(1) | RetainersCash retainers for membership on the Board of Directors and on the Executive Committee were paid in equal monthly installments. All other cash retainers were paid in equal quarterly installments.
| | 1. | The Board of Directors annual cash retainer increased to $9,000 as of April 1, 2014. Prior to this, the annual retainer was $7,200. In 2014, the Company also granted awards of 6,660 shares of restricted stock with a grant date value of $9,009, which generally vest over a two-year period, to non-employee Directors. |
| | (2)2. | There currently is no Audit Committee Vice-Chairperson.The Lead Director annual retainer increased to $4,000 as of April 1, 2014. Prior to this, the annual retainer was $2,800. |
| | (3)3. | Loan Committee Vice-Chairperson and Enterprise Investment Advisors Committee Vice-Chairperson roles were established as of December 2014. |
| | 4. | The Strategic Growth Planning Committee dissolvedwas established as of September 18, 2012.June 2014. |
Directors who are also full-time salaried officers of the Bank were not paid for attending Board of Directors or committee meetings in 2014and did not receive retainers of any kind for their services in any capacity as Directors.
For the year 20122014, non-employee Directors had the rightoption to make an irrevocable election (by December 31, 20112013) to receive shares of Common Stock in lieu of receiving an elected portion of cash fees. The number of shares issued to non-employee Directors pursuant to this election was based on the closing price of the Common Stock on the NASDAQ Global Market on January 3,2, 20122014. For the year 20122014, the Company issued a total of 12,59211,612 shares of Common Stock to nine non-employee Directors at a per share issuance price of $14.63.$20.84. These shares were issued
in January 20132015. For the year 20132015, non-employee Directors have the same option to receive shares of Common Stock in lieu of cash fees at a per share issuance price of $17.43,$23.86, which reflects the value of the Common Stock aton January 2, 20132015, based on the closing price of the Common Stock on the NASDAQ Global Market on that date. In 2012, the Company also granted awards of stock, which generally vest over a two-year period, to non-employee Directors.
The Company believes that giving non-employee Directors the option to receive stock in lieu of cash fees and granting to them restricted stock awards with vesting requirements further aligns such Directors’ interests with those of the Company’s stockholders.
The following table details the total compensation paid to each non-employee Director for the year ended December 31, 20122014.
| | Name | Fees paid in cash or stock ($) (1) | Stock Awards ($) (2) | Total ($) | Fees earned or paid in cash or stock ($) (1) | Stock Awards ($) (2) (3) (4) | Total ($) | Kenneth S. Ansin (3) | $12,250 | $7,215 | $19,465 | | Gino J. Baroni | $23,200 | $7,215 | $30,415 | $25,350 | $9,009 | $34,359 | John R. Clementi | $31,050 | $7,215 | $38,265 | $31,100 | $9,009 | $40,109 | James F. Conway, III | $28,350 | $7,215 | $35,565 | | James F. Conway III | | $27,750 | $9,009 | $36,759 | Carole A. Cowan | $30,850 | $7,215 | $38,065 | $32,500 | $9,009 | $41,509 | Normand E. Deschene | $17,600 | $7,215 | $24,815 | $22,300 | $9,009 | $31,309 | Lucy A. Flynn | $20,050 | $7,215 | $27,265 | $23,800 | $9,009 | $32,809 | John T. Grady, Jr. | | $16,000 | $9,009 | $25,009 | Eric W. Hanson | $28,600 | $7,215 | $35,815 | $27,600 | $9,009 | $36,609 | John P. Harrington | $25,050 | $7,215 | $32,265 | $26,700 | $9,009 | $35,709 | Mary Jane King | | $13,000 | $— | $13,000 | John A. Koutsos | | $21,400 | $9,009 | $30,409 | Arnold S. Lerner | $34,550 | $7,215 | $41,765 | $36,900 | $9,009 | $45,909 | Jacqueline F. Moloney | $22,250 | $7,215 | $29,465 | $31,650 | $9,009 | $40,659 | Luis Pedroso | | $18,300 | $— | $18,300 | Michael T. Putziger | $25,250 | $7,215 | $32,465 | $31,800 | $9,009 | $40,809 | Carol L. Reid | $34,050 | $7,215 | $41,265 | $36,750 | $9,009 | $45,759 | Michael A. Spinelli | $21,600 | $7,215 | $28,815 | $21,200 | $9,009 | $30,209 |
| | (1) | All non-employee Directors, excluding Messrs. Ansin, Hanson,Grady, Lerner, Pedroso and Spinelli, Ms. Flynn and Ms. Flynn,King, elected to receive all or a portion of their 2014 Directors fees in the form of shares of Common Stock, which were issued in January 20132015. |
| | (2) | The value of the restricted stock awards is based on the fair market value of the Common Stock on the date of grant, which was March 20, 2012.18, 2014. The fair market value was calculated as the closing price of the Common Stock on the NASDAQ Global Market on the date of grant.grant, which was $20.29 per share. |
| | (2) | None of the above listed non-employee Directors held any outstanding stock options as of December 31, 2014. |
| | (3) | As previously announced byof December 31, 2014, each of the Company,above listed non-employee Directors , excluding Ms. King, Mr. Ansin resigned fromKoutsos and Mr. Pedroso, had 664 shares of unvested restricted stock. As of December 31, 2014, Mr. Koutsos had 444 shares of unvested restricted stock. Ms. King and Mr. Pedroso did not have shares of restricted stock as they joined the Board of Directors effective July 17, 2012 at which time he became a full time employee atafter the Bank.last restricted stock grant. |
During 2012, none of the above listed non-employee Directors received any stock option awards or non-equity incentive plan compensation, nor did they have pensions or nonqualified deferred compensation earnings or any other form of compensation other than the fees paid in cash or stock and the stock awards set forth above. None of the above listed non-employee Directors held any outstanding stock options as of December 31, 2012.
INFORMATION REGARDING EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES Set forth below is certain information regarding the executive officers of the Company (including the Bank), other than those executive officers who are also Directors of the Company and for whom such information is provided elsewhere in this Proxy Statement. Each individual named below has held his position for at least five years, except as otherwise indicated.
| | | | Name | Age | Position | Brian H. Bullock | 5557 | Executive Vice President and Chief Commercial Lending Officer of the Bank; prior to April 2009, Senior Vice President and Chief Commercial Lender of the Bank | Stephen J. Irish | 5860 | Executive Vice President and Chief Operating Officer of the Bank; prior to April 2009, Executive Vice President and Chief Information Officer of the Bank | Steven R. Larochelle | 4951 | Executive Vice President and Chief Banking Officer of the Bank; prior to April 2009, Senior Vice President and Chief Commercial Real Estate Lender of the Bank | James A. Marcotte | 5557 | Executive Vice President, Chief Financial Officer and Treasurer of the Company and the Bank | Diane J. Silva | 5557 | Executive Vice President and Mortgage Lending Director of the Bank; prior to March 2011, Senior Vice President and Mortgage Lending Director of the Bank | Chester J. Szablak, Jr. | 5557 | Executive Vice President and Chief Sales and Marketing Officer of the Bank; from November 2007 through March 2009, Senior Vice President and Chief Sales and Marketing Officer of the Bank; from January 2006 through October 2007, Senior Vice President and Chief Sales Officer of the Bank | Janice R. Villanucci | 6062 | Executive Vice President and Deposit Services Director of the Bank; prior to March 2011, Senior Vice President and Deposit Operations Director of the Bank |
COMPENSATION DISCUSSION AND ANALYSIS
Objectives and Design The Company'sCompany’s core compensation philosophy provides that total annual compensation levels should: (1) reflect compensation levels of those found in other banking organizations of comparable asset size and performance; (2) reflect individual responsibilities, contribution, leadership, experience, skill set and performance; and (3) provide incentive to achieve business and financial objectives within reasonable risk parameters. The Company believes that this compensation philosophy is necessary to attract, motivate and retain highly qualified executives, who are essential to achieving the financial goals set by the Board of Directors and enhancing long-term value for shareholders, while operating the Company in a safe and sound manner.
Consistent with this philosophy, the Compensation Committee regularly obtains information regarding compensation levels in the Company'sCompany’s industry through various sources, including compensation surveys conducted by banking industry associations and independent compensation consultants. The Compensation Committee also reviews the responsibilities and performance of the Company’s executive officers. Elements of compensation are established with the goal of rewarding the executive officers for individual performance and organizational short- and long-term goals.
Under the Compensation Committee Charter, the Compensation Committee recommends to the independent members of the Board of Directors the compensation of the Company'sCompany’s Chairman. The Chairman and the Compensation Committee review the performance of both the Company'sCompany’s Chief Executive Officer and President.
The Chairman recommends the compensation of the Chief Executive Officer and President to the Compensation Committee and after review of the
Chairman's Chairman’s recommendation the Compensation Committee recommends their compensation to the independent members of the Board of Directors for approval. The Chief Executive Officer of the Company evaluates the performance and responsibilities of the remaining executive officers and recommends their compensation to the Compensation Committee. After review of the Chief Executive Officer'sOfficer’s recommendations, the Compensation Committee recommends executive compensation to the independent members of the Board of Directors for approval.
The Company at least annually assesses total compensation paid to its executive officers. As part of this process, the Compensation Committee assesses and evaluates the elements of total compensation paid to executive officers as a group and individually.
Elements and Rationale Executive compensation may include the following components in addition to an executive'sexecutive’s base salary: incentive cash compensation, equity compensation, supplemental retirement benefit, supplemental life insurance benefit, income protection following a termination of employment under various circumstances, including following a change in control of the Company, and automobiles and club memberships for business development purposes. Each of these components is reviewed, both separately and from a total compensation perspective, and approved by the Compensation Committee and the independent members of the Board of Directors on at least an annual basis. The Company believes that by using a combination of these elements it is best able to find an effective balance in motivating each executive to achieve long-term and short-term goals without taking unnecessary or excessive risks that could threaten the Company'sCompany’s financial condition or prospects, thereby enhancing long-term shareholder value. In establishing the components of compensation for each individual executive officer, the Compensation Committee considers the performance and responsibilities of the individual, the executive'sexecutive’s designation or role within the Company, and the cost to the Company of the various components of compensation to be provided.provided, and the support received from stockholders in 2014 on the “Say on Pay” advisory vote. The CompanyCompensation Committee annually engages a compensation consulting firm to review the cash (base salary and cash incentive) and equity elements of the Company'sCompany’s executive compensation and to provide comparative market information on overall cash and equitytotal compensation for the Compensation Committee'sCommittee’s review. The Company engaged Pearl Meyer & Partners to conduct a comparative market review of the Company's executive annual cash and equity compensation programs for 2012. For 2013, the Company engaged McLagan, an Aon Hewitt Company to conduct a comparative market review of the Company'sCompany’s executive annual cashtotal compensation programs for 2014 and equity programs. The Company selected a new compensation consulting firm to gain an additional perspective on the executive cash and equity programs.2015. The scope of this comparative market review included, in addition to survey data, the development of a peer group of publicly traded banks with similar asset size and performance within the Company's geographic region.Northeast region of the United States, excluding New York City metro area. The information was not gathered to benchmark executive compensation to particular levels within the peer and survey group, rather, it was reviewed for comparative purposes to ensure thatassess the competitiveness of total executive compensation remains competitive.compensation.
The Compensation Committee selected the following peer group:
| | | Century Bancorp, Inc. | Bryn Mawr Bank Corp. | Washington Trust Bancorp, Inc. | Cape BancorpBar Harbor Bankshares | Century Bancorp, Inc.Financial Institutions | SI Financial Group Inc. | Meridian Interstate Bancorp, Inc. (MHC) | Chemung Financial Corporation | Camden National Corporation | Westfield Financial, Inc. | Meridian Interstate Bncp (MHC) | Bar Harbor Bankshares | Rockville Financial, Inc | BSB Bancorp, Inc. | Canandaigua National Corp. | Hingham Institution for Savings | Metro Bancorp, Inc. | Westfield Financial, Inc. | First of Long Island Corp. | New Hampshire Thrift Bancshares, Inc. | First Connecticut Bancorp, Inc. | EvansCitizens & Northern Corp. | Peapack-Gladstone Financial | BSB Bancorp Inc. | ChemungMerchants Bancshares, Inc. | Penns Woods Bancorp Inc. | OceanFirst Financial Corp. | Merchants Bancshares,Corodus Valley Bancorp. Inc. | United Financial Bancorp, Inc.Univest Corp. of Pennsylvania | |
222014 Executive Compensation Program
Base Salary Based upon the comprehensive reviews and comparative assessments performed by Pearl Meyer & Partners,McLagan, an Aon Hewitt Company, and various other factors, including a review of each executive'sexecutive’s responsibilities, experience in his role, leadership, contributions, overall performance, and a review of the various components of compensation provided to the individual executive, for 2014, the 2012 annualCompensation Committee determined that the base salaries for the Chief Executive Officer, Chief Financial Officer,Messrs. Duncan, Main, Clancy, Marcotte, and the three other most highly compensated executive officers of the Bank identified in the Summary Compensation Table at page 29 below (the “Named Executive Officers”) were increased or remained unchanged from 2011 levels as follows: for Mr. Marcotte, anIrish would increase from $192,000 to $195,840; for Mr. Irish, an increase from $192,000 to $195,840; and annual base salaries remained unchanged for Mr. Clancy at $400,000, Mr. Duncan at $350,000, and Mr. Main at $258,918. The increase in Mr. Marcotte and Mr. Irish's base salaries was,2013 levels, in part, to maintain alignment with the competitive range of base salaries for their positions.positions found in the above peer group. The base salariessalary increases for Messrs.2014 were as follows: Mr. Marcotte from $195,840 to $205,632, Mr. Irish from $195,840 to $205,632, Mr. Clancy from $400,000 to $475,000, Mr. Main from $258,918 to $271,862, and Mr. Duncan Main and Clancy remain unchanged for 2012, as the Company determined that an increase in their total incentive compensation opportunity and an increase in equity incentive would be the focus for 2012.from $350,000 to $367,500.
For 2013,2015, the Compensation Committee reviewed the various components of the compensation provided to each executive, assessed each executive'sexecutive’s responsibilities, leadership, overall performance, and contributions, and reviewed the comparative assessment provided by McLagan.McLagan, an Aon Hewitt Company. The Compensation Committee determined that the base salaries for Messrs. Duncan, Main, Clancy, Marcotte, and Irish would remainincrease from 2014 levels, in part, to maintain alignment with the samecompetitive range of base salaries for their positions found in the above peer group. Additionally, the increases in the base salaries of Messrs. Duncan and that an increaseMain were also based upon a change in the mix of their total incentive compensation would be the focus for 2013.2015. Specifically, Messrs. Duncan and Mr. Main’s equity compensation decreased in 2015 compared to 2014 levels. The base salary increases for 2015 are as follows: Mr. Marcotte from $205,632 to $231,336, Mr. Irish from $205,632 to $231,336, Mr. Main from $271,862 to $300,000, and Mr. Duncan from $367,500 to $400,000.
