0001018399FALSE00010183992023-03-212023-03-21

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (Date of Earliest Event Reported): March 24, 2023 (March 21, 2023)
  
ENTERPRISE BANCORP, INC.
(Exact name of registrant as specified in charter)
 
     
Massachusetts 001-33912 04-3308902
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
 
 
222 Merrimack Street  
Lowell,Massachusetts 01852
(Address of principal executive offices) (Zip Code)
 
(978)459-9000
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
☐            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
☐            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
☐            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareEBTCNASDAQ Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐  



Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

(e) 2023 Variable Compensation Incentive Plan. On March 21, 2023, 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 2023 Variable Compensation Incentive Plan (the “2023 Incentive Plan”), including approval of specific performance factors, performance targets and percentage payout amounts for the year ending December 31, 2023. The 2023 Incentive Plan applies to employees, including the Company’s named executive officers, who do not otherwise participate in any form of individual or team-based sales incentive plan(s) or individual commission plan(s) maintained by the Company or the Bank.
The 2023 Incentive Plan is designed to acknowledge and reward Bank-wide performance objectives. Eligible employees of the Bank 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 December 31, 2023). Each eligible 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 2023 Incentive Plan will be determined by the Company’s overall performance for the year ending December 31, 2023. The Company must attain a specified level of performance in “Net Income” (the “trigger” level) for the plan year for a payout to be made under any of the performance factors outlined in the 2023 Incentive Plan. The “Income” performance metric under the 2023 Incentive Plan is defined as pre-tax income excluding income taxes, variable compensation plan expense, the provision for credit losses, the change in market value of equity securities (bank portfolio), gains and losses on sales of bonds, and any other non-recurring or non-core operating income or expense such as but not limited to gains or losses on the sale of other real estate owned, derivatives, and bank owned life insurance. Under the terms of the 2023


Incentive Plan, a favorable or unfavorable variance to budget for the provision for credit losses expense will be applied to the “Income” performance factor at 50% of the variance. The additional performance factors for which payout amounts may be made under the 2023 Incentive Plan for the Company’s named executive officers are year-to-date average low cost deposits, year-to-date average high cost deposits, loan growth, non-interest fee 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 2023 Incentive Plan. Any payout under the 2023 Incentive Plan will be made on or before March 15, 2024 and will be as outlined below.
In addition to the six specific “core” performance factors described above (i.e., “Income,” year-to-date average low cost deposits, year-to-date average high cost deposits, loan growth, non-interest fee revenue, and loan quality), the “supplemental” performance factor of annualized fixed salary and benefit expense for the year ending December 31, 2023 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 Mr. George L. Duncan, the Company’s Executive Chairman, and Mr. Richard W. Main, the Company’s President (each of whom is included in the “Bankwide” incentive group with a multiplier under the 2023 Incentive Plan), may receive an incentive payout under the 2023 Incentive Plan ranging from 1% of their respective base salaries if the Bank accomplishes the “threshold” level to 45% of their respective base salaries at “target” levels and 67.5% of their respective base salaries at “stretch” levels.
Mr. John P. Clancy, Jr., the Company’s Chief Executive Officer (who is included in the “Bankwide” incentive group with a multiplier under the 2023 Incentive Plan), may receive an incentive payout under the 2023 Incentive Plan ranging from 1% of his base salary if the Bank accomplishes the “threshold” level to 50% of his base salary at “target” levels and 75% of his base salary at “stretch” levels.
Mr. Stephen J. Irish, the Company’s Sr. Managing Director of Wealth Management and Chief Operating Officer (who is included in the “Bankwide” incentive group with a multiplier under the 2023 Incentive Plan), may receive an incentive payout under the 2023 Incentive Plan ranging from 1% of his


