SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Enterprise Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing:
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No:
(3) Filing party:
(4) Date Filed:
<PAGE>
March 25, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of the
Stockholders (the "Annual Meeting") of Enterprise Bancorp, Inc. (the "Company"),
the parent holding company of Enterprise Bank and Trust Company, to be held on
Tuesday, May 5, 1998, at 4:00 p.m. local time, at the American Textile Museum,
491 Dutton Street, Lowell, Massachusetts.
The Annual Meeting has been called for the following purposes:
1. To elect five Directors of the Company, each for a three-year
term;
2. To approve and adopt the Company's 1998 Stock Incentive Plan;
3. To ratify the Board of Directors' appointment of KPMG Peat
Marwick LLP as the Company's independent auditors for the
fiscal year ending December 31, 1998; and
4. To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.
The accompanying Proxy Statement of the Company provides information
concerning the matters to be voted on at the Annual Meeting. Also enclosed is
the Company's 1997 Annual Report to Stockholders, which contains additional
information and results for the year ended December 31, 1997, including the
Company's Annual Report on Form 10-KSB as filed with the Securities and Exchange
Commission.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are requested to
complete, date, sign and return the enclosed proxy card in the enclosed postage
paid envelope.
Thank you for returning your proxy. We appreciate your continuing
support of the Company.
Sincerely,
George L. Duncan
Chairman of the Board
and Chief Executive Officer
<PAGE>
ENTERPRISE BANCORP, INC.
222 MERRIMACK STREET
LOWELL, MASSACHUSETTS 01852
TELEPHONE: (978) 459-9000
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Tuesday, May 5, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Enterprise Bancorp, Inc. (the "Company") will be held at the American Textile
Museum, 491 Dutton Street, Lowell, Massachusetts at 4:00 p.m. local time on
Tuesday, May 5, 1998 for the following purposes:
1. To elect Walter L. Armstrong, George L. Duncan, John P.
Harrington, Charles P. Sarantos and Michael A. Spinelli as
Directors of the Company, each to serve for a three-year term
(Proposal One);
2. To approve and adopt the Company's 1998 Stock Incentive Plan
(Proposal Two);
3. To ratify the Board of Directors' appointment of KPMG Peat
Marwick LLP as the Company's independent auditors for the
fiscal year ending December 31, 1998 (Proposal Three); and
4. To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 10,
1998 as the record date for determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournments or postponements
thereof. Only holders of the Company's common stock of record at the close of
business on that date will be entitled to notice of, and to vote at, the Annual
Meeting and any adjournments or postponements thereof.
In the event there are not sufficient votes to approve any of the
foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies by the Company.
By Order of the Board of Directors
Arnold S. Lerner
Clerk
Lowell, Massachusetts
March 25, 1998
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING AND DESIRE TO WITHDRAW YOUR PROXY AND VOTE IN PERSON,
YOU MAY DO SO.
<PAGE>
ENTERPRISE BANCORP, INC.
222 MERRIMACK STREET
LOWELL, MASSACHUSETTS 01852
Telephone: (978) 459-9000
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Tuesday, May 5, 1998
General
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Enterprise Bancorp, Inc. (the
"Company"), the parent holding Company of Enterprise Bank and Trust Company (the
"Bank"), for the 1998 Annual Meeting of Stockholders of the Company (the "Annual
Meeting"), to be held on Tuesday, May 5, 1998 at 4:00 p.m. local time, at the
American Textile Museum, 491 Dutton Street, Lowell, Massachusetts and at any
adjournments or postponements thereof. This Proxy Statement, the accompanying
Notice of Annual Meeting and the accompanying proxy card are first being mailed
to stockholders on or about March 25, 1998.
The Annual Meeting has been called for the following purposes: (1) to
elect a class of five Directors of the Company, each for a three-year term; (2)
to approve and adopt the Company's 1998 Stock Incentive Plan; (3) to ratify the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors; and
(4) to transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
The Company is a Massachusetts corporation and a registered bank
holding company. All of the company's material business activities are conducted
through the Bank.
Record Date
The Board of Directors has fixed the close of business on March 10,
1998 as the Record Date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting and any adjournments or postponements
thereof. Only holders of record of the Company's common stock at the close of
business on the Record Date will be entitled to notice of, and to vote at, the
Annual Meeting and any adjournments or postponements thereof. At the close of
business on the Record Date, there were 1,580,217 shares of the Company's common
stock, par value $0.01 per share (the "Common Stock"), issued and outstanding
and entitled to vote at the Annual Meeting and any adjournments or postponements
thereof. As of such date there were approximately 593 holders of record of the
Common Stock. The holders of each share of the Common Stock outstanding as of
the close of business on the Record Date will be entitled to one vote for each
share held of record upon each matter properly submitted to the Annual Meeting
or any adjournments or postponements thereof.
Proxies
Holders of the Common Stock are requested to complete, date, sign and
promptly return the accompanying proxy card in the enclosed envelope which
requires no postage if mailed in the United States. If the enclosed form of
proxy is properly executed and returned to the Company in time to be voted at
the Annual Meeting, the shares represented thereby will, unless such proxy has
previously been revoked, be voted in accordance with the instructions marked
thereon. Properly executed proxies with no instructions indicated thereon will
be voted (1) FOR the election of Walter L. Armstrong, George L. Duncan, John P.
Harrington,
<PAGE>
Charles P. Sarantos and Michael A. Spinelli, the five nominees of the Board of
Directors, as Directors of the Company, (2) FOR the approval and adoption of the
Company's 1998 Stock Incentive Plan, (3) FOR the ratification of the Board of
Directors' appointment of KPMG Peat Marwick LLP as the Company's independent
auditors for the fiscal year ending December 31, 1998, and (4) in such manner as
management's proxy-holders shall decide on such other matters as may properly
come before the Annual Meeting or any adjournments or postponements thereof.
The presence of a stockholder at the Annual Meeting will not
automatically revoke a stockholder's proxy. A stockholder may, however, revoke a
proxy at any time prior to the voting thereof on any matter (without, however,
affecting any vote taken prior to such revocation) by filing with the Clerk of
the Company a written notice of revocation, or by delivering to the Company a
duly executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person. All written notices of revocation and other communications
with respect to revocation of proxies in connection with the Annual Meeting
should be addressed as follows: Enterprise Bancorp, Inc., 222 Merrimack Street,
Lowell, Massachusetts 01852, Attention: Arnold S. Lerner, Clerk.
It is not anticipated that any matters other than those set forth in
the foregoing proposals (1), (2) and (3) contained in this Proxy Statement will
be brought before the Annual Meeting. If any other matters properly come before
the Annual Meeting, the persons named as proxies will vote upon such matters in
their discretion in accordance with their best judgment.
In addition to use of the mails, proxies may be solicited personally or
by telephone or telegraph by officers, Directors and employees of the Company
who will not be specially compensated for such solicitation activities.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries for forwarding solicitation materials to the beneficial
owners of shares held of record by such persons, and the Company will reimburse
such persons for their reasonable out-of-pocket expenses incurred in that
connection. The cost of soliciting proxies will be borne by the Company.
Quorum; Vote Required
The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares of the Common Stock is necessary to
constitute a quorum at the Annual Meeting for the transaction of business.
Abstentions and "broker non-votes" (as defined below) will be counted as present
for purposes of determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting. A quorum being present, the
affirmative vote of a plurality of the votes cast at the Annual Meeting is
required to elect a class of five Directors of the Company (Proposal One).
Neither abstentions nor broker non-votes will be counted as "votes cast" for
purposes of electing a class of five Directors of the Company and, therefore,
they will not affect the election of Directors of the Company. The approval and
adoption of the Company's 1998 Stock Incentive Plan (Proposal Two) requires the
affirmative vote of the holders of a majority of the outstanding shares of the
Common Stock present, in person or by proxy, and entitled to vote thereon at the
Annual Meeting. Abstentions will be included among the shares that are
considered present and entitled to vote on this proposal, and since they will
not be counted as affirmative votes "for" this proposal, they will have the
effect of votes "against" this proposal. Broker non-votes will not be included
among the shares that are considered present and entitled to vote on this
proposal and, therefore, they will have no effect on the voting for this
proposal. Approval of the proposal to ratify the appointment of independent
auditors (Proposal Three) requires the affirmative vote of a majority of the
shares present and voting, in person or by proxy, at the Annual Meeting. Neither
abstentions nor broker non-votes will be included among the shares that are
considered to be present and voting on this proposal and, therefore, they will
have no effect on the voting for this proposal.
-2-
<PAGE>
A "broker non-vote" is a proxy from a broker or other nominee
indicating that such person has not received instructions from the beneficial
owner or other person entitled to vote the shares which are the subject of the
proxy on a particular matter with respect to which the broker or other nominee
does not have discretionary voting power.
The Directors and executive officers of the Company have indicated that
they intend to vote all shares of the Common Stock which they are entitled to
vote in favor of each of proposals (1), (2) and (3) presented herein. On the
Record Date, the Directors and executive officers of the Company in the
aggregate had the right to vote 305,395 shares of the Common Stock representing
approximately 19.33% of the outstanding shares of the Common Stock as of such
date.
PROPOSAL ONE
ELECTION OF CLASS OF DIRECTORS
The Company's By-Laws provide that the number of Directors shall be set
by a majority vote of the entire Board of Directors. The number of Directors for
the Company has been accordingly set at 14. Under the Company's Articles of
Organization and By-Laws, this number shall be divided into three classes, as
nearly equal in number as possible, with the Directors in each class serving a
term of three years and until their respective successors are duly elected and
qualified, or until his or her earlier resignation, death or removal. As the
term of one class expires, a successor class is elected at the annual meeting of
stockholders for that year.
At the Annual Meeting, there are five Directors to be elected to serve
until the 2001 annual meeting of stockholders and until their respective
successors are duly elected and qualified, or until his or her earlier
resignation, death or removal. The Board of Directors has nominated each of
Walter L. Armstrong, George L. Duncan, John P. Harrington, Charles P. Sarantos
and Michael A. Spinelli, for election as a Director for a three-year term.
Unless authority to do so has been withheld or limited in the proxy, it
is the intention of the persons named in the proxy to vote the shares
represented by each properly executed proxy for the election as a Director of
each of the nominees named above. The Board of Directors believes that all of
the nominees will stand for election and will serve as a Director if elected.