Incentive Compensation (Cash) The terms of incentive cash compensation for executive officers are established by the Compensation Committee, subject to approval by the independent members of the Board of Directors, on a year-to-year basis. Certain senior officers, including the Named Executive Officers, are eligible for incentive cash compensation through the Company'sCompany’s Variable Compensation Incentive Plan. Payments for executives under the Variable Compensation Incentive Plan for 20122014 were determined by various weighted elements of the Company'sCompany’s short- and long-term performance, including net income, deposit growth, loan growth, loan quality, and loan quality.non-interest revenue. Additionally,
to focus executives on growth of investment asset revenuesmanaging salary and growth of insurance commissions,benefits expense, the Plan included a multiplier for executives that reduced or increased their overall payout based on performance compared to specific growth targets for these areas.this area. Target incentive payout percentages for Messrs. Duncan, Clancy, and Main were 30%40% of their annual regular earnings and the target payout percentages for Messrs. Marcotte and Irish were 19.5%30%. Messrs. Duncan, Main, Clancy,Performance factors and Marcotte were placed in the Bank-wide Variable Compensation Group, for which thetheir relative weighting ofas well as the various performance factors was allocated as follows: net income, 50%; deposit growth, 20%; loan growth, 20%; and loan quality, 10%. Mr. Irish, who has significant responsibility for supporting long-term growth through generating deposits, was placed in the Deposit Focused Variable Compensation Group, for which the relative weighting of the various performance factors was allocated as follows: net income, 50%; deposit growth, 35%; loan growth, 10%; and loan quality, 5%. The Company's performance in 2012 relative to its performance targetseach factor under the plan was as follows: exceeded its target level for net income (1.25), deposit growth (2.0)are shown in the table below. | | | | | Performance Factor | Weight | Level for 2014 | Weighted Results | Net Income | 50% | 1.00 | 0.5000 | Deposit Growth (Low) | 15% | 1.25 | 0.1875 | Loan Growth | 15% | 0.75 | 0.1125 | Loan Quality | 10% | 2.00 | 0.2000 | Non-interest Revenue | 10% | 0.50 | 0.0500 | Overall Result Payable to Target: 1.05 | |
Salaries and loan quality (1.75) and achieved less than its target level for loan growth (0.75). The performance multipliers exceededbenefits expense multiplier met the targeted range and increaseddid not impact the result of the weighted targets by 5%.overall results. In 2014, Messrs. Duncan, Clancy, and Main who were in the Bank-wide Variable Compensation Group, received an actual payout of 42.53%42%, which resulted in the following cash payments: $148,838$152,371 for Mr. Duncan; $170,100$191,019 for Mr. Clancy; and $110,105$100,861 for Mr. Main. Mr. Marcotte also in the Bank-wide Variable Compensation Group, received an actual payout of 27.64% or $53,847. As a member of the Deposit Focused Variable Compensation Group,and Mr. Irish received an actual payout of 30.46% or $59,330.31.5%, which resulted in a cash payment of $63,944 to each of Mr. Marcotte and Mr. Irish. On March 19, 2013,17, 2015, the Board approved the Company's 2013Company’s 2015 Variable Compensation Incentive Plan. The 20132015 plan applies to all of the Named Executive Officers. The Board approved specific performance factors, performance targets and percentage payout amounts for 20132015 for each of the Named Executive Officers. To place a more meaningful proportion of total cash compensation at risk to ensure alignment of executive rewards with the
Company's financial results, theThe target payout percentage for each of Messrs. Duncan Clancy, and Main was increased to 32.5%remained at 40% of their annual regular earningsearnings. To further align executive rewards with the Company’s financial results and to ensure total cash compensation is within a competitive range, the target payout percentage for each of Messrs. Marcotte and Irish was increased to 23%32.5% and for Mr. Clancy was increased to 45%. Mr. Clancy’s increase was, in part, based on a shift in his compensation mix for 2015, which reflects a decrease in his equity compensation compared to his 2014 level. As in 2012,2014, payments for participants under the 20132015 Variable Compensation Incentive Plan will be determined by various elements of Company performance and individual performance.
All employees, including Named Executive Officers, also participate in a profit sharing program, which is solely determined based upon the Company's net income for the year. Payouts under this program were made in the form of an employer contribution to each employee's, including each of the Named Executive Officer's, 401(k) Plan account. The Company's achievement of net income of $12,242,010 exceeded target level in 2012 resulting in a contribution of 3.5% of the first $75,000 of an individual employee's base salary. Accordingly, a profit sharing contribution of $2,625 was made to each Named Executive Officer's 401(k) Plan account.
The Named Executive Officers will continue to participate in the Company's bank-wide profit sharing program in 2013. Payouts under the profit sharing program will be based solely on Company performance (net income) for 2013. As in 2012, the target payout for 2013 is 2.5% of up to $75,000 in base salary based on achieving the net income target; however, the target payout percentage may increase or decrease based upon the Company's actual performance.
Long-Term Incentive (Equity) Compensation The Company aligns the interests of its executives with the long-term interests of stockholders through the granting of equity-based compensation awards, which have been in the form of stock options and restricted stock, granted in all cases at current fair market value. The Company'sCompany’s current long-term equity program is intended to (1) enhance management'smanagement’s sense of ownership and commitment to the long-term success of the Company, (2) encourage and reward management performance that increases the long-term success and shareholder value of the Company, and (3) attract and retain the senior leadership and management talent the Company needs to be successful. At this time, the Compensation Committee anticipates that restricted stock as well as stock options will continue to serve as the primary vehicles to be used to achieve these objectives.
In connection with its compensation program, the Company evaluates the issuance of equity grants to employees on an annual basis. Equity grants to executive officers have been considered and granted at the same time that equity grants have been granted for employees during the first quarter of each year. The total number of options or restricted stock granted to all employees in the aggregate is determined after considering various factors, such as overhang and run rate. The number of options or value of restricted stock awards granted to individual employees, including executives, is also based upon various factors, but is primarily based upon an employee'semployee’s level of responsibility and individual performance and contribution, and, with respect to the Named Executive Officers and other senior
management, the desired mix of compensation is considered.compensation. Stock optionoptions and restricted stock grants for employees other than executive officers are recommended by the Chief Executive Officer and the total grant is subject to the approval of the Compensation Committee and Board of Directors. In addition to the recommendation of the Chief Executive Officer and Compensation Committee approval, stock options and restricted stock awards granted to executive officers must also be approved by independent members of the Board of Directors. In all cases, the exercise price of the stock option and the value of the restricted stock is established based on the market price of the Company'sCompany’s stock on the date of the grant.
On March 20, 2012,18, 2014, the Company granted to employees a total of 67,75031,229 stock options at an exercise price of $16.25$20.29 per share (which reflected the market price of the Company's common stockCompany’s Common Stock on the date of the grant) and 64,96052,184 shares of restricted stock. Of the options and restricted stock shares granted, the Board approved grants toFor the Named Executive Officers each such grantand other specific senior employees, restricted stock grants will vest based on the Company reaching specific targets in earnings per share cumulative totals (as outlined on page 28). Specific incremental targets were set to align executive management with shareholder interests by requiring earnings targets be met for awards to vest over four years.rather than incremental time based vesting. If thesuch targets are not met by December 31, 2018 unvested shares will be forfeited. For all other employees restricted stock grants will vest 25% per year. Stock option grants to both Named Executive Officer retiresOfficers and meetsother employees will vest 50% at year two and 50% at year four. The equity grant vesting schedules are aligned with the Company's retirement guidelines, which is a minimum age of 62 and a combination of years of service and age, options vest immediately and vesting of a portion of restricted stock shares is accelerated for grants issued more than 12 months prior to the retirement date. Messrs. Duncan and Main meet the Company's retirement guidelines. Company’s long-term performance goals.
The amounts granted to the Named Executive Officers in 20122014 were as follows: 9,0003,117 options and 9,4007,243 shares of
restricted stock to Mr. Duncan; 9,0003,476 options and 7,0008,075 shares of restricted stock to Mr. Clancy; 9,0001,831 options and 4,1754,253 shares of restricted stock to Mr. Main; 1,5001,083 options and 3,3502,513 shares of restricted stock to Mr. Marcotte; and 1,5001,083 options and 3,3502,513 shares of restricted stock to Mr. Irish. Mr. Clancy also received 3,000 shares of restricted stock that vested immediately. This grant was made to increase his ownership and further align Mr. Clancy's interest with stockholders, to recognize his performance and in recognition that Mr. Clancy declined a stock grant and salary increase in 2009 and salary increases in 2011 and 2012. The number of options and shares of restricted stock granted to the Named Executives Officers for 20122014 were considered to be consistent with the Company'sCompany’s objective of maintaining a reasonable level of employee participation in the Company'sCompany’s equity compensation program and to be within competitive ranges for executive management. Additionally, the Compensation Committee believes that these equity grants further align the executives'executives’ interests with those of the stockholders.
On March 19, 2013,17, 2015, the Company granted to employees a total of 44,17527,115 options, at an exercise price of $16.43$21.03 per share (which reflected the market price of the Company'sCompany’s common stock on the date of the grant), and 72,66047,443 shares of restricted stock. Of the options and restricted stock shares granted, the independent members of the Board of Directors approved grants to the Named Executive Officers. For the Named Executive Officers and certain other specific senior employees, restricted stock grants will vest based on the Company reaching specific targets in earnings per share cumulative totals. For non-executive officersall other employees restricted stock grants will vest 25% per year. Stock option grants to both Named Executive Officers and other employees will vest 50% at year two and 50% at year four. The equity grant vesting schedules are aligned with the Company'sCompany’s long term performance goals. If the Named Executive Officer retires and meets the Company's retirement guidelines, which is a minimum age of 62 and a combination of years of service and age, options vest immediately and vesting of a portion of restricted stock shares is accelerated for grants issued more than 12 months prior to the retirement date. Messrs. Duncan and Main meet the Company's retirement guidelines.
The amounts granted to the Named Executive Officers in 20132015 were as follows: 4,0002,873 options and 10,0206,588 shares of restricted stock to Mr. Duncan; 10,0002,780 options and 10,5706,377 shares of restricted stock to Mr. Clancy; 4,0001,534 options and 5,4703,516 shares of restricted stock to Mr. Main; 1,500969 options and 3,7802,223 shares of restricted stock to Mr. Marcotte; and 1,500969 options and 3,7802,223 shares of restricted stock to Mr. Irish. The number of options and shares of restricted stock granted to the executivesNamed Executive Officers for 20132015 were considered to be within competitive ranges for executive management, and the Compensation Committee believes such equity grants meet the Company'sCompany’s objective of executive employee participation in the Company'sCompany’s equity compensation program aligning the executives'executives’ interests with those of the stockholders.
Supplemental Retirement Benefit and Supplemental Life Insurance Benefit
The Compensation Committee believes that providing a supplemental retirement benefit, which is implemented through salary continuation agreements, and supplemental life insurance benefits serve as a long-term retention tool, as well as providing a reward component to the executive.
The Bank is party to salary continuation and supplemental life insurance agreements with each of Messrs. Duncan and Main. The terms of these salary continuation agreements, and the annual amounts payable to the executives thereunder, are described further at page 3334 below. The annual expense incurred by the Company in maintaining this supplemental retirement benefit for each executive equals the annual increase of the present value of the accumulated benefit to be paid to the executive. This amount is included for each of the executives in the Summary Compensation Table at page 2926 below under the heading “Change in Pension Value and Nonqualified Deferred Compensation Earnings.” The supplemental life insurance benefits that are payable to Messrs. Duncan and Main are included in the amounts shown as payable in the event of death in the table at page 3734 below and are specifically referenced in footnote 3 to the table. In 2006, the Company initiated a supplemental life insurance benefit plan for a number of its employees in management positions. Under this plan, the Company has provided supplemental life insurance benefits to the employees, subject to certain restrictions. Messrs. Clancy, Marcotte and Irish participate in this plan and the amounts
of their supplemental life insurance benefits are included in the amounts shown as payable in the event of death in the table at page 3734 below and are specifically referenced in footnote 3 to the table. Income Protection and Non-Compete In addition to the above noted elements of compensation, Messrs. Duncan, Main and Clancy have employment agreements with the Company, which include non-competition restrictions, and Mr. Irish and Mr. Marcotte have change in control/noncompetitionnon-competition agreements with the Company. These agreements provide the executive with income protection in the event of a termination of his employment under certain circumstances, including following a change in control of the Company. The Compensation Committee believes these agreements are an important tool in retaining key executives while providing protection to the Company by restricting the executive'sexecutive’s ability to compete in the Company'sCompany’s marketplace if he were to leave prior to any change in control. The terms of these agreements are described at pages 34-3631-33 below and the amounts payable thereunder to the executives under various termination scenarios are included in the table at page 3734 below. The Compensation Committee believes that the non-competition protection afforded by these agreements is critical in the Company'sCompany’s competitive marketplace and that the payment amounts and related conditions thereto contained in the agreements are consistent with reasonable industry standards. The maximum amounts that may be paid to any executive under any of these agreements are limited by automatic “cutback” provisions that ensure payments will not exceed the limits specified under Section 280G of the Code.
Perquisites
In addition to their participation in the Company'sCompany’s general employee benefit plans, as described in footnote 4 of the Summary Compensation Table at page 2926 below, the Company provides company-owned vehicles for the use of Messrs. Duncan, Main and Clancy. The Company also pays dues related to club memberships for business development purposes for Messrs. Duncan, Main, and Clancy. The Compensation Committee believes that the cost of these additional perquisites is modest for the size of the Company and that providing them is consistent with maintaining a competitive total compensation and benefits package for senior management and for business development purposes.
2012 Executive Compensation ProgramConclusion
In determining the Named Executive Officers'Officers’ total 20122014 compensation (including base salary, incentive cash compensation, equity compensation, supplemental retirement benefits and other perquisites), the Compensation Committee considered the support received from the Company’s stockholders in 2014 on the “Say on Pay” advisory vote. Accordingly, the Compensation Committee did not change its approach in 2014 and applied rationale similar to that used in the prior year and consideredyear. The Compensation Committee will continue to consider the support received from stockholders in 2012 onoutcome of the Company’s “Say on Pay” advisory vote. vote when making future compensation decisions for the Named Executive Officers.
In 2012,2014, the Compensation Committee also continued to place greater emphasis on incentive cash compensation and equity compensation as an element of total compensation for particular Named Executive Officers to reward for performance objectives in alignment with shareholder interests. Additionally, base salary compensation increases were a focus, in part, to maintain alignment with the competitive range of base salaries for their positions and reward and retain Named Executive Officers for their contributions and performance. Equity compensation continues to be an important element of total compensation for the Named Executive Officers to enhance the executive'sexecutive’s ownership interest in the Company and to further align management'smanagement’s interest with shareholder interests and to reward performance.interest.
Each Named Executive Officer'sOfficer’s total compensation in 20122014 reflected the Compensation Committee'sCommittee’s assessment of his responsibilities, performance and contributions as well as the comparative market data provided by Pearl Meyer & Partners.McLagan, an Aon Hewitt Company. In referring to such comparative data, the Compensation Committee sought to confirm that its compensation decision for each individual executive was reasonable.
The Company believes that its 20122014 executive compensation program successfully linked executive compensation to the Company'sCompany’s financial performance.
COMPENSATION COMMITTEE MATTERS
Role of the Compensation Committee
The Compensation Committee of the Board of Directors is comprised of five members, all of whom are currently deemed to be independent. In determining the independence of the members, the Board of Directors has used the definition of independence contained in Rule 5605(d)(2)(A) of the Marketplace Rules of the NASDAQ Stock Market and has applied this definition consistently to all members of the Compensation Committee. It is the responsibility of the Compensation Committee to review the performance of the Chairman and recommend his compensation to the independent members of the Board of Directors for review and approval. The Chairman and Compensation Committee review the performance of the Chief Executive Officer and President and recommend their compensation to the independent members of the Board of Directors for review and approval. The Company'sCompany’s Chief Executive Officer evaluates the performance of the remaining executive officers and recommends their compensation to the Compensation Committee. The Compensation Committee reviews the Chief Executive Officer'sOfficer’s recommendations and submits its recommendation to the independent members of the Board of Directors for approval. During 2012,2014, the independent members of the Board of Directors approved all recommendations presented by the Compensation Committee.
