Item 5.02.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
(e)
2018 Incentive Plan.
On March 20, 2018, the Board of Directors of Enterprise Bank and Trust Company (the “Bank”), the wholly owned banking subsidiary of Enterprise Bancorp, Inc. (the “Company”), approved the Enterprise Bank 2018 Variable Compensation Incentive Plan (the “2018 Incentive Plan”), including approval of specific performance factors, performance targets and percentage payout amounts. The 2018 Incentive Plan applies to employees, including the Company’s named executive officers, who do not otherwise participate in any form of individual-based incentive plan maintained by the Bank.
The 2018 Incentive Plan is designed to acknowledge and reward bank-wide and individual performance objectives. Eligible employees receive a target incentive opportunity, which is a set percentage of an individual’s base salary for the plan year (i.e., salary earnings for the year ending on December 31, 2018). Each participating employee is assigned to an incentive group based upon the employee’s position and role in the Bank. The performance factors that apply to each incentive group are generally similar, but there is some variation as performance factors are selected based on the role of the employee. The weights assigned to each performance factor (which determine the percentage of the total incentive payment that may be earned by an employee through accomplishment of the performance target applicable to such factor) differ by incentive group.
The total compensation pool available for incentive payouts under the 2018 Incentive Plan will be determined by the Company’s overall performance for the 2018 Incentive Plan year. The Company must attain a specified level of performance in net income (the “threshold” level) for the plan year for a payout to be made under any of the performance factors outlined in the 2018 Incentive Plan. The additional performance factors for which payout amounts may be made under the 2018 Incentive Plan for the Company’s named executive officers are low cost deposit growth, high cost & CD deposit growth, loan growth, non-interest revenue and loan quality. Higher levels of payout may be accomplished with respect to each performance factor if performance levels exceed “threshold”, including reaching “target” and “stretch” levels. There is no minimum bonus amount that is required to be paid to any employee under the 2018 Incentive Plan.
In addition to the specific “core” performance factors described above, the additional “supplemental” performance factor of annualized fixed salary and benefit expense for the plan year also applies to the final determination
of payout amounts to certain specified members of the Bank’s management team, including all of the Company’s named executive officers.
Each of the Company’s Chairman and President (each of whom is included in the “Bank wide” incentive group with multiplier) may receive an incentive payout under the 2018 Incentive Plan ranging from 22.5% of base salary if the Bank accomplishes the “threshold” levels for each “core” performance factor (i.e., net income, low cost deposit growth, high cost & CD deposit growth, loan growth, non-interest revenue and loan quality) to 45% at “target” levels and 67.5% at “stretch” levels.
The Company’s Chief Executive Officer (who is included in the “Bank wide” incentive group with multiplier) may receive an incentive payout under the 2018 Incentive Plan ranging from 25% of base salary if the Bank accomplishes the “threshold” levels for each “core” performance factor to 50% at “target” levels and 75% at “stretch” levels.
The Company’s Managing Director Wealth Management & Chief Operating Officer (who is included in the “Bank wide” incentive group with multiplier) may receive an incentive payout under the 2018 Incentive Plan ranging from 18.75% of base salary if the Bank accomplishes the “threshold” levels for each “core” performance factor to 37.5% at “target” levels and 56.25% at “stretch” levels.
The Company’s Chief Financial Officer (who is included in the “Bank wide” incentive group with multiplier) may receive an incentive payout under the 2018 Incentive Plan ranging from 16.25% of base salary if the Bank accomplishes the “threshold” levels for each “core” performance factor to 32.5% at “target” levels and 48.75% at “stretch” levels.
The actual payout percentages to the named executive officers may also be increased by a multiple of up to 1.05 or decreased by a multiple of as low as 0.95 depending upon the Bank’s performance with respect to the “supplemental” performance factor of annualized fixed salary and benefit expense; however, incentive payouts will not exceed 150% of target. The foregoing description is a summary of the 2018 Incentive Plan and is qualified in its entirety by reference to the copy of the 2018 Incentive Plan that is attached as Exhibit 10.1 to this report and is hereby incorporated by reference to this report.
Grants of Restricted Stock
. At a meeting held on March 20, 2018, the Company’s Board of Directors, on the recommendation of the Compensation Committee of the Company’s Board of Directors (the “Compensation
Committee”), approved grants of an aggregate of 12,820 shares of performance-based restricted stock under the Company’s 2009 Stock Incentive Plan (the “2009 Plan”) to the named executive officers of the Company, as follows: 4,036 shares of restricted stock to Mr. Duncan; 3,906 shares of restricted stock to Mr. Clancy; 2,154 shares of restricted stock to Mr. Main; 1,362 shares of restricted stock to Mr. Marcotte; and 1,362 shares of restricted stock to Mr. Irish. The shares of restricted stock were granted pursuant to the terms of a restricted stock agreement with each named executive officer that is substantially consistent with the forms and descriptions thereof previously filed with the Securities and Exchange Commission by the Company.
The restricted stock grants will vest based on the Company’s attainment of certain cumulative diluted earnings per share criteria, as set forth below:
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when cumulative diluted earnings per share from January 1, 2018 reaches $2.50, 25% of the restricted shares granted will vest; and
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when cumulative diluted earnings per share from January 1, 2018 reaches $5.00, an additional 25% of the restricted shares granted will vest; and
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when cumulative diluted earnings per share from January 1, 2018 reaches $7.50, an additional 25% of the restricted shares granted will vest; and
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when cumulative diluted earnings per share from January 1, 2018 reaches $10.00, the final 25% of the restricted shares granted will vest.
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If the company’s cumulative diluted earnings per share does not reach $10.00 by December 31, 2022 (5 years from January 1, 2018), any unvested shares will be forfeited. The calculation of cumulative diluted earnings per share will be made at the end of each quarter and restricted stock is considered to be earned at the close of business on the day the Company issues its earnings release for the quarter in which the criteria is met.
If there is a stock offering or stock issued for an acquisition, the above targets can be adjusted by the Company’s Board of Directors based upon a recommendation from the Compensation Committee.
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