base salary if the Bank accomplishes the “threshold” level to 40% of his base salary at "target" levels and 60% of his base salary at “stretch” levels.
Mr. Joseph R. Lussier, the Company’s Chief Financial Officer and Treasurer (who is included in the “Bankwide” incentive group with a multiplier under the 2023 Incentive Plan), may receive an incentive payout under the 2023 Incentive Plan ranging from 1% of his base salary if the Bank accomplishes the “threshold” level to 32.5% of his base salary at “target” levels and 48.75% of his base salary 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 under the 2023 Incentive Plan will not exceed 150% of “target” levels. In addition, the Compensation and Human Resources Committee of the Company’s Board of Directors (the “Compensation Committee”) has the discretion to (i) determine whether the occurrence of an extraordinary event outside the control of the Company, and which affects the Company’s financial statements, should impact the payout under the 2023 Incentive Plan, and (ii) require recoupment of a partial or full payout received by an employee with the title of Senior Vice President or a more senior title if there is a material negative restatement resulting from material noncompliance with certain rules and regulations.
The foregoing description is a summary of the 2023 Incentive Plan and is qualified in its entirety by reference to the copy of the 2023 Incentive Plan that is attached as Exhibit 10.1 to this Current Report on Form 8-K and is hereby incorporated by reference to this Current Report on Form 8-K.
Grants of Restricted Stock. At a meeting held on March 21, 2023, the Company’s Board of Directors, on the recommendation of the Compensation Committee, approved grants of an aggregate of 17,338 shares of performance-based restricted stock under the Company’s 2016 Stock Incentive Plan (the “2016 Plan”) to the named executive officers of the Company, as follows: 5,044 shares of restricted stock to Mr. Duncan; 6,429 shares of restricted stock to Mr. Clancy; 2,692 shares of restricted stock to Mr. Main; 1,161 shares of restricted stock to Mr. Lussier; and 2,012 shares of restricted stock to Mr. Irish. The shares of restricted stock were granted pursuant to the terms of the Executive Officer


Restricted Stock Agreement 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:
•when cumulative diluted earnings per share from January 1, 2023 forward reach $3.32, 25% of the restricted shares granted will vest; and
•when cumulative diluted earnings per share from January 1, 2023 forward reach $6.64, an additional 25% of the restricted shares granted will vest; and
•when cumulative diluted earnings per share from January 1, 2023 forward reach $9.96, an additional 25% of the restricted shares granted will vest; and
•when cumulative diluted earnings per share from January 1, 2023 forward reach $13.28, an additional 25% of the restricted shares granted will vest.

If the Company’s cumulative diluted earnings per share do not reach $13.28 by December 31, 2027 (approximately 5 years from January 1, 2023), any unvested restricted shares will be forfeited. The calculation of cumulative diluted earnings per share will be made at the end of each fiscal quarter and restricted stock will be considered to be earned at the close of business on the day the Company issues its earnings release for the fiscal quarter in which the criteria is met.
If there is an offering of the Company’s common stock or shares of the Company’s common stock are issued in connection with an acquisition, the above targets can be adjusted by the Company’s Board of Directors based upon a recommendation from the Compensation Committee.
Supplemental Executive Retirement and Deferred Compensation Plan 2023 Addendum. At a meeting held on March 21, 2023, the Company’s Board of Directors, on the recommendation of the Compensation Committee, approved the Enterprise Bank Supplemental Executive Retirement and Deferred Compensation Plan (the “SERP”) 2023 Addendum (the “2023 SERP Addendum”), including approval of service-based and performance-based contributions for the Chief Executive Officer and the Executive Vice Presidents of the Company, including Mr. Irish, the Company’s Sr. Managing Director of Wealth Management and Chief Operating Officer, and Mr. Lussier, the Company’s Chief Financial Officer and Treasurer. The contributions under the SERP for the plan year ending December 31, 2023 will be made on or before March 21, 2024 and will be as outlined below.