The Compensation Committee has the authority to retain or obtain advice from independent advisors, such as outside legal counsel and consulting firms, as it deems necessary to perform its role. The CompanyAfter taking into consideration the factors set forth in NASDAQ Marketplace Rule 5605(d)(3)(D), the Compensation Committee obtained the services of Pearl Meyer & Partners in 2011 and McLagan, an Aon Hewitt Company in 20122014 and 2015 to provide market assessment information to the Compensation Committee, which is discussed in further detail in the Company'sCompany’s Compensation Discussion and Analysis at pages 21-2618-24 above. McLagan was paid $24,181 for these services in 2014. The Compensation Committee confirmed that McLagan did not have any potential or actual conflicts of interest with the Board of Directors or the Company.
The Compensation Committee operates under a written charter, a copy of which can be found on the Company'sCompany’s website (www.enterprisebanking.com)(www.enterprisebanking.com). The Compensation Committee annually reviews its charter and recommends any changes to the full board of directors. The charter requires the Compensation Committee to meet at least four times every year. In 2014, the Compensation Committee met six times.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Company'sCompany’s Compensation Discussion and Analysis contained at pages 21-2618-24 above (the “CD&A”) with management and based on this review and discussion the Compensation Committee has recommended to the Board of Directors that the CD&A be included in this Proxy Statement.
James F. Conway, III (Chairperson) John R. Clementi Carole A. Cowan Eric W. Hanson Arnold S. Lerner
Compensation Committee Interlocks and Insider Participation The Directors listed above under the heading “Compensation Committee Report” at page 2725 constitute all of the individuals who served as members of the Compensation Committee during the year ended December 31, 20122014. None of these Directors was an officer or employee of the Company at any time during such period or has ever been an officer of the Company. None of these Directors has had any relationship with the Company that would
require disclosure in this Proxy Statement under the heading “Transactions with Certain Related Persons” at pages 40-4137-38 below under applicable SEC rules.
Mr. Duncan, Chairman of the Board,Clancy, Chief Executive Officer, serves on the board of directors of Lowell General Hospital.Circle Health, and Mr. Duncan, Chairman of the Board, previously served on the board of directors of Circle Health. Mr. Hanson and Dr. Moloney also serve on the board of directors of Lowell General Hospital.Circle Health. Mr. Deschene is the President and Chief Executive Officer of Lowell General Hospital.Circle Health.
As described in further detail under the heading “Transactions with Certain Related Persons” at pages 40-4137-38 below, the members of the Compensation Committee, as well as businesses and other entities with which they may be affiliated, are customers of the Bank and/or have entered into loan transactions with the Bank in the ordinary course of business.
Risk Assessment of Compensation Policies and Practices The Company has implemented an annual risk assessment of its compensation policies and practices, which is intended to determine whether any of its existing compensation policies or practices create incentives for taking unnecessary or excessive risks that are reasonably likely to have a material adverse effect on the Company. On the basis of this assessment, the Compensation Committee of the Board of Directors has determined that no changes to the Company’s existing compensation policies and practices are necessary at this time.
EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth the total compensation paid by the Company (through the Bank) for services rendered in all capacities during the years ended December 31, 20122014, December 31, 20112013 and December 31, 20102012, to the Chief Executive Officer, the Chief Financial Officer and each of the three other most highly compensated executive officers of the Bank (the “Named"Named Executive Officers”Officers"). The Company does not employ any persons, other than through the Bank.
| | | | | | | | | | | | | | | | | | | | | | | | | | | SUMMARY COMPENSATION TABLE | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Option Awards ($) (2) | Non-Equity Incentive Plan Compen-sation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (3) | All Other Compensation ($) (4) | Total ($) | George L. Duncan Chairman of the Company and the Bank | 2012 | $ | 350,002 |
| $ | — |
| $ | 152,750 |
| $ | 56,970 |
| $ | 148,838 |
| $ | 131,253 |
| $ | 49,939 |
| $ | 889,752 |
| 2011 | $ | 336,540 |
| $ | — |
| $ | — |
| $ | 79,050 |
| $ | 85,728 |
| $ | 179,810 |
| $ | 45,793 |
| $ | 726,921 |
| 2010 | $ | 274,128 |
| $ | — |
| $ | — |
| $ | — |
| $ | 47,287 |
| $ | 158,981 |
| $ | 60,469 |
| $ | 540,865 |
| John P. Clancy, Jr. Chief Executive Officer of the Company and the Bank | 2012 | $ | 400,000 |
| $ | — |
| $ | 162,500 |
| $ | 56,970 |
| $ | 170,100 |
| $ | — |
| $ | 33,652 |
| $ | 823,222 |
| 2011 | $ | 400,000 |
| $ | — |
| $ | 170,775 |
| $ | 52,700 |
| $ | 101,893 |
| $ | — |
| $ | 24,058 |
| $ | 749,426 |
| 2010 | $ | 386,539 |
| $ | — |
| $ | 125,100 |
| $ | 43,520 |
| $ | 66,678 |
| $ | — |
| $ | 21,810 |
| $ | 643,647 |
| Richard W. Main President of the Company and the Bank | 2012 | $ | 258,918 |
| $ | — |
| $ | 67,844 |
| $ | 56,970 |
| $ | 110,105 |
| $ | 94,565 |
| $ | 37,324 |
| $ | 625,726 |
| 2011 | $ | 254,879 |
| $ | — |
| $ | — |
| $ | 52,700 |
| $ | 64,926 |
| $ | 126,468 |
| $ | 32,752 |
| $ | 531,725 |
| 2010 | $ | 237,223 |
| $ | — |
| $ | 62,550 |
| $ | 13,056 |
| $ | 40,915 |
| $ | 164,608 |
| $ | 31,809 |
| $ | 550,161 |
| Stephen J. Irish Executive Vice President, Chief Operating Officer of the Bank | 2012 | $ | 194,804 |
| $ | — |
| $ | 54,437 |
| $ | 9,495 |
| $ | 59,331 |
| $ | — |
| $ | 15,898 |
| $ | 333,965 |
| 2011 | $ | 191,991 |
| $ | — |
| $ | 51,975 |
| $ | 7,905 |
| $ | 33,764 |
| $ | — |
| $ | 14,822 |
| $ | 300,457 |
| 2010 | $ | 191,344 |
| $ | — |
| $ | 59,423 |
| $ | 7,616 |
| $ | 21,798 |
| $ | — |
| $ | 14,280 |
| $ | 294,461 |
| James A. Marcotte Executive Vice President, Treasurer and Chief Financial Officer of the Company and the Bank | 2012 | $ | 194,806 |
| $ | — |
| $ | 54,437 |
| $ | 9,495 |
| $ | 53,847 |
| $ | — |
| $ | 15,859 |
| $ | 328,444 |
| 2011 | $ | 192,000 |
| $ | — |
| $ | 51,975 |
| $ | 7,905 |
| $ | 32,902 |
| $ | — |
| $ | 13,952 |
| $ | 298,734 |
| 2010 | $ | 191,160 |
| $ | — |
| $ | 59,423 |
| $ | 7,616 |
| $ | 20,576 |
| $ | — |
| $ | 13,404 |
| $ | 292,179 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | SUMMARY COMPENSATION TABLE | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Option Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (3) | All Other Compensation ($) (4) | Total ($) | George L. Duncan Chairman of the Company and the Bank | 2014 | $ | 362,863 |
| $ | — |
| $ | 146,960 |
| $ | 25,933 |
| $ | 152,371 |
| $ | 119,473 |
| $ | 59,074 |
| $ | 866,674 |
| 2013 | $ | 350,002 |
| $ | — |
| $ | 164,628 |
| $ | 26,240 |
| $ | 106,641 |
| $ | 82,877 |
| $ | 56,319 |
| $ | 786,707 |
| 2012 | $ | 350,002 |
| $ | — |
| $ | 152,750 |
| $ | 56,970 |
| $ | 148,838 |
| $ | 131,253 |
| $ | 49,939 |
| $ | 889,752 |
| John P. Clancy, Jr. Chief Executive Officer of the Company and the Bank | 2014 | $ | 454,888 |
| $ | — |
| $ | 163,842 |
| $ | 28,920 |
| $ | 191,019 |
| $ | — |
| $ | 34,642 |
| $ | 873,311 |
| 2013 | $ | 400,000 |
| $ | — |
| $ | 173,665 |
| $ | 65,600 |
| $ | 121,875 |
| $ | — |
| $ | 38,323 |
| $ | 799,463 |
| 2012 | $ | 400,000 |
| $ | — |
| $ | 162,500 |
| $ | 56,970 |
| $ | 170,100 |
| $ | — |
| $ | 33,652 |
| $ | 823,222 |
| Richard W. Main President of the Company and the Bank | 2014 | $ | 258,376 |
| $ | — |
| $ | 86,293 |
| $ | 15,234 |
| $ | 100,861 |
| $ | 86,638 |
| $ | 31,290 |
| $ | 578,692 |
| 2013 | $ | 252,605 |
| $ | — |
| $ | 89,872 |
| $ | 26,240 |
| $ | 76,726 |
| $ | 57,926 |
| $ | 33,476 |
| $ | 536,845 |
| 2012 | $ | 258,918 |
| $ | — |
| $ | 67,844 |
| $ | 56,970 |
| $ | 110,105 |
| $ | 94,565 |
| $ | 37,324 |
| $ | 625,726 |
| Stephen J. Irish Executive Vice President, Chief Operating Officer of the Bank | 2014 | $ | 203,070 |
| $ | — |
| $ | 50,989 |
| $ | 9,010 |
| $ | 63,944 |
| $ | — |
| $ | 14,322 |
| $ | 341,335 |
| 2013 | $ | 195,840 |
| $ | — |
| $ | 62,105 |
| $ | 9,840 |
| $ | 42,228 |
| $ | — |
| $ | 15,296 |
| $ | 325,309 |
| 2012 | $ | 194,804 |
| $ | — |
| $ | 54,437 |
| $ | 9,495 |
| $ | 59,331 |
| $ | — |
| $ | 15,898 |
| $ | 333,965 |
| James A. Marcotte Executive Vice President, Treasurer and Chief Financial Officer of the Company and the Bank | 2014 | $ | 203,076 |
| $ | — |
| $ | 50,989 |
| $ | 9,010 |
| $ | 63,944 |
| $ | — |
| $ | 13,268 |
| $ | 340,287 |
| 2013 | $ | 195,840 |
| $ | — |
| $ | 62,105 |
| $ | 9,840 |
| $ | 42,228 |
| $ | — |
| $ | 15,241 |
| $ | 325,254 |
| 2012 | $ | 194,806 |
| $ | — |
| $ | 54,437 |
| $ | 9,495 |
| $ | 53,847 |
| $ | — |
| $ | 15,859 |
| $ | 328,444 |
|
| | (1) | The value of the stock awards is based on the fair market value of the Common Stock on the date of grant. The fair market value was calculated as the closing price of the Common Stock on the NASDAQ Global Market on the date of grant.grant, March 18, 2014, which equals $20.29 per share. |
| | (2) | The value of the option awards is based on the fair market value of the awards as calculated using the Black-Scholes option valuation model. For assumptions used in calculating the value of option awards and the accounting treatment of the awards, refer to footnote 12 on11 at page 108107 of the Company's Annual Report on Form 10-K.10-K, which is incorporated herein by reference. For information on vesting, refer to the table “Outstanding Equity Awards at Fiscal Year-End” and the associated footnote 1 at page 3330 below. |
| | (3) | For each of Messrs. Duncan and Main this amount is equal to the increase in 20122014, 20112013 and 20102012 of the present value of the accumulated benefit attributable to the executive's supplemental retirement plan. For Mr. Duncan,plan, excluding the impact of the decrease in the liability from the change in discount rate in 2013. The amounts shown in 20122014, 20112013 and 20102012 take into account payments he received through his supplemental retirement plan in each of those years. Forby Mr. Duncan and Mr. Main the amounts shown in 2012, 2011 and 2010 take into account payments he received through his supplemental retirement plan in each of those years. In 20122014, the discount rate used to determine the present value of the accumulated benefit was updated to 4.50% from 5.00% resulting in the value to the employee increasing $52,179 and $40,010 for Messrs. Duncan and Main, respectively. In 2013, the discount rate used to determine the present value of the accumulated benefit was updated to 5.00% from 4.25% resulting in the value to the employee decreasing $66,886 and $88,375 for Messrs. Duncan and Main, respectively. In 2012, the discount rate used to determine the present value of the accumulated benefit was updated to 4.25% from 4.75% resulting in the value to the employee increasing $60,264 and $46,002 for Messrs.Messrs Duncan and Main, respectively. Thererespectively.There were no changes to the terms or amounts of the benefit paid to the employees based on the discount rate change. |
| | (4) | For each of the Named Executive Officers, these amounts include $2,625, $1,875 and $2,250$2,625 in annual contributions by the Bank for the Bank's Profit Sharing Plan in 2012, 20112013 and 20102012, respectively, and the following: |
-Annual matching contributions by the Bank to the Bank’s 401(k) plan:
| | | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | Duncan | $ | 8,820 |
| $ | 8,820 |
| $ | 8,820 |
| $ | 8,820 |
| $ | 8,820 |
| $ | 8,820 |
| Clancy | $ | 8,820 |
| $ | 8,820 |
| $ | 8,820 |
| $ | 8,820 |
| $ | 8,820 |
| $ | 8,820 |
| Main | $ | 8,820 |
| $ | 8,820 |
| $ | 8,539 |
| $ | 8,820 |
| $ | 8,820 |
| $ | 8,820 |
| Irish | $ | 7,013 |
| $ | 6,912 |
| $ | 6,880 |
| $ | 7,308 |
| $ | 7,050 |
| $ | 7,013 |
| Marcotte | $ | 7,013 |
| $ | 6,912 |
| $ | 6,871 |
| $ | 7,308 |
| $ | 7,050 |
| $ | 7,013 |
|
-Life insurance premiums paid:
| | | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | Duncan | $ | 27,660 |
| $ | 25,320 |
| $ | 30,106 |
| $ | 33,071 |
| $ | 30,204 |
| $ | 27,660 |
| Clancy | $ | 2,105 |
| $ | 2,092 |
| $ | 2,044 |
| $ | 3,812 |
| $ | 3,798 |
| $ | 2,105 |
| Main | $ | 10,404 |
| $ | 7,636 |
| $ | 7,223 |
| $ | 6,179 |
| $ | 5,644 |
| $ | 10,404 |
| Irish | $ | 2,041 |
| $ | 2,130 |
| $ | 2,100 |
| $ | 3,177 |
| $ | 2,082 |
| $ | 2,041 |
| Marcotte | $ | 2,001 |
| $ | 1,260 |
| $ | 1,233 |
| $ | 2,123 |
| $ | 2,027 |
| $ | 2,001 |
|
-Dividends paid on unvested shares of restricted stock:
| | | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | Duncan | $ | 3,102 |
| $ | 2,100 |
| $ | 10,000 |
| $ | 8,753 |
| $ | 6,970 |
| $ | 3,102 |
| Clancy | $ | 7,645 |
| $ | 5,933 |
| $ | 4,050 |
| $ | 10,102 |
| $ | 9,770 |
| $ | 7,645 |
| Main | $ | 2,615 |
| $ | 1,706 |
| $ | 1,500 |
| $ | 4,778 |
| $ | 4,167 |
| $ | 2,615 |
| Irish | $ | 4,220 |
| $ | 3,905 |
| $ | 3,050 |
| $ | 3,838 |
| $ | 4,289 |
| $ | 4,220 |
| Marcotte | $ | 4,220 |
| $ | 3,905 |
| $ | 3,050 |
| $ | 3,838 |
| $ | 4,289 |
| $ | 4,220 |
|
-The amount attributed to the personal use of Bank owned automobiles:
| | | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | Duncan | $ | 3,409 |
| $ | 3,355 |
| $ | 4,970 |
| $ | 3,927 |
| $ | 3,947 |
| $ | 3,409 |
| Clancy | $ | 5,136 |
| $ | 5,338 |
| $ | 4,646 |
| $ | 3,360 |
| $ | 5,512 |
| $ | 5,136 |
