10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2007
or
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                              to
Commission File Number 0-21021

Enterprise Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Massachusetts	04-3308902
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
222 Merrimack Street, Lowell, Massachusetts	01852
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (978) 459-9000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition for “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerate filer o                                                         Accelerated filer x                                               Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: May 1, 2007, Common Stock - Par Value $0.01: 7,773,296 shares outstanding

ENTERPRISE BANCORP, INC.

INDEX

	Cover Page
	Index
	PART I FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Balance Sheets - March 31, 2007 and December 31, 2006
	Consolidated Statements of Income - Three months ended March 31, 2007 and 2006
	Consolidated Statement of Changes in Stockholders’ Equity -  Three months ended March 31, 2007
	Consolidated Statements of Cash Flows - Three months ended March 31, 2007 and 2006
	Notes to Unaudited Consolidated Financial Statements
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3	Quantitative and Qualitative Disclosures About Market Risk
Item 4	Controls and Procedures
	PART II OTHER INFORMATION
Item 1	Legal Proceedings
Item 1A	Risk Factors
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3	Defaults Upon Senior Securities
Item 4	Submission of Matters to a Vote of Security Holders
Item 5	Other Information
Item 6	Exhibits
	Signature page

2

ENTERPRISE BANCORP, INC.

Consolidated Balance Sheets

(unaudited)

	March 31,		December 31,
(Dollars in thousands)	2007		2006
Assets
Cash and cash equivalents:
Cash and due from banks	$	30,800	$	35,583
Short-term investments	15,886		15,304
Total cash and cash equivalents	46,686		50,887
Investment securities at fair value	129,354		131,540
Loans, less allowance for loan losses of $13,096 at March 31, 2007 and $12,940 at December 31, 2006	767,258		748,173
Premises and equipment	15,668		16,015
Accrued interest receivable	5,884		5,464
Deferred income taxes, net	6,704		6,861
Bank-owned life insurance	12,347		12,212
Prepaid expenses and other assets	4,955		1,976
Core deposit intangible, net of amortization	442		475
Goodwill	5,656		5,656
Total assets	$	994,954	$	979,259
Liabilities and Stockholders’ Equity
Liabilities
Deposits	$	881,549	$	867,522
Borrowed funds	15,168		15,105
Junior subordinated debentures	10,825		10,825
Accrued expenses and other liabilities	4,517		6,567
Income taxes payable	1,146		92
Accrued interest payable	2,175		2,105
Total liabilities	915,380		902,216
Commitments and Contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value per share; 1,000,000 shares authorized; no shares issued	—		—
Common stock $0.01 par value per share; 10,000,000 shares authorized; 7,770,196 and 7,722,288 shares issued and outstanding at March 31, 2007 and December 31, 2006, respectively	78		77
Additional paid-in capital	26,489		25,806
Retained earnings	52,730		51,127
Accumulated other comprehensive income	277		33
Total stockholders’ equity	79,574		77,043
Total liabilities and stockholders’ equity	$	994,954	$	979,259

See accompanying notes to the unaudited consolidated financial statements.

3

ENTERPRISE BANCORP, INC.

Consolidated Statements of Income

(unaudited)

	Three months ended
(Dollars in thousands, except per share data)	March 31,  2007		March 31,  2006
Interest and dividend income:
Loans	$	14,269	$	12,482
Investment securities	1,321		1,566
Short-term investments	31		93
Total interest and dividend income	15,621		14,141
Interest expense:
Deposits	5,058		3,315
Borrowed funds	233		441
Junior subordinated debentures	294		294
Total interest expense	5,585		4,050
Net interest income	10,036		10,091
Provision for loan losses	83		273
Net interest income after provision for loan losses	9,953		9,818
Non-interest income:
Investment advisory fees	778		629
Deposit service fees	504		415
Bank-owned life insurance	148		41
Net gains on sales of investment securities	53		30
Gains on sales of loans	40		44
Other income	555		522
Total non-interest income	2,078		1,681
Non-interest expense:
Salaries and employee benefits	5,335		5,122
Occupancy expenses	1,618		1,424
Audit, legal and other professional fees	296		322
Advertising and public relations	262		245
Supplies and postage	233		225
Investment advisory and custodial expenses	123		118
Other operating expenses	653		762
Total non-interest expense	8,520		8,218
Income before income taxes	3,511		3,281
Income tax expense	1,289		1,225
Net income	$	2,222	$	2,056
Basic earnings per share	$	0.29	$	0.27
Diluted earnings per share	$	0.28	$	0.26
Basic weighted average common shares outstanding	7,747,985		7,603,694
Diluted weighted average common shares outstanding	7,879,334		7,795,572

See accompanying notes to the unaudited consolidated financial statements.

4

ENTERPRISE BANCORP, INC.

