Exhibit 10.1

 

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Long-Term Incentive Plan

 

2017-2019

 

 

 

 

 

 

 

 

Adopted: February 2017

 

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Long-Term Incentive Plan

 

Objectives

 

Eagle Bancorp, Inc. (the “Company”) is committed to rewarding executive officers
of the Company and its principal subsidiary EagleBank for their contributions to
the Company’s success. The Company’s long-term incentive plan (LTIP) is adopted
under, and constitutes the basis under which the Company will establish the
equity based compensation awarded to executive officers pursuant to the
Company’s then-applicable, shareholder approved, equity compensation plan (the
“Stock Plan”), and is part of a total compensation package, which includes base
salary, annual cash incentives (under the Senior Executive Incentive Plan –
“SEIP”), long-term equity incentives and benefits. The objectives of this
Long-Term Incentive Plan are to:

 

▪            Focus and reward participants for driving long-term, sustained
performance.

 

▪            Align executive officers with shareholder interests.

 

▪            Enable the Company and its subsidiaries to attract and retain
talent needed to drive the Company’s success.

 

▪            Ensure sound risk management by providing a balanced view of
performance and aligning rewards with the time horizon of risk.

 

▪            Position EagleBank’s total compensation to be competitive with
market for meeting performance goals.

 

▪            Work with the SEIP to ensure a proper balance of performance goals
and time horizons for overall performance and compensation.

 

Participation

 

▪            Participants are the executive officers of the Company and
EagleBank, as designated by the Board of Directors.

 

▪            Time-Vested Awards: New participants hired July 1 or later will not
be eligible to receive awards of RS for the year in which they are hired but
will become eligible for the next cycle.

 

▪            Performance-Vested Awards: New participants must be an executive
officer on the first business day of the year to be eligible for
performance-vested awards (made in the first quarter) relating to the
forthcoming three-year period. [Participants must be an active employee as of
the last day of the applicable performance period and on the date stock vests to
receive the benefit of an award.

 

▪            Participant’s performance must be in good standing (minimum rating
of 3) for the PRSU Performance Period and for the year of grant for Restricted
Shares..

 

Program Components

 

The LTIP provides the opportunity to receive shares of time vested restricted
stock (“RS”) and performance-vested restricted stock units (“PRSU”), to balance
goals to reward for performance, retain executives and align executives’
interests with shareholders. Each year, participants are eligible to receive:

 

▪                 Performance Shares (PSRU) (for 2017 this will be  42.5% of
award value); PRSUs are performance-based and align executives with shareholder
interests since award value is based on Company performance-based metrics. PRSUs
represent the right to receive shares of the Company’s common stock upon
certification of the achievement of specified performance based metrics over a
three year performance and vesting cycle (the “performance period”).

 

▪                 Restricted Stock (RS) (for 2017 this will be 57.5% of award
value); RS supports executive ownership and retention objectives since there is
always some value retained (even if performance metric minimums are not met).

 

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▪                 PRSUs are granted at target, with the potential to achieve
vesting at or above a lower (50% of target) “threshold” level, or to achieve
vesting up to a “stretch/maximum” (150% of target) level (with the award value
is focused on achievement of future performance based on predefined performance
measures). RS awards may be granted at target or could vary to allow for
recognition/variation of Company and Individual performance.

 

The number of Restricted Stock and PRSU shares will be determined by dividing
the value of the compensation award by the stock price on the date of grant
(utilizing the formula contained in the applicable Stock Plan then in effect).
The number of Performance Shares (PRSUs) will be granted at target but will be
settled in Common Stock after the three year performance and vesting period.

 

Performance units promote pay for performance alignment and are intended to
reward future performance since the awards are only paid out when predefined
performance goals are met. Performance units are earned and cliff vest after
three years. Earned performance units are paid within 75 days after the end of
the Performance Period or as soon as practicable thereafter if the measurement
data was not yet readily available, and vest on the date the Compensation
Committee certifies the performance data..

 

The grants of RS and PRSUs under this Plan are under and a part of the
applicable Company Stock Plan and not outside thereof, and are subject to all
terms and conditions of such Plan.

 

Individual grant agreements will be provided to each individual upon grant and
will specify the terms and conditions of the grant.

