Exhibit 10.1

 

Execution copy

 

EARLY RETIREMENT COMPENSATION AGREEMENT

 

THIS EARLY RETIREMENT COMPENSATION AGREEMENT (“Agreement”) is entered into as of
the 29 day of March, 2011, between EagleBank, a Maryland chartered commercial
bank (the “Bank”), Eagle Bancorp, Inc., a Maryland corporation (“Bancorp”), and
Martha Foulon-Tonat (“Foulon-Tonat”)

 

RECITALS:

 

WHEREAS, the Bank and Foulon-Tonat are parties to an Amended and Restated
Employment Agreement dated as of December 2, 2008 (the “Employment Agreement”);
and

 

WHEREAS, under certain of the Bank’s benefit plans, an executive may retire
after reaching age 65; and

 

WHEREAS, Foulon-Tonat has advised the Bank that she is interested in retiring
even though she is not yet 65 years of age; and

 

WHEREAS, the Bank has received financial assistance from the U.S. Government
pursuant under the Capital Purchase Program established under the Emergency
Economic Stabilization Act of 2008 (the “Act”); and

 

WHEREAS, Section 111 of the Act, as amended by the American Recovery and
Reinvestment Act of 2009, and the regulations promulgated thereunder
(collectively, “EESA”) prohibits financial institutions that have received but
not repaid such financial assistance from making “golden parachute payments”
upon the departure of certain senior executive and highly compensated employees
(“restricted employees”); and

 

WHEREAS, Foulon-Tonat is such a restricted employee; and

 

WHEREAS, the parties have determined that the restrictions imposed by EESA will
not prevent the Bank from paying retirement benefits to Foulon-Tonat if she
retires after the Bank has repaid all financial assistance received under the
Act; and

 

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WHEREAS, by this Agreement, the parties desire to amend the Employment Agreement
to provide certain benefits to Foulon-Tonat upon her retirement after the Bank
has repaid all financial assistance received under the Act.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the parties agree as follows:

 

1.                                       Defined Terms. Capitalized terms used
but not defined in this Agreement have the meanings set forth in the Employment
Agreement.

 

2.                                       Early Retirement Notice.  At such time
as the Bank and its Affiliates have repaid all financial assistance received
pursuant to the Act and have determined that all payments provided for in this
Agreement may be paid to Foulon-Tonat without violating EESA, the Bank shall
give notice to Foulon-Tonat stating that such restrictions no longer apply and
offering Foulon-Tonat the opportunity to promptly retire from employment with
the Bank (“Early Retirement”).  If, within five (5) business days of
Foulon-Tonat’s receipt of such notice, Foulon-Tonat gives the Bank notice
stating her decision to take Early Retirement, the Term shall terminate upon the
Bank’s receipt of such notice or upon such later date upon which the parties may
mutually agree (with such date of Early Retirement being the “Termination Date”
for purposes of applying the Employment Agreement).  If Foulon-Tonat elects
Early Retirement in accordance with this Section 2, she will be relieved of the
requirement otherwise imposed by Section 7.5 of the Employment Agreement to give
ninety (90) days notice of termination.  If Foulon-Tonat fails to give notice of
Early Retirement within the five (5) business day period specified above, she
shall thereafter have no further right to elect Early Retirement or to receive
any of the benefits of Early Retirement provided by this Agreement, and the
provisions of this Agreement shall be deemed null and void.  The parties agree
that time is of the essence with respect to Foulon-Tonat’s right to elect Early
Retirement.