Mr. Clancy, the Company’s Chief Executive Officer, will be eligible to receive a performance-based contribution outlined below based on the following criteria for the year ending December 31, 2023:
0%25%50%100% (Target)125%150%
Income Metric40,60046,60052,60064,60073,10081,600
Chief Executive Officer Contribution Amount:$0$31,250$62,500$125,000$156,250$187,500

Mr. Irish, the Company’s Sr. Managing Director of Wealth Management and Chief Operating Officer, will receive a service-based contribution of $18,000. Mr. Lussier, the Company’s Chief Financial Officer and Treasurer, will receive a service-based contribution of $7,000. Mr. Irish and Lussier will each be eligible to receive an additional performance-based contribution outlined below based on the following criteria for the year ending December 31, 2023:
0%25%50%100% (Target)125%150%
Income Metric40,60046,60052,60064,60073,10081,600
Executive Vice Presidents Contribution Amount:$0$1,750$3,500$7,000$14,000$21,000

Similar to the 2023 Incentive Plan, “Income” is defined in the 2023 SERP Addendum as pre-tax income excluding income taxes, variable compensation plan expense, the provision for credit loses, the change in market value of equity securities (bank portfolio), gains and losses on sales of bonds, and any other non-recurring or non-core operating income or expense such as but not limited to gains or losses on the sale of other real estate owned, derivatives, and bank owned life insurance. A favorable or unfavorable variance to budget for the provision for credit losses expense will be applied to the “Income” performance factor at 50% of the variance.

The foregoing description is a summary of the SERP and the 2023 SERP Addendum and is qualified in its entirety by reference to the copy of the SERP filed as Exhibit 10.15.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and


Exchange Commission on March 8, 2023 and the 2023 SERP Addendum that is attached as Exhibit 10.2 to this Current Report on Form 8-K and is hereby incorporated by reference to this Current Report on Form 8-K.



Item 9.01.Financial Statements and Exhibits.
(d)The following exhibits are included with this Current Report on Form 8-K:


[Remainder of Page Intentionally Blank]



























Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ENTERPRISE BANCORP, INC.
Date: March 24, 2023By:/s/ Joseph R. Lussier
Joseph R. Lussier
Executive Vice President, Treasurer and Chief Financial Officer

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2023 Variable Compensation Incentive Plan

Purpose and Objective
The 2023 Variable Compensation Incentive Plan (the Plan) incents and rewards for Bank and Individual performance.
Participant Eligibility
Regular team members who do not participate in an individual sales incentive plan or an individual commission plan are eligible to participate in the Plan. Temporary and co-operative team members are ineligible to participate in the Plan. If your hire date is after January 1 of the current plan year, you will be eligible for a pro-rata payout, based on wages earned during the plan year. Team members who leave the Bank and are rehired within the same Plan year, the payout opportunity will include all regular eligible earnings earned in the Plan year.
Target Awards
You will have a target variable compensation opportunity (target percentage), which is a percentage of your eligible regular earnings (base salary) earned in the current plan year.
Determination of Variable Compensation Incentive Payout
You will be assigned to a variable compensation incentive group based upon your position and role at the end of the Plan year. Team members who experience an employment change from one short term incentive plan to another in the middle of the plan year, will have their payout prorated for each plan. Team members will receive credit for the first part of the year under their current cash incentive Plan and receive credit for the second part of the year under their new cash incentive Plan.

The Bank must attain Net Income of $20.3 million (the “trigger”) in the current plan year for payouts to be made. If the trigger is achieved, the Plan payouts will be determined by the precise financial performance achieved in the plan applied to the target to determine the payout. The maximum incentive opportunity to be paid under this plan is 150% of target. The attached addendums outline the specific performance factors.

Timing of Payouts and Plan Payouts
The performance period is January 1 through December 31 of the current plan year. If it is determined that participants will receive a payout under the Plan, payouts will be received on or before March 15, following the plan year.

Payouts will be made in a cash lump sum. Incentive awards will be considered taxable income to participants in the year paid and will be subject to withholding for required income and other applicable taxes.

Team Member Individual Performance
Team member’s individual performance will be taken into consideration when determining final payouts under the 2023 Variable Compensation Incentive Plan based on results and impacts.  Team member’s individual performance may be reduced up to 25% of the total Plan payout if a team member is not meeting performance expectations.
Termination of Employment
If a participant retires after the age of 62, passes away or employment ends as result of disability and has been employed for at least three months in the current plan year, the participant or the participant’s beneficiary is eligible to receive a pro-rata payout to be received within 30 days following the end of the quarter of the participant’s death, disability, or retirement. If any of these terminating events take place during quarter four, the payment will be made by March 15 of the following year.