 

Participation in the Plan does not guarantee an award at the target levels
detailed in Appendix A. The Compensation Committee of the Company (the
“Committee”) will have the discretion to grant above or below target for RS to
allow for appropriate reflection of the Company’s performance, business
environment, risk mitigating factors, affordability and individual performance
and contribution.

 

Award Opportunities

 

Each participant will have a target equity award that reflects being a part of a
competitive total compensation package for his/her role. LTIP targets will be
communicated to each participant at the start of each performance period. (See
Appendix A for current target opportunities.) LTIP targets are estimates only,
subject to adjustment as set forth herein and are not committed amounts until
awards are actually made and vested.

 

Restricted Stock (Time Vested) Shares – How They Work

 

RS grants are awarded based on a holistic view of performance that recognizes
individual and Company performance. Actual awards can vary +/- 25% from target
to reflect performance. Once awarded, RS vests one-third per year for three
years, beginning on the first anniversary after the grant date.

 

Performance Shares – How they Work

 

Performance Period

 

Each performance cycle (i.e., performance period) is three years. Performance
goals and target opportunities are communicated at the start of each performance
period. For the 2017 Plan, the performance period will be January 1, 2017 to
December 31, 2019. The payout of the award is contingent on actual performance
of pre-defined measures at the end of the performance period. The result is a
rolling series of annual awards, each earned over three years.

 

Eagle Bancorp Long Term Incentive Plan

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The diagram below shows how the annual award process results in overlapping
cycles.

 

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Performance Measures

 

The Committee shall establish one or more Performance Goals for each grant of
PRSUs. The selected performance measures are intended to reflect the Company’s
strategic plan as well as shareholder expectations.

 

It is intended that target goals will reflect performance that is attainable
with reasonable stretch. Stretch (maximum) goals will reflect challenge goals
that require superior performance. Performance of each goal is measured
independently.

 

Actual payout after three years will be interpolated on a straight-line basis
between threshold, target and maximum to reward incremental performance.
Performance will range from 50% of target for achieving threshold performance to
150% of target for achieving stretch performance.

 

The table below establishes three performance goals and ranges, all relative to
the Index, for 2017.

 

 

 

 

 

 

Measures

Weight

Threshold

Target

Stretch/Maximum

Average Annual Earnings Per Share Growth

33 1/3%

Median

62.5% Percentile

75% Percentile

Average Annual Total Shareholder Return

33 1/3%

Median

62.5% Percentile

75% Percentile

Average Annual Return on Average Assets

33 1/3%

Median

62.5% Percentile

75% Percentile

Payout Range (% of Target)

100%

50%

100%

150%

 

The Index is the KBW Regional Bank Index (KRX) .

 

EPS Growth shall be measured (after adjustment for intervening share issuances)
by determining each year’s EPS Growth and then averaging the three years.

 

TSR shall be measured based on the change in stock price and the reinvested
dividends, if any, as at period end, based on the twenty trading day moving
average..

 

ROAA shall be measured by determining each year’s ROAA and then averaging the
three years.

 

Awards Payouts

 

Eagle Bancorp Long Term Incentive Plan

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The Company’s performance in respect of each of the performance measures will be
calculated following the end of each performance cycle to determine the portion
of an award of PRSUs that has vested. Vested PRSUs will be settled in the
Company’s common stock.

 

In light of extraordinary regional economic or business circumstances of a force
majeure nature (such as a result of a terrorist act or new government
sequestration), the grant may provide that the Committee retains the right to
apply positive discretion to vesting as appropriate to normalize for such
extraordinary regional circumstance. The factors listed above will be considered
before vesting is approved by the Committee.

 

Terms and Conditions

 

This section provides a general overview of the major terms and conditions for
the Long-Term Incentive Plan. Information represented below is subject to change
and does not constitute a binding agreement.

 

Effective Date

 

This LTIP is effective initially to reflect a performance period of January 1,
2017 to December 31, 2019. The LTIP will be reviewed annually by the Company’s
Compensation Committee of the Board to ensure proper alignment with the
Company’s business objectives. The Company retains the rights as described below
to amend, modify or discontinue the Plan at any time during the specified period
regarding future grants. The Plan will remain in effect until outstanding awards
are vested.