 

3.                                       Payments after Early Retirement. 
Provided that Foulon-Tonat (i) is not in breach of any of her obligations under
the Employment Agreement (including without limitation Article 8 thereof) and
(ii) signs and delivers to the Bank, effective as of the Termination Date a
General Release and Waiver in the form attached to the Employment Agreement as
Exhibit A, if the Term is terminated because of Foulon-Tonat’s Early Retirement:

 

a.                                       The Bank shall pay to Foulon-Tonat an
amount equal to her annual Salary at the rate in effect as of December 31, 2010
(the “Early Retirement Payment”).  The first installment of the Early Retirement
Payment, which will be equal to one-half (1/2) of Foulon-Tonat’s annual Salary,
will be paid on the date six (6) months and one (1) day after the Termination
Date.  The Bank will pay the remaining one-half (1/2) of the Early Termination

 

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Payment in monthly installments during the period from the date of such payment
until the first anniversary of the Termination Date, each installment to be in
the amount that Foulon-Tonat would have been paid as Salary under the Employment
Agreement if she had remained employed by the Bank during such period at the
same rate of Salary but with appropriate reduction of withholding to take into
account amounts that Foulon-Tonat is no longer contributing to Bank benefit
plans.  In the event Foulon-Tonat breaches any provision of Article 8 of the
Employment Agreement (as amended by this Agreement), Foulon-Tonat’s entitlement
to the Early Retirement Payment shall thereupon immediately cease and terminate
as of the date of such breach, with Foulon-Tonat having the obligation to repay
to the Bank all payments that were theretofore paid to her pursuant to this
Section 3.a.

 

b.                                      If Foulon-Tonat timely elects to
continue her health insurance under COBRA, the Bank shall pay to Foulon-Tonat on
the date six (6) months and one (1) day after the Termination Date an amount
equal to the premiums paid by Foulon-Tonat for such COBRA health insurance
continuation for the six (6) month period after the Termination Date, subject to
Foulon-Tonat providing the Bank with reasonable substantiation showing that she
has paid such premiums to the insurer.  Thereafter, the Bank shall pay directly
to the insurer premiums for such COBRA health insurance coverage for the period
from the beginning of the seventh month after the Termination Date through the
date one (1) year after the Termination Date (provided that Foulon-Tonat remains
qualified for such continuation under COBRA during such period).  In the event
Foulon-Tonat breaches any provision of Article 8 of the Employment Agreement (as
amended by this Agreement), Foulon-Tonat’s entitlement to the payments under
this Section 3.b shall thereupon immediately cease and terminate as of the date
of such breach, with Foulon-Tonat having the obligation to repay to the Bank all
payments that were theretofore paid pursuant to this Section 3.b.

 

c.                                       On January 21, 2010, Bancorp issued to
Foulon-Tonat eight thousand seventy-three (8,073) shares of Bancorp Common
Stock, par value One Cent ($0.01) per share (“Stock”), pursuant to the 2006
Stock Plan of Bancorp (the “Stock Plan”).  Bancorp and Foulon-Tonat entered into
two separate Restricted Stock Award Agreements dated as of January 21, 2010,
which set out the vesting schedule applicable to such shares of Stock (the “2010
Restricted Stock”), with vesting being conditioned on Foulon-Tonat’s continuing
to provide substantial services for the Company through the date of vesting,
other than termination of services due to her death, disability, retirement
after age 65 or a change in control event.  If the Term is terminated because of
Foulon-Tonat’s Early Retirement, Foulon-Tonat, in her discretion, may elect, by
written notice to the President of the Bank prior to the Termination Date, to
receive, in lieu of any rights to the 2010 Restricted Stock, an amount equal to
the value of eight thousand seventy-three (8,073) shares of Stock as of the
Termination Date (“Termination Date Value”).  If Foulon-Tonat timely gives such
notice of election, all of the shares of 2010 Restricted Stock shall be
forfeited as of the Termination Date and Bancorp shall pay the Termination Date
Value to

 