Consolidated Statement of Changes in Stockholders’ Equity

(unaudited)

	Three months ended March 31, 2007
(Dollars in thousands)	Common  Stock		Additional  Paid-in  Capital		Retained Earnings			Comprehensive Income			Accumulated  Other  Comprehensive Income		Total  Stockholders’  Equity
Balance at December 31, 2006	$	77	$	25,806	$	51,127					$	33	$	77,043
Comprehensive income
Net income					2,222			$	2,222				2,222
Other comprehensive income, net								244			244		244
Total comprehensive income								$	2,466
Common stock dividend paid ($0.08 per share)					(619		)						(619		)
Common stock issued under dividend reinvestment plan	—		267										267
Stock-based compensation	—		310										310
Stock options exercised	1		106										107
Balance at March 31, 2007	$	78	$	26,489	$	52,730					$	277	$	79,574
Disclosure of other comprehensive income:
Gross unrealized holding gains on securities arising during the period								$	454
Income tax expense								(175		)
Net unrealized holding gains, net of tax								279
Reclassification adjustment for net gains included in net income:
Net realized gains on sales of securities during the period								53
Income tax expense								(18		)
Reclassification adjustment, net of tax								35
Other comprehensive income, net of reclassification								$	244

See the accompanying notes to the unaudited consolidated financial statements

5

ENTERPRISE BANCORP, INC.

Consolidated Statements of Cash Flows

(unaudited)

	Three months ended
	March 31,			March 31,
(Dollars in thousands)	2007			2006
Cash flows from operating activities:
Net income	$	2,222		$	2,056
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	83			273
Depreciation and amortization	685			605
Amortization of intangible assets	33			33
Stock-based compensation expense	184			118
Net gains on sales of investment securities	(53		)	(30		)
Gains on sales of loans	(40		)	(44		)
Income on bank-owned life insurance, net	(135		)	(28		)
(Increase) decrease in:
Loans held for sale, net of gain	(428		)	55
Accrued interest receivable	(420		)	(272		)
Prepaid expenses and other assets	(1,029		)	(257		)
Increase (decrease) in:
Accrued expenses and other liabilities	(2,091		)	(322		)
Accrued interest payable	70			104
Change in income taxes	1,054			1,073
Net cash provided by operating activities	135			3,364
Cash flows from investing activities:
Proceeds from sales of investment securities	1,576			376
Proceeds from maturities, calls and pay-downs of investment securities	3,366			6,048
Purchase of investment securities	(2,319		)	(3,264		)
Purchase of tax credits	(1,735		)	—
Net increase in loans	(18,700		)	(19,072		)
Additions to premises and equipment, net	(369		)	(1,085		)
Net cash used in investing activities	(18,181		)	(16,997		)
Cash flows from financing activities:
Net increase in deposits	14,027			57,589
Net increase (decrease) in borrowed funds	63			(29,165		)
Cash dividends paid	(619		)	(532		)
Proceeds from issuance of common stock	267			236
Proceeds from exercise of stock options	107			39
Net cash provided by financing activities	13,845			28,167
Net (decrease) / increase in cash and cash equivalents	(4,201		)	14,534
Cash and cash equivalents at beginning of period	50,887			38,381
Cash and cash equivalents at end of period	$	46,686		$	52,915
Supplemental financial data:
Cash Paid For:
Interest	$	5,515		$	3,946
Income taxes	235			152

See accompanying notes to the unaudited consolidated financial statements.

6

ENTERPRISE BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

(1)           Organization of Holding Company

Enterprise Bancorp, Inc. (the “company”) is a Massachusetts corporation organized at the direction of Enterprise Bank and Trust Company, (the “bank”), for the purpose of becoming the holding company for the bank.  The bank, a Massachusetts trust company, has three wholly owned subsidiaries, Enterprise Insurance Services, LLC, Enterprise Investment Services, LLC, and Enterprise Security Corporation, organized for the purposes of engaging in insurance sales activities, offering non-deposit investment products and services and investing in equity securities on its own behalf and not as a broker, respectively.

(2)           Basis of Presentation

The accompanying unaudited consolidated financial statements and these notes should be read in conjunction with the company’s December 31, 2006 audited consolidated financial statements and notes thereto contained in the company’s 2006 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2007.  Interim results are not necessarily indicative of results to be expected for the entire year.  The company has not changed its significant accounting and reporting policies from those disclosed in its 2006 annual report.

In the opinion of management, the accompanying consolidated financial statements reflect all necessary adjustments consisting of normal recurring accruals for a fair presentation.  All significant intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements.

Certain fiscal 2006 information has been reclassified to conform to the 2007 presentation.

On May 3, 2006, the company announced a two-for-one stock split in the form of a stock dividend payable to shareholders of record as of June 15, 2006.  On June 30, 2006 the company issued 3,842,015 shares related to this dividend.  All share and per share amounts have been retroactively adjusted to reflect the stock dividend for all periods presented.

(3)Critical Accounting Estimates

In preparing the consolidated financial statements in conformity with U. S. generally accepted accounting principles , management is required to exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized.  These estimates and assumptions affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the period.  Actual results could differ should the assumptions and estimates used change over time.

As discussed in the company’s 2006 Annual Report on Form 10-K, the two most significant areas in which management applies critical assumptions and estimates that are particularly susceptible to change relate to the determination of the allowance for loan losses and the impairment valuation of goodwill.  Refer to note 1 to the company’s consolidated financial statements included in the company’s 2006 Annual Report on Form 10-K for significant accounting policies.

(4)       Accounting for Uncertainty in Income Taxes

In July the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - An interpretation of FASB Statement No 109” (“FIN 48”). The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006.  The adoption of FIN 48 did not have a material impact on the company’s financial position or results of operation.