However, if any person nominated by the Board of Directors fails to stand for
election or is unable or refuses to accept election, the proxies will be voted
for the election of such other person or persons as the Board of Directors may
recommend.
Recommendation of Directors
The Board of Directors recommends that the stockholders vote FOR the
election of Walter L. Armstrong, George L. Duncan, John P. Harrington, Charles
P. Sarantos and Michael A. Spinelli, the five nominees proposed by the Board of
Directors, as Directors of the Company to serve until the 2001 annual meeting of
stockholders and until their successors are elected and qualified.
Information Regarding Directors and Nominees
The following table sets forth certain information for each of the five
nominees for election as Directors at the Annual Meeting and for those
continuing Directors whose terms expire at the annual meetings of the Company's
stockholders in 1999 and 2000. Each individual has been engaged in his or her
principal occupation for at least five years, except as otherwise indicated.
-3-
<PAGE>
<TABLE>
<CAPTION>
Nominees
(Term to Expire in 2001)
Name, Age and Principal Occupation Director Since (1)
- ---------------------------------- ------------------
<S> <C>
Walter L. Armstrong (61) 1989
Executive Vice President of the Bank
George L. Duncan (57) 1988
Chairman and Chief Executive Officer of the Company since its inception;
Chairman and Chief Executive Officer of the Bank
John P. Harrington (55) 1989
Since February 1995, Senior Vice President,
Colonial Gas Company; prior thereto, Vice
President, Colonial Gas Company; Director, Colonial Gas Company
Charles P. Sarantos (72) 1991
Chairman, C&I Electrical Supply Co., Inc.
Michael A. Spinelli (65) 1988
Owner, Merrimac Travel and Action Six
Travel Network; Assistant Clerk of the Company and the Bank
<CAPTION>
Continuing Directors
(Term to Expire in 1999)
Name, Age and Principal Occupation Director Since (1)
- ---------------------------------- ------------------
<S> <C>
Kenneth S. Ansin (33) 1994
President and Chief Executive Officer,
L.B. Evans Company; President and
Chief Executive Officer of Ansewn
Shoe Company
Eric W. Hanson (54) 1991
Chairman and President
D.J. Reardon Company, Inc.
Arnold S. Lerner (68) 1988
Partner in WLLH Radio (Lowell)
and in several other radio stations;
Director, Courier Corporation;
Clerk of the Company and the Bank
Richard W. Main (50) 1989
President of the Company since its inception;
President, Chief Operating Officer and
Chief Lending Officer of the Bank
-4-
<PAGE>
<CAPTION>
(Term to Expire in 2000)
Name, Age and Principal Occupation Director Since (1)
- ---------------------------------- ------------------
<S> <C>
Gerald G. Bousquet, M.D. (64) 1988
Physician; director and partner in
several health care facilities
Kathleen M. Bradley (73) 1988
Former owner, Westford Sports Center, Inc.
James F. Conway, III (45) 1989
Chairman, Chief Executive Officer and President
Courier Corporation
Nancy L. Donahue (67) 1988
Chair of the Board of Trustees, Merrimack Repertory Theatre
Lucy A. Flynn (44) 1997
Since May 1996, Senior Vice President, Wang Laboratories;
prior thereto, Senior Vice President, Shawmut Bank, N.A.
- ------------------------------
<FN>
(1) All of the Directors are also Directors of the Bank. The years listed in the foregoing tables are the
respective years in which each named individual first became a Director of the Company and/or the Bank.
</FN>
</TABLE>
Meetings of Board of Directors and Committees
There were five meetings of the Company's Board of Directors during the
calendar year ended December 31, 1997. During such period, each Director
attended more than 75% in the aggregate of the total number of meetings of the
Board of Directors and of each of the committees of the Board of Directors on
which he or she served.
The Company's Board of Directors maintains three standing committees,
an executive committee, an audit committee and a compensation committee. The
executive committee, composed of Messrs. Duncan and Lerner, together with two
additional members chosen to serve on a three-month rotating basis, is
authorized to manage and transact the business of the Company. The executive
committee met three times in 1997. The audit committee, composed of Ms. Bradley
and Messrs. Hanson, Harrington and Spinelli, recommends to the Board of
Directors the appointment of an independent certified public accounting firm to
serve as independent auditors to the Company, oversees and reviews all internal
audit examinations and reports, and reviews all reports of examination of the
Company prepared by regulatory authorities. The audit committee met once in
1997. The compensation committee, composed of Messrs. Conway, Hanson and Lerner,
is responsible for overseeing the administration of the employee benefit and
compensation programs of the Company. The compensation committee met two times
in 1997.
The Bank's Board of Directors, which met 11 times during the year ended
December 31, 1997, has an executive committee, audit committee,
compensation/personnel committee, investment and asset/liability committee,
marketing committee, banking technology committee, trust committee, overdue loan
review committee and ECOA (Equal Credit Opportunity Act) committee.
-5-
<PAGE>
Executive Committee. The executive committee is authorized to manage
and transact the business of the Bank. In addition, loans over certain amounts
must be pre-approved by at least two members of the executive committee. Messrs.
Duncan (chair of the committee) and Lerner serve as permanent members of the
executive committee, while two members are chosen to serve on a three-month
rotating basis from among the remaining members of the Board of Directors. The
committee held 12 meetings in 1997.
Audit Committee. The audit committee oversees and reviews all internal
audit examinations and reports and reviews all reports of examination of the
Bank prepared by bank regulatory authorities. The current members of the
committee are Ms. Bradley and Messrs. Hanson, Harrington and Spinelli (chair of
the committee). The committee held seven meetings in 1997.
Compensation/Personnel Committee. The compensation/personnel committee
is responsible for overseeing the administration of the employee benefit and
compensation programs of the Bank. Messrs. Conway (chair of the committee),
Hanson and Lerner serve on the committee. The committee held 10 meetings in
1997.
Investment and Asset/Liability Committee. The investment and
asset/liability committee is authorized to develop and refine the strategic
investment and asset/liability portfolio and asset/liability objectives of the
Bank to ensure that the Bank maintains a portfolio consistent with sound
investment and banking practices. Messrs. Conway, Duncan, Lerner (chair of the
committee) and Main serve on the committee. Two additional members are chosen to
serve on a three-month rotating basis from among the remaining members of the
Bank's Board of Directors. The committee held 12 meetings in 1997.
Marketing Committee. The marketing committee reviews the Bank's
marketing activities. The current members of the committee are Messrs. Ansin,
Armstrong, Duncan, Harrington, Lerner, Main and Ms. Donahue (chair of the
committee). The committee held three meetings in 1997.
Banking Technology Committee. The banking technology committee is
responsible for overseeing the administration of the Bank's data processing
function. Messrs. Ansin, Bousquet and Sarantos (chair of the committee) serve on
the committee. The committee held four meetings in 1997.
Trust Committee. The trust committee is responsible for overseeing
trust activities including administering trust policy and reviewing trust
accounts. Messrs. Conway, Duncan, Lerner (chair of the committee) and Main serve
on the committee. The committee held 12 meetings in 1997.
Overdue Loan Review Committee. The overdue loan review committee
reviews and assesses all loan delinquencies. The current members of the
committee are Messrs. Armstrong, Bousquet (chair of the committee), Harrington,
Sarantos and Mesdames Bradley and Donahue. The committee held four meetings in
1997.
ECOA Committee. The ECOA committee is responsible for reviewing,
enhancing and developing policies and procedures to combat possible
discrimination in lending. Mr. Ansin and Ms. Donahue (chair of the committee)
serve on the committee, which met once in 1997.
-6-
<PAGE>
Information Regarding Executive Officers and Other Significant Employees
Set forth below is certain information regarding the executive officers
and other significant employees of the Company (including the Bank), other than
those executive officers who are also Directors of the Company and for whom such
information has been provided above. Each individual named below has held his or
her position for at least five years, except as otherwise indicated.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
John P. Clancy, Jr. 40 Treasurer of the Company since its inception; Senior
Vice President, Chief Financial Officer, Treasurer and
Chief Investment Officer of the Bank since December
1996; prior thereto, Senior Vice President, Chief
Financial Officer and Treasurer of the Bank
Robert R. Gilman 52 Executive Vice President, Administration, and
Commercial Lender of the Bank since December 1996;
prior thereto, Senior Vice President, Administration,
and Commercial Lender of the Bank
Stephen J. Irish 43 Senior Vice President and Chief Information and Chief
Operations Officer of the Bank since December 1996;
prior thereto, Senior Vice President and Chief
Information Officer of the Bank
</TABLE>
Executive Compensation
Summary Compensation Table. The following table sets forth the
compensation paid by the Company (through the Bank) for services rendered in all
capacities during the year ended December 31, 1997, to the chief executive
officer and each of the four most highly compensated executive officers of the
Bank (the "Named Executive Officers"). The Company does not employ any persons,
other than through the Bank.
-7-
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation
Compensation Awards
------------ ------
Securities
Salary Bonus Underlying All Other
Name and Principal Position Year ($) ($) Options(#) Compensation (1)
- --------------------------- ---- ----- ----- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
George L. Duncan 1997 $156,250 $ 66,984 5,500 $104,448 (2)
Chairman and Chief
Executive Officer of the
Company and the Bank
1996 $156,250 $ 78,219 5,500 $ 25,335 (2)
1995 $156,250 $ 50,387 5,500 $ 4,625
Richard W. Main $124,345 $ 53,308 2,750 $ 6,042
President of the Company and
President, Chief Operating
Officer and Chief Lending
Officer of the Bank 1997
1996 $124,345 $ 62,255 2,750 $ 4,750
1995 $124,345 $ 39,950 2,750 $ 4,625
Walter L. Armstrong $129,400 - 0 - 1,500 $ 5,795
Executive Vice President,
Business Development, of the
Bank 1997
1996 $119,600 - 0 - 1,500 $ 4,750
1995 $115,943 - 0 - 1,000 $ 4,625
Robert R. Gilman $105,798 $ 22,080 1,500 $ 5,359
Executive Vice President,
Administration, and
Commercial Lender of the
Bank 1997
1996 $ 96,180 $ 15,052 1,500 $ 4,700
1995 $ 96,180 $ 17,793 1,000 $ 3,892
John P. Clancy, Jr. 1997 $ 107,830 $ 21,954 1,500 $ 5,357
Treasurer of the Company and
Senior Vice President, Chief
Financial Officer, Treasurer
and Chief Investment Officer
of the Bank
1996 $ 93,767 $ 14,675 1,500 $ 4,400
1995 $ 93,767 $ 17,347 1,000 $ 4,218
- -----------------
<FN>
(1) Reflects the Bank's matching contribution on behalf of each Named Executive Officer to the Bank's existing 401(k) plan.