| Main | $ | 4,491 |
| $ | 4,442 |
| $ | 4,024 |
| $ | 2,946 |
| $ | 4,422 |
| $ | 4,491 |
|
-The amount paid to a local club on the executive’s behalf for business development purposes:
| | | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | Duncan | $ | 4,323 |
| $ | 4,323 |
| $ | 4,323 |
| $ | 4,503 |
| $ | 4,503 |
| $ | 4,323 |
| Clancy | $ | 7,321 |
| $ | — |
| $ | — |
| $ | 8,548 |
| $ | 8,548 |
| $ | 7,321 |
| Main | $ | 8,368 |
| $ | 8,273 |
| $ | 8,273 |
| $ | 8,548 |
| $ | 8,548 |
| $ | 8,368 |
|
GRANTS OF PLAN-BASED AWARDS
The following table sets forth information concerning individual grants of restricted stock and stock options and non-equity incentive plan awards made during 20122014 to each of the Named Executive Officers. Other than the grants of restricted stock and stock options shown in the table, there were no other equity-based awards granted under any incentive plans to any Named Executive Officer in 2012. | | Name | Grant Date | Stock Awards: Number of Shares of Stock or Units (#) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) (2) | Grant Date Fair Value of Stock and Option Awards (3) | Grant Date | All Other Restricted Stock Awards: Number of Shares of Stock or Units (#) (2) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | All Other Option Awards: Number of Securities Underlying Options (#) (3) | Exercise or Base Price of Option Awards ($/Sh) (4) | Grant Date Fair Value of Stock and Option Awards (5) | Threshold ($) | Target ($) | Maximum ($) | Threshold ($) | Target ($) | Maximum ($) | George L. Duncan | 3/20/2012 | | $0 | $ | 105,000 |
| $ | 220,501 |
| 9,000 | $16.25 | $ | 56,970 |
| 3/18/2014 | | $0 | $ | 145,116 |
| $ | 290,231 |
| 3,117 | $20.29 | $ | 25,933 |
| George L. Duncan | 3/20/2012 | 9,400 | | | | $ | 152,750 |
| 3/18/2014 | 7,243 | | | | $ | 146,960 |
| John P. Clancy, Jr. | 3/20/2012 | | $0 | $ | 120,000 |
| $ | 252,000 |
| 9,000 | $16.25 | $ | 56,970 |
| 3/18/2014 | | $0 | $ | 181,923 |
| $ | 363,846 |
| 3,476 | $20.29 | $ | 28,920 |
| John P. Clancy, Jr | 3/20/2012 | 10,000 | | | | $ | 162,500 |
| 3/18/2014 | 8,075 | | | | $ | 163,842 |
| Richard W. Main | 3/20/2012 | | $0 | $ | 77,676 |
| $ | 163,119 |
| 9,000 | $16.25 | $ | 56,970 |
| 3/18/2014 | | $0 | $ | 96,058 |
| $ | 192,116 |
| 1,831 | $20.29 | $ | 15,234 |
| Richard W. Main | 3/20/2012 | 4,175 | | | | $ | 67,844 |
| 3/18/2014 | 4,253 | | | | $ | 86,293 |
| Stephen J. Irish | 3/20/2012 | | $0 | $ | 37,987 |
| $ | 79,772 |
| 1,500 | $16.25 | $ | 9,495 |
| 3/18/2014 | | $0 | $ | 60,899 |
| $ | 121,797 |
| 1,083 | $20.29 | $ | 9,011 |
| Stephen J. Irish | 3/20/2012 | 3,350 | | | | $ | 54,438 |
| 3/18/2014 | 2,513 | | | | $ | 50,989 |
| James A. Marcotte | 3/20/2012 | | $0 | $ | 37,987 |
| $ | 79,773 |
| 1,500 | $16.25 | $ | 9,495 |
| 3/18/2014 | | $0 | $ | 60,899 |
| $ | 121,797 |
| 1,083 | $20.29 | $ | 9,011 |
| James A. Marcotte | 3/20/2012 | 3,350 | | | | $ | 54,438 |
| 3/18/2014 | 2,513 | | | | $ | 50,989 |
|
| | (1) | Amounts actually earned and paid to the Named Executive Officers for 20122014 pursuant to the non-equity incentive plan awards that are shown in the table as having been granted in such year are included in the Summary Compensation Table at page 2926 above under the heading “Non-Equity Incentive Plan Compensation”.Compensation." |
| | (2) | Restricted stock awards granted in 2014 vest in 25% increments, when cumulative diluted earnings per share from January 1, 2014 forward reach $1.40, $2.87, $4.47 and $6.15. |
| | (3) | For options granted in 2014, one-half of the total number of options become exercisable on each of the second and fourth anniversary date of the original grant date. |
| | (4) | The exercise price of all stock options granted to employees in 20122014, including those granted to Named Executive Officers and reflected in this table, equals the closing price of the Common Stock on the NASDAQ Global Market on the date of grant as required under the Company’s 2009 Stock Incentive Plan.grant. |
| | (3)(5) | For an explanation of the grant date fair value of the restricted stock and option awards, including the assumptions used in calculating the grant date fair value of the option awards, refer to footnote 1211 on page 108107 of the Company’s Annual Report on Form 10-K.10-K, which is incorporated herein by reference. |
OPTION EXERCISES AND STOCK VESTED The following table sets forth information concerning the exercise of stock options and the vesting of restricted stock awards for each of the Named Executive Officers during the year ended December 31, 20122014: | | | Option Awards | Stock Awards | Option Awards | Stock Awards | Name | Number of Shares Acquired on Exercise (#) | Value Realized Upon Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (2) | Number of Shares Acquired on Exercise (#) | Value Realized Upon Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (2) | George L. Duncan | — | $ | — |
| — | $ | — |
| 23,000 | $ | 161,940 |
| 4,855 | $ | 97,034 |
| John P. Clancy, Jr. | — | $ | — |
| 7,500 | $ | 124,170 |
| 10,000 | $ | 109,300 |
| 8,892 | $ | 176,941 |
| Richard W. Main | — | $ | — |
| 1,250 | $ | 20,950 |
| 7,500 | $ | 81,975 |
| 3,661 | $ | 72,962 |
| Stephen J. Irish | — | $ | — |
| 3,313 | $ | 55,526 |
| 10,250 | $ | 88,628 |
| 3,846 | $ | 76,452 |
| James A. Marcotte | 1,500 | $ | 11,175 |
| 3,313 | $ | 55,526 |
| — | $ | — |
| 3,846 | $ | 76,452 |
|
| | (1) | The value realized upon exercise calculations in the third column from the left above areis based upon the difference between the value of the Common Stock on the option exercise date and the per share exercise price of the options. The value on the exercise date was based on the closing market price of the stockCommon Stock on the NASDAQ Global Market on the exercise date. |
| | (2) | The value realized on vesting calculation in the far right column is based upon the value of the Common Stock on the vesting date of the restricted stock. The value on the vesting date was based on the closing market price of the stockCommon Stock on the NASDAQ Global Market on the vesting date. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information concerning unexercised stock options and unvested stock awards held by each of the Named Executive Officers as of December 31, 20122014. The Company has not granted any option awards that are unexercised and unearned and not otherwise disclosed in the table or any stock awards that are unearned and have not vested and are not otherwise disclosed in the table.
| | | | | | | | | | | OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | | Option Awards | Stock Awards | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have not Vested (#) (2) | Market Value of Shares or Units of Stock that Have Not Vested ($) (3) | George L. Duncan | 28,000 | 0 | $14.375 | 8/2/2013 | 9,400 |
| $ | 155,288 |
| 13,000 | 0 | $16.50 | 3/6/2014 | 10,000 | 0 | $12.75 | 3/17/2015 | 3,750 | 11,250 | $14.85 | 3/14/2018 | 0 | 9,000 | $16.25 | 3/19/2019 | John P. Clancy, Jr. | 20,000 | 0 | $14.375 | 8/2/2013 | 18,000 |
| $ | 297,360 |
| 13,000 | 0 | $16.50 | 3/6/2014 | 10,000 | 0 | $12.75 | 3/17/2015 | 5,000 | 5,000 | $12.51 | 3/15/2017 | 2,500 | 7,500 | $14.85 | 3/14/2018 | 0 | 9,000 | $16.25 | 3/19/2019 | Richard W. Main | 14,000 | 0 | $14.375 | 8/2/2013 | 6,675 |
| $ | 110,271 |
| 6,500 | 0 | $16.50 | 3/6/2014 | 7,500 | 0 | $12.75 | 3/17/2015 | 3,000 | 0 | $12.51 | 3/15/2017 | 2,500 | 7,500 | $14.85 | 3/14/2018 | 0 | 9,000 | $16.25 | 3/19/2019 | Stephen J. Irish | 9,000 | 0 | $14.375 | 8/2/2013 | 9,600 |
| $ | 158,592 |
| 4,000 | 0 | $16.50 | 3/6/2014 | 4,250 | 0 | $12.75 | 3/17/2015 | 1,500 | 500 | $8.75 | 3/16/2016 | 875 | 875 | $12.51 | 3/15/2017 | 375 | 1,125 | $14.85 | 3/14/2018 | 0 | 1,500 | $16.25 | 3/19/2019 | James A. Marcotte | 9,000 | 0 | $14.375 | 8/2/2013 | 9,600 |
| $ | 158,592 |
| 4,000 | 0 | $16.50 | 3/6/2014 | 3,500 | 0 | $12.75 | 3/17/2015 | 0 | 500 | $8.75 | 3/16/2016 | 875 | 875 | $12.51 | 3/15/2017 | 375 | 1,125 | $14.85 | 3/14/2018 | 0 | 1,500 | $16.25 | 3/19/2019 |
| | | | | | | | | | | OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | | Option Awards | Stock Awards | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have not Vested (#) (2) | Market Value of Shares or Units of Stock that Have Not Vested ($) (3) | George L. Duncan | 11,250 | 3750 | $14.85 | 3/14/2018 | 19,458 |
| $ | 491,315 |
| 4,500 | 4,500 | $16.25 | 3/19/2019 | 0 | 4,000 | $16.43 | 3/18/2023 | 0 | 3,117 | $20.29 | 3/17/2024 | John P. Clancy, Jr. | 10,000 | 0 | $12.51 | 3/15/2017 | 21,503 |
| $ | 542,951 |
| 7,500 | 2500 | $14.85 | 3/14/2018 | 4,500 | 4,500 | $16.25 | 3/19/2019 | — | 10,000 | $16.43 | 3/18/2023 | — | 3,476 | $20.29 | 3/17/2024 | Richard W. Main | 3,000 | 0 | $12.51 | 3/15/2017 | 10,444 |
| $ | 263,711 |
| 7,500 | 2500 | $14.85 | 3/14/2018 | 4,500 | 4500 | $16.25 | 3/19/2019 | — | 4,000 | $16.43 | 3/18/2023 | — | 1,831 | $20.29 | 3/17/2024 | Stephen J. Irish | 1,750 | 0 | $12.51 | 3/15/2017 | 7,898 |
| $ | 199,425 |
| 1,125 | 375 | $14.85 | 3/14/2018 | 750 | 750 | $16.25 | 3/19/2019 | 0 | 1,500 | $16.43 | 3/18/2023 | 0 | 1,083 | $20.29 | 3/17/2024 | James A. Marcotte | 3,500 | 0 | $12.75 | 3/17/2015 | 7,898 |
| $ | 199,425 |
| 500 | 0 | $8.75 | 3/16/2016 | 1,750 | 0 | $12.51 | 3/15/2017 | 1125 | 375 | $14.85 | 3/14/2018 | 750 | 750 | $16.25 | 3/19/2019 | 0 | 1,500 | $16.43 | 3/18/2023 | | 0 | 1,083 | $20.29 | 3/17/2024 | | |
| | (1) | For options granted prior toin 2011 and 2012, one-fourth of the total number of shares of Common Stock subject to the options granted becomesbecome exercisable on an annual basis on the anniversary date of the original grant date, and, if sooner, become fully exercisable upon the option recipient reaching the age of 62while remaining employed with the Bank as of such date. For options granted in 20112013 and 2012, one-fourth2014, one-half of the total number of sharesoptions become exercisable on each of Common Stock subject to the optionssecond and fourth anniversary date of the original grant date. The four most recent option grants were granted becomes on March 15, 2011, March 20, 2012, March 19, 2013 and March 18, 2014. |
exercisable on an annual basis on the anniversary date of the original grant date. The four most recent option grants were granted on March 17, 2009, March 16, 2010, March 15, 2011 and March 20, 2012.
| | (2) | The shares awarded to Mr. Main subject to restrictedRestricted stock awards vest over a four-year period, with 25% of the shares vesting on or about the first anniversary of the date of the award and an additional 25% vesting on or about each of the next three subsequent anniversary dates of the date of the award. Mr. Main's restricted stock awards were granted on March 16, 2010 and March 20, 2012. The shares awarded to Mr. Clancy subject to restricted stock awards vest over a four-year period, with 25% of the shares vesting on or about the first anniversary of the date of the award and an additional 25% vesting on or about each of the next three subsequent anniversary dates of the date of the award. As part of the shares awarded to Mr. Clancy subject to restricted stock awards, 3,000 of the shares awarded on March 20, 2012 and 3,500 of the shares awarded on March 15, 2011 vested on the date of grant. Mr. Clancy's restricted stock awards were granted on March 16, 2010, March 15,in 2011 and March 20, 2012. The shares awarded to Messrs. Irish and Marcotte subject to restricted stock awards2012 vest over a four-year period, with 25% of the shares vesting on or about the first anniversary of the date of the award and an additional 25% vesting on or about each of the next three subsequent anniversary dates of the date of the award. The restricted stockshares awarded to Messrs. Irish and Marcotte were granted on March 17, 2009, March 16, 2010, March 15, 201119, 2013 vest based on attainment of diluted earnings per share cumulative totals. Vesting occurs, in 25% increments, when cumulative diluted earnings per share from January 1, 2013 forward reach $1.34, $2.80, $4.45 and March 20, 2012.$6.15. The restricted shares awarded on |
March 18, 2014 vest based on attainment of diluted earnings per share cumulative totals. Vesting occurs, in 25% increments, when cumulative diluted earnings per share from January 1, 2014 forward reach $1.40, $2.87, $4.47 and $6.15. | | (3) | The market value of the shares subject to restricted stock awards that have not vested is based upon the value of the Common Stock on December 31, 20122014, the last business day of the Company's last completed fiscal year. The closing market price of the stock on the NASDAQ Global Market on December 31, 20122014 was $16.5225.25. |
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
The Company and the Bank are parties to employment agreements with Messrs. Duncan, Main and Clancy and change in control/noncompetition agreements with Messrs. Irish and Marcotte. The Bank is also a party to salary continuation agreements with Messrs. Duncan and Main and supplemental life insurance agreements with Messrs. Duncan, Main, Clancy, Irish and Marcotte.
Each of the employment agreements with Messrs. Duncan, Main and Clancy is for a fixed term of years (three years for Mr. Duncan and two years for each of Messrs. Main and Clancy), subject to an automatic “rolling” renewal each year, unless either the Company or the executive provides a notice of non-renewal, in which case the agreement will expire at the end of the then-current term. Each of Messrs. Duncan, Main and Clancy is guaranteed a minimum base salary under the terms of his employment agreement: $203,900 for Mr. Duncan; $193,920 for Mr. Main; and $350,000 for Mr. Clancy. These amounts from time to time, atAt least annually, shall bethese amounts are reviewed for increases by the Board.