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Foulon-Tonat on the date six (6) months and one (1) day after the Termination
Date, provided that Foulon-Tonat has not theretofore breached any provision of
the Employment Agreement, including without limitation Article 8 thereof (as
amended by this Agreement).  If the Term is terminated because of Foulon-Tonat’s
Early Retirement but Foulon-Tonat does not give such notice of election, she
shall retain all of the shares of 2010 Restricted Stock but vesting shall no
longer be subject to Foulon-Tonat’s continued performance of services.  In lieu
of the vesting schedule otherwise applicable to the 2010 Restricted Stock, all
of the shares of 2010 Restricted Stock shall fully vest on the date six
(6) months and one (1) day after the Termination Date, provided that
Foulon-Tonat has not theretofore breached any provision of the Employment
Agreement, including without limitation Article 8 thereof (as amended by this
Agreement).  Notwithstanding the foregoing, if Bancorp determines that the
change in vesting of the 2010 Restricted Stock would be inappropriate or unduly
burdensome because of administrative constraints or regulatory requirements, it
may pay to Foulon-Tonat an amount equal to the value of the 2010 Restricted
Stock as of the date six (6) months and one day after the Termination Date in
which case Foulon-Tonat will forfeit all of the shares of 2010 Restricted Stock.

 

d.                                      If the Term is terminated because of
Foulon-Tonat’s Early Retirement, and provided that Foulon-Tonat has not
theretofore breached any provision of the Employment Agreement, including
without limitation Article 8 thereof (as amended by this Agreement), Bancorp
shall issue to Foulon-Tonat on the date six (6) months and one day after the
Termination Date an additional seven thousand three hundred (7,300) shares of
Stock, which shares of Stock shall not have been registered under the Securities
Act of 1933; provided, however, if Bancorp determines at the time that the Stock
issuance would otherwise be made that the issuance of such Stock would be
inappropriate or unduly burdensome because of administrative constraints or
regulatory requirements, it may pay to Foulon-Tonat an amount equal to the value
of such Stock as of the date six (6) months and one day after the Termination
Date in lieu of issuing such Stock to her.  Notwithstanding the foregoing,
Foulon-Tonat, in her discretion, may elect, by written notice to the President
of the Bank prior to the Termination Date, to receive, in lieu of the seven
thousand three hundred (7,300) shares of Stock that she would otherwise receive
under this Section 3.d, an amount equal to the value of seven thousand three
hundred (7,300) shares of Stock as of the Termination Date.  If Foulon-Tonat has
timely made such election, Bancorp shall not issue such shares of Stock to
Foulon-Tonat but instead shall pay such amount to Foulon-Tonat on the date six
(6) months and one day after the Termination Date, provided that Foulon-Tonat
has not theretofore breached any provision of the Employment Agreement,
including without limitation Article 8 thereof (as amended by this Agreement).

 

e.                                       Notwithstanding anything to the
contrary in this Section 3, any payment pursuant to this Section shall be
subject to (i) any delay in payment required by Section 10.3 of the Employment
Agreement (applicable to certain payments of nonqualified deferred compensation

 

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subject to Section 409A) and (ii) any reduction required pursuant to
Section 10.2 of the Employment Agreement (applicable to certain Parachute
Payments).

 

f.                                         If, in lieu of being issued or
retaining Stock pursuant to Section 3.c or 3.d, Foulon-Tonat is to receive cash
equal to the value of Stock, the value of such Stock shall be determined based
on the average of the highest and lowest selling price for Stock on the date at
which value is to be determined (or, if such date is not a business day, the
immediately succeeding business day).

 

g.                                      If the Term is terminated because of
Foulon-Tonat’s Early Retirement, she shall not be entitled to any payment under
Article 9 of the Employment Agreement if there occurs any Change in Control.

 

4.                                       Restrictive Covenants. If the Term is
terminated because of Foulon-Tonat’s Early Retirement, the restrictive covenants
set forth in Article 8 of the Employment Agreement shall continue in force but
with the “Restricted Period” to extend until the date eighteen (18) months after
the Termination Date instead of the period otherwise specified in Section 8.5 of
the Employment Agreement.

 

5.                                       50% Reduction.

