx:
We are pleased to detail herein below the provisions of your
employment agreement with Doral Mortgage Corporation ("DMC").
1. TERMS OF EMPLOYMENT
The term of this Agreement shall be for a period commencing on
January 1, 1997 and ending December 31, 1997, unless sooner terminated as
herein provided. This Agreement supersedes and cancels all prior employment,
personal service or similar agreements between you and DMC or First Financial
Caribbean Corporation ("FFCC") and their respective subsidiaries, divisions and
ventures.
2. POSITION AND RESPONSIBILITIES
You will serve as President of DMC. By your acceptance of
this Agreement, you undertake to accept such employment and to devote your full
time and attention to DMC, and to use your best efforts, ability and fidelity
in the performance of the duties attaching to such employment. During the term
of your employment hereunder, you shall not perform any services for any other
company, which services conflict in any way with your obligations under the two
preceding sentences of this Section 2, whether or not such company is
competitive with the businesses DMC or FFCC, provided, however, that nothing in
this Agreement shall preclude you from devoting reasonable periods required for
(i) serving as a director or member of a committee of any
organization involving no conflict or potential conflict of interest with the
interests of DMC or FFCC;
(ii) delivering lectures, fulfilling speaking engagements,
teaching at educational institutions;
(iii) engaging in charitable and community activities; and
(iv) managing your personal and family investments,
provided that such activities do not interfere with the regular performance of
your duties and responsibilities under this Agreement.
2
Xx. Xxxxxx Xxxxx
As of December 31, 1996
Page 2
You shall, at all times during the term hereof, be subject to
the supervision and direction of the Chairman of the Board and Chief Executive
Officer and the Board of Directors of DMC with respect to your duties,
responsibilities and the exercise of your powers.
3. COMPENSATION
(a) During the term of this Agreement you shall receive
an annual salary of $240,000 annually, payable no less often than monthly in
accordance with corporate policy.
(b) (i) During the term of this Agreement, you shall
also be entitled to receive an annual incentive bonus
equal to the lesser of (x) 200,000 and (y) 3% of the
net income of DMC over and above Three Million
Dollars ($3,000,000) derived from its Mortgage
Banking Activities (as hereinafter defined).
(ii) One half (1/2) of the incentive bonus shall be
payable annually by DMC within 120 days following the
end of the preceding fiscal year, provided that such
amount shall only be payable if you shall have served
as President to DMC pursuant to this Agreement for
the entire fiscal year to which such payments relate.
As used in this Section 3, "Net Income" means the
annual net income by DMC and its subsidiaries after
all taxes during the calendar year preceding the
payment as determined in accordance with generally
accepted accounting principles applied on a
consistent basis throughout the periods involved and
as shown by DMC's audited financial statements
audited by its independent accountants (hereinafter
referred to as "GAAP"). As used in this Section 3,
"Mortgage Banking Activities" shall mean the
origination, purchase, receipt of interest, servicing
and sale of mortgages or pools of mortgages on homes
in Puerto Rico and the purchase and sale of interests
in pools of mortgages. Until you have been given
notice to the contrary, all activities of DMC shall
be deemed to be Mortgage Banking Activities, and all
expenses of DMC (including all taxes) shall be deemed
to be related to its Mortgage Banking Activities.
(iii) The remaining one-half (1/2) of the incentive
bonus (the "Deferred Bonus") shall be deferred
pursuant to the deferred compensation arrangement
described in Exhibit A hereto.
(c) You shall be entitled to participate in the other
benefit plans of DMC upon the terms and conditions on which such benefits are
made available to other officers of DMC. Nothing herein shall obligate FFCC to
continue any existing benefit plan or to establish any replacement benefit
plan.
(d) You shall be entitled to reimbursement for reasonable
travel and entertainment expenses incurred in connection with the rendering of
your services hereunder. Nothing contained herein shall authorize you to make
any political contributions, including but not limited to payments for dinners
and advertising in any political party program or any other payment to any
person which might be deemed a
3
Xx. Xxxxxx Xxxxx
As of December 31, 1996
Page 3
bribe, kickback or otherwise and improper payment under corporate policy or
practice and no portion of the compensation payable hereunder is for any such
purpose.
(e) Payments under this Agreement shall be subject to
reduction by the amount of any applicable federal, Commonwealth, state or
municipal income, withholding, social security, state disability insurance, or
similar or other taxes or other items which may be required or authorized to be
deducted by law or custom.
(f) No additional compensation shall be due to you for
services performed or offices held in any subsidiary, division, affiliate, or
venture of DMC or FFCC.