If a Plan participant terminates employment before the payout out date, an incentive award will not be paid. Participants must be an active team member of the Bank on the date the Plan incentive is paid to receive the award.

Plan Authorization and Discretion


This Plan was developed based on the Bank’s existing business, market and economic conditions, current services, and staff assignments and is authorized by the Board of Directors and administered by the Compensation and Human Resources Committee. If changes occur that are substantial enough to affect these conditions, services, or assignments, the Compensation and Human Resources Committee may add to, amend, modify, or discontinue any of the terms and conditions of the Plan at any time as it deems appropriate. The Compensation and Human Resources Committee will determine on at least an annual basis, those team members of the Bank that will be eligible to participate in the Plan.

Extraordinary Event
An extraordinary event, such as a windfall, or a federal or state compliance, Community Reinvestment Act (CRA) or safety and soundness rating below satisfactory, or another unusual event, may either positively or negatively impact the Bank’s financial results and conditions. The Compensation and Human Resources Committee will have discretion whether the extraordinary event will impact the payout under the Plan.

Clawback Provision
If the Bank’s reported financial or operating results are determined to be subject to material negative restatement due to material noncompliance with any financial reporting requirement under the securities laws, fraud, or misconduct (other than a restatement caused by a change in applicable accounting rules or interpretations), the Compensation and Human Resources Committee may require recoupment of full or partial payout made to participants with an officer status of Senior Vice President (SVP) or above.

Ethics and Interpretation
If there is any ambiguity as to the meaning of any terms or provisions of this Plan or any questions as to the correct interpretation of any information contained therein, the Bank’s interpretation expressed by the Compensation and Human Resources Committee will be final and binding.

The altering, inflating, and/or inappropriate manipulation of performance/financial results or any other infraction of recognized ethical business standards, will subject the team member to disciplinary action up to and including termination of employment. In addition, any incentive compensation as provided by the Plan to which the team member would otherwise be entitled will be revoked.

Miscellaneous
The Plan will not be deemed to give any participant the right to be retained in the employ of the Bank nor will the Plan interfere with the right of the Bank to discharge any participant at any time. The relationship between team members and the Bank is one of at-will employment.

This Plan and the transactions and payments hereunder shall, in all respect, be governed by, and construed and enforced in accordance with applicable governmental laws and regulations. Each provision in this Plan is severable, and if any provision is held to be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not, in any way, be affected or impaired thereby.



Addendum: Bankwide Group with Multiplier
                             
Performance Factor Grid for Participant Scorecard
Performance Factor

Weight
Threshold
  

Target
  

Stretch
0%
25%
50%
100%
125%
150%
200%
Income (1)50%40,600
46,600
52,600
64,600
73,100
81,600
98,600
YTD Average Low Cost Deposits
7.5%
2,116.9
2,160.2
2,203.6
2,290.3
2,333.6
2,377.0
2,463.7
YTD Average High Cost Deposits (2)
7.5%
1,654.4
1,686.7
1,719.0
1,783.7
1,816.0
1,848.3
1,913.0
Loan Growth
15%
-63,600
15,900
95,400
254,400
333,900
413,400
572,400
Loan Quality (3)
10%
1.00%
0.88%
0.75%
0.50%
0.38%
0.25%
0.00%
Non-Interest Fee Revenue (4)
10%
16,700
17,350
18,000
19,300
19,950
20,600
21,900
(1)    Income is defined as pre-tax income excluding income taxes, variable compensation plan expense, the provision for credit losses, the change in market value of equity securities (bank portfolio), gains and losses on sales of bonds, and any other non-recurring or non-core operating income or expense such as but not limited to gains or losses on other real estate owned, derivatives and bank owned life insurance.
(2)    High cost deposits include money market, business premium savings, municipal investment savings, certificates of deposit and IRAs.
(3)    Loan Quality is defined as the non-performing assets to total loan ratio at year end plus the annual net charge-off to average total loans ratio.
(4)    Non-Interest Fee Revenue is defined as non-interest income excluding the change in market value of equity securities (bank and serp portfolios), gains and losses on sales of bonds, and any other non-recurring or non-core operating income such as but not limited to gains or losses on other real estate owned, derivatives and bank owned life insurance.