The amount of severance payments and benefits, if any, which may be due to any of the named executive officersNamed Executive Officers under any of the agreements referenced above following any form of termination of the executive is summarized generally below and is further quantified in the table at page 3734 of this Proxy Statement.
Under the employment agreements with Messrs. Duncan, Main and Clancy, if the executive dies, his beneficiary will be paid a lump sum equal to one-half of his then-current annual base salary and his spouse and any other eligible dependents will continue to receive health and welfare benefits at no cost, subject to limitations described in the agreement; provided, however, that if the executive dies either within one year before or two years after the occurrence of a change in control of the Company (as defined in the agreement), then, in addition to such continuing health and welfare benefits, the executive's beneficiary will be paid a lump sum equal to three times, in the case of Mr. Duncan, and two times, in the case of either Mr. Main or Mr. Clancy, the executive's
previous highest annual compensation (as defined in the agreement to include the sum of the executive's highest annual base salary and highest annual cash bonus paid at any time prior to the date of termination since January 1, 2004) (such lump sum payment being referred to herein as the “Lump Sum Payment”), subject to reduction for any prior lump sum payment that may have been paid following the death of the executive.
In addition to the foregoing death benefits payable to Messrs. Duncan, Main and Clancy under their employment agreements, the beneficiaries of each of the Named Executive Officers will also be paid the death benefits provided under the executive's supplemental life insurance agreement, the amounts of which are included in footnote 3 to the table at page 3734 below.
Under the employment agreements with Messrs. Duncan, Main and Clancy, if the executive is terminated at any time as a result of his long-term disability (as defined in the agreement), then for the remaining term of the agreement the executive will be paid an annual amount equal to 75% of his previous highest annual compensation, subject to reduction for any payments received by the executive during this payment period under any group long-term disability plan that may be maintained by the Company, and will be entitled to receive continuing health and welfare benefits on the same terms as were available to the executive as an employee.
Under the employment agreements with Messrs. Duncan, Main and Clancy, if the executive retires on or after his specified retirement age (65 for Mr. Duncan, 63 for Mr. Main and 62 for Mr. Clancy), then the executive is entitled to receive continuing health and welfare benefits for twelve12 months on the same terms as were available to him as an employee, and, in addition, if the executive retires either within one year before or one year after the occurrence of a change in control, then the executive will be paid the Lump Sum Payment. In addition to the retirement rights provided to Messrs. Duncan and Main under their employment agreements, the salary continuation agreements referenced above also provide additional annual compensation benefits payable to Messrs. Duncan and Main which vest over time, subject to acceleration upon a change in control (as defined in the agreement), and become payable to the executive over a 20-year period upon his reaching a specified age (68 for Mr. Duncan, which he reached on June 8, 2008, and 63 for Mr. Main, which he reached on April 3, 2010), whether or not the executive has retired or remains employed with the Company at such time. The annual amounts payable to each of Messrs. Duncan and Main under their salary continuation agreements are $149,500 and $95,300, respectively. Under the employment agreements with Messrs. Duncan, Main and Clancy, if the Company (including any successor) terminates the executive at any time for cause, whether before or after the occurrence of a change in control, then the executive will not be entitled to receive any severance payments or benefits. However, if the Company (including any successor) terminates the executive at any time without cause, whether before or after the occurrence of a change in control, then the executive will be paid the Lump Sum Payment and will be entitled to receive continuing health benefits for 18 months at no cost to the executive. Under the employment agreements with Messrs. Duncan, Main and Clancy, if the executive chooses to terminate his employment at any time for good reason (as defined in the agreement to include, among several other reasons, a material reduction in the executive's base salary or his authority, duties or responsibilities), whether before or after the occurrence of a change in control, then the executive will be paid the Lump Sum Payment and will be entitled to receive continuing health benefits for 18 months at no cost to the executive. If the executive chooses to terminate his employment at any time without good reason, then he will not be entitled to receive any severance payments or benefits, unless the executive chooses to terminate his employment without good reason either within one year before or one year after the occurrence of a change in control, in which case the executive will be paid the Lump Sum Payment. Each of the employment agreements with Messrs. Duncan, Main and Clancy also provides that the parties may agree at any time to enter into a modified employment arrangement for the remaining term of the agreement. Under the terms of such arrangement, in exchange for the executive continuing to work at a level of at least 50%
of the level worked during the preceding three years, the Company will pay the executive an annual salary equal to 50% of his previous highest annual compensation and will continue to provide the executive with full benefits. Under each of the employment agreements with Messrs. Duncan, Main and Clancy, the executive is subject to confidentiality, non-compete and non-solicitation restrictions for up to two years after the termination of his employment for any reason if the termination occurs before a change in control. The non-compete restrictions do not apply following any termination of the executive's employment that occurs after a change in control, and any non-compete restrictions that may be in effect at the time of a change in control automatically expire upon such change in control. If the executive breaches any applicable confidentiality, non-compete or non-solicitation covenants, then the Company may enforce a right to recoup any prior severance payments made to the executive. Under the terms of the change in control/noncompetition agreement with Messrs. Irish and Marcotte, the executive will be paid a lump sum equal to 1.5 times his previous highest annual compensation (as defined in the agreement to include the sum of the executive's highest annual base salary and highest annual cash bonus paid within the most recent three years prior to the date of termination), together with certain other specified payments and benefits, including continuation of health and welfare benefits for 18 months on the same terms as were available to the executive as of the date of termination or, if more favorable, as of the date of the change in control,
if the executive's employment is terminated for any reason, whether at the initiative of the Company or of the executive and whether or not for cause, within two years after the date of a change in control of the Company. If Mr. Irish's or Mr. Marcotte's employment is terminated for any reason within one year prior to the occurrence of a change in control, other than for cause, then he is entitled to receive all of the payments and benefits that he would have been entitled to receive if such termination had occurred within two years after the date of such change in control. Messrs. Irish and Marcotte are also subject to confidentiality, non-compete and non-solicitation restrictions for one year following a termination of employment for any reason prior to a change in control (and assuming a change in control does not occur within this one-year period). If Mr. Irish's or Mr. Marcotte's termination in the absence of any change in control is initiated by the Company for any reason other than for cause, then he will be paid a lump sum equal to 75% of the sum of his then-current annual base salary and the amount of any annual incentive or other bonus paid to him with respect to the most recently completed fiscal year prior to the date of termination, subject to recoupment by the Company if he breaches any of the applicable confidentiality, non-compete and non-solicitation covenants. POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The following table summarizes the estimated cost of executivepayments and benefits that wouldto be incurred byprovided to the Company,Named Executive Officers, as of December 31, 20122014, under the various termination scenarios referenced in the table for each of the named executive officers.Named Executive Officers. The estimates shown below factor in base salary and incentive compensation payments, the value realized from accelerated vesting of stock options and restricted stock, the value realized from accelerated vesting of supplemental retirement benefits and other benefits and payments to be paid to the named executive officersNamed Executive Officers under the terms of any agreement or plan that is not generally available to all employees. The following calculations were made without giving consideration to any possible “cutback” or other reduction of payments or benefits that could be required under an executive's employment or other contract:
| | Name | Change in Control (1) | Voluntary Termination (Includes Early Retirement) (2) | Involuntary Not for Cause Termination by Company or, if Applicable, Good Reason Termination by Employee | For Cause Termination | Normal Retirement (2) | Death (2)(3) | Disability | Change in Control (1) | Voluntary Termination (Includes Early Retirement) (2) | Involuntary Not for Cause Termination by Company or, if Applicable, Good Reason Termination by Employee | For Cause Termination | Normal Retirement (2) | Death (2)(3) | Disability | George L. Duncan (4) | $ | 1,715,407 |
| $ | — |
| $ | 1,538,901 |
| $ | — |
| $ | 36,502 |
| $ | 1,829,033 |
| $ | 876,183 |
| $ | 2,196,895 |
| $ | — |
| $ | 1,575,341 |
| $ | — |
| $ | 13,946 |
| $ | 1,818,599 |
| $ | 900,835 |
| John P. Clancy, Jr. | $ | 1,564,735 |
| $ | — |
| $ | 1,175,493 |
| $ | — |
| $ | 15,285 |
| $ | 670,369 |
| $ | 553,575 |
| $ | 2,102,894 |
| $ | — |
| $ | 1,321,911 |
| $ | — |
| $ | 15,017 |
| $ | 660,429 |
| $ | 624,309 |
| Richard W. Main (4) | $ | 891,324 |
| $ | — |
| $ | 766,098 |
| $ | — |
| $ | 70,208 |
| $ | 1,062,795 |
| $ | 363,401 |
| $ | 1,142,715 |
| $ | — |
| $ | 768,143 |
| $ | — |
| $ | 15,017 |
| $ | 1,032,436 |
| $ | 364,730 |
| Stephen J. Irish | $ | 612,851 |
| $ | — |
| $ | 190,601 |
| $ | — |
| $ | — |
| $ | 154,077 |
| $ | — |
| $ | 701,478 |
| $ | — |
| $ | 200,260 |
| $ | — |
| $ | — |
| $ | 154,077 |
| $ | — |
| James A. Marcotte | $ | 641,638 |
| $ | — |
| $ | 186,490 |
| $ | — |
| $ | — |
| $ | 170,500 |
| $ | — |
| $ | 720,794 |
| $ | — |
| $ | 200,264 |
| $ | — |
| $ | — |
| $ | 170,500 |
| $ | — |
|
| | (1) | With respect to each of Messrs. Duncan, Clancy, Main, Irish and Marcotte the amount shown includes the amount payable, including the estimated expense of continuing benefits, under various termination scenarios either preceding or following a change in control under the executive's employment agreement or, in the case of Messrs. Irish and Marcotte, their change in control/noncompetition agreement, which are described in further detail under the heading “Agreements With Named Executive OfficersOfficers" at pages 34-3631-33 above. |
The amounts shown also include the present value attributable to accelerated vesting of death benefit payable under the Bank's executive supplemental life insurance plan, which is $56,876$66,091 for Mr. Clancy, $52,990$61,136 for Mr. Irish and $53,441$61,951 for Mr. Marcotte, and the value attributable to the accelerated vesting of outstanding stock options and unvested restricted stock, which is $176,506$621,555 for Mr. Duncan, $332,365$714,892 for Mr. Clancy, $125,226$374,573 for Mr. Main, $168,270$228,677 for Mr. Irish and $179,925$228,677 for Mr. Marcotte. The value of any outstanding stock options and unvested restricted stock is based upon the value of the Common Stock on December 31, 20122014, which equals $25.25 per share, the closing market price of the stock on the NASDAQ Global Market on that date. | | (2) | With respect to each of Messrs. Duncan, Clancy, Main, Irish and Marcotte assumes that termination has not occurred within the time periods before or after a change in control specified in his employment agreement or change in control/noncompetition agreement as applicable. With respect to Mr. Main the amount shown under the heading “normal retirement” includes $41,300, which is the value attributable to the accelerated vesting of unvested restricted stock and $14,955, which is the value attributable to the accelerated vesting of unvested stock options. With respect to Mr. Duncan the amount shown under the heading “normal retirement” includes $21,218, which is the value attributable to the accelerated vesting of unvested stock options. |
| | (3) | Includes amounts payable under supplemental life insurance benefits, which equal the following amounts for each of the executives: $1,556,056 for Mr. Duncan; $190,080 for Mr. Clancy; $791,496 for Mr. Main; and the entire amount shown in the table for Messrs. Irish and Marcotte. |
| | (4) | In addition to the amounts payable to Messrs. Duncan and Main under the various scenarios shown in the table above, each of the executives has a fully vested right to receive annual amounts payable over a twenty-year20 year period under the executive's salary continuation agreement. These annual amounts, payable in monthly installments, are paid to the executive regardless of his employment status, unless the executive is terminated for cause, in which case he would forfeit his right to receive any further payments following the date of termination. In 2012,2014, both Messrs. Duncan and Main were eligible to receive payments under their salary continuation agreements, and each received the full annual amount to which he is entitled, detailed in the table below. |
PENSION BENEFITS
The following table sets forth additional information concerning the supplemental retirement benefits as of December 31, 20122014 which are provided to Messrs. Duncan and Main::
| | Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) (1) | Payments During Last Fiscal Year ($) | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) (1) | Payments During Last Fiscal Year ($) | George L. Duncan | Supplemental Employee Retirement Plan | 24 | $ | 1,689,524 |
| $ | 149,500 |
| Supplemental Employee Retirement Plan | 26 | $ | 1,492,042 |
| $ | 149,500 |
| Richard W. Main | Supplemental Employee Retirement Plan | 24 | $ | 1,164,287 |
| $ | 95,300 |
| Supplemental Employee Retirement Plan | 26 | $ | 1,042,793 |
| $ | 95,300 |
|
| | (1) | The present value of accumulated benefit was valued at the established present value of the payments to be received by the executives upon reaching the specified ages noted above at a discount rate of 4.25%5.00%. The annual benefit will be payable in twelve monthly installments. |
DIRECTOR NOMINATIONS AND STOCKHOLDER COMMUNICATIONS Proposed director nominees are recommended to the Board of Directors for its approval by the Company's Corporate Governance/Nominating Committee (“CGNC”("CGNC"). The CGNC is comprised of five independent Directors. In determining the independence of the CGNC members, the Board of Directors has used the definition of independence contained in Rule 5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market and has applied this definition consistently to all members of the CGNC.
A copy of the CGNC's Charter and the Company's Corporate Governance Guidelines can be found on the Company's website (www.enterprisebanking.comwww.enterprisebanking.com/investor-relations.html). The Charter and Guidelines outline director qualifications, appointment to and removal from the Board of Directors and its various committees, structure and operations of the Board of Directors and its various committees and the CGNC's reporting function to the Board of Directors.
In evaluating candidates, the CGNC considers independence, experience relevant to the needs of the Company, leadership qualities and the ability to represent the broad interests of stockholders. In selecting new Directors, consideration is given to both the personal qualities and abilities of individual candidates and the existing collective skills and aptitudes of the Board of Directors as a whole.
Although it does not have a formal diversity policy, in addition to the criteria described above, the Board and the CGNC also consider professional, personal and geographic diversity in their review of candidates. Overall, candidates are selected based on a review of qualifications that are considered in the best interest of the stockholders.
Nominees for election to the Board of Directors may be identified and submitted to the CGNC for its consideration by Directors, stockholders and/or management. The CGNC may also retain a professional search firm to assist with the identification of qualified candidates.
The Chairman of the CGNC and the Chairman of the Board of Directors shall extend an invitation to join the Board of Directors, subject to election by the Company's stockholders, to those nominees who are recommended by the CGNC and approved by the Board of Directors. The Board of Directors also retains the right, as outlined in the Company's By-Laws, to appoint Directors as needed throughout the year.
Directors are required to attend the Company's annual meeting. Absences will be allowed for serious personal or business obligations that cannot be rescheduled. All of the Company's Directors attended the 20122014 annual meeting.
Stockholders may submit nominations for candidates for election to the Board of Directors in accordance with the applicable requirements contained in the Company's By-Laws to the attention of the Company's Secretary at the Company's principal office located at 222 Merrimack Street, Lowell, Massachusetts 01852. Stockholders may also communicate directly with members of the Board of Directors by sending such communications to a specified director or group of Directors or to the Board of Directors in its entirety, addressed c/o the Secretary of the Company at the Company's principal office at the foregoing address.