 

a.                                       Notwithstanding any provision of this
Agreement to the contrary, the total amount payable to Toulon-Fonat hereunder
shall be reduced by fifty percent (50%) (“50% Reduction”) if either of the
following shall occur at any time during the Restricted Period (without regard
to whether Foulon-Tonat is personally responsible in any manner for the
occurrence thereof):

 

i.                                          if any officer with a title of Vice
President or above of the Bank or its Affiliates leaves employment with the Bank
and commences providing services to any institution identified in Schedule
5(a)(i) hereto, or any Affiliate thereof, whether as an employee, contractor or
otherwise; or

 

ii.                                       if one or more Persons who had
deposits with the Bank as of the date of Foulon-Tonat’s Early Retirement
withdraw in the aggregate more than Ten Million Dollars ($10,000,000) from the
Bank and deposit, directly or through one or more Affiliates, more than Ten
Million Dollars ($10,000,000) with any institution identified in Schedule
5(a)(i) hereto, or any Affiliate thereof; provided, however, that the Persons
and accounts identified in Schedule 5(a)(ii) will not be taken into account in
applying this provision.

 

b.                                      For purposes of implementing the 50%
Reduction, the total amount payable to Foulon-Tonat hereunder shall be deemed to
be the sum of (i) the amount of the Early Retirement Payment plus (ii) the
amount payable for COBRA continuation coverage pursuant to Section 3.b,

 

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plus (iii) if Foulon-Tonat has elected pursuant to Section 3.c to receive a cash
payment in lieu of the 2010 Restricted Stock, the Termination Date Value, or if
she has not made such election, the value of eight thousand seventy-three
(8,073) shares of Stock as of the date on which the 50% Reduction is required,
plus (iv) the value of seven thousand three hundred (7,300) shares of Stock as
of the date on which the 50% Reduction is required or, if Foulon-Tonat has
elected pursuant to Section 3.d to receive a cash payment in lieu of Stock, the
value of seven thousand three hundred (7,300) shares of Stock as of the
Termination Date.

 

c.                                       If the 50% Reduction is required, the
Bank, in its discretion, may cause such reduction to be effected in any or all
of the following manners:

 

i.                                          reduction of further payments under
Section 3.a;

 

ii.                                       reduction of COBRA continuation
payments under Section 3.b;

 

iii.                                    reduction of amounts to be paid to
Foulon-Tonat under Section 3.c;

 

iv.                                   forfeiture of the 2010 Restricted Stock or
the right to receive a cash payment in lieu thereof;

 

v.                                      forfeiture of the right to receive
additional shares of Stock or a cash payment in lieu thereof under Section 3.d;
or

 

vi.                                   Foulon-Tonat’s repayment of amounts
previously paid to her under Section 3.a, 3.b, 3.c or 3.d.

 

Upon determining that the 50% Reduction is required, the Bank shall give notice
to Foulon-Tonat advising her of the manner in which the 50% Reduction will be
implemented.  If the Bank is requiring funds to be repaid pursuant to clause iv
above, Foulon-Tonat shall repay such funds to the Bank within fifteen (15) days
of the date on which notice is given to her pursuant to the preceding sentence.

 

The parties further agree that if this Section is deemed void as against public
policy or otherwise illegal or unenforceable, it will no longer be in effect as
of the date of said determination and will be stricken from this Agreement.  The
parties further agree that if such a determination is made and monies or stock
have been withheld from Foulon-Tonat, such monies and/or stock shall be paid
and/or issued within fifteen (15) days of the date of the determination. Such a
determination will not affect the legality, validity or enforceability of any
remaining portion or provision of this Agreement, which shall remain in force
and effect.

 

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6.                                       Nondisparagement.

 

a.                                       Provided that Foulon-Tonat is not in
breach of her obligations under the Employment Agreement (as amended by this
Agreement), the Bank covenants and agrees to not make, and to cause its
Affiliates and its and their directors and officers to not make, to any third
party any derogatory statements about, denigrate, criticize, disparage or
defame, or otherwise impugn or damage the reputation of, Foulon-Tonat, except in
response to valid compulsory legal process.