4. MISCELLANEOUS PROVISIONS RELATING TO THE BONUS AND OTHER
MATTERS
(a) Your acceptance of this Agreement will confirm that
you understand and agree that the granting of the incentive compensation
referred to in Section 3(b) (the "incentive compensation"), and any action
thereunder, does not involve any statement or representation of any kind by DMC
as to its business, affairs, earnings or assets, or as to the tax status of the
incentive compensation or the tax consequences of any payment thereof, or
otherwise. You further agree that any action at any time taken by or on behalf
of DMC or by its directors or any committee thereof, which might or shall at
any time adversely affect you or the incentive compensation, may be freely
taken notwithstanding any such adverse effect without your being thereby or
otherwise entitled to any right or claim against DMC, FFCC or any other person
or party by reason thereof.
(b) The incentive compensation is personal to you and,
except as provided as contemplated in Section 3(b) above and Exhibit A hereto,
in the event of your death or incapacity, is not transferable or assignable
either by your act or by operation of law, and no assignee, trustee in
bankruptcy, receiver or other party whosoever shall have any right to demand
any incentive compensation or any other right with respect to it. If, in the
event of your death or incapacity, your legal representative shall be entitled
to demand the incentive compensation under any of the provisions hereof then,
unless otherwise indicated by the context or otherwise required by any term
hereof, references to "you" shall apply to said representative.
(c) If and when questions arise from time to time as to
the intent, meaning or application of any one or more of the provisions hereof
such questions will be decided by the Board of Directors of DMC or any
Committee appointed to consider such matters, or, in the event DMC is merged
into or consolidated with any other corporation, by the Board of Directors (or
a Committee appointed by it) of the surviving or resulting corporation, and the
decision of such Board of Directors or Committee, as the case may be, as to
what is a fair and equitable settlement of each such question or as to what is
a fair and proper interpretation of any provision hereof or thereof, whatever
the effect of such a decision may be, beneficial or adverse, upon the incentive
compensation, shall be conclusive and binding and you hereby agree that the
incentive compensation is granted to and accepted by you subject to such
condition and understanding. You understand that the incentive compensation is
not held or set aside in trust and (1) DMC may seek to retain, offset, attach
or similarly place a lien on such funds in circumstances where you have been
discharged for cause and shall be entitled to do so for (x) malfeasance
damaging to DMC, (y) conversion to you of
4
Xx. Xxxxxx Xxxxx
As of December 31, 1996
Page 4
opportunity of DMC or FFCC, or (z) a violation of FFCC's conflict of interest
policy, in each case as determined in the sole discretion of the Board of
Directors, and (2) in the event DMC is unable to make any payment under this
Agreement because of insolvency, bankruptcy or similar status or proceedings,
you will be treated as a general unsecured creditor of DMC and may be entitled
to no priority under applicable law with respect to such payments.
5. RESTRICTIONS ON COMPETITION
During the term of this Agreement and for a period of one year
after you cease to be an employee of DMC or an affiliate of DMC or FFCC, you
will not, without the prior written consent of DMC, (a) accept employment or
render service to any person, firm or corporation, directly or indirectly, in
competition with DMC or FFCC, or any affiliate thereof for any purpose which
would be competitive with the mortgage banking business within the Commonwealth
of Puerto Rico or any other geographic area in which DMC or any affiliate of
DMC or FFCC by which you were employed, conducted operations (the "Restricted
Area") or any business as to which studies or preparations relating to the
entry into which were made by DMC or FFCC or any affiliate of DMC or FFCC by
which you were employed within two years prior thereto (collectively, the
"Restricted Businesses") or (b) directly or indirectly, enter into or in any
manner take part in or lend your name, counsel or assistance to any venture,
enterprise, business or endeavor, whether as proprietor, principal, investor,
partner, director, officer, employee, consultant, adviser, agent, independent
contractor or in any other capacity whatsoever for any purpose which would be
competitive with the Restricted Businesses in the Restricted Area. An
investment not exceeding 5% of the outstanding stock in any corporation
regularly traded on any national securities exchange or in the over-the-counter
market shall not be deemed to violate this provision, provided that you shall
not render any services for such corporation.
6. TERMINATION OF EMPLOYMENT
(a) Your employment hereunder may be terminated for
dishonesty, death, incapacity, or inability to perform the duties of your
employment on a daily basis, resulting from physical or mental disability
caused by illness, accident or otherwise or refusal to perform the duties and
responsibilities of you employment hereunder, or breach of fidelity to DMC.
(b) At any time following a "Change in Control" of DMC,
this Agreement may be terminated by DMC or you on 30 days' written notice to
you or FFCC, as the case may be, such termination to be effective as of the end
of the calendar year during which such notice is given. As used herein, a
"Change in Control" shall be deemed to have occurred at such time as any person
other than FFCC or an entity controlled by or under common control with FFCC
ceases to be the owner of at least 51% of the outstanding voting securities of
DMC.
(c) If at any time you shall voluntarily terminate your
employment, then this Agreement, except for Section 5 hereof, shall terminate
and all further obligations of FFCC hereunder shall cease, provided that in any
termination pursuant to subsection (b) of this Section 6 you shall be entitled
to receive
5
Xx. Xxxxxx Xxxxx
As of December 31, 1996
Page 5
all compensation due to pursuant to Section 3 hereof for the calendar year in
which such date of termination occurs.