(2) Includes the dollar value, in an amount of $5,610 for 1997 and $1,018 for 1996, attributable to the portion of the annual
premium related to term insurance coverage paid by the Bank under a split- dollar life insurance policy and the additional
dollar value, in an amount of $90,981 for 1997 and $19,692 for 1996, of the benefit to Mr. Duncan of the remaining portion
(unrelated to term insurance coverage) of the annual premium paid by the Bank under such split-dollar life insurance policy
projected on an actuarial basis. The premiums paid by the Bank over the life of the policy will be fully recovered by the Bank.
</FN>
</TABLE>
-8-
<PAGE>
Director Compensation
The Company pays no separate compensation to the Directors for their
service as members of the Company's Board of Directors. The Bank pays $200 to
Directors for Board of Directors meetings, $200 to Directors for executive
committee meetings, $150 to Directors for all other committee meetings, a $100
monthly retainer to all Directors and a $100 monthly retainer to executive
committee members. The Bank also pays a $100 monthly retainer to the
vice-chairman of the Board of Directors, a $200 monthly retainer to the Clerk of
the Bank and $200 to the chairpersons of the investment and asset/liability,
trust, banking technology, ECOA, compensation/personnel, overdue loan review,
audit and marketing committees for each meeting attended. Directors who are also
salaried officers of the Bank are not paid for attending Board of Directors or
committee meetings.
Employment Agreements
The Bank has entered into employment agreements with each of Messrs.
Duncan and Main.
The term of Mr. Duncan's agreement is a "rolling" three years until and
unless terminated based on the occurrence of any of the following events: (i) 36
months after notice is given by the Bank to Mr. Duncan that it no longer desires
to extend the agreement; (ii) the death of Mr. Duncan; (iii) the termination of
Mr. Duncan by the Bank for cause; (iv) 60 days after notice is given by Mr.
Duncan to the Bank at any time after the occurrence of a Business Combination as
defined in the Bank's Articles of Organization; and (v) 60 days after notice is
given by Mr. Duncan to the Bank following the Board of Directors' failure to
re-elect Mr. Duncan as the chief executive officer of the Bank.
Mr. Duncan receives a minimum annual base salary under the agreement of
$156,250, which is subject to annual review by the Compensation Committee and
Board of Directors. In addition to his base salary, Mr. Duncan is entitled to
participate in all other benefit plans and otherwise receive all other fringe
benefits that the Bank from time to time makes available to its officers.
Following the occurrence of any Business Combination, Mr. Duncan has
the option, upon 60 days advance written notice to the Bank, to terminate the
agreement, in which event the Bank is obligated to pay Mr. Duncan 2.99 times his
previous highest annual earnings under the agreement. If Mr. Duncan exercises
the option to terminate under such circumstances, he is relieved of the
non-competition restrictions that would otherwise apply upon his termination of
the agreement.
If the Board of Directors fails to re-elect Mr. Duncan chief executive
officer at any time during the period of the agreement, then Mr. Duncan has the
options, upon 60 days advance written notice to the Bank to: (i) remain as a
full-time employee; (ii) terminate the agreement; or (iii) serve the Bank as a
consultant in lieu of serving in another capacity. In the event Mr. Duncan
elects to terminate the agreement because he is no longer the chief executive
officer, he shall receive compensation from the Bank for two years. The
compensation shall equal the highest annual earnings paid to Mr. Duncan during
any year of the agreement. During the two-year period he is receiving payments
under the agreement and in consideration of the compensation to be paid to him,
Mr. Duncan is prohibited from competing with the Bank. In the event Mr. Duncan
elects to serve as a consultant to the Bank, he would be required to devote
approximately one-half of his time to the business and affairs of the Bank and
would receive as compensation a salary equal to one-half of the highest annual
earnings paid to him during the period in which he served the Bank in the
capacity of chief executive officer.
If Mr. Duncan becomes disabled during the term of the agreement, then
the Bank may elect to stop paying Mr. Duncan his regular annual earnings and,
upon notice, pay Mr. Duncan during the period of his disability an amount equal
to 75% of the highest annual earnings paid to him during the term of the
agreement
-9-
<PAGE>
less any amounts payable to him under the Bank's group disability plan. If Mr.
Duncan dies while the agreement is in effect, then the Bank will continue to
provide health insurance coverage under its group plan to Mr. Duncan's spouse
and children in accordance with certain conditions specified in the agreement.
Under the terms of the agreement, Mr. Duncan is prohibited from
competing with the Bank during the two-year period from the date on which the
agreement is terminated for any reason, except as described above in the event
of Mr. Duncan's termination of the agreement following a Business Combination.
During each year of the two-year non-compete period, Mr. Duncan would be
entitled to receive salary payments at least equal to 70% of the highest annual
earnings paid to him during any year of the term of the agreement.
The terms of Mr. Main's employment agreement are substantially
equivalent to those of Mr. Duncan's employment agreement, except that (i) the
term of Mr. Main's agreement is for a "rolling" two years; (ii) Mr. Main's
minimum annual base salary is $124,345; (iii) the office which the agreement
contemplates will be held by Mr. Main is the office of president; and (iv) Mr.
Main's potential termination payment following a Business Combination is two
times his previous highest annual earnings under the agreement.
Option Grants in Last Fiscal Year
The following table shows individual grants of stock options to the
Named Executive Officers during the year ended December 31, 1997:
<TABLE>
<CAPTION>
Number of
Securities Percent of Total
Underlying Options Granted
Options to Employee in Exercise or Base Expiration
Name Granted (#)(1)(2) Fiscal Year Price ($/Sh ) Date
- ---- ----------------- ------------- --------------- -----
<S> <C> <C> <C> <C> <C>
George L. Duncan 5,500 21.61% $18.00 07/02/2007
Richard W. Main 2,750 10.81% $18.00 07/02/2007
Walter L. Armstrong 1,500 5.89% $18.00 07/02/2007
Robert R. Gilman 1,500 5.89% $18.00 07/02/2007
John P. Clancy, Jr. 1,500 5.89% $18.00 07/02/2007
- --------------------
<FN>
(1) All options were granted under the Company's 1988 Stock Option Plan, were granted at an exercise price of not less than the
fair market value of the Common Stock at the date of grant and are intended to qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
(2) All of the options become exercisable at a rate of 25% per year, commencing with initial vesting on the first anniversary of
the date of grant, and become immediately exercisable in full upon a Change of Control (as such term is defined in the 1988
Stock Option Plan) of the Company.
</FN>
</TABLE>
-10-
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table shows each exercise of stock options by the Named
Executive Officers during the year ended December 31, 1997 and the unexercised
stock options held by such persons as of such date:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options at Fiscal Options at Fiscal
Shares Acquired Year-End (#) Year-End ($)
on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable (1)
- ---- -------------- ------------------ ------------- -----------------
<S> <C> <C> <C> <C>
George L. Duncan - 0 - --- 23,925/12,375 $276,100/$90,750
Richard W. Main - 0 - --- 11,962/6,188 $138,046/$45,375
Walter L. Armstrong - 0 - --- 10,775/3,125 $126,925/$22,375
Robert R. Gilman - 0 - --- 4,875/3,125 $ 56,125/$22,375
John P. Clancy, Jr. - 0 - --- 4,375/3,125 $ 50,125/$22,375
- --------------------
<FN>
(1) The dollar values shown are based upon the difference between $23.00, which the Board of Directors believes approximates the
current fair market value of the Common Stock, and the per share exercise price of the options.
</FN>
</TABLE>
Transactions with Certain Related Persons
The Bank leases its headquarters from First Holding Trust. Mr. Duncan
is a trustee of First Holding Trust and is a general partner of Old City Hall
Limited Partnership which is, in turn, the beneficiary of First Holding Trust.
Messrs. Main, Armstrong, Gilman and Clancy are limited partners of Old City Hall
Limited Partnership. Mr. Duncan has a 17% ownership interest, and Messrs. Main,
Armstrong, Gilman and Clancy each have a 5% ownership interest, in Old City Hall
Limited Partnership. Under the terms of the Bank's lease with First Holding
Trust, the Bank paid $185,658 and $178,684, respectively, in rent, parking fees,
taxes and maintenance for the years ended December 31, 1997 and December 31,
1996.
Certain Directors and executive officers of the Company are also
customers of the Bank and have entered into loan transactions with the Bank in
the ordinary course of business. In addition, certain Directors are also
directors, officers or stockholders of corporations, non-profit entities or
members of partnerships which are customers of the Bank and which enter into
loan and other transactions with the Bank in the ordinary course of business.
Such loan transactions with Directors and executive officers of the Bank and
with such corporations and partnerships are on such terms, including interest
rates, repayment terms and collateral, as those prevailing at the time for
comparable transactions with persons who are not affiliated with the Bank and do
not involve more than a normal risk of collectibility or present other features
unfavorable to the Bank.
-11-
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to Directors,
Named Executive Officers and Directors and executive officers as a group and
persons known to the Company who are the beneficial owners of more than 5% of
the Common Stock as of February 28, 1998. Information includes the total number
of shares of the Common Stock known by the Company to be beneficially owned by
each such person and group and the percentage of the Common Stock each such
person and group beneficially owns. All shares are owned of record and
beneficially, and each person and group identified has sole voting and
investment power with respect to such shares, except as otherwise noted.
<TABLE>
<CAPTION>
Shares of Common Stock Percent of Total
Directors Beneficially Owned (1) Common Stock
- --------- ---------------------- ------------
<S> <C> <C>
Kenneth S. Ansin 11,000 *
Walter L. Armstrong (2) 13,875 *
Gerald G. Bousquet 7,000 *
Kathleen M. Bradley 7,000 *
James F. Conway, III 91 *
Nancy L. Donahue 5,000 *
George L. Duncan (3) 137,004 8.67%
710 Andover Street
Lowell, MA 01852
Lucy A. Flynn (4) 1,075 *
Eric W. Hanson (5) 96,350 6.10%
Three Boardwalk
Chelmsford, MA 01824
John P. Harrington 100 *
Arnold S. Lerner (6) 131,000 8.29%
155 Pine Hill Road
Hollis, NH 03049
Richard W. Main (7) 25,262 1.60%
Charles P. Sarantos (8) 9,600 *
Michael A. Spinelli 61,000 3.86%
Other Named Executive Officers
- ------------------------------
Robert R. Gilman (9) 6,375 *
John P. Clancy, Jr. (10) 5,575 *
All Directors and Executive Officers 521,682 33.01 %
as a Group (17 Persons) (11)
-12-
<PAGE>
Other 5% Stockholders
Ronald M. Ansin 156,000 9.87%
132 Littleton Road
Harvard, MA 01451
- ---------------------
<FN>
* Named individual beneficially owns less than 1% of total Common Stock.