The company classifies interest resulting from underpayment of income taxes as income tax expense in the first period the interest would begin accruing according to the provisions of the relevant tax law.

The company classifies penalties resulting from underpayment of income taxes as income tax expense in the period for which the company claims or expects to claim an uncertain tax position or in the period in which the company’s judgment changes regarding an uncertain tax position.

The company did not have any unrecognized tax benefits accrued as income tax liabilities or receivables or as deferred tax items at March 31, 2007 or December 31, 2006.  The Company is subject to federal and state income tax examinations for tax years beginning after December 31, 2002.

7

(5)Stock-Based Compensation

The company has not significantly changed the general terms and conditions related to stock compensation from those disclosed in the company’s 2006 Annual Report on Form 10-K.

Total stock-based compensation expense, which includes stock option awards and restricted stock awards to officers and other employees, and director stock compensation in lieu of cash fees to directors, was $184 thousand and $118 thousand for the three months ended March 31, 2007 and 2006, respectively.

The company recognized stock-based compensation expense related to stock option awards of $131 thousand for the three months ended March 31, 2007, compared to $69 thousand for the same period in 2006.  Stock-based compensation expense recognized in association with a restricted stock award amounted to $12 thousand for both the three month periods ended March 31, 2007 and 2006.  Stock-based compensation expense related to Directors’ election to receive shares of common stock in lieu of cash fees for attendance at Board and Board Committee meetings amounted to $41 thousand and $37 thousand for the three months ended March 31, 2007 and 2006, respectively.   In January 2007, 10,575 shares of common stock were issued to directors in lieu of cash fees related to 2006 annual directors’ stock-based compensation expense of $167.

There were 124,100 stock option awards granted to employees during the three months ended March 31, 2007. No options were granted during the three months ended March 31, 2006.   The options become exercisable at the rate of 25% per year and expire seven years from the date of grant.  In addition, the options provide for full vesting upon attainment of age 62 while remaining employed with the bank.

The per share weighted average fair value of stock options granted in 2007 was determined to be $3.69.  The weighted average fair value of the options was determined to be 22% of the market value of the stock at the date of grant.  The assumptions used in the valuation model for determining weighted average fair value of the 2007 stock option grants for the risk-free interest rate, expected volatility, dividend yield and expected life in years were 4.42%, 21%, 2.03% and 5.5 years, respectively.

Refer to note 9 “Stock Based Compensation Plans” in the company’s 2006 Annual Report on Form 10-K for a description of the assumptions used in the valuation model.

(6)Supplemental Retirement Plan

The following table illustrates the net periodic benefit cost for the supplemental executive retirement plan for the three months ended March 31, 2007 and 2006:

(Dollars in thousands)	2007		2006
Service cost	$	138	$	134
Interest cost	32		22
Net periodic benefit cost	$	170	$	156

The company anticipates accruing an additional $509 thousand to the plan during the remainder of 2007.

(7)       Earnings Per Share

Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding during the period.  Diluted earnings per share reflects the effect on weighted average shares outstanding of the number of additional shares outstanding if dilutive stock options were converted into common stock using the treasury stock method.

8

The table below presents the increase in average shares outstanding, using the treasury stock method, for the diluted earnings per share calculation for the three months ended March 31st and the effect of those shares on earnings:

	Three months ended March 31,
	2007			2006
Basic weighted average common shares outstanding	7,747,985			7,603,694
Dilutive shares	131,349			191,878
Diluted weighted average common shares outstanding	7,879,334			7,795,572
Basic earnings per share	$	0.29		$	0.27
Effect of dilutive shares	(0.01		)	(0.01		)
Diluted earnings per share	$	0.28		$	0.26

At March 31, 2007, there were additional options outstanding to purchase up to 140,100 shares which were excluded from the calculation of diluted earnings per share due to the exercise price of these options exceeding the average market price of the company’s common stock.  These options, which were not dilutive at that date, may potentially dilute earnings per share in the future.

(8)       Guarantees and Commitments

Standby letters of credit are conditional commitments issued by the company to guarantee the performance by a customer to a third party.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  If the letter of credit is drawn upon the company creates a loan for the customer with the same criteria associated with similar loans.  The fair value of these commitments was estimated to be the fees charged to enter into similar agreements.  The estimated fair value of these commitments carried on the balance sheet was $40 thousand and $69 thousand at March 31, 2007 and 2006, respectively. These amounts are amortized to income over the life of the letters of credit, typically one year.

Fixed and adjustable rate residential mortgage loans are generally originated using underwriting standards and standard documentation allowing their sale in the secondary market. Depending on the current interest rate environment, management projections of future interest rates and the overall asset-liability management program of the company, management may elect to sell or hold residential loan production for the company’s portfolio. The company generally does not pool mortgage loans for sale, but instead sells the loans on an individual basis. The company may retain or sell the servicing when selling the loans. Interest rate lock commitments related to the origination of mortgage loans that will be sold are considered derivative instruments.  The company estimates the fair value of these derivatives using the difference between the guaranteed interest rate in the commitment and the current market interest rate. To reduce the net interest rate exposure arising from its loan sale activity, the company enters into the commitment to sell these loans at essentially the same time that the interest rate lock commitment is quoted on the origination of the loan.   The commitments to sell loans are also considered derivative instruments, with estimated fair values based on changes in current market rates.   At March 31, 2007, the estimated fair value of the company’s derivative instruments was considered to be immaterial.