Additional Performance Factor     
Annualized salaries and benefits expense multiplier for 2023:     
•If less than $65,048,000, multiply actual payout percentage by 1.05
•If between $65,048,000 to $65,848,000, multiply actual payout percentage by 1.0
•If more than $65,848,000, multiply actual payout percentage by 0.95

Scorecard Adjustor for the Provision for Credit Losses:
A favorable or unfavorable variance to budget for the Provision for Credit Losses expense will be applied to the Income performance factor at 50% of the variance.  For example, if the Provision for Credit Losses is favorable or unfavorable to budget by $1 million, the Income performance factor results would be increased or decreased by $500 thousand.

Scorecard Calculation Information:
The scorecard will be calculated using a precise payout level based on actual performance between levels.  For example, if the Bank’s unadjusted Income result is $60.00M and the Provision for Credit Losses is $1.00M favorable to budget, the final Income result will be adjusted to $60.50M ($60.00M + 50% x $1.00M) and the Income performance metric would be adjusted to 83%.   If the Provision for Credit Losses is $1.00M unfavorable to budget, the final Income result will be adjusted to $59.50M ($60.00M - 50% x $1.00M) and the Income performance metric would be adjusted to 79%.

Enterprise Bank Supplemental Executive Retirement and Deferred Compensation Plan
2023 Addendum

This Addendum to the Enterprise Bank Supplemental Executive Retirement and Deferred Compensation Plan (the "Plan") is effective for the Plan year commencing on January 1, 2023 (the "2023 Plan Year") and is intended to set forth certain provisions of the Plan that are determined at the discretion of the Compensation and Human Resources Committee of the Enterprise Bank and Trust Company Board of Directors (the "Compensation and Human Resources Committee"). Plan eligibility and Plan contributions will be reviewed annually by the Compensation and Human Resources Committee.

Plan Eligibility
The Chief Executive Officer and individuals with the titles noted below as of March 27, 2023 will be eligible for Plan contributions.

Employer Plan Contribution
Plan contributions will be made annually on or before March 15 of the year following the plan year and will be as follows for 2023:

Service Based Contributions
A service-based contribution of $7,000 will be made for the following for 2023:
•Chief Commercial Lending Officer
•Branch Administration Director
•Construction Lending Director
•Chief Risk Officer
•Chief Banking Officer
•NH Community Banking and Lending Director
•Chief Sales, Community and Customer Relationship Officer
•Chief Human Resources Officer
•Chief Digital and Operations Officer
•Regional Commercial Lending Director
•Chief Financial Officer & Treasurer
•Mortgage Lending Director

A service-based contribution of $18,000 will be made for the following Executive Vice Presidents for 2023:
•Sr. Managing Director of Wealth Management & Chief Operating Officer

Performance Based Contributions
The participants will each receive an additional contribution based on the performance of the Income metric in the 2023 Variable Compensation Incentive Plan:
0%25%50%100% (Target)125%150%
Income Metric*40,60046,60052,600
64,600
73,100
81,600
Executive Vice Presidents Contribution Amount:$0$1,750$3,500$7,000$14,000$21,000
Chief Executive Officer Contribution Amount:$0$31,250$62,500$125,000$156,250$187,500

(1)    Income is defined as pre-tax income excluding income taxes, variable compensation plan expense, the provision for credit losses, the change in market value of equity securities (bank portfolio), gains and losses on sales of bonds, and any other non-recurring or non-core operating income or expense such as but not limited to gains or losses on other real estate owned, derivatives and bank owned life insurance.

Scorecard Adjustor for the Provision for Credit Losses:
A favorable or unfavorable variance to budget for the Provision for Credit Losses expense will be applied to the Income performance factor at 50% of the variance.  For example, if the Provision for Credit Losses is favorable or unfavorable to budget by $1 million, the Income performance factor results would be increased or decreased by $500 thousand.
Scorecard Calculation Information:
The scorecard will be calculated using a precise payout level based on actual performance between levels.