(1) The information as to the Common Stock beneficially owned has been furnished by each such stockholder. All persons have sole
voting and investment power over the shares, unless otherwise indicated.
(2) Includes options to purchase 10,775 shares of the Common Stock which are currently vested, but which have not been exercised.
This figure does not include an option to purchase up to 25,000 shares of the Common Stock owned by Mr. Duncan, which option
was granted to Mr. Armstrong by Mr. Duncan.
(3) Includes options to purchase 23,925 shares of the Common Stock which are currently vested but which have not been exercised,
2,500 shares owned by Mr. Duncan's wife and 2,500 shares owned by Mr. Duncan's children. Includes 50,000 shares owned by Mr.
Duncan, which are subject to options granted by Mr. Duncan to Mr. Armstrong and Mr. Main.
(4) Includes 1,000 shares owned by Mrs. Flynn's husband.
(5) Includes 92,350 shares owned jointly with Mr. Hanson's wife and 4,000 shares owned by Mr. Hanson's children, with respect to
which Mr. Hanson or his wife are the custodians.
(6) Includes 50,000 shares owned by Mr. Lerner's wife and 15,000 shares owned by Mr. Lerner's children as to which Mr. Lerner
disclaims beneficial ownership.
(7) Includes options to purchase 11,962 shares of the Common Stock which are currently vested but which have not been exercised,
3,900 shares owned jointly with Mr. Main's wife and 800 shares owned by Mr. Main's children, with respect to which Mr. Main is
the custodian. This figure does not include an option to purchase up to 25,000 shares of the Common Stock owned by Mr. Duncan,
which option was granted to Mr. Main by Mr. Duncan.
(8) Includes 4,000 shares owned jointly with Mr. Sarantos' wife and 1,000 shares owned jointly by Mr. Sarantos' wife and daughter.
(9) Includes options to purchase 4,875 shares of the Common Stock, which are currently vested but which have not been exercised,
and 1,500 shares owned by Mr. Gilman jointly with his wife.
(10) Includes options to purchase 4,375 shares of the Common Stock, which are currently vested but which have not been exercised,
and 1,200 shares owned by Mr. Clancy's children.
(11) Includes options to purchase 60,287 shares of the Common Stock which are currently exercisable.
</FN>
</TABLE>
-13-
<PAGE>
PROPOSAL TWO
APPROVAL OF 1998 STOCK INCENTIVE PLAN
Description of 1998 Stock Incentive Plan
On February 27, 1998, the Company's Board of Directors unanimously
approved and adopted the Enterprise Bancorp, Inc. 1998 Stock Incentive Plan (the
"Stock Incentive Plan") and directed that the Stock Incentive Plan be submitted
to the Company's stockholders for their consideration and approval.
The following summary of the material features of the Stock Incentive
Plan is qualified in its entirety by reference to the full text of the Stock
Incentive Plan, which is included as Exhibit A to this Proxy Statement.
Purpose, Participants, Effective Date and Duration. The purpose of the
Stock Incentive Plan is to encourage employees, directors, and consultants of
the Company and its subsidiaries (including without limitation the Bank) who
render services to, and who have contributed or may be expected to contribute to
the success of, the Company or a subsidiary (the "Participants") to continue
their association with the Company and its subsidiaries by providing favorable
opportunities for them to participate in the ownership of the Company and in its
future growth through the granting of shares of Common Stock subject to
restrictions ("Restricted Stock"), options to acquire Common Stock ("Options"),
stock appreciation rights ("SARs") and other rights to compensation in amounts
determined by the value of the Common Stock. Restricted Stock, SARs and other
rights are referred to collectively in this summary as "Other Rights." Inasmuch
as substantially all of the shares of Common Stock reserved for issuance
pursuant to the Company's 1988 Stock Option Plan are subject to previously
issued and currently outstanding options, and that in any case no further
options may be granted under the 1988 Stock Option Plan after June 20, 1998, the
Board of Directors believes that the adoption of the Stock Incentive Plan is
necessary to enable the Company to continue to attract and retain the high
caliber of employees and directors required for the Company's continuing growth
and success. As of the date of this Proxy Statement, there are 11 nonemployee
directors, six executive officers (including three employee directors) and 119
other employees, including other officers, who would be eligible Participants
under the Stock Incentive Plan. While outside consultants would also be eligible
Participants, the Board of Directors has no current intention of granting or
issuing Options or Other Rights to any such persons. The Stock Incentive Plan
becomes effective as of May 1, 1998, subject to ratification by the holders of a
majority of the outstanding shares of Common Stock present, in person or by
proxy, and entitled to vote thereon at the Annual Meeting. The Stock Incentive
Plan will terminate on April 30, 2008, unless earlier terminated by the Board of
Directors. Termination of the Stock Incentive Plan will not affect awards made
prior to termination, but awards will not be made after termination.
Shares Subject to the Stock Incentive Plan. The total number of shares
of Common Stock that may be subject to Options and Other Rights under the Stock
Incentive Plan may not exceed 78,810 (the "Reserved Shares"), which equals
slightly less than 5% of the number of shares of Common Stock outstanding on the
Record Date. These shares may be authorized but unissued shares or treasury
shares. In the event of any change in the number or kind of Common Stock
outstanding pursuant to a reorganization, recapitalization, exchange of shares,
stock dividend or split or combination of shares, appropriate adjustments to the
number of Reserved Shares and the number of shares subject to outstanding grants
or awards, in the exercise price per share of outstanding Options and in the
kind of shares which may be distributed under the Stock Incentive Plan will be
made. The total amount of Reserved Shares that may be granted to any single
employee under the Stock Incentive Plan may not exceed in the aggregate 30,000.
Shares will be deemed issued under the Stock Incentive Plan only to the extent
actually issued pursuant to an award or settled in cash or shares. To the extent
that an award under the Stock Incentive Plan lapses or is forfeited, any shares
subject to such award will again become available for grant under the terms of
the Stock Incentive Plan.
-14-
<PAGE>
The Common Stock is not listed or otherwise qualified for trading on
any stock exchange or other market system. The Board of Directors believes that
the approximate current fair market value of the Common Stock is $23.00. As of
the date of this Proxy Statement, no Options or Other Rights have been granted
or otherwise issued under the Stock Incentive Plan.
Administration. The Stock Incentive Plan may be administered by the
Board of Directors' Compensation Committee, or a subcommittee of the
Compensation Committee, which must consist of at least three members of the
Board, or by the Board of Directors itself. References to the "Compensation
Committee" in this summary are intended to refer to the Compensation Committee
or such subcommittee or the full Board of Directors, as the case may be, unless
the context requires otherwise. For so long as Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), is applicable to the
Company, each member of the Compensation Committee must be a "non-employee
director" or the equivalent within the meaning of the SEC's Rule 16b-3
promulgated under the Exchange Act. For so long as Section 162(m) of the Code is
applicable to the Company, each such member of the Compensation Committee must
also be an "outside director" within the meaning of Section 162 of the Code and
the regulation thereunder. With respect to persons subject to Section 16 of the
Exchange Act (generally, executive officers, directors and any 10%
stockholders), all transactions under the Stock Incentive Plan are intended to
comply with all applicable conditions of the SEC's Rule 16b-3 or any successor
regulation.
Subject to the terms of the Stock Incentive Plan, the Compensation
Committee has authority to: (i) select the persons to whom Options and Other
Rights shall be granted; (ii) determine the number or value and the terms and
conditions of Options or Other Rights granted to each such person, including the
price per share to be paid upon exercise of any Option and the period within
which each such Option or Other Right may be exercised; and (iii) interpret the
Stock Incentive Plan and prescribe rules and regulations for the administration
thereof.
Stock Options. The Compensation Committee may grant awards to
Participants in the form of Options. With regard to each Option, the
Compensation Committee determines the number of shares of Common Stock subject
to the Option, the exercise price of the Option, the manner and time of exercise
of the Option and whether the Option is intended to qualify as an incentive
stock option ("ISO") within the meaning of Section 422 of the Code. Options that
are not intended to qualify as ISOs are referred to as non-qualified stock
options ("NSOs"). In the case of an ISO, the exercise price may not be less than
the "fair market value" of the Common Stock on the date the Option is granted;
provided, however, that in the case of an employee who owns (or is considered to
own under Section 424(d) of the Code) stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any of its
subsidiaries, the price at which Common Stock may be purchased pursuant to an
ISO may not be less than 110% of the fair market value of the Common Stock on
the date the ISO is granted.
The duration of the ISOs and NSOs granted under the Stock Incentive
Plan may be specified pursuant to each respective stock option agreement, but in
no event can any ISO be exercisable after the expiration of 10 years after the
date of grant. In the case of any employee who owns (or is considered under
Section 424(d) of the Code as owning) stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any of its
subsidiaries, no ISO shall be exercisable after the expiration of five years
from its date of grant. The Compensation Committee, in its discretion, may
provide that any Option is exercisable during its entire duration or during any
lesser period of time.
The option exercise price may be paid in cash, in shares of Common
Stock owned by the optionee, by delivery of a recourse promissory note secured
by the Common Stock acquired upon exercise of the Option or by means of a
"cashless exercise" procedure in which a broker transmits to the Company the
exercise price in cash, either as a margin loan or against the optionee's notice
of exercise and confirmation by the Company that it will issue and deliver to
the broker stock certificates for that number of Reserved
-15-
<PAGE>
Shares having an aggregate fair market value equal to the exercise price or
agrees to pay the Option price to the Company in cash upon its receipt of stock
certificates.