9

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis should be read in conjunction with the company’s consolidated financial statements and notes thereto contained in this report and the company’s 2006 Annual Report on Form 10-K.

Special Note Regarding Forward-Looking Statements

This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning plans, objectives, future events or performance and assumptions and other statements that are other than statements of historical fact.  Forward-looking statements may be identified by reference to a future period or periods or by use of forward-looking terminology such as “anticipates”, “believes”, “expects”, “intends”, “may”, “plans”, “pursue”, “views” and similar terms or expressions. Various statements contained in Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 3 – “Quantitative and Qualitative Disclosures About Market Risk,” including, but not limited to, statements related to management’s views on the banking environment and the economy, competition and market expansion opportunities, the interest rate environment, credit risk and the level of future non-performing assets and charge-offs, potential asset and deposit growth, future non-interest expenditures and non-interest income growth, and borrowing capacity are forward-looking statements.  The company wishes to caution readers that such forward-looking statements reflect numerous assumptions and involve a number of risks and uncertainties that may adversely affect the company’s future results. The following important factors, among others, could cause the company’s results for subsequent periods to differ materially from those expressed in any forward-looking statement made herein: (i) changes in interest rates could negatively impact net interest income;  (ii) changes in the business cycle and downturns in the local, regional or national economies, including deterioration in the local real estate market, could negatively impact credit and/or asset quality and result in credit losses and increases in the company’s reserve for loan losses; (iii) changes in consumer spending could negatively impact the company’s credit quality and financial results; (iv) increasing competition from larger regional and out-of-state banking organizations as well as non-bank providers of various financial services could adversely affect the company’s competitive position within its market area and reduce demand for the company’s products and services; (v) deterioration of securities markets could adversely affect the value or credit quality of the company’s assets and the availability of funding sources necessary to meet the company’s liquidity needs; (vi) changes in technology could adversely impact the company’s operations and increase technology-related expenditures;  (vii) increases in employee compensation and benefit expenses could adversely affect the company’s financial results;  (viii) changes in laws and regulations that apply to the company’s business and operations could increase the company’s regulatory compliance costs and adversely affect the company’s business environment, operations and financial results; and (ix) changes in accounting standards, policies and practices, as may be adopted or established by the regulatory agencies, the Financial Accounting Standards Board (the “FASB”)or the Public Company Accounting Oversight Board could negatively impact the company’s financial results.  Therefore, the company cautions readers not to place undue reliance on any such forward-looking information and statements.

Accounting Policies/Critical Accounting Estimates

The company has not changed its significant accounting and reporting policies from those disclosed in its 2006 Annual Report on Form 10-K. In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized.  These estimates and assumptions affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the period.  Actual results could differ should the assumptions and estimates used change over time.

As discussed in the company’s 2006 Annual Report on Form 10-K, the two most significant areas in which management applies critical assumptions and estimates that are particularly susceptible to change relate to the determination of the allowance for loan losses and the impairment valuation of goodwill.   Refer to note 1 to the company’s consolidated financial statements included in the company’s 2006 Annual Report on Form 10-K for significant accounting policies.

10

Overview

The current interest rate environment and the highly competitive marketplace continue to present a growth and earnings challenge for the banking industry. At Enterprise Bancorp, Inc., this environment has contributed to slower loan and deposit growth and continued pressure on the company’s net interest margin from rising funding costs.

Despite these economic and industry issues, the company reported net income for the three months ended March 31, 2007 of $2.222 million compared to $2.056 million for the same period in 2006, an increase of 8%.

Diluted earnings per share were $0.28 for the quarter compared to $0.26 for the same period in 2006, an increase of 8%.  All prior period per-share amounts have been adjusted to reflect the two-for-one stock split paid on June 30, 2006 in the form of a stock dividend.

Net income growth resulted primarily from an increase in non-interest income and a decrease in the provision for loan losses, partially offset by an increase in non-interest expense.

Composition of Earnings

The company’s earnings are largely dependent on its net interest income, which is the difference between interest income on loans and investments and interest expense on deposits and borrowings. The re-pricing frequency of these assets and liabilities are not identical, and therefore subject the company to the risk of adverse changes in interest rates. This is often referred to as “interest rate risk” and is reviewed in more detail in Item 3, “Quantitative and Qualitative Disclosures About Market Risk.”

Net interest income for the quarter ended March 31, 2007 amounted to $10.0 million, representing a $55 thousand decrease from the same period in 2006.  Net interest margin, the spread earned between interest-earning assets and the company’s funding sources, primarily deposits, was 4.59% for the quarter ended March 31, 2007 compared to 4.74% and 4.79% for the quarters ended December 31, and March 31, 2006, respectively.  The decrease in net interest margin resulted from both the flat yield curve and a highly-competitive marketplace.

Non-interest income was $2.1 million for the quarter ended March 31, 2007, an increase of $397 thousand or 24% over the same period in 2006.  The growth resulted primarily from increases of $149 thousand in investment advisory fees, $107 thousand in bank-owned life insurance income and $89 thousand in deposit service fees.