AUDIT COMMITTEE REPORT The Audit Committee of the Company's Board of Directors (the “Audit Committee”) is comprised of sixseven independent Directors and operates under a written charter. A list of the Audit Committee members and their qualifications and a copy of the Audit Committee's Charter can be found on the Company's website (www.enterprisebanking.com). The Audit Committee reviews and reassesses the adequacy of the Audit Committee charter on an annual basis. The Board of Directors has determined that Carol Reid, who is one of these sixseven independent Directors, qualifies to serve as an Audit Committee Financial Expert (as such term is defined under applicable SEC rules). The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the Company's independent registered public accounting firm, which reports directly to the Audit Committee. The Audit Committee evaluates the Company’s independent registered public accounting firm and the lead audit engagement partner, at a minimum, on an annual basis with consideration given to past performance, the quality of communications with the Audit Committee and management, professional qualifications, expertise and reputation of the firm, and continued independence. The Audit Committee held eight10 meetings in 20122014 and met in executive session at seven8 meetings. The committeeAudit Committee also held six5 executive sessions with the Company's independent registered public accounting firm in 2012,2014, at which time discussions of financial management, accounting, financial reporting and internal controls took place.
In determining the independence of the Audit Committee members, the Board of Directors has used, as required for a company with shares listed on the NASDAQ Global Market, the definition of independence contained in Section 5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market as well as the additional independence requirements contained in Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and Rule 10A-3(b)(1) of the Commission, and has applied such definition and additional criteria consistently to all members of the Audit Committee.
Management is responsible for the Company's internal controls, the financial reporting process and compliance by the Company with legal and regulatory requirements. The Company's independent registered public accounting firm is responsible for performing an independent audit of the Company's consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and for auditing whether the Company maintained, in all material respects, effective internal controls over financial reporting and for issuing reports thereon. The Audit Committee's responsibility is to monitor and oversee these processes. The Audit Committee's responsibilities also include resolving any disagreements that may arise between management and the Company's independent registered public accounting firm. In addition, the Audit Committee is responsible for the oversight of financial reporting, the oversight of the Company’s Internal Audit function, the oversight of management’s efforts to manage third party risk, the oversight of compliance by the Company with legal and regulatory requirements, and establishing procedures for the receipt, retention and treatment of any complaints that may be received by the Company regarding accounting, internal controls or
auditing matters and the confidential, anonymous submission by employees of the Company of any concerns that may arise regarding questionable accounting or auditing matters.
The Audit Committee has met and held discussions with management and the Company's independent registered public accounting firm. Management has represented to the Audit Committee that the Company's consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the Company's independent registered public accounting firm. The Audit Committee has discussed with the
Company's independent registered public accounting firm the matters required to be discussed under the professional standards of the AICPA and Public Company Accounting Oversight Board.
The Company's independent registered public accounting firm has also provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence, and the Audit Committee has discussed with the Company's independent registered public accounting firm that firm's independence.
Based upon the Audit Committee's discussions with management and the Company's independent registered public accounting firm, and the Audit Committee's review of the representation of management and the reports of the Company's independent registered public accounting firm to the Audit Committee, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 20122014 as filed with the SEC.
Carol L. Reid (Chairperson) Carole A. Cowan Lucy A. Flynn John P. Harrington Gino J. Baroni Jacqueline F. Moloney Luis M. Pedroso
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Audit Committee reviews disclosures made in this Proxy Statement and all other reports and filings of the Company required under the federal securities laws regarding all related-party transactions that are required to be disclosed under the requirements of Item 404 of the SEC's Regulation S-K. The Company's Code of Business Conduct and Ethics, which can be found on the Company's website (www.enterprisebanking.com), provides procedures for the Board of Directors' review and approval of transactions involving the Company and related parties. Any transactions involving the Company (including any subsidiaries) and members of the Board of Directors, officers holding a title of senior vice president or above or any family members or affiliated entities of any such Directors or officers must be conducted on an arms-length basis and any consideration paid or received by the Company in connection with any such transaction shall be on terms no less favorable to the Company than terms that would be available under the same or similar circumstances with an unaffiliated third party. With respect to any such transaction, the Director's or officer's interest is disclosed to the Board of Directors prior to any action being taken by the Board to approve the transaction.
As described in further detail under the heading “Independence of Board of Directors” at pages 14-15 above, in 2010, the Bank paid $2.0 million to a real estate trust in which Mr. Putziger held an indirect interest in order to acquire a leasehold interest in its headquarters and also paid a total of $208,734 in lease payments during the year prior to its acquisition of the lease. Mr. Putziger's proportional interest in the gross proceeds paid by the Bank in connection with these lease and purchase transactions in 2010 totaled $303,480. The Board believes that the terms of all of these transactions, including the amounts paid by the Bank, were a product of arms-length negotiations between the parties.
Certain Directors and executive officers of the Company are also customers of the Bank and have entered into loan, trust and brokerage and deposit transactions with the Bank in the ordinary course of business. In addition, certain Directors are also directors, trustees, officers or stockholders of corporations and non-profit entities or members of partnerships that are customers of the Bank and that 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, non-profit entities 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 collectability or present other features unfavorable to the Bank.
SECURITIES OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth stock ownership information with respect to Directors, Named Executive Officers, all Directors and executive officers as a group and all other persons known to the Company who are the beneficial owners of more than 5% of the Common Stock. All such information is as of March 4, 20136, 2015. This 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. | | Directors | Shares of Common Stock Beneficially Owned (1)(2) | Percent of Total Common Stock (3) | | Directors and Named Executive Officers | | Shares of Common Stock Beneficially Owned (1)(2) | Percent of Total Common Stock (3) | Gino J. Baroni | 2,285 | * | 3,928 | * | John P. Clancy, Jr. (4) | 146,812 | 1.50% | 164,839 | 1.60% | John R. Clementi (5) | 124,373 | 1.28% | 133,179 | 1.30% | James F. Conway, III | 21,605 | * | | James F. Conway III | | 26,546 | * | Carole A. Cowan | 12,215 | * | 14,936 | * | Normand E. Deschene | 1,037 | * | 3,818 | * | George L. Duncan (6)
| 430,438 | 4.41% | 438,950 | 4.27% | Lucy A. Flynn (7) | 9,640 | * | 7,923 | * | John T. Grady, Jr. | 300 | * | 1,183 | * | Eric W. Hanson (8) | 431,585 | 4.44% | 397,793 | 3.88% | John P. Harrington (9) | 20,063 | * | 22,689 | * | Mary Jane King | | 2,000 | | John A. Koutsos | | 15,471 | * | Arnold S. Lerner (10) 155 Pine Hill Road Hollis, NH 03049 | 522,958 | 5.38% | 523,641 | 5.11% | Richard W. Main (11) | 249,316 | 2.56% | 252,950 | 2.46% | Jacqueline F. Moloney (12) | 6,183 | * | 9,601 | * | Luis M. Pedroso | | 6,000 | | Michael T. Putziger (13) | 129,903 | 1.34% | 139,587 | 1.36% | Carol L. Reid | 18,944 | * | 24,571 | * | Michael A. Spinelli | 280,649 | 2.89% | 281,532 | 2.75% | | | | Other Named Executive Officers | | | | | | Stephen J. Irish (14) | 59,572 | * | 51,904 | * | James A. Marcotte (15) | 34,085 | * | 40,056 | * | All Directors and Executive Officers as a Group (24 Persons) | 2,747,651 | 27.68% | | All Directors and Executive Officers as a Group (27 Persons) | | 2,802,814 | 27.33% | | | | Other 5% Stockholders | | | Ronald M. Ansin 132 Littleton Road Harvard, MA 01451 | 747,462 | 7.68% | 784,231 | 7.65% |
* Named individual beneficially owns less than 1% of total Common Stock.
| | ◦ | 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. |
| | (2) | Includes shares subject to options exercisable within sixty60 days as follows: Mr. Clancy, 37,750;31,750; Mr. Duncan, 32,750;23,750; Mr. Main, 24,250;21,750; Mr. Irish, 21,687;5,125; Mr. Marcotte, 10,437;5,625; and all Directors and executive officers as a group, 199,053.124,125. |
| | (3) | The percentage ownership interest of each Director, named executive officer and all Directors and executive officers as a group is calculated on the basis of 9,726,47510,255,679 shares outstanding as of the Record Date plus, in each such calculation, the number of shares that may be purchased pursuant to vested options held by the individual director or named executive officer or all Directors and executive officers as a group, as the case may be. |
| | (4) | Includes 2,451 shares owned by Mr. Clancy's children and 88,611111,586 shares owned jointly with Mr. Clancy's wife. |
| | (5) | AllIncludes 132,296 shares held by Mr. Clementi through trusts. |
| | (6) | Includes 18,445 shares owned by Mr. Duncan's wife.wife and 150,602 shares owned by Mr. Duncan that were pledged as collateral on debt that was paid in full on March 13, 2015. |
| | (7) | Includes 1,000 shares owned by Ms. Flynn's husband. |
| | (8) | Includes 100,000 shares owned by Mr. Hanson that are pledged as collateral. |
| | (9) | Includes 4,5284,753 shares owned by Mr. Harrington's wife. |
| | (10) | Includes 218,647 shares owned by Mr. Lerner's wife, for which Mr. Lerner disclaims beneficial ownership; and 13,033 shares owned by a trust for the Lerner Family. |
| | (11) | Includes 96,749174,749 shares held by Mr. Main through trusts; and 78,000 shares owned jointly with Mr. Main's wife,trusts, of which 36,000 shares are pledged as collateral. |
| | (12) | Includes 5,4968,031 shares owned jointly with Dr. Moloney's husband. |
| | (13) | Includes 24,62125,843 shares owned by trusts for which Mr. Putziger is the trustee; and 100,095 shares owned by Mr. Putziger that are pledged as collateral.trustee. |
| | (14) | Includes 27,877 shares held by Mr. Irish through trusts, of which 20,000 shares are pledged as collateral; and 408 shares owned by Mr. Irish's minor grandchildren for whom Mr. Irish acts as custodian. |
| | (15) | Includes 11,00023,033 shares owned jointly with Mr. Marcotte's wife. |
STOCKHOLDER PROPOSALS A stockholder proposal for business to be brought before the 20142016 annual meeting of stockholders will be acted upon only in the following circumstances:
if the proposal is to be included in next year's proxy statement, pursuant to Rule 14a-8 under the Exchange Act, the proposal (meeting all the requirements set forth in the SEC's rules and regulations) is received by our corporate secretary no earlier than January 6, 2014 and no later than February 6, 2014; or
ifIf the proposal relates to the nomination of a person to serve as a Director of the Company, pursuant to our By-laws, a written proposal describing various matters regarding the nominee, including name, address and shares held, and otherwise meeting all other requirements set forth in our By-Laws must be received by our corporate secretary no earlier than December 5, 2015 and no later than January 5, 2016;
If the proposal relates to any other business and is not to be included in the Company’s proxy statement and proxy for the 2016 annual meeting of stockholders, a written proposal (meeting all other requirements set forth in our amended and restated by-laws)By-Laws) must be received by our corporate secretary not lessno earlier than one
hundred twenty (120) daysJanuary 5, 2016 and not moreno later than one hundred fifty (150) days priorFebruary 4, 2016;
If the stockholder wishes the proposal to be included in the 2013Company’s proxy statement and proxy for the 2016 annual meeting (unlessof stockholders, the date ofproposal must comply with all Rule 14a-8 requirements under the Annual Meeting is advanced moreExchange Act and must be received by the Company at its principal offices no later than 30 calendar days prior to the first anniversary of the Annual Meeting or delayed more than 60 calendar days after such anniversary, in which case our By-Laws prescribe an alternate deadline).February 4, 2016.
Proposals should be sent to Enterprise Bancorp, Inc., 222 Merrimack Street, Lowell, Massachusetts 01852, Attention: Corporate Secretary.
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. Mr. Baroni purchased 120 shares on January 29, 2013 for which a Form 4 was not filed until February 11, 2013. Ms. Silva exercised stock options using a stock swap on December 18, 2012 for which a Form 4 was not filed until December 28, 2012. Ms. Villanucci sold 4,000 shares on May 10, 2012 for which a Form 4 was not filed until May 15, 2012. To the Company's knowledge, all other reports under Section 16(a) of the Exchange Act that any of its Directors or executive officers has been required to file during the year ended December 31, 20122014 and through March 4, 20136, 2015 have been filed on a timely basis.basis, except that Ms. Flynn sold 2,600 shares on March 10, 2014 for which a Form 4 was not filed until March 13, 2014.
OTHER MATTERS Shares represented by proxies in the enclosed form that are properly executed and delivered and proxies that are properly delivered electronically or by telephone will be voted as stockholders direct. Properly delivered proxies that contain no directions to the contrary will be voted (1) FOR the election of George L. Duncan, Eric W. Hanson, Jacqueline F. Moloney, Michael T. Putziger, Carol L. Reid and Michael A. Spinelli, the six nominees of the Board of Directors, as Directors of the Company; (2) FORthe amendment to Section 4.1 of the Company's Restated Articles of Organization; (3) FOR the amendment to Section 5.10 of the Company's Restated Articles of Organization; (4) FOR the amendment to Section 5.11 of the Company's Restated Articles of Organization; (5) FOR the amendment and restatement of the Company's Restated Articles of Organization; and (6) FOR the ratification of the Audit Committee's appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2013. 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-K The Company's Annual Report on Form 10-K (without exhibits) is included with the Company's Annual Report to Stockholders, and is being furnished to stockholders 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: Michael A Spinelli, Secretary.
ADDITIONAL COPIES OF ANNUAL REPORT AND PROXY STATEMENT AVAILABLE TO STOCKHOLDERS SHARING COMMON MAILING ADDRESS Unless the Company has received instructions to the contrary, two or more stockholders of record who share a common mailing address may receive one Annual Report to Stockholders and one copy of this Proxy Statement, together with a separate proxy card for each such stockholder, in a single package addressed to such stockholders. Any stockholder of record who shares a common mailing address with one or more other stockholders of record and has received a single Annual Report to Stockholders and Proxy Statement as provided herein, may request a separate Annual Report to Stockholders and Proxy Statement either by directing such request in writing to the Secretary of the Company at the address given in the preceding paragraph or by making such request by phone, directed to Jim Marcotte at (978) 656-5614. If you are a stockholder of record who shares a common mailing address with one or more other stockholders of record, you may ensure future delivery of the desired number of Annual Reports to Stockholders and Proxy Statements (whether a single copy or multiple copies) by requesting such either in writing or by phone in accordance with the foregoing instructions. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE EITHER DELIVER YOUR PROXYVOTE ELECTRONICALLY USING THE INTERNET OR BY PHONE BY FOLLOWING THE INSTRUCTIONS INCLUDED WITH YOUR PROXY CARD OR COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW ANY PROXY GIVEN BY YOU AND VOTE YOUR SHARES IN PERSON.
April 1, 2013March 31, 2015
APPENDIX A
AMENDED AND RESTATED ARTICLES OF ORGANIZATION
OF
ENTERPRISE BANCORP, INC.
ARTICLE I
NAME
The name of the corporation is Enterprise Bancorp, Inc. (the “Corporation”).
ARTICLE II
PURPOSE
The purpose of the Corporation is to engage in the following business activities:
A.To acquire, invest in or hold stock in any subsidiary permitted under the Bank Holding Company Act of 1956 and Chapter 167A of the Massachusetts General Laws, as such statutes may be amended from time to time, and to engage in any activity or enterprise permitted to a bank holding company under said statutes or other applicable law.
B.To engage generally in any business activity which may be lawfully carried on by a corporation organized under Chapter 156D of the Massachusetts General Laws as may be amended from time to time and any successor statute thereto.
ARTICLE III
CAPITAL STOCK
Section 3.1Authorized Stock. The Corporation is authorized to issue two (2) classes of capital stock designated “common” and “preferred.” The aggregate number of shares which the Corporation is authorized to issue is Twenty One Million (21,000,000), consisting of (1) Twenty Million (20,000,000) shares of common stock, par value $0.01 per share (“Common Stock”), and (2) One Million (1,000,000) shares of preferred stock, par value $0.01 per share (“Preferred Stock”).