Stock Appreciation Rights. The Compensation Committee may grant SARs to
Participants as to such number of Reserved Shares and on such terms and
conditions as it may determine. SARs may be granted separately or in connection
with ISOs or NSOs. Upon exercise of an SAR, the holder is entitled to receive
payment equal to the excess of the fair market value, on the date of exercise,
of the number of Reserved Shares for which the SAR is exercised, over the
exercise price for such Reserved Shares under a related Option, or if there is
no related Option, over an amount per share stated in the written agreement
setting forth the terms and conditions of the SAR. Payment may be made in cash
or other property, including Common Stock, in accordance with the provisions of
an SAR agreement. Upon the exercise of an SAR related to an Option, the Option
shall terminate as to the number of Reserved Shares for which the SAR is
exercised.
Stock Grants. The Committee may grant to Participants a number of
shares of Common Stock determined in its discretion, subject to terms and
conditions so determined by it, including conditions that may require the holder
to forfeit the Common Stock in the event that the holder ceases to provide
services to the Company or a subsidiary before a stated time. Unlike holders of
Options and SARs, a holder of Restricted Stock has the rights of a stockholder
of the Company to vote and to receive payment of dividends on the Restricted
Stock, unless the Compensation Committee specifies to the contrary in the award
agreement.
Effect of Certain Corporate Transactions. If while unexercised or
otherwise unvested Options or Other Rights remain outstanding under the Stock
Incentive Plan the Company is subject to a Change of Control (as such term is
defined in the Stock Incentive Plan) or is liquidated, then, except as otherwise
specifically provided to the contrary in any applicable agreement, (i) each such
Option and SAR outstanding immediately prior to the effective time of such
Change of Control or liquidation and held by an individual who is employed by
the Company or a subsidiary within the 10-day period prior to the effective time
of either such event shall become immediately exercisable upon such effective
time with respect to all of the Reserved Shares subject to such Option or SAR,
as the case may be, whether or not the Participant's rights under such Option or
SAR would otherwise have been so fully exercisable at such time and (ii) each
holder of shares of Restricted Stock outstanding immediately prior to the
effective time of such Change of Control or liquidation who is employed by the
Company or a subsidiary within the 10-day period prior to the effective time of
either such event shall become fully vested upon such effective time with
respect to such holder's ownership of such shares, whether or not such holder
would otherwise have been so fully vested with respect to such shares at such
time.
Under the terms of the Stock Incentive Plan, a "Change of Control" is
deemed to have occurred in either of the following events: (i) if there has
occurred a change in control that the Company would be required to report in
response to Item 1 of a Current Report on Form 8-K as filed by the Company with
the SEC pursuant to the requirements of Section 13 or Section 15(d) of the
Exchange Act or, if such reporting obligation is no longer in effect, any
regulations promulgated by the SEC or any successor agency pursuant to the
Exchange Act or any successor statute that are intended to serve similar
purposes; or (ii) when any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) becomes a beneficial owner (as that term is
defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the total
number of votes that may be cast for the election of Directors of the Company,
and in the case of either (i) or (ii) above, the Company's Board of Directors
has not consented to such event by a two-thirds vote of all of its members
(unless there exists at such time an Interested Stockholder, as that term is
defined in the Company's Articles of Organization, in which case the affirmative
vote of two-thirds of the Continuing Directors, as that term is defined in the
Company's Articles of Organization, is also required). In addition, under the
terms of the Stock Incentive Plan, a Change in Control is also deemed to have
occurred if as the result of, or in connection with, any tender or exchange
offer, merger or other business combination, sale or other disposition of assets
or contested
-16-
<PAGE>
election or any combination of the foregoing transactions, the persons who were
Directors of the Company before such transaction or related series of
transactions cease to constitute a majority of the Board of Directors of the
Company or of any successor institution.
Amendments to Stock Incentive Plan. The Board of Directors may modify,
revise or terminate the Stock Incentive Plan at any time and from time to time,
except that approval of the stockholders of the Company is required with respect
to any amendment that: (i) materially increases the benefits accruing to
Participants under the Stock Incentive Plan or constitutes a "modification" as
that term is defined in Section 424 (or any successor provision) of the Code, if
any such increase in benefits or modification would adversely affect either the
availability to the Stock Incentive Plan of the protections of Section 16(b) of
the Exchange Act, if applicable to the Company, or the qualification of the
Stock Incentive Plan or any Options for incentive stock option treatment under
Section 422 of the Code; (ii) changes the number of Reserved Shares that may be
issued either to any one Participant or in the aggregate; (iii) changes the
class of persons eligible to receive Options or Other Rights; or (iv) otherwise
requires stockholder approval under applicable law.
The following description of the federal income tax consequences of
Options and Other Rights is general and does not purport to be complete.
Tax Treatment of Options. A Participant realizes no taxable income when
an NSO is granted. Instead, the difference between the fair market value of the
Common Stock subject to the NSO and the exercise price paid is taxed as ordinary
compensation income when the NSO is exercised. The difference is measured and
taxed as of the date of exercise, if the stock is not subject to a "substantial
risk of forfeiture," or as of the date or dates on which the risk terminates in
other cases. A Participant may elect to be taxed on the difference between the
exercise price and the fair market value of the Common Stock on the date of
exercise, even though some or all of the Common Stock acquired is subject to a
substantial risk of forfeiture. Gain on the subsequent sale of the Common Stock
is taxed as capital gain. The Company receives no tax deduction on the grant of
a NSO, but is entitled to a tax deduction when the Participant recognizes
taxable income on or after exercise of the NSO, in the same amount as the income
recognized by the Participant.
Generally, a Participant incurs no federal income tax liability on
either the grant or the exercise of an ISO, although a Participant will
generally have taxable income for alternative minimum tax purposes at the time
of exercise equal to the excess of the fair market value of the stock subject to
an ISO over the exercise price. Provided that the shares of Common Stock are
held for at least one year after the date of exercise of the related ISO and at
least two years after its date of grant, any gain realized on the subsequent
sale of the stock will be taxed as long-term capital gain. (Preferential rates
of tax may apply to gains recognized upon the disposition of Common Stock held
for more than 18 months.) If the stock is disposed of within a shorter period of
time, the Participant will be taxed as if the Participant had then received
ordinary compensation income in an amount equal to the difference between the
fair market value of the stock on the date of exercise of the ISO and its fair
market value on its date of grant. The Company receives no tax deduction on the
grant or exercise of an ISO, but is entitled to a tax deduction if the
Participant recognizes taxable income on account of a premature disposition of
ISO stock, in the same amount and at the same time as the Participant's
recognition of income.
Tax Treatment of SARs. A Participant incurs no imputed income upon the
grant of an SAR, but upon its exercise realizes ordinary compensation income in
an amount equal to the cash or cash equivalent that he received at that time. If
the Participant receives shares of Common Stock upon exercise of the SAR, the
recipient incurs imputed income measured by the difference between the base
amount set forth in the SAR agreement and the fair market value of the Common
Stock at the exercise date (or, if at the exercise date the stock is subject to
a substantial risk of forfeiture, at the date or dates on which such risk
expires).
-17-
<PAGE>
Tax Treatment of Stock Grants. A person who receives a grant of Common
Stock subject to restrictions generally will not recognize taxable income at the
time the award is received, but will recognize ordinary compensation income when
any restrictions constituting a substantial risk of forfeiture lapse. The amount
of imputed income will be equal to the excess of the aggregate fair market
value, as of the date the restrictions lapse, over the amount (if any) paid by
the holder for the Restricted Stock. Alternatively, a recipient of Restricted
Stock may elect to be taxed on the excess of the fair market value of the
Restricted Stock at the time of grant over the amount (if any) paid for the
Restricted Stock, notwithstanding the restrictions on the stock. Outright grants
of Common Stock (i.e., grants without any restrictions) will result in ordinary
compensation income to the Participant. All such taxable amounts are deductible
by the Company at the time and in the amount of the ordinary compensation income
recognized by the Participant.
Parachute Payments. Under certain circumstances, an accelerated vesting
or granting of Options or Other Rights in connection with a Change of Control
(as defined above) of the Company may give rise to an "excess parachute payment"
for purposes of the golden parachute tax provisions of Section 280G of the Code.
To the extent it is so considered, a Participant may be subject to a 20%
nondeductible federal excise tax and the Company may be denied an income tax
deduction.
Recommendation of Directors
The Board of Directors recommends that the stockholders vote FOR the
approval and adoption of the Company's 1998 Stock Incentive Plan.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP to serve as
independent auditors of the Company for the fiscal year ending December 31,
1998.
The Company is not required to submit the ratification and approval of
the Board of Directors' appointment of independent auditors to a vote of
stockholders. In the event a majority of the votes cast are against the
appointment of KPMG Peat Marwick LLP, the Board of Directors may consider the
vote and the reasons therefor in future decisions on its appointment of
independent auditors.
Representatives of KPMG Peat Marwick LLP are expected to attend the
annual meeting at which time they will have an opportunity to make a statement
if they wish to do so and will be available to answer any appropriate questions
from stockholders.
Recommendation of Directors
The Board of Directors recommends that the stockholders vote FOR the
ratification of the Board of Directors' appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the fiscal year ending December 31,
1998.
-18-
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company intended to be presented at
the 1999 Annual Meeting of the Company must be received by the Company no later
than November 18, 1998 to be included in the Company's proxy statement and form
of proxy relating to that meeting. In addition, the Company's Articles of
Organization and By-Laws provide that any stockholder wishing to have any
Director nominations or a stockholder proposal considered at an annual meeting
must provide written notice of said nomination or stockholder proposal to the
Clerk of the Company as set forth in the Articles of Organization and By-Laws of
the Company at its principal executive offices not less than 60 days nor more
than 150 days prior to the date of the scheduled annual meeting; provided,
however, that in the event that less than 70 days notice or prior public
disclosure of the scheduled date of the meeting is given or made to
stockholders, notice by the stockholder must be received not later than the
close of business on the 10th day following the day on which such notice of the
scheduled date of the meeting was mailed or such disclosure was made, whichever
first occurs. Any stockholder desiring to submit a nomination or proposal must
comply with all of the procedural and informational requirements contained in
the Company's Articles of Organization and By-Laws as applicable.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that the Company's Directors
and executive officers and any other persons who own more than 10% of the
outstanding shares of the Common Stock file with the SEC initial reports of
ownership and subsequent reports of changes of ownership with respect to their
beneficial ownership of the Common Stock. Such persons are required by SEC
regulations to furnish the Company with copies of all such Section 16(a) reports
that they may be required to file. To the Company's knowledge, based solely on
information furnished to the Company for the year ended December 31, 1997, all
such persons have complied with the applicable Section 16(a) reporting
requirements for such year.