Non-interest expense amounted to $8.5 million for the quarter ended March 31, 2007 compared to $8.2 million for the same period in 2006, an increase of 4%.  The increases were predominantly in occupancy and compensation related costs necessary to support the company’s growth.

The provision for loan losses, which is impacted by asset quality and loan growth, amounted to $83 thousand for the quarter ended March 31, 2007 compared to $273 thousand in the first quarter of 2006. The reduced provision reflects continued favorable asset quality, evidenced by a non-performing loans to total loans ratio of 0.38% at March 31, 2007 and net recoveries of $73 thousand during the quarter. The allowance for loan losses to total loans ratio was 1.68% at March 31, 2007 compared to 1.70% at December 31, 2006.  The company’s management of credit risk is reviewed in more detail under the heading “Asset Quality and the Allowance for Loan Losses” contained in the Financial Condition section of this Item 2.

Sources and Uses of Funds

The company’s primary sources of funds are deposits, brokered certificates of deposit, borrowings from the Federal Home Loan Bank of Boston (the “FHLB”), repurchase agreements, current earnings and proceeds from the sales, maturities and paydowns on loans and investment securities.  The company uses funds to originate loans, purchase investment securities, conduct operations, expand the branch network, and pay dividends to shareholders.

Total assets amounted to $995.0 million at March 31, 2007, an increase of 2% since December 31, 2006.

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The company’s core asset strategy is to grow loans, primarily commercial loans. Total loans increased 3% since December 31, 2006 and amounted to $780.4 million or 78% of total assets. Commercial loans amounted to $667.4 million or 85% of total loans.

The investment portfolio is the other key component of the company’s earning assets and is primarily used to invest excess funds, provide liquidity and to manage the company’s asset-liability position. Total investments amounted to $129.4 million at March 31, 2007, or 13% of total assets, and have decreased $2.2 million since December 31, 2006.

From a funding perspective, management’s strategy is to grow low cost deposits (primarily checking accounts). Asset growth in excess of low cost deposits is typically funded through higher cost deposits (certificates of deposit and money market / savings products), brokered deposits, repurchase agreements, FHLB borrowings, and investment portfolio cash flow.

At March 31, 2007, total deposits, which included brokered term deposits (“brokered CDs”), amounted to $881.5 million, representing 2% growth over December 31, 2006. Total deposits, excluding brokered CDs, amounted to $791.6 million at March 31, 2007, representing a 1% decrease since December 31, 2006.

At March 31, 2007, the company had $89.9 million in brokered CDs and $12.3 million in FHLB borrowings compared to $64.9 million in brokered CDs and $10.3 million in FHLB borrowings at December 31, 2006.

Opportunities and Risks

The company’s primary market is the Merrimack Valley and North Central regions of Massachusetts and the South Central region of New Hampshire. Management believes the company’s business model, strong service culture, skilled management team and brand name create opportunities for the company to be the leading provider of banking and investment management services in its growing market area. Management continually strives to differentiate the company from competitors by providing highly competitive commercial banking, investment, and insurance products delivered through prompt and personal service based on management’s familiarity and understanding of the banking and other financial service needs of its customers, which include businesses, professionals, and consumers.

Management recognizes that substantial competition exists in the marketplace and views this as a key business risk.  Market competition includes the expanded commercial lending capabilities of credit unions, the shift to commercial lending by traditional savings banks, the presence of large regional and national commercial banks, as well as the products offered by non-bank financial services competitors.

Despite these challenges, the company has been successful in growing its commercial banking services. Management believes this growth is the result of ongoing business development efforts and continued market expansion within existing and into new markets. The company has fourteen branch locations and has received regulatory approval to establish a new branch facility in the city of Methuen, Massachusetts and expects to open the branch for business in late 2007. The company continues to look for market and branch opportunities that will increase long-term franchise value and shareholder returns. Such expansion typically increases the company’s operating expenses, primarily in salary and benefits, marketing, and occupancy, before the growth benefits are fully realized in those markets.

In addition to growth and competition, the company’s significant challenges continue to be the effective management of credit, interest rate and operational risk.

Credit risk management is reviewed below in this Item 2 under the heading “Asset Quality and the Allowance for Loan Losses.”

Interest rate risk management is reviewed under Item 3, “Quantitative and Qualitative Disclosures About Market Risk.”

Operational risk management is also a key component of the company’s risk management process, particularly as it relates to technology administration, information security, and business continuity.

12

Management utilizes a combination of third party security assessments, key technologies and ongoing internal evaluations in order to continually monitor and safeguard information on its operating systems and that of third party service providers.  The company contracts with outside parties to perform a broad scope of both internal and external security assessments on a regular basis. These third parties test the company’s security controls and network configuration, and assess internal practices and other key items.  In addition, the company contracts with an outside service provider to monitor usage patterns and identify unusual activity on bank issued debit/ATM cards.  The company also utilizes firewall technology and an intrusion detection system to protect against unauthorized access and commercial software that continuously scans for computer viruses on the company’s information systems.