The shares of the Corporation's authorized capital stock may be issued by the Corporation from time to time by a vote of its Board of Directors (the “Board”) without the approval of its shareholders, except as may be otherwise provided in this Article III. Upon payment of lawful consideration therefor and issuance, all shares of the capital stock of the Corporation shall be deemed to be fully paid and nonassessable. No holder of any of the capital stock of the Corporation shall have any preemptive right to purchase or subscribe for the purchase of any additional shares issued by the Corporation. In the case of a stock dividend, that part of the surplus account or undivided profits account of the Corporation which is transferred to stated capital upon the issuance of shares as a stock dividend shall be deemed to be the consideration for the issuance of such stock dividend.
Section 3.2 Description of Stock. A description of the different classes and series (if any) of the Corporation's capital stock and a statement of the designations and the relative rights, preferences and limitations of the shares of each class and series (if any) of capital stock are as follows:
A.Common Stock. Except as provided by law or in this Article (or in any supplementary sections hereto) or in any certificate of establishment of a series of Preferred Stock, the holders of the Common Stock shall exclusively possess all voting power. Each holder of outstanding shares of Common Stock shall be entitled to one vote for each share of Common Stock held by such holder.
Holders of the Common Stock shall be entitled to the payment of dividends out of any assets of the Corporation legally available for the payment thereof, but only as and when declared by the Board.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after there shall have been paid to or set aside for the holders of any class having preferences over the Common Stock in the event of liquidation, dissolution or winding up of the Corporation, of the full preferential amounts to which they are respectively entitled, the holders of the Common Stock and of any class or series of stock entitled to participate, in whole or in part, therewith, as to distribution of assets shall be entitled, after payment or provision for payment of all debts and liabilities of the Corporation, to receive the remaining assets of the Corporation available for distribution, in cash or in kind, in proportion to their holdings.
B.Preferred Stock. The Board is authorized by vote or votes, from time to time adopted, to provide for the issuance of Preferred Stock in one or more series and to fix and state the voting powers, designations, preferences and relative participating, optional or other special rights of the shares of each series and the qualifications, limitations and restrictions thereof, including, but not limited to, determination of one or more of the following:
(1)the distinctive serial designation and the number of shares constituting such series;
(2)the dividend rates or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and, if so, from which date or dates, the payment date or dates for dividends and the participating or other special rights, if any, with respect to dividends;
(3)the voting powers, full or limited, if any, of shares of such series;
(4)whether the shares of such series shall be redeemable and, if so, the price or prices at which, and the terms and conditions on which, such shares may be redeemed;
(5)the amount or amounts payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Bank;
(6)whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price or prices at which such shares may be redeemed or purchased through the application of such fund;
(7)whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation, and if so convertible or exchangeable, the conversion price or prices, or the rate or rates of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;
(8)the price or other consideration for which the shares of such series shall be issued; and
(9)whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of Preferred Stock and whether such shares may be reissued as shares of the same or any other series of stock.
Unless otherwise provided by law, any such vote shall become effective when the Corporation files with the Secretary of State of the Commonwealth of Massachusetts Articles of Amendment to these Articles of Organization that establish and designate one or more series of Preferred Stock, fixing and determining the relative rights and preferences thereof, and that contain such information and are in such form as may be prescribed by said Secretary of State.
ARTICLE IV
CERTAIN BUSINESS COMBINATIONS
The restrictions, if any, imposed by the Articles of Organization upon the transfer of shares of stock of any class are:
Section 4.1. Vote for Certain Business Combinations.
A.Required Vote. In addition to any affirmative vote required by the Massachusetts General Laws or by these Articles of Organization, and except as otherwise expressly provided in Section 4.2:
1.any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Shareholder (as hereinafter defined) or (ii) any other corporation or entity (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder;
2.any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $2,500,000 or more;
3.the purchase, exchange, lease or other acquisition by the Corporation or any Subsidiary (in a single transaction or a series of related transactions) of all or substantially all of the assets or business of any Interested Shareholder or any Affiliate of any Interested Shareholder;
4.the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $2,500,000 or more;
5.the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Shareholder or any Affiliate of any Interested Shareholder; or
6.any reclassification of the securities of the Corporation (including any reverse stock split), any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving any Interested Stockholder) which has the effect, directly or indirectly,
of increasing the proportion of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate of any Interested Shareholder; shall require the affirmative vote of the holders of at least two-thirds of the voting power of the Voting Stock (as hereinafter defined) voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required or that a lesser percentage may be specified by law.
B.Definition of “Business Combination”. The term “Business Combination” as used in this Article shall mean any transaction which is referred to in any one or more of the clauses (1) through (6) of Paragraph A of this Section 4.1.
Section 4.2. When Higher Vote is Not Required. The provisions of Section 4.1 shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any other provision of these Articles of Organization, if all of the conditions specified in either of the following paragraphs A or B are met:
A.The Business Combination shall have been approved by two-thirds of the Continuing Directors (as hereinafter defined); or
B.All of the following conditions shall have been met:
1.The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination (the “Consummation Date”) of any consideration other than cash to be received per share by holders of the Common Stock in such Business Combination shall be at least equal to the highest of the following:
a. (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers fees) paid by the Interested Shareholder for any shares of the Common Stock of the Corporation acquired by it (i) within the two year period immediately prior to the first public announcement of the proposal of the Business Combination (the “Announcement Date”) or (ii) in the transaction in which it became an Interested Shareholder, whichever is higher;
b.the highest Fair Market Value per share of the Common Stock of the Corporation on any date during the one-year period prior to and including the Announcement Date; and
c. (if applicable) the price per share equal to the product of (i) the Fair Market Value per share of the Common Stock of the Corporation on the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder (such latter date is referred to in this Article IV as the “Determination Date”), whichever is higher, and (ii) a fraction, (x) the numerator of which is the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of the Common Stock acquired by it within the two year period immediately prior to and including the Announcement Date, and (y) the denominator of which is the Fair Market Value per share of the Common Stock on the first day in such two-year period upon which the Interested Shareholder acquired any shares of the Common Stock.
2.The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of the Business Combination of consideration other than cash to be received per share by holders of shares of any other class of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this paragraph B(2) shall be required to be met with respect to every other class of outstanding Voting Stock, whether or not the Interested Shareholder has previously acquired any shares of a particular class of Voting Stock):
a. (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers fees) paid by the Interested Shareholder for any shares of such class of Voting Stock acquired by it (i) within the two year period immediately prior to the Announcement Date or (ii) in the transaction in which it became an Interested Shareholder, whichever is higher;
b. (if applicable) the highest preferential amount per share which the holders of shares of such class of Voting Stock are entitled to receive from the Corporation in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;
c. (if applicable) the highest Fair Market Value per share of such class of Voting Stock on any date during the one year period prior to and including the Announcement Date; and
d. (if applicable) the price per share equal to the product of (i) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher, and (ii) a fraction, (x) the numerator of which is the highest per share price (including any brokerage commission, transfer taxes and soliciting dealers fees paid by the Interested Shareholder for any shares of such class of Voting Stock acquired by it within the two year period immediately prior to and including the Announcement Date, and (y) the denominator of which is the Fair Market Value per share of such class of Voting Stock on the first day in such two year period upon which the Interested Shareholder acquired any shares of such class of Voting Stock.
3.The consideration to be received by holders of a particular class of outstanding Voting Stock shall be in cash or in the same form as the Interested Shareholder has previously paid for shares of such class of Voting Stock. If the Interested Shareholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of such class of Voting Stock previously acquired by such Interested Shareholder.
4.After becoming an Interested Shareholder and prior to the consummation of any such Business Combination: (a) there shall have been (i) no failure to declare and pay at regular dates therefor the full amount of any dividends (whether or not cumulative) payable on the Common Stock and any other class or series of stock entitled to dividends; (ii) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Continuing Directors; and (iii) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (b) such Interested Shareholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Shareholder's becoming an Interested Shareholder.
5.After becoming an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly except proportionately as a shareholder, of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise, unless such transaction shall have been approved or ratified by a majority of the Continuing Directors after such person shall have become an Interested Shareholder.
6.A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”), or any successor agency thereto, thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to shareholders of the Corporation at least 20 days prior to consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).
Section 4.3. Certain Definitions.
A.The term “person” shall mean an individual, a Group Acting in Concert, a corporation, a partnership, an association, a joint stock company, a trust, a business trust, a government or political subdivision, any unincorporated organization and any similar association or entity.
B.The term “Interested Shareholder” shall mean any person (other than any Employee Stock Ownership Plan established by the Board, the Corporation or any Subsidiary thereof formed at the direction of the Corporation) who or which:
1.is the beneficial owner, directly or indirectly, of ten percent (10%) or more of the voting power of the then outstanding shares of Voting Stock;
2.is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of ten percent (10%) or more of the voting power of the then outstanding shares of Voting Stock; or
3.is an assignee of or has otherwise succeeded to the beneficial ownership of any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended, and such assignment of succession was not approved by a majority of the Continuing Directors.
C.A person shall be a “beneficial owner” of any shares of “Voting Stock”:
1.which such person or any of its Affiliates or Associates, directly or indirectly, has or shares with respect to such Voting Stock (a) the right to acquire or direct the acquisition of (whether such right is exercisable immediately or only after the passage of time or on the satisfaction of any conditions or both), pursuant to any agreement, arrangement or understanding or upon the exercise of any conversion rights, warrants, or options or otherwise; (b) the right to vote, or direct the voting of, pursuant to any agreement, arrangement or understanding or otherwise; or (c) the right to dispose of or transfer or direct the disposition or transfer of pursuant to any agreement, arrangement, understanding or otherwise; or
2.which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.
D.For the purpose of determining whether a person is an Interested Shareholder pursuant to paragraph B of this Section 4.3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned by such person through application of paragraph C of this Section 4.3 but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options or otherwise.
E.The terms “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the SEC's General Rules and Regulations under the 1934 Act.
F.The term “Subsidiary” shall mean any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph B of this Section 4.3, the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation.
G.The term “Continuing Director” shall mean any member of the Board who is not an Interested Shareholder, or an Affiliate or an Associate of any Interested Shareholder and was a member of the Board prior to the time that any Interested Shareholder became an Interested Shareholder, and any successor of a Continuing Director who is not an Interested Shareholder, or an Affiliate or an Associate of any Interested Shareholder and is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board.
H. The term “Fair Market Value” shall mean:
1.in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the principal United States securities exchange registered under the 1934 Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers Automated Quotation System or a comparable system then in use, or if not such quotations are available, the fair market value on the date in question of a share of such stock as determined by at least a majority of the Continuing Directors in good faith; and
2.in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by at least a majority of the Continuing Directors in good faith.
I.The term “Group Acting in Concert” shall mean persons seeking to combine or pool their voting or other interests in the securities of the Corporation for a common purpose, pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written, oral or otherwise, or any “group of persons' as defined under Section 13(d) of the 1934 Act. When persons act together for any such purpose, their group is deemed to have acquired their stock.
J. The term “Voting Stock” shall mean the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.
K.In the event of any Business Combination in which the Corporation survives, the phrase “consideration other than cash” as used in paragraphs B(1) and (2) of Section 4.2 of this Article IV shall include the shares of common stock and/or the shares of any other class of outstanding voting stock retained by the holders of such shares.
Section 4.4. Powers of the Board of Directors. A majority of the directors of the Corporation (or, if there is an Interested Shareholder, a majority of the Continuing Directors then in office) shall have the power to determine for the purposes of this Article IV, on the basis of information known to them after reasonable inquiry, including without limitation, (A) whether a person is an Interested Shareholder, (B) the number of shares of Voting Stock beneficially owned by any person, (C) whether a person is an Affiliate or Associate of or is affiliated or associated with another, (D) whether the requirements of Section 4.2 have been met with respect to any Business Combination, (E) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $2,500,000 or more, and (F) any other matters of interpretation arising under this Article IV or under Section 5.2. The good faith determination of a majority of the directors (or, if there is an Interested Shareholder, a majority of the Continuing Directors then in office) on such matters shall be conclusive and binding for all purposes of this Article IV and of Section 5.2.
Section 4.5. No Effect on Fiduciary Obligations of Interested Shareholders. Nothing contained in this Article IV shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law.
ARTICLE V
OTHER LAWFUL PROVISIONS
Section 5.1. Standards for Board of Directors Evaluation of Offers. The Board, when evaluating any offer of another person to (A) make a tender or exchange offer for any equity security of the Corporation, (B) merge or consolidate the Corporation with another institution, or acquire all of the Voting Stock of the Corporation, or (C) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, shall, in connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its shareholders, give due consideration to all relevant factors including, without limitation, the social and economic effects of acceptance of such offer on the Corporation's present and future account holders, borrowers and employees; on the communities in which the Corporation operates or is located; and on the ability of the Corporation to fulfill the objectives of a bank holding company under applicable statutes and regulations.
Section 5.2. Beneficial Ownership Limitation. No Person (as defined below) or group of selected Persons or Persons acting in concert may own control or have the power to vote directly or indirectly more than 9.9% of the outstanding shares of Common Stock. This limitation shall not apply (A) to any acquisition of shares of Common Stock of the Corporation which has been expressly approved in advance by an affirmative vote of not less than two-thirds of the Continuing Directors then in office, (B) to any offer to the Corporation made by any underwriters selected by the Corporation in connection with a public offering by the Corporation of the Corporation's capital stock, or (C) to any Employee Stock Ownership Plan established by the Corporation. “Person” shall mean an individual, partnership, corporation, limited liability company, trust, unincorporated organization, government agency or partial subdivision thereof, or any other legal entity.
For the purposes of determining the number of shares of Common Stock owned hereunder by any person, the number of shares of Common Stock deemed to be outstanding shall include shares deemed owned by such Person through the application of Section 5.2 but shall not include any other shares of Common Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options or otherwise.
In the event that any Common Stock is acquired in violation of this Section 5.2, (i) all shares of Common Stock beneficially owned by any Person in excess of 9.9% of the total number of outstanding shares of Common Stock shall be considered “excess shares” and such shares shall not be counted as shares entitled to vote, shall not be voted by any person or counted as voting shares in connection with any matter submitted to the shareholders for a vote, and shall not be counted as outstanding for purposes of determining the affirmative vote necessary to approve any matter submitted to the shareholders for a vote, and (ii) the Board may cause such excess shares to be transferred to an independent trustee for sale on the open market or otherwise, with the expenses of such trustee to be paid out of the proceeds from such sale. The term “offer” as it is used in this Section 5.2 includes every offer to buy or acquire, solicitation of an offer to sell, tender offer for or request or invitation for tender of, a security or interest in a security for value.
Section 5.3. Directors. The Corporation shall be under the direction of the Board. The number of directors on the Board shall not be fewer than three (3) or as required by law. The Board shall be divided into three classes (Class I, Class II and Class III) as nearly equal in number as possible, with one class to be elected annually in accordance with the By-Laws, to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election and until their respective successors are elected and qualified, subject to their earlier death, resignation, disqualification or removal.
Any director (including persons elected by directors to fill vacancies in the Board) may be removed from office only for Cause (as hereinafter defined), by an affirmative vote of not less than (i) the holders of two-thirds of the total votes eligible to be cast by shareholders or (ii) two-thirds of the members of the Board then in office, unless at the time of such removal there shall be an Interested Shareholder, in which case the affirmative vote of not less than two-thirds of the Continuing Directors then in office shall also be required for removal by vote of the Board, and in either case such removal must be undertaken at a duly constituted meeting of shareholders or of the Board, as applicable, called expressly for such purpose. At least thirty days prior to such meeting of shareholders or of the Board, as applicable, written notice shall be sent to the director whose removal will be considered at the meeting.