OTHER MATTERS
Shares represented by proxies in the enclosed form will be voted as
stockholders direct. Properly executed proxies that contain no directions to the
contrary will be voted in favor of (1) the election of the five nominees to
serve as Directors of the Company, (2) the approval and adoption of the
Company's 1998 Stock Incentive Plan and (3) the ratification of the appointment
of independent auditors. At the time of preparation of this Proxy Statement, the
Board of Directors knows of no other matters to be presented for action at the
Annual Meeting. As stated in the accompanying proxy card, if any other business
should properly come before the Annual Meeting, the proxies named therein have
discretionary authority to vote the shares according to their best judgment.
ANNUAL REPORT ON FORM 10-KSB
The Company's Annual Report on Form 10-KSB (without exhibits) is
included with the Company's Annual Report to Stockholders, and is being
furnished to shareholders of record together with this Proxy Statement. Requests
for additional copies may be directed to: Enterprise Bancorp, Inc., 222
Merrimack Street, Lowell, Massachusetts 01852, Attention: Arnold S. Lerner,
Clerk.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF
YOU ATTEND THE MEETING, YOU MAY WITHDRAW ANY PROXY GIVEN BY YOU AND VOTE YOUR
SHARES IN PERSON.
March 25, 1998
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EXHIBIT A
ENTERPRISE BANCORP, INC.
1998 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 1998 Stock Incentive Plan (the "Plan") is to
encourage employees, directors, and consultants of Enterprise Bancorp, Inc. (the
"Company") and its Subsidiaries (as hereinafter defined) to continue their
association with the Company by providing favorable opportunities for them to
participate in the ownership of the Company and in its future growth through the
granting of stock, stock options, and other rights to compensation in amounts
determined by the value of the Company's stock. The term "Subsidiary" as used in
the Plan means a corporation, company, partnership or other form of business
organization (including without limitation any bank, thrift, trust company or
depository institution) of which the Company owns, directly or indirectly
through an unbroken chain of ownership, fifty percent or more of the total
combined voting power of all classes of stock or other form of equity ownership.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a committee or subcommittee (the
"Compensation Committee") consisting of three or more members of the Company's
Board of Directors (the "Board") or by the Board itself. The Compensation
Committee shall from time to time determine to whom options or Other Rights (as
hereinafter defined) shall be granted under the Plan, whether options granted
shall be incentive stock options ("ISOs") or nonqualified stock options
("NSOs"), the terms of the options or Other Rights and the number of shares of
Common Stock (as hereinafter defined) that may be granted under options or as
Other Rights. The Compensation Committee shall report to the Board the names of
individuals to whom Common Stock or options or Other Rights are to be granted,
the number of shares covered and the terms and conditions of each grant. The
determinations described in this paragraph may be made by the Compensation
Committee or by the Board, as the Board shall direct in its discretion, and
references in the Plan to the Compensation Committee shall be understood to
refer to the Board in any such case.
The Compensation Committee shall select one of its members as Chairman
and shall hold meetings at such times and places as it may determine. A majority
of the Compensation Committee shall constitute a quorum, and acts of the
Compensation Committee at which a quorum is present, or acts reduced to or
approved in writing by all the members of the Compensation Committee, shall be
the valid acts of the Compensation Committee. The Compensation Committee shall
have the authority to adopt, amend and rescind such rules and regulations as, in
its opinion, may be advisable in the administration of the Plan. All questions
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of interpretation and application of such rules and regulations of the Plan and
of options granted thereunder (the "Options"), outright grants of Common Stock,
grants of Common Stock subject to restrictions under the Plan ("Restricted
Stock") and stock appreciation rights granted under the Plan ("SARs")
(collectively, "Other Rights") shall be subject to the determination of the
Compensation Committee, which shall be final and binding. The Plan shall be
administered in such a manner as to permit those Options granted hereunder and
specially designated under Section 5 hereof as an ISO to qualify as incentive
stock options as described in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
For so long as Section 16 of the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"), is applicable to the Company,
each member of the Compensation Committee shall be a "non-employee director" or
the equivalent within the meaning of Rule 16b- 3 under the Exchange Act, and,
for so long as Section 162(m) of the Code is applicable to the Company, an
"outside director" within the meaning of Section 162 of the Code and the
regulations thereunder.
With respect to persons subject to Section 16 of the Exchange Act
("Insiders"), transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successor under the Exchange Act. To
the extent any provision of the Plan or action by the Compensation Committee
fails to so comply, it shall be deemed to be modified so as to be in compliance
with such Rule or, if such modification is not possible, it shall be deemed to
be null and void, to the extent permitted by law and deemed advisable by the
Compensation Committee.
3. STOCK SUBJECT TO THE PLAN
The total number of shares of capital stock of the Company that may be
subject to Options and Other Rights under the Plan shall be 78,810 shares of the
Company's common stock, $0.01 par value per share (the "Common Stock"), from
either authorized but unissued shares or treasury shares. The number of shares
stated in this Section 3 shall be subject to adjustment in accordance with the
provisions of Section 10. Shares of Restricted Stock that fail to vest, and
shares of Common Stock subject to an Option that is neither fully exercised
prior to its expiration or other termination nor terminated by reason of the
exercise of an SAR related to the Option shall again become available for grant
under the terms of the Plan.
The total amount of the Common Stock with respect to which Options and
Other Rights may be granted to any single employee under the Plan shall not
exceed in the aggregate 30,000 shares.
4. ELIGIBILITY
The individuals who shall be eligible for grant of Options and Other
Rights under the Plan shall be employees, directors and other individuals who
render services of special importance to the management, operation or
development of the Company or a Subsidiary, and who have contributed or may be
expected to contribute materially to the success of the Company or a Subsidiary.
ISOs shall not be granted to any individual who is not an employee of the
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Company or a subsidiary, as that term is defined in Section 424(f) of the Code
(an "ISO Subsidiary"). The term "Optionee," as used in the Plan, refers to any
individual to whom an Option or Other Right has been granted.
5. TERMS AND CONDITIONS OF OPTIONS
Every Option shall be evidenced by a written Stock Option Agreement in
such form as the Compensation Committee shall approve from time to time,
specifying the number of shares of Common Stock that may be purchased pursuant
to the Option, the time or times at which the Option shall become exercisable in
whole or in part, whether the Option is intended to be an ISO or an NSO and such
other terms and conditions as the Compensation Committee shall approve, and
containing or incorporating by reference the following terms and conditions.
(a) Duration. The duration of each Option shall be as specified by
the Compensation Committee in its discretion; provided, however, that
no ISO shall expire later than ten years from its date of grant, and no
ISO granted to an employee who owns (directly or under the attribution
rules of Section 424(d) of the Code) stock possessing more than ten
percent of the total combined voting power of all classes of stock of
the Company or any ISO Subsidiary shall expire later than five years
from its date of grant.
(b) Exercise Price. The exercise price of each Option shall be any
lawful consideration, as specified by the Compensation Committee in its
discretion; provided, however, that the price with respect to an ISO
shall be at least one hundred percent of the Fair Market Value (as
hereinafter defined) of the shares on the date on which the
Compensation Committee awards the Option, which shall be considered the
date of grant of the Option for purposes of fixing the price; and
provided, further, that the price with respect to an ISO granted to an
employee who at the time of grant owns (directly or under the
attribution rules of Section 424(d) of the Code) stock representing
more than ten percent of the voting power of all classes of stock of
the Company or of any ISO Subsidiary shall be at least one hundred ten
percent of the Fair Market Value of the shares on the date of grant of
the ISO. For purposes of the Plan, except as may be otherwise
explicitly provided in the Plan or in any Stock Option Agreement,
Restricted Stock Agreement, SAR Agreement or similar document, the
"Fair Market Value" of a share of Common Stock at any particular date
shall be determined according to the following rules: (i) if the Common
Stock is not at the time listed or admitted to trading on a stock
exchange or the Nasdaq Stock Market, the Fair Market Value shall be the
closing price of the Common Stock on the date in question in the
over-the-counter market, as such price is reported in a publication of
general circulation selected by the Board and regularly reporting the
price of the Common Stock in such market; provided, however, that if
the price of the Common Stock is not so reported, the Fair Market Value
shall be determined in good faith by the Board, which may take into
consideration (1) the price paid for the Common Stock in the most
recent trade of a substantial number of shares known to the Board to
have occurred at arm's length between willing and knowledgeable
investors, (2) an appraisal by an independent party or (3) any other
method of valuation undertaken in good faith by the Board, or some or
all of the above as the Board shall in its discretion elect; or (ii) if
the Common Stock is at the time listed or admitted to trading on any
stock exchange or the Nasdaq Stock Market, then the Fair
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Market Value shall be the mean between the lowest and highest reported
sale prices (or the lowest reported bid price and the highest reported
asked price) of the Common Stock on the date in question on the
principal exchange or the Nasdaq Stock Market, as the case may be, on
which the Common Stock is then listed or admitted to trading. If no
reported sale of Common Stock takes place on the date in question on
the principal exchange or the Nasdaq Stock Market, as the case may be,
then the reported closing sale price (or the reported closing asked
price) of the Common Stock on such date on the principal exchange or
the Nasdaq Stock Market, as the case may be, shall be determinative of
Fair Market Value.
(c) Method of Exercise. To the extent that it has become
exercisable under the terms of the Stock Option Agreement, an Option
may be exercised from time to time by written notice to the Chief
Executive Officer of the Company, or his delegate, stating the number
of shares with respect to which the Option is being exercised and
accompanied by payment of the exercise price in cash or check payable
to the Company or, if the Stock Option Agreement so provides, other
payment or deemed payment described in this Section 5(c). Such notice
shall be delivered in person or by facsimile transmission to the Chief
Executive Officer of the Company, or his delegate, or shall be sent by
registered mail, return receipt requested, to the Chief Executive
Officer of the Company, or his delegate, in which case delivery shall
be deemed made on the date such notice is deposited in the mail.