The company maintains an Information Security and Technology Practices policy applicable to all employees.  The policy outlines the employee’s responsibilities and key components of the company’s Information Security and Technology Practices Program, which include the following: identification and assessment of risk; institution of policies and procedures to manage and control the risk; risk assessment of outsourced service providers; development of strategic security contingency plans; training of all officers and employees; and reporting to the Board of Directors.  Significant technology issues, related changes in risk and results of third party security assessments are reported to the Board’s Banking Technology and Audit Committees.  The Board, through these committees, reviews the status of the Information Security and Technology Practices Program and makes adjustments to the policy as deemed necessary.

The company has a Business Continuity Plan that consists of the information and procedures required to enable rapid recovery from an occurrence that would disable the company for an extended period.  The plan establishes responsibility for assessing a disruption of business, contains alternative strategies for the continuance of critical business functions, assigns responsibility for restoring services, and sets priorities by which critical services will be restored.

Financial Condition

Total assets increased $15.7 million, or 2%, over December 31, 2006, to $995.0 million at March 31, 2007.  The increase was primarily attributable to increases in total loans partially offset by slight reductions in cash and investment securities.

Short-term investments

As of March 31, 2007, short-term investments amounted to $15.9 million compared to $15.3 million at December 31, 2006. Short-term investment represented 2% of total assets at both March 31, 2007 and December 31, 2006.  Short-term investments carried as cash equivalents consist of overnight and term federal funds sold and money market mutual funds.

Investments

At March 31, 2007, the investment portfolio’s fair market value was $129.4 million, representing a decline of $2.2 million since December 31, 2006.  The fair market value of the investment portfolio represented 13% of total assets at both March 31, 2007 and December 31, 2006.

During the three months ended March 31, 2007, the total principal paydowns, calls and maturities amounted to $3.4 million.  These portfolio outflows were partially offset by net purchases of $796 thousand, primarily in the equity portfolio and in FHLB stock.

The net unrealized gain on the portfolio at March 31, 2007 was $238 thousand compared to a net unrealized loss of $163 thousand at December 31, 2006.  The increase in fair market value was primarily due to lower bond market interest rates in the current period over the prior period and an increase in equity market values.  The net unrealized gain or loss in the company’s fixed income portfolio fluctuates as interest rates rise and fall.  Due to the fixed rate nature of this portfolio, as rates fall the value of the portfolio rises, and as rates rise, the value of the portfolio declines.  The unrealized gains on fixed income investments will also decline as the securities approach maturity.  The net unrealized gain or loss on equity securities will change based on changes in the market value of the individual securities and mutual funds in the portfolio.    Unrealized gains or losses will only be recognized in the statements of income if the securities are sold. However, if an unrealized loss on a fixed income or equity security is deemed to be other-than-temporary, the company marks the investment down to its carrying value through a charge to earnings.

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The following table summarizes the fair market value of investments at the dates indicated:

(Dollars in thousands)	March 31, 2007		December 31, 2006
Federal agency obligations (1)	$	10,403	$	10,405
Collateralized mortgage obligations and other mortgage backed securities (CMO/MBS)	58,847		61,431
Municipal securities	48,245		48,762
Available for sale fixed income securities	$	117,495	$	120,598
Equity securities	9,217		8,481
Federal Home Loan Bank stock (2)	1,609		1,428
Certificates of deposit	1,033		1,033
Total investments	$	129,354	$	131,540

(1)Federal agency obligations include securities issued by government-sponsored enterprises such as Fannie Mae, Freddie Mac, and the FHLB.  These securities do not represent obligations of the U.S. government and are not backed by the full faith and credit of the United States Treasury.

(2)The bank is required to purchase FHLB stock in association with outstanding advances from the FHLB; this stock is classified as a restricted investment and carried at cost.

From time to time the company may pledge investments from the portfolio as collateral for various municipal deposit accounts, repurchase agreements and treasury, tax and loan deposits.  The fair value of securities pledged as collateral was $26.3 million and $27.1 million at March 31, 2007 and December 31, 2006 respectively.  Securities designated as qualified collateral for FHLB borrowing capacity amounted to $44.5 million and $46.2 million at March 31, 2007 and December 31, 2006 respectively.

Loans

The company specializes in lending to business entities, non-profit organizations, professionals and individuals. The company’s primary lending focus is on the development of high quality commercial relationships achieved through active business development efforts, strong community involvement and focused marketing strategies.  Loans made by the company to businesses include commercial mortgage loans, construction loans, secured and unsecured commercial loans and lines of credit, and standby letters of credit.  The company also originates equipment lease financing for businesses.  Loans made to individuals include residential mortgage loans, home equity loans, residential construction loans, secured and unsecured personal loans and lines of credit and mortgage loans on investment and vacation properties.

Total loans were $780.4 million at March 31, 2007, an increase of $19.2 million, or 3%, compared to December 31, 2006.  Total loans represented 78% of total assets at both March 31, 2007 and December 31, 2006.

The following table sets forth the loan balances by certain loan categories at the dates indicated and the percentage of each category to gross loans.