 

Plan Administration

 

The LTIP is authorized by the Board and administered by the Compensation
Committee. The Compensation Committee has the sole authority to interpret the
LTIP and to make or nullify any rules and procedures, as necessary, for proper
administration of the LTIP. The Compensation Committee will make all final
determinations regarding long-term incentive awards to participants. Any
determinations by the Compensation Committee will be final and binding on all
participants. The Compensation Committee may, in its sole discretion, terminate
or modify the LTIP, however, no amendment or termination of this LTIP will
adversely affect an outstanding award.

 

Plan Changes or Discontinuance

 

The Company has developed the LTIP on the basis of existing business, market and
economic conditions; current services; and staff assignments. If substantial
changes occur that affect these conditions, services, assignments, or forecasts
(for example, mergers, dispositions or other corporate transactions, changes in
laws or accounting principles or other events that would in the absence of some
adjustment, frustrate the intended operation of this arrangement), the Company
may add to, amend, modify or discontinue any of the terms or conditions of the
LTIP at any time regarding future grants.

 

Termination of Employment

 

To encourage executive retention, a participant must be an active employee of
the Company or Bank on the vesting date. (See exceptions for death, disability,
retirement, termination for good reason or without cause and change in control
below). PRSUs will be forfeited by participants who terminate employment during
the performance cycle except as otherwise set forth in this LTIP.

 

Death, Disability, Retirement

 

If a participant ceases to be employed by the Company or Bank due to death,
disability or retirement (as defined in the applicable Stock Plan), his/her RS
shares will immediately vest, and his/her performance-

 

Eagle Bancorp Long Term Incentive Plan

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vested PRSUs vesting will be the greater of (i) based on actual performance
measured on the most recent completed fiscal quarter, without proration or
(ii) based on an assumed “at target” performance for the entire Performance
Period, but then prorated for the period between grant and CIC.  Pro ration
shall be computed based on full months, including any partial month of service.

 

Change in Control (CIC)

 

Upon a change in control (as defined in, and subject to any conditions contained
in, the Stock Plan then in effect), (a) an executive’s RS shares will vest and
(b) his/her performance-vested PRSUs vesting will be the greater of (i) based on
actual performance measured on the most recent completed fiscal quarter, without
proration or (ii) based on an assumed “at target” performance for the entire
Performance Period, but then prorated for the period between grant and CIC.  Pro
ration shall be computed based on full months, including any partial month of
service.

 

Clawback

 

All awards under this Plan are subject to clawback in accordance with the
requirements of the applicable award agreement and applicable Stock plan,
applicable law and regulation and the listing requirements of any exchange on
which the Company’s common stock is listed for trading.

 

Ethics and Interpretation

 

If there is any ambiguity as to the meaning of any terms or provisions of the
Plan or any questions as to the correct interpretation of any information
contained therein, the interpretation expressed by the Compensation Committee
will be final and binding.

 

The altering, inflating, and/or inappropriate manipulation of
performance/financial results or any other infraction of recognized ethical
business standard, will subject a participant to disciplinary action up to and
including termination of employment. In addition, any incentive compensation
under the Plan to which the participant would otherwise be entitled may be
revoked.

 

Miscellaneous

 

The LTIP will not be deemed to give any participant the right to be retained in
the employ of the Bank, nor will the LTIP interfere with the right of the
Company or Bank to discharge any participant at any time for any reason. Receipt
of an award in one year does not guarantee the eligibility of a participant to
receive, or entitle a participant to receive, an award in any subsequent year.

 

Each provision in this LTIP is severable, and if any provision is held to be
invalid, illegal, or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not, in any way, be affected or impaired thereby.

 

This incentive plan and the transactions and payments hereunder shall, in all
respects, be governed by, and construed and enforced in accordance with the laws
of the state of Maryland (without regard to its conflicts of laws provisions).

 

Eagle Bancorp Long Term Incentive Plan

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Appendix A
2017 LTI Target Opportunity

 

Tier

Target LTI

RS and PRSU
(% of Salary)

CEO

275%

Tier 1

145%

Tier 2

125%

 

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