Alternatively, payment of the exercise price may be made:
(1) In whole or in part in shares of Common Stock already
owned by the Optionee or to be received upon exercise of the
Option; provided, however, that such shares are fully vested and
free of all liens, claims and encumbrances of any kind; and
provided, further, that the Optionee may not make payment in
shares of Common Stock that he acquired upon the earlier exercise
of any ISO, unless he has held the shares until at least two years
after the date the ISO was granted and at least one year after the
date the ISO was exercised. If payment is made in whole or in part
in shares of Common Stock, then the Optionee shall deliver to the
Company stock certificates registered in his name representing a
number of shares of Common Stock legally and beneficially owned by
him, fully vested and free of all liens, claims and encumbrances
of every kind and having a Fair Market Value on the date of
delivery that is not greater than the exercise price, such stock
certificates to be duly endorsed, or accompanied by stock powers
duly endorsed, by the record holder of the shares represented by
such stock certificates. If the exercise price exceeds the Fair
Market Value of the shares for which stock certificates are
delivered, the Optionee shall also deliver cash or a check payable
to the order of the Company in an amount equal to the amount of
that excess or, if the Stock Option Agreement so provides, his
promissory note as described in paragraph (2) of this Section
5(c); or
(2) In whole or in part by delivery of the Optionee's
recourse promissory note, in a form specified by the Company,
secured by the Common Stock acquired upon exercise of the Option
and such other security as the Compensation Committee may require.
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Alternatively, Options may be exercised by means of a "cashless
exercise" procedure acceptable to the Compensation Committee in which a
broker: (i) transmits the exercise price to the Company in cash or
acceptable cash equivalents either (1) against the Optionee's notice of
exercise and the Company's confirmation that it will deliver to the
broker stock certificates issued in the name of the broker for at least
that number of shares having a Fair Market Value equal to the exercise
price or (2) as the proceeds of a margin loan to the Optionee; or (ii)
agrees to pay the exercise price to the Company in cash or acceptable
cash equivalents upon the broker's receipt from the Company of stock
certificates issued in the name of the broker for at least that number
of shares having a Fair Market Value equal to the exercise price. The
Optionee's written notice of exercise of an Option pursuant to a
"cashless exercise" procedure must include the name and address of the
broker involved, a clear description of the procedure and such other
information or undertaking by the broker as the Compensation Committee
shall reasonably require.
At the time specified in an Optionee's notice of exercise, the
Company shall, without issue or transfer tax to the Optionee, deliver
to him at the main office of the Company, or such other place as shall
be mutually acceptable, a stock certificate for the shares as to which
his Option is exercised. If the Optionee fails to pay for or to accept
delivery of all or any part of the number of shares specified in his
notice upon tender of delivery thereof, his right to exercise the
Option with respect to those shares shall be terminated, unless the
Company otherwise agrees.
(d) Notice of ISO Stock Disposition. The Optionee must notify the
Company promptly in the event that he sells, transfers, exchanges or
otherwise disposes of any shares of Common Stock issued upon exercise
of an ISO before the later of (i) the second anniversary of the date of
grant of the ISO and (ii) the first anniversary of the date the shares
were issued upon his exercise of the ISO.
(e) Effect of Cessation of Employment or Service Relationship. The
Compensation Committee shall determine in its discretion and specify in
each Stock Option Agreement the effect, if any, of the termination of
the Optionee's employment with or performance of services for the
Company or any Subsidiary upon the exercisability of the Option.
(f) No Rights as Stockholder. An Optionee shall have no rights as
a stockholder with respect to any shares covered by an Option until the
date of issuance of a stock certificate to him for the shares. No
adjustment shall be made for dividends or other rights for which the
record date is earlier than the date the stock certificate is issued,
other than as required or permitted pursuant to Section 10.
(g) Substituted Option. With the consent of the Optionee, the
Compensation Committee shall have the authority at any time and from
time to time to terminate any outstanding Option and grant in
substitution for it a new Option covering the same number or a
different number of shares; provided, however, that the exercise price
under the new Option shall be no less than the Fair Market Value of the
Common Stock on the date of grant of the new Option.
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(h) Transferability of Options. An Option shall not be assignable
or transferable by the Optionee except by will or by the laws of
descent and distribution. During the life of the Optionee, an Option
shall be exercisable only by him, by a conservator or guardian duly
appointed for him by reason of his incapacity or by the person
appointed by the Optionee in a durable power of attorney acceptable to
the Company's counsel. Notwithstanding the preceding sentences of this
Section 5(h), the Compensation Committee may specify in a Stock Option
Agreement that pertains to an NSO that the Optionee may transfer the
NSO to a member of the Immediate Family (as hereinafter defined) of the
Optionee, to a trust solely for the benefit of the Optionee and the
Optionee's Immediate Family or to a partnership or limited liability
company whose only partners or members are the Optionee and members of
the Optionee's Immediate Family. "Immediate Family" shall mean, with
respect to any Optionee, the Optionee's child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, and shall include adoptive relationships.
6. STOCK APPRECIATION RIGHTS
The Compensation Committee may grant SARs in respect of such number of
shares of Common Stock subject to the Plan as it shall determine, in its
discretion, and may grant SARs either separately or in connection with Options,
as described in the following sentence. An SAR granted in connection with an
Option may be exercised only to the extent of the surrender of the related
Option and to the extent of the exercise of the related Option the SAR shall
terminate. Shares of Common Stock covered by an Option that terminates upon the
exercise of a related SAR shall cease to be available under the Plan. The terms
and conditions of an SAR related to an Option shall be contained in the Stock
Option Agreement and the terms of an SAR not related to any Option shall be
contained in an SAR Agreement.
Upon exercise of an SAR, the Optionee shall be entitled to receive from
the Company an amount equal to the excess of the Fair Market Value, on the
exercise date, of the number of shares of Common Stock as to which the SAR is
exercised over the exercise price for those shares under a related Option or, if
there is no related Option, over the base value stated in the SAR Agreement. The
amount payable by the Company upon exercise of an SAR shall be paid in the form
of cash or other property (including Common Stock of the Company), as provided
in the Stock Option Agreement or SAR Agreement governing the SAR.
7. STOCK GRANTS
The Compensation Committee may make outright grants or awards of shares
of Common Stock. The Compensation Committee may also grant or award shares of
Restricted Stock in respect of such number of shares of Common Stock and subject
to such terms or conditions as it shall determine and specify in a Restricted
Stock Agreement.
A holder of Restricted Stock shall have all of the rights of a
stockholder of the Company, including the right to vote the shares and the right
to receive any cash dividends, unless the Compensation Committee shall otherwise
determine. Stock certificates representing Restricted
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Stock shall be imprinted with a legend to the effect that the shares represented
may not be sold, exchanged, transferred, pledged, hypothecated or otherwise
disposed of except in accordance with the terms of the Restricted Stock
Agreement and, if the Compensation Committee so determines, the Optionee may be
required to deposit the stock certificates with an escrow agent designated by
the Compensation Committee, together with a stock power or other instrument of
transfer appropriately endorsed in blank.
8. METHOD OF GRANTING OPTIONS AND OTHER RIGHTS
The grant of Options and Other Rights shall be made by action of the
Board at a meeting at which a quorum of its members is present, or by unanimous
written consent of all its members; provided, however, that if an individual to
whom a grant has been made fails to execute and deliver to the Compensation
Committee a Stock Option Agreement, SAR Agreement or Restricted Stock Agreement
within thirty (30) days after it is submitted to him, the Option or Other Rights
granted under the agreement shall be voidable by the Company at its election,
without further notice to the Optionee.
9. REQUIREMENTS OF LAW
The Company shall not be required to transfer Common Stock or any
Restricted Stock or to sell or issue any shares upon the exercise of any Option
or SAR if the issuance of such shares will result in a violation by the Optionee
or the Company of any provisions of any law, statute or regulation of any
governmental authority. Specifically, in connection with the Securities Act of
1933, as amended from time to time (the "Securities Act"), upon the transfer of
Common Stock or of Restricted Stock or the exercise of any Option or SAR, the
Company shall not be required to issue shares unless the Compensation Committee
has received evidence satisfactory to it to the effect that the holder of the
Option or Other Right will not transfer such shares except pursuant to a
registration statement in effect under the Securities Act or unless an opinion
of counsel satisfactory to the Company has been received by the Company to the
effect that registration is not required. Any determination in this connection
by the Compensation Committee shall be conclusive. The Company shall not be
obligated to take any other affirmative action in order to cause the transfer of
Restricted Stock or the exercise of an Option or SAR to comply with any law or
regulations of any governmental authority, including, without limitation, the
Securities Act or applicable state securities laws.
10. CHANGES IN CAPITAL STRUCTURE
In the event that the outstanding shares of Common Stock are hereafter
changed for a different number or kind of shares or other securities of the
Company, by reason of a reorganization, recapitalization, exchange of shares,
stock split, combination of shares or dividend payable in shares or other
securities, a corresponding adjustment shall be made by the Compensation
Committee in the number and kind of shares or other securities covered by
outstanding Options and Other Rights and for which Options or Other Rights may
be granted under the Plan. Any such adjustment in outstanding Options or Other
Rights shall be made without change in the total price applicable to the
unexercised portion of the Option or Other
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Rights, but the price per share specified in each Stock Option Agreement or
agreement as to Other Rights shall be correspondingly adjusted; provided,
however, that no adjustment shall be made with respect to an ISO that would
constitute a modification as defined in Section 424 of the Code. Any such
adjustment made by the Compensation Committee shall be conclusive and binding
upon all affected persons, including the Company and all Optionees.
If while unexercised or otherwise unvested Options or Other Rights
remain outstanding under the Plan the Company merges or consolidates with a
wholly-owned subsidiary for the purpose of reincorporating itself under the laws
of another jurisdiction, the Optionees will be entitled to acquire or, in the
case of Restricted Stock hold, shares of common stock of the reincorporated
Company upon the same terms and conditions (including without limitation any
vesting schedule) as were in effect immediately prior to such reincorporation
(unless such reincorporation involves a change in the number of shares or the
capitalization of the Company, in which case proportional adjustments shall be
made as provided above) and the Plan, unless otherwise rescinded by the Board,
will remain the Plan of the reincorporated Company.
Except as otherwise provided in the preceding paragraph, if while
unexercised or otherwise unvested Options or Other Rights remain outstanding
under the Plan the Company is subject to a Change of Control (as hereinafter
defined) or is liquidated, then, except as otherwise specifically provided to
the contrary in an Optionee's Stock Option Agreement, SAR Agreement or
Restricted Stock Agreement,(i) each such Option and SAR outstanding immediately
prior to the effective time of such Change of Control or liquidation and held by
an individual who is employed by the Company or a Subsidiary within the 10-day
period prior to the effective time of either such event shall become immediately
exercisable upon such effective time with respect to all of the shares of Common
Stock subject to such Option or SAR, as the case may be, whether or not the
Optionee's rights under such Option or SAR would otherwise have been so fully
exercisable at such time and (ii) each holder of shares of Restricted Stock
outstanding immediately prior to the effective time of such Change of Control or
liquidation who is employed by the Company or a Subsidiary within the 10-day
period prior to the effective time of either such event shall become fully
vested upon such effective time with respect to such holder's ownership of such
shares, whether or not such holder would otherwise have been so fully vested
with respect to such shares at such time.