	March 31, 2007					December 31, 2006
(Dollars in thousands)	Amount			Percent		Amount			Percent
Commercial real estate	$	377,279		48.3	%	$	368,621		48.3	%
Commercial and industrial	176,125			22.5	%	164,865			21.6	%
Commercial construction	114,045			14.6	%	114,078			15.0	%
Total Commercial loans	667,449			85.4	%	647,564			84.9	%
Residential mortgages	62,111			8.0	%	61,854			8.1	%
Residential construction	4,264			0.6	%	3,981			0.5	%
Home equity	42,528			5.4	%	44,038			5.8	%
Consumer	4,158			0.5	%	4,307			0.6	%
Loans held for sale	1,017			0.1	%	549			0.1	%
Gross loans	781,527			100.0	%	762,293			100.0	%
Deferred fees, net	(1,173		)			(1,180		)
Total loans	780,354					761,113
Allowance for loan losses	(13,096		)			(12,940		)
Net loans	$	767,258				$	748,173

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Commercial real estate loans were $377.3 million at March 31, 2007, compared to $368.6 million at December 31, 2006, an increase of $8.7 million or 2%.  Commercial real estate loans are typically secured by apartment buildings, office or mixed-use facilities, strip shopping malls or other commercial property.

Commercial and industrial loans totaled $176.1 million at March 31, 2007, compared to $164.9 million at December 31, 2006, an increase of $11.3 million or 7%.  Commercial loans include seasonal revolving lines of credit, working capital loans, equipment financing (including equipment leases), term loans, revolving lines of credit and loans under various U.S. Small Business Administration programs.

Commercial construction loans amounted to $114.0 million at March 31, 2007, compared to $114.1 million at December 31, 2006.  Commercial construction loans include the development of residential housing and condominium projects, the development of commercial and industrial use property and loans for the purchase and improvement of raw land.

At March 31, 2007, the company had commercial loan balances participated out to various banks amounting to $7.3 million, compared to $8.2 million at December 31, 2006.  These balances participated out to other institutions are not carried as assets on the company’s financial statements.  Loans originated by other banks in which the company is the participating institution are carried in the loan portfolio at the company’s pro rata share of ownership and amounted to $17.1 million and $18.3 million at March 31, 2007 and December 31, 2006, respectively.  The company performs an independent credit analysis of each commitment prior to participation in any loan.

Loans designated as qualified collateral for FHLB borrowing capacity amounted to $163.9 million and $42.5 million at March 31, 2007 and December 31, 2006, respectively.  In January 2007, the company increased its FHLB borrowing capacity by pledging additional commercial real estate, home equity and multi-family loans as collateral to the FHLB.

Asset Quality and the Allowance for Loan Losses

The company’s credit risk management function focuses on a wide variety of factors, including, among others, current and expected economic conditions and trends, the real estate market, the financial condition of borrowers, the ability of borrowers to adapt to changing conditions or circumstances affecting their business and the continuity of borrowers’ management teams.

Management regularly monitors these factors, as well as levels of non-accrual loans, levels of charge-offs and recoveries, growth and composition of the loan portfolio, expansion in geographic market areas, comparison to industry peers and known and inherent risks in the portfolio, through ongoing credit reviews by the credit department, an external loan review service, reviews by members of senior management and the Loan Committee of the Board of Directors and the full Board of Directors.

The allowance for loan losses is an estimate of credit risk inherent in the loan portfolio.  The allowance for loan losses is established through a provision for loan losses, a direct charge to earnings.  Loan losses are charged against the allowance when management believes that the collectability of the loan principal is unlikely.  Recoveries on loans previously charged off are credited to the allowance.  The company maintains the allowance at a level that it deems adequate to absorb all reasonably anticipated losses from specifically known and other credit risks associated with the portfolio.

In making its assessment on the adequacy of the allowance, management considers several quantitative and qualitative factors that could have an effect on the credit quality of the portfolio, some of which are outlined above.  There were no significant changes in credit quality, the company’s underwriting, or the allowance assessment methodology used to estimate loan loss exposure as reported in the company’s Annual Report on Form 10-K for the year ended December 31, 2006.

The allowance for loan losses to total loans ratio was 1.68% at March 31, 2007 and was consistent with the December 31, 2006 ratio of 1.70%.  Based on the foregoing, as well as management’s judgment as to the risks inherent in the loan portfolio, the company’s allowance for loan losses was deemed adequate to absorb reasonably anticipated losses from specifically known and other credit risks associated with the portfolio as of March 31, 2007.

15

The following table sets forth information regarding non-performing assets and past due loans at the dates indicated:

(Dollars in thousands)	March 31,  2007			December 31, 2006			March 31,  2006
Non-accrual loans	$	2,950		$	1,785		$	1,475
Accruing loans > 90 days past due	22			7			—
Total non-performing loans	2,972			1,792			1,475
Other real estate owned	—			—			—
Total non-performing assets	$	2,972		$	1,792		$	1,475
Total Loans	$	780,354		$	761,113		$	718,789
Allowance for loan losses	$	13,096		$	12,940		$	12,325
Allowance for loan losses: Total loans	1.68		%	1.70		%	1.71		%
Allowance for loan losses: Non-performing loans	440.65		%	722.10		%	835.59		%
Non-performing loans: Total loans	0.38		%	0.24		%	0.21		%
Non-performing assets: Total assets	0.30		%	0.18		%	0.16		%
Loans 30-89 days past due: Total loans	1.33		%	0.75		%	0.59		%

Total non-performing loans were $3.0 million at March 31, 2007 compared to $1.8 million and $1.5 million at December 31, 2006 and March 31, 2006, respectively.  The increase since December was mainly due to two commercial relationships added to non-accrual status during the period and management does not consider the increase since December to be indicative of deterioration in the credit quality of the general loan portfolio.  Overall, non-performing assets are considered to be at low levels.