 

b.                                      Provided that the Bank and Bancorp are
not in breach of their obligations under the Employment Agreement (as amended by
this Agreement), Foulon-Tonat covenants and agrees to not make to any third
party (including but not limited to any customer, former customer or potential
customer of the Bank, any employee or other representative of any Bank
Regulatory Agency, or any employee of the Bank) at any time any derogatory
statements about, denigrate, criticize, disparage or defame, or otherwise impugn
or damage the reputation of, the Bank or any of its Affiliates or any of the
directors and officers thereof, except in response to valid compulsory legal
process.

 

7.                                       Repayment if Violation of EESA.  If,
after payment of any amount under this Agreement by the Bank or Bancorp, it is
determined that such payment was made in violation o EESA, Foulon-Tonat shall be
required to disgorge and pay over to the Bank or Bancorp, as applicable, all
such amounts theretofore paid to her, together with interest at the applicable
federal rate determined pursuant to Section 1274(d) of the Code, and Bank and
Bancorp shall have no further obligation to make any payment hereunder.

 

8.                                       Title and Duties.  While still employed
by the Bank and prior to her election of Early Retirement, Foulon-Tonat shall
remain the Executive Vice President of the Bank but she will no longer be the
Chief Lending Officer.  She will be responsible for performing such assignments
as may be reasonably assigned to her by the Chief Executive Officer of the Bank
and will also be responsible for finalizing reviews of her staff, but shall not
be required to meet with her staff to conduct such reviews.  The Bank will
provide Foulon-Tonat with all necessary information to allow her to accomplish
such reviews and specific assignments.  The parties understand that Foulon-Tonat
may use some or all of her vacation and sick leave as she considers whether to
take Early Retirement.  If at the time Foulon-Tonat elects Early Retirement she
has any accrued unused vacation or sick leave, the Bank shall pay the balance of
such leave to her in cash within five (5) business days after the Termination
Date.

 

9.                                       Stock Options.  Foulon-Tonat holds
options for 63,607 shares of Stock, which were granted to her under Bancorp’s
1999 Stock Option Plan and/or Bancorp’s 2006 Stock Plan.  The parties’ entering
into this Agreement shall have no effect on such options, which Foulon-Tonat
will continue to hold subject to the terms and conditions of such plan.

 

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10.                                 Interpretation of Agreement.

 

a.                                       This Agreement is intended to be, and
shall be construed as, an amendment to the Employment Agreement.  To the extent
that there is any inconsistency between any provision of this Agreement and any
provision of the Employment Agreement, the provision of this Agreement shall
prevail.

 

b.                                      The rules of construction and
application set forth in Sections 11 through 19 of the Employment Agreement
shall apply to this Agreement.

 

c.                                       If any provision of this Agreement
requires action to be taken that would be in violation of the Bank’s obligations
under EESA or any other provision of law, the parties agree that such provision
shall automatically be modified and shall be deemed to extend only to the extent
that it would not require action in violation of law.  If either party
determines in good faith that modification of the scope of this Agreement is
required because of this section, it shall promptly notify the other party of
such determination and the modification that it deems to be appropriate.

 

d.                                      The parties acknowledge that this
Agreement may be disclosed in filings with the Securities and Exchange
Commission, Bank Regulatory Agencies and other federal and state governmental
bodies and as otherwise required by law.

 

11.                                 Paragraph 13 of the Employment Agreement is
hereby amended to require that all notices required to be given to Foulon-Tonat
include notice to the following:

 

Daniel E. Farrington, Esq.

Margaret J. Scheele, Esq.

The Farrington Law Firm, LLC

4550 Montgomery Avenue

Suite 775 North

Bethesda, MD 20814

Facsimile No. (301) 951-1544

 

IN WITNESS WHEREOF, the parties have executed this Early Retirement Compensation
Agreement as of the date first written above.

 

 

EAGLEBANK

 

 

 

 

 

By:

/s/ Ronald D. Paul

 

 

Ronald D. Paul, Chief Executive Officer

 

 

 

 

 

EAGLE BANCORP, INC.

 

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By:

/s/ Ronald D. Paul

 

 

Ronald D. Paul, Chairman

 

 

 

MARTHA FOULON-TONAT

 

 

 

/s/ Martha Foulon-Tonat

 

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