A "Change in Control" shall be deemed to have occurred in either of the
following events: (i) if there has occurred a change in control that the Company
would be required to report in response to Item 1 of a Current Report on Form
8-K as filed by the Company with the Securities and Exchange Commission pursuant
to the requirements of Section 13 or Section 15(d) of the Exchange Act or, if
such reporting obligation is no longer in effect, any regulations promulgated by
the Securities and Exchange Commission or any successor agency pursuant to the
Exchange Act or any successor statute that are intended to serve similar
purposes; or (ii) when any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) becomes a beneficial owner (as that term is
defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing twenty-five percent or
more of the total number of votes that may be cast for the election of directors
of the Company, and in the case of either (i) or (ii) above, the Board has not
consented to such event by a two-thirds vote of all of its members (unless there
is an Interested Stockholder, as that term is defined in the Company's Articles
of Incorporation, as amended, in which case the affirmative vote of two-thirds
of the Continuing Directors, as that term is defined in the Company's Articles
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of Incorporation, as amended, shall also be required). In addition, a Change in
Control shall be deemed to have occurred if as the result of, or in connection
with, any tender or exchange offer, merger or other business combination, sale
or other disposition of assets or contested election or any combination of the
foregoing transactions, the persons who were directors of the Company before
such transaction or related series of transactions shall cease to constitute a
majority of the Board or of any successor institution.
Except as expressly provided to the contrary in this Section 10, the
issuance by the Company of shares of stock of any class for cash or property or
for services, either upon direct sale or upon the exercise of rights or
warrants, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect the number, class or
price of shares of Common Stock then subject to outstanding Options or Other
Rights.
11. FORFEITURE FOR DISHONESTY
Notwithstanding anything to the contrary in the Plan or in any Stock
Option Agreement, Restricted Stock Agreement or SAR Agreement, if the
Compensation Committee determines, after full consideration of the facts
presented on behalf of both the Company and an Optionee, that the Optionee has
been engaged in fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his employment by or performance of services for the
Company or a Subsidiary that damaged the Company or a Subsidiary, or has
disclosed trade secrets or other proprietary information of the Company or a
Subsidiary or has violated the terms of his agreements with the Company, (a) the
Optionee shall forfeit all unexercised Options and Other Rights and all
exercised Options and Other Rights under which the Company has not yet delivered
the stock certificates and (b) the Company shall have the right to repurchase
all or any part of the shares of Common Stock acquired by the Optionee upon the
earlier exercise of any Option or Other Rights, at a price equal to the amount
paid to the Company upon such transfer or exercise, increased by an amount equal
to the interest that would have accrued in the period between the date of
transfer or exercise of the Option or Other Rights and the date of such
repurchase upon a debt in the amount of the grant or exercise price at the prime
rate(s) announced from time to time during such period in the Federal Reserve
Statistical Release Selected Interest Rates. The decision of the Compensation
Committee as to the cause of an Optionee's discharge and the damage done to the
Company or a Subsidiary shall be final, binding and conclusive. No decision of
the Compensation Committee, however, shall affect in any manner the finality of
the discharge of an Optionee by the Company or a Subsidiary.
12. MISCELLANEOUS
(a) Nonassignability of Other Rights. No Other Rights shall be
assignable or transferable by the Optionee except by will or the laws
of descent and distribution. During the life of the Optionee, Other
Rights shall be exercisable only by the Optionee.
(b) No Guarantee of Employment or other Service Relationship.
Neither the Plan nor any Stock Option Agreement, SAR Agreement or
Restricted Stock Agreement shall give an employee the right to continue
in the employment of the Company or a Subsidiary or give the Company or
a Subsidiary the right to require an employee to
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continue in employment. Neither the Plan nor any Stock Option
Agreement, SAR Agreement or Restricted Stock Agreement shall give a
director or consultant the right to continue to perform services for
the Company or a Subsidiary or give the Company or a Subsidiary the
right to require the director or consultant to continue to perform
services.
(c) Tax Withholding. To the extent required by law, the Company
shall withhold or cause to be withheld income and other taxes with
respect to any income recognized by an Optionee by reason of the
exercise or vesting of an Option or Other Right, or a cash bonus paid
in connection with such exercise or vesting, and as a condition to the
receipt of any Option or Other Right or related cash bonus the Optionee
shall agree that if the amount payable to him by the Company and any
Subsidiary in the ordinary course is insufficient to pay such taxes,
then he shall upon the request of the Company pay to the Company an
amount sufficient to satisfy its tax withholding obligations.
Without limiting the foregoing, the Compensation Committee may in its
discretion permit any Optionee's withholding obligation to be paid in whole or
in part in the form of shares of Common Stock by withholding from the shares to
be issued or by accepting delivery from the Optionee of shares already owned by
him. The Fair Market Value of the shares for such purposes shall be determined
as set forth in Section 5(b). An Optionee may not make any such payment in the
form of shares of Common Stock acquired upon the exercise of an ISO until the
shares have been held by him for at least two years after the date the ISO was
granted and at least one year after the date the ISO was exercised. If payment
of withholding taxes is made in whole or in part in shares of Common Stock, the
Optionee shall deliver to the Company stock certificates registered in his name
representing shares of Common Stock legally and beneficially owned by him, fully
vested and free of all liens, claims and encumbrances of every kind, duly
endorsed or accompanied by stock powers duly endorsed by the record holder of
the shares represented by such stock certificates. If the Optionee is subject to
Section 16(a) of the Exchange Act, his ability to pay his withholding obligation
in the form of shares of Common Stock shall be subject to such additional
restrictions as may be necessary to avoid any transaction that might give rise
to liability under Section 16(b) of the Exchange Act.
(d) Use of Proceeds. The proceeds from the sale of shares
pursuant to Options or Other Rights shall constitute general funds of
the Company.
(e) Construction. All masculine pronouns used in this Plan shall
include both sexes; the singular shall include the plural and the
plural the singular unless the context otherwise requires. The titles
of the sections of the Plan are included for convenience only and shall
not be construed as modifying or affecting their provisions.
13. EFFECTIVE DATE, DURATION, AMENDMENT AND TERMINATION OF PLAN
The Plan shall be effective as of May 1, 1998, subject to ratification
by (a) the holders of a majority of the outstanding shares of capital stock
present, or represented, and entitled to vote thereon (voting as a single class)
at a duly held meeting of the stockholders of the Company
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<PAGE>
or (b) by the written consent of the holders of a majority (or such greater
degree as may be prescribed under the Company's charter, by-laws and applicable
state law) of the capital stock of the issuer entitled to vote thereon (voting
as a single class) within twelve months after such date. Options and Other
Rights that are conditioned upon the ratification of the Plan by the
stockholders may be granted prior to ratification. The Compensation Committee
may grant Options and Other Rights under the Plan from time to time until the
close of business on April 30, 2008. The Board may at any time amend the Plan;
provided, however, that without approval of the Company's stockholders there
shall be no (a) material increase in the benefits accruing to Optionees under
the Plan or any "modifications," as that term is defined in Section 424 (or its
successor) of the Code, if such increase in benefits or modifications would
adversely affect (i) the availability to the Plan of the protections of Section
16(b) of the Exchange Act, if applicable to the Company, or (ii) the
qualification of the Plan or any Options for incentive stock option treatment
under Section 422 of the Code; (b) change in the number of shares of Common
Stock that may be issued under the Plan, except by operation of the provisions
of Section 10, either to any one Optionee or in the aggregate; (c) change in the
class of persons eligible to receive Options or Other Rights; (d) other change
in the Plan that requires stockholder approval under applicable law. No
amendment shall adversely affect outstanding Options or Other Rights without the
consent of the Optionee. The Plan may be terminated at any time by action of the
Board, but any such termination will not terminate any Option or Other Rights
then outstanding without the consent of the Optionee.
A-11
<PAGE>
ENTERPRISE BANCORP, INC.
PROXY
This proxy is solicited on behalf of the Board of Directors of Enterprise
Bancorp, Inc. The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned. If no direction is given, this proxy, if otherwise properly
executed, will be voted FOR Proposals 1, 2 and 3.
Name: ________________________________________________________________________
No. of Shares Represented by Proxy: __________________
[X] Please mark your votes this way.
The undersigned, a stockholder of Enterprise Bancorp, Inc. (the
"Company"), revoking all prior proxies, hereby appoint(s) Richard W. Main and
Arnold S. Lerner, and each of them with full power of substitution, the
attorneys, agents and proxies of the undersigned to represent and vote all
shares of stock of the Company which the undersigned would be entitled to vote
if personally present at the annual meeting of stockholders of the Company and
any adjournments or postponements thereof, to be held at the American Textile
Museum, 491 Dutton Street, Lowell, Massachusetts, on Tuesday, May 5, 1998, at
4:00 P.M. as specified herein as to each of the proposals 1, 2 and 3 below:
Proposal 1: Election of Directors
Walter L. Armstrong, George L. Duncan, John P.
Harrington, Charles P. Sarantos and Michael A. Spinelli:
For All Withheld from
Nominees All Nominees
[ ] [ ]
[ ] FOR ALL NOMINEES except as noted below (write name(s)
of nominee(s) in the space providedbelow):
- -------------------------------------------------------------------------------
Proposal 2: Approval and adoption of the Enterprise Bancorp, Inc. 1998 Stock
Incentive Plan
For Against Abstain
[ ] [ ] [ ]
Proposal 3: Ratification of appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending December 31, 1998
For Against Abstain
[ ] [ ] [ ]
By execution and delivery of this proxy, the undersigned acknowledge(s) and
agree(s) that the proxies named herein are authorized to vote, in their
discretion and in accordance with their best judgment, upon such other matters
as may properly come before the meeting or any adjournments or postponements
thereof.
I plan to attend the Meeting [ ]
Mark here for address change [ ]
Please note address change at the left
Signature____________________Date______ Signature___________________Date______
Please date and sign exactly as name appears herein and return in the enclosed
envelope. When shares are held by joint owners, both should sign. Executors,
administrators, trustees and others signing in a representative capacity should
give their full title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