You agree that this Section 6 shall create no additional
rights in you to direct the operations of DMC.
7. WAIVERS AND MODIFICATIONS
No waiver by either party of any breach by the other of any
provisions hereof shall be deemed to be a waiver of any later or other breach
thereof, or as a waiver of any such or other provision of this Agreement. This
Agreement sets forth all of the terms of the understandings between the parties
with reference to the subject matter set forth herein and may not be waived,
changed, discharged or terminated orally or by any course of dealing between
the parties, but only by an instrument in writing signed by the party against
whom any waiver, change, discharge or termination is sought.
8. SEVERABILITY
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective under applicable law. In the
event that any provision, or any portion of any provision, of this Agreement
shall be held to be void and unenforceable, the remaining provisions of this
Agreement, and the remaining portion of any provision found void or
unenforceable in part only, shall continue in full force and effect.
9. ARBITRATION
Any dispute arising under this Agreement shall be submitted to
arbitration in New York, New York under the rules of the American Arbitration
Association.
10. NOTICES
Any notice or communication required or permitted to be given
hereunder shall be deemed duly given if delivered personally or sent by
registered or certified mail, return receipt requested, to the address of the
intended recipient as herein set forth or to such other address as a party may
theretofore have specified in writing to the other by delivering or mailing in
a similar manner. Any notice or communication intended for DMC shall be
addressed to the attention of its Board of Directors.
11. GOVERNING LAW
This Agreement shall be construed in accordance with the laws
of the Commonwealth of Puerto Rico.
6
Xx. Xxxxxx Xxxxx
As of December 31, 1996
Page 6
12. MISCELLANEOUS
This Agreement shall be binding upon the successors and
assigns of DMC. This Agreement is personal to you, and you therefore may not
assign your duties under this Agreement. The headings of the Sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof or to affect the meaning hereof.
If the foregoing terms and conditions correctly embody your
mutual understanding with DMC, kindly endorse your acceptance and agreement
therewith in the space below provided, whereupon this shall become a binding
agreement.
Very truly yours,
DORAL MORTGAGE CORPORATION
By: /s/ Xxxxxxx Xxxxx
--------------------------------------------
Name: Xxxxxxx Xxxxx
Title: Chairman of the Board
and Chief Executive Officer
Accepted and Agreed to as of the
date first above set forth:
/s/ Xxxxxx Xxxxx
--------------------------------
Xxxxxx Xxxxx
7
EXHIBIT A
DEFERRED ARRANGEMENT
1. Creation of Accounts by DMC.
(a) DMC shall create and maintain in its records a
Deferred Bonus Account for you with respect to the Deferred Bonus, if any,
earned by you under the Agreement. To that Account shall be credited the
Deferred Bonus and all interest earned thereon.
(b) DMC shall not segregate the amounts credited to you
but may utilize such amounts for such purposes as it deems appropriate,
including working capital.
(c) The Account shall bear interest (calculated on the
basis of a 360 day year consisting of twelve 30 day months) at the rate of
interest publicly announced by the Chase Manhattan Bank, N.A., New York, New
York as its "Reference Rate" on the first day of each calendar quarter less one
percentage point, which amount shall be credited to each Account as of the end
of each quarter in each year and such interest shall thereafter become a part
of the Account.
(d) DMC may withhold from the amount payable with respect
to the Deferred Bonus account, any amount which it deems necessary to withhold
by reason of applicable federal, state, Puerto Rican or municipal income,
withholding, social security, state disability insurance or similar or other
taxes or other items which may be required or authorized to be deducted by law
or custom.
2. Termination of Right to Deferred Bonus.
(a) Your right to any Deferred Bonus Account hereunder
may be terminated for dishonesty or if you otherwise breach the provisions of
your employment agreement with DMC, including the provisions of Section 5
thereof.
(b) On your death or legally determined incapacity, your
Deferred Bonus Account shall be deemed to have been transferred to your legal
representative who may within twelve months after your death or legally
determined incapacity demand payment of all your Deferred Bonus Account whether
or not five years shall have elapsed since the accrual of the Deferred Bonus
giving rise to the Deferred Bonus Account.
3. Management and Statutory Creditor.
You acknowledge that you have no right to restrict or in any
way affect the management policies or decisions of DMC and that you shall not
obtain any status as a creditor of DMC.
4. Payment of Deferred Bonus, Notice, Withholding.
(a) Subject to Sections 2(a) and 2(b), you shall be
entitled to receive on demand the full amount of your Deferred Bonus Account
five (5) or more years after such Deferred Bonus was earned (e.g., January 1,
2003).
8
2
(b) Demand for payment of the Deferred Bonus Account
shall be made by written notice, addressed to the Chairman of the Board of DMC,
specifying the amount of the then receivable Deferred Bonus Account and
requesting its payment at any time during which it is then payable. Payment
shall ordinarily be made to you within 30 days after request.