For purposes of this Section 5.3, “Cause” shall be defined as (i) conviction of a felony, (ii) declaration of unsound mind by order of court, (iii) gross dereliction of duty as determined by a majority of the Board, (iv) commission of an action involving moral turpitude, or (v) commission of an action which constitutes intentional misconduct or a knowing violation of law if such action in either event results both in an improper substantial personal benefit and a material injury to the Corporation.
Section 5.4. Transactions with Interested Persons.
A.Unless entered into in bad faith, and to the extent otherwise permitted by applicable law, no contract or transaction by the Corporation shall be void, voidable or in any way affected by reason of the fact that it is with an Interested Person.
B.For the purposes of this Section 5.4, “Interested Person” means any person or organization in any way interested in the Corporation whether as a director, officer, shareholder, employee or otherwise, and any other entity in which any such person or organization of the Corporation is in any way interested.
C.Unless such contract or transaction was entered into in bad faith, and to the extent such contract or transaction is otherwise permitted by applicable law, no Interested Person, because of such interest, shall be liable to the Corporation or to any other person or organization for any loss or expense incurred by reason of such contract or transaction or shall be accountable for any gain or profit realized from such contract or transaction.
D.The provisions of this Section 5.4 shall be operative notwithstanding the fact that the presence of an Interested Person was necessary to constitute a quorum at a meeting of directors or shareholders of the Corporation at which such contract or transaction was authorized.
Section 5.5. Acting as a Partner. The Corporation may be a partner in any business enterprise which it would have power to conduct by itself.
Section 5.6. Call of Special Meetings. Special meetings of the shareholders for any purpose or purposes may be called at any time only by the Chairman of the Board or the Chief Executive Officer, or by the affirmative vote of a majority of the directors then in office; provided, however, that if at the time of such call there is an Interested Shareholder, any such call shall also require the affirmative vote of a majority of the Continuing Directors then in office. Only those matters set forth in the call of the special meeting may be considered or acted upon at such special meeting, unless otherwise provided by law.
Section 5.7. Amendment of By-Laws. The By-Laws of the Corporation may be altered, amended or repealed, in whole or in part, at any time by the affirmative vote of at least two-thirds of the total votes eligible to be cast by the shareholders of the Corporation at a duly constituted meeting of the shareholders. The Board, by the affirmative vote of at least a majority of the directors then in office, may also alter, amend or repeal the By-Laws of the Corporation, in whole or in part, at a duly constituted meeting of the Board, unless at the time of such action there shall be an Interested Shareholder, in which case such action shall also require the affirmative vote of at least two-thirds of the Continuing Directors then in office at such meeting; provided, however, that the Board shall not be authorized hereunder to alter, amend or repeal, in whole or in part, any provision of the By-laws of the Corporation that, by law, these Articles of Organization or the By-Laws, may be altered, amended or repealed, in whole or in part, only through an action exclusively by the shareholders. Any By-Laws of the Corporation that are adopted by the Board as provided herein may be amended or repealed by the Corporation's shareholders.
Section 5.8. Amendment to Articles of Organization. No amendment, addition, alteration, change or repeal of these Articles of Organization shall be made, unless the same is first approved by the affirmative vote of at least a majority of the directors then in office, and thereafter, if and to the extent that applicable law requires that such amendment, addition, alteration, change or repeal must also be approved by the shareholders of the Corporation, approved by the shareholders by not less than two-thirds of the total votes eligible to be cast at a duly constituted meeting, or, in the case of any amendment, addition, alteration, change or repeal that requires shareholder approval under applicable law and does not affect in any way any of Articles III or IV of these Articles of Organization, by not less than a majority of the total votes eligible to be cast, and if, at any time within the sixty-day period immediately preceding the meeting at which any required shareholder vote is to be taken there is an Interested Shareholder, such amendment, addition, alteration, change, or repeal shall also require the affirmative vote of at least two-thirds of the Continuing Directors then in office, prior to approval by the shareholders. Unless otherwise provided by law, any amendment, addition, alteration, change or repeal so acted upon shall be effective on the date it is filed with the Secretary of State of the Commonwealth of Massachusetts or on such other date as specified in such amendment, addition, alteration, change or repeal or as the Secretary of State may specify.
Section 5.9. Director's Liability. No director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for any breach of such director's fiduciary duty as a director of the Corporation, notwithstanding any provision of law imposing such liability; provided, however, that, to the extent required by applicable law, this provision shall not eliminate the liability of a director of the Corporation (i) for any breach of such director's duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law (iii) for improper distributions under Section 6.40 of Chapter 156D of the Massachusetts General Laws as may be amended from time to time or any successor statute thereto, or (iv) for any transaction from which such director derived any improper personal benefit. This provision shall not eliminate the liability of a director for any act or omission occurring prior to the date upon which this provision becomes effective. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to the date of such amendment or repeal.
TERMS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
The following is a statement of the terms (including preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms or conditions of redemption) of the Series A Junior Participating Preferred Stock, par value $.01 per share, of Enterprise Bancorp, Inc. (the “Corporation”):
| | 1. | Designation and Amount. The shares of such series shall be designated as “Series A Junior Participating Preferred Shares” and the number of shares constituting such series shall be 200,000.
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| | 2. | Dividends and Distributions.
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(a)Subject to the prior and superior rights of the holders of any shares of any series of shares of preferred stock (generally, “Preferred Shares”) ranking prior and superior to the Series A Junior Participating Preferred Shares with respect to dividends (if any), the holders of Series A Junior Participating Preferred Shares shall be entitled to receive, when, as and if declared by the Board out of funds legally available for the purpose, dividends payable in cash at such times as dividends, other than dividends payable in Common Shares (as defined herein), are paid by the Corporation to holders of shares of the common stock, par value $0.01 per share, of the Corporation (the “Common Shares”), commencing on the first date on which such a dividend is paid by the Corporation to the holders of the Common Shares following the first issuance of a Series A Junior Participating Preferred Share or fraction thereof. Each such dividend payable on the Series A Junior Participating Preferred Shares shall be in an amount per share (rounded to the nearest cent) equal to, subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, plus 100 times the aggregate per share amount (payable in kind) of all noncash dividends or other distributions, other than a dividend payable in Common Shares or a subdivision of the outstanding Common Shares (by reclassification or otherwise), declared by the Board and then payable on the Common Shares. In the event the Corporation shall at any time after December 11, 2007 (the “Rights Declaration Date”) (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the amount to which holders of Series A Junior Participating Preferred Shares were entitled immediately prior to such event pursuant to the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.
(b)The Board shall declare a dividend or distribution on the Series A Junior Participating Preferred Shares as provided in paragraph (a) above immediately after it declares a dividend or distribution on the Common Shares (other than a dividend payable in Common Shares).
(c)Dividends shall begin to accrue and be cumulative on outstanding Series A Junior Participating Preferred Shares from the date of issue of such shares. Accrued but unpaid dividends shall not bear interest. Dividends paid on the Series A Junior Participating Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board may fix a record date for the determination of holders of Series A Junior Participating Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 70 days prior to the date fixed for the payment thereof.
3.Voting Rights. The holders of Series A Junior Participating Preferred Shares shall have the following voting rights:
(a)Subject to the provision for adjustment hereinafter set forth, each Series A Junior Participating Preferred Share shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the shareholders of the Corporation. In the event that the Board shall at any time after the Rights Declaration Date (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the number of votes per share to which holders of Series A Junior Participating Preferred Shares were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.
(b)Except as otherwise provided herein or by law, the holders of Series A Junior Participating Preferred Shares and the holders of Common Shares shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation.
(c)(i) If at any time dividends on any Series A Junior Participating Preferred Shares shall be in arrears, the occurrence of such contingency shall mark the beginning of a period (a “Default Period”) which shall extend until such time when all accrued and unpaid dividends for all previous dividend periods and for the current dividend period on all Series A Junior Participating Preferred Shares then outstanding shall have been declared and paid or set apart for payment. During each Default Period, all holders of Preferred Shares (including holders of the Series A Junior Participating Preferred Shares) with dividends in arrears, voting as a class, irrespective of series, shall have the right to elect two (2) directors.
(ii)During any Default Period, such voting right of the holders of Series A Junior Participating Preferred Shares may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(c) or at an annual meeting of shareholders, and thereafter at annual meetings of shareholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Shares, if any, to increase, in certain cases, the authorized number of directors shall be exercised unless the holders of ten percent (10%) in number of Preferred Shares outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Shares shall not affect the exercise by the holders of Preferred Shares of such voting right. At any meeting at which the holders of Preferred Shares shall exercise such voting right initially during an existing Default Period, they shall have the right, voting as a class, to elect directors to fill up to two (2) vacancies, if any, in the Board or, if such right is exercised at an annual meeting, to elect two (2) directors. The holders of Preferred Shares shall have the right to make such increase in the number of directors as shall be necessary to permit the election by them at any special meeting of two (2) directors. After the holders of Preferred Shares shall have exercised their right to elect directors in any Default Period and during the continuance of such period, the number of directors shall not be increased or decreased except by vote of the holders of Preferred Shares as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Shares, if any.
(iii)Unless the holders of Preferred Shares shall, during an existing Default Period, have previously exercised their right to elect directors, the Board may order, or any shareholder or shareholders owning in the aggregate not less than ten percent (10%) of the total number of Preferred Shares outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Shares, which meeting shall thereupon be called by the Board, the Chairman or the Chief Executive Officer of the Corporation. The Secretary of the Corporation shall give notice of such meeting and of any annual meeting at which holders of Preferred Shares are entitled to vote pursuant to this paragraph (c)(iii) to each holder of record of Preferred Shares by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than fifteen (15) days and not later than sixty (60) days after such order or request. If such meeting is not called within sixty (60) days after such order or request, such meeting may be called on similar notice by any shareholder or shareholders owning in the aggregate not less than ten percent (10%) of the total number of Preferred Shares outstanding. Notwithstanding the provisions of this paragraph (c)(iii), no such special meeting shall be called during the period within sixty (60) days immediately preceding the date fixed for the next annual meeting of the shareholders.
(iv)In any Default Period, the holders of Common Shares shall continue to be entitled to elect the whole number of directors of the Corporation until the holders of Preferred Shares shall have exercised their rights to elect two (2) directors voting as a class, after the exercise of which right, (X) the directors so elected by the holders of Preferred Shares shall continue in office until their successors shall have been elected by such holders or until the expiration of the Default Period, and (Y) any vacancy in the Board shall (except as provided in paragraph (c)(ii) of this Section 3) be filled by vote of a majority of the remaining directors theretofore elected by the holders of the class of capital stock of the Corporation (i.e., the Common Shares or the Preferred Shares) which elected the directors whose office shall have become vacant. References in this paragraph (c) to directors elected by the holders of a particular class of the capital stock of the Corporation shall include directors elected by such directors to fill vacancies as provided in clause (Y) of the foregoing sentence.
(v)Immediately upon the expiration of a Default Period, (X) the right of the holders of Preferred Shares as a class to elect directors shall cease, (Y) the term of any directors elected by the holders of Preferred Shares as a class shall terminate, and (Z) the number of directors shall be such number as may be provided for in the Articles of Organization, as may then be amended or restated and in effect, or the By-Laws of the Corporation, irrespective of any increase made pursuant to the provisions of paragraph (c)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law, or in the Articles of Organization, as may be amended or restated from time to time, or the By-Laws of the Corporation). Any vacancies in the Board effected by the provisions of clauses (Y) and (Z) in the preceding sentence may be filled by a majority of the remaining directors.
(d)Except as set forth herein, holders of Series A Junior Participating Preferred Shares shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Shares as set forth herein) for taking any corporate action.
4.Certain Restrictions.
(a)Whenever dividends or other distributions payable on the Series A Junior Participating Preferred Shares as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on Series A Junior Participating Preferred Shares outstanding shall have been paid in full, the Corporation shall not:
i.declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of capital stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Shares;
ii.declare or pay dividends on or make any other distributions on any shares of capital stock of the Corporation ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Shares except dividends paid ratably on the Series A Junior Participating Preferred Shares and all such parity shares of capital stock of the Corporation on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares of capital stock are then entitled;
iii.redeem or purchase or otherwise acquire for consideration shares of capital stock of the Corporation ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Shares provided that the Corporation may at any time redeem, purchase or otherwise acquire any such parity shares of capital stock in exchange for any shares of capital stock ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Shares;
iv.purchase or otherwise acquire for consideration any Series A Junior Participating Preferred Shares, or any shares of capital stock of the Corporation ranking on a parity with the Series A Junior Participating Preferred Shares, except pursuant to Section 8 hereof or in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes of shares of capital stock of the Corporation.
(b)The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of capital stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
5.Reacquired Shares. Any Series A Junior Participating Preferred Shares, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued Preferred Shares and may be reissued as part of a new series of Preferred
Shares to be created by resolution or resolutions of the Board, subject to the conditions and restrictions on issuance set forth herein.
6.Liquidation, Dissolution or Winding Up.
(a)Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of capital stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Shares, unless, prior thereto, the holders of Series A Junior Participating Preferred Shares shall have received Five Thousand Two Hundred and 00/100 Dollars ($5,200.00) per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “Liquidation Preference”). Following the payment of the full amount of the Liquidation Preference, no additional distributions shall be made to the holders of Series A Junior Participating Preferred Shares, unless, prior thereto, the holders of Common Shares shall have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph (c) below to reflect such events as stock splits, stock dividends and recapitalization with respect to the Common Shares) (such number in clause (ii) immediately above being referred to as the “Adjustment Number”). Subject to the rights of any other series of Preferred Shares then outstanding, if any, following the payment of the full amount of the Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Shares and Common Shares, respectively, holders of Series A Junior Participating Preferred Shares and holders of shares of Common Shares shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to one (1) with respect to such Series A Junior Participating Preferred Shares and Common Shares, on a per share basis, respectively.
(b)In the event, however, that there are not sufficient assets available to permit payment in full of the Liquidation Preference and the liquidation preferences of all other series of Preferred Shares, if any, which rank on a parity with the Series A Junior Participating Preferred Shares, then such remaining assets shall be distributed ratably to the holders of such parity Preferred Shares (including the Series A Junior Participating Preferred Shares) in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment after satisfaction of the liquidation preferences of all series of Preferred Shares, if any, then such remaining assets shall be distributed ratably to the holders of Common Shares.
(c)In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of shares of Common Shares that were outstanding immediately prior to such event.
7.Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the Common Shares are exchanged for or changed into other stock or securities, cash or any other property, then in any such case the Series A Junior Participating Preferred Shares shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of shares, securities, cash or any other property (payable in kind), as the case may be, into which or for which each Common Share is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the outstanding Common Shares into a smaller number of Shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of Series A Junior Participating Preferred Shares shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.
8.Redemption. The Series A Junior Participating Preferred Shares shall not be redeemable.
9.Ranking. The Series A Junior Participating Preferred Shares shall rank junior to all other series of the Corporation's Preferred Shares as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.
10.Amendment. At such time as Series A Junior Participating Preferred Shares are outstanding, the Articles of Organization of the Corporation shall not be amended, nor shall any Articles of Amendment thereto, including without limitation any amendment establishing a series or class of stock pursuant to Section 6.02 of Chapter 156D of the Massachusetts General Laws, be filed with the Secretary of State of the Commonwealth of Massachusetts or otherwise amended, in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Shares so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding Series A Junior Participating Preferred Shares voting separately as a class.
11.Fractional Shares. Series A Junior Participating Preferred Shares may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and have the benefit of all other rights of a holder of Series A Junior Participating Preferred Shares.
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