The ratio of non-performing loans to total loans increased to 0.38% as of March 31, 2007, compared to 0.24% and 0.21% at December 31, 2006 and March 31, 2006, respectively.    The increase since December was mainly due to the two commercial relationships referred to above amounting to 0.14% of total loans at March 31, 2007.  Management does not consider the increase in the level of non-performing loans to be significant.

Loans for which management considers it probable that not all contractual principal and interest will be collected in accordance with the original loan terms are designated as impaired loans.  The majority of impaired loans are included within the non-accrual balances; however, not every loan in non-accrual status has been designated as impaired.  Total impaired loans were $2.8 million at March 31, 2007 compared to $1.8 million and $1.4 million at December 31, 2006 and March 31, 2006, respectively.

The ratio of delinquent loans 30-89 days past due, but still accruing, as a percentage of total loans increased to 1.33% at March 31, 2007, from 0.75% at December 31, 2006 and from 0.59% at March 31, 2006. The ratio of delinquent loans to total loans will fluctuate due to the timing of customer payments.  The largest concentration of these loans is generally less than 40 days past due, as was the case at March 31, 2007 at which time approximately 85% of delinquent loans were included in the 30 – 40 day past due category.

Management closely monitors the credit quality of individual delinquent and non-performing relationships, industry concentrations, the local and regional real estate market and current economic conditions.  The level of delinquent and non-performing assets is largely a function of economic conditions and the overall banking environment.  Despite prudent loan underwriting, adverse changes within the company’s market area or deterioration in the local, regional or national economic conditions could negatively impact the company’s level of non-performing assets in the future.

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The following tables summarize the activity in the allowance for loan losses for the periods indicated:

	Three months ended March 31,
(Dollars in thousands)	2007			2006
Balance at beginning of year	$	12,940		$	12,050
Charged off	(14		)	(2		)
Recovered	87			4
Net loans recovered	73			2
Provision charged to operations	83			273
Balance at March 31	$	13,096		$	12,325
Annualized net loans recovered: Average loans outstanding	0.04		%	0.00		%

Net loans recovered during the quarters ended March 31, 2007 and 2006 were $73 thousand and $2 thousand, respectively.   The provision reflects management’s estimate of loan loss reserves necessary to support the level of credit risk inherent in the portfolio during the period.  The provision for loan losses, which is impacted by asset quality and loan growth, amounted to $83 thousand and $273 thousand for the quarters ended March 31, 2007 and 2006 respectively.  The reduced provision reflects net recoveries, the level of loan growth and the continued favorable asset quality during the period.

Deposits

Total deposits amounted to $881.5 million at March 31, 2007 compared to $867.5 million at December 31, 2006.  The increase of $14.0 million, or 2%, primarily resulted from an increase in brokered CDs of $25.0 million, partially offset by a net reduction in non-brokered deposits of $10.9 million.

The following table sets forth the deposit balances by certain categories at the dates indicated and the percentage of each category to total deposits.

	March 31, 2007				December 31, 2006
(dollars in thousands)	Amount		Percent		Amount		Percent
Demand	$	158,696	18.0	%	$	169,910	19.6	%
Interest bearing checking	171,697		19.5	%	179,533		20.7	%
Total checking	330,393		37.5	%	349,443		40.3	%
Retail savings/money markets	141,184		16.0	%	141,202		16.3	%
Commercial savings/money markets	126,464		14.3	%	125,584		14.5	%
Total savings/money markets	267,648		30.3	%	266,786		30.8	%
Certificates of deposit	193,588		22.0	%	186,349		21.4	%
Total non-brokered deposits	791,629		89.8	%	802,578		92.5	%
Brokered certificates of deposit	89,920		10.2	%	64,944		7.5	%
Total deposits	$	881,549	100.0	%	$	867,522	100.0	%

Borrowed Funds

Borrowed funds, consisting of securities sold under agreements to repurchase (“repurchase agreements”) and FHLB borrowings, amounted to $15.2 million at March 31, 2007 compared to $15.1 million at December 31, 2006.  Total repurchase agreements declined by $2.0 million since December 31, 2006 and were $2.8 million at March 31, 2007.  Total FHLB borrowings amounted to $12.3 million at March 31, 2007, an increase of $2.1 million since December 31, 2006.

At March 31, 2007, the bank had the capacity to borrow additional funds from the FHLB of up to $120.0 million.  Management believes that the company has adequate liquidity to meet its commitments.

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Accounting Rule Changes

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. The provisions of FIN 48 are to be applied to all tax positions upon initial adoption of this standard. Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of FIN 48.  The adoption of FIN 48 did not have a material impact on the company’s financial position or results of operation.

In September 2006 the FASB’s Emerging Issues Task Force reached a consensus regarding Issue No. 06-4 (“EITF No. 06-4”) “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements.”  The Task Force affirmed that an employer should recognize a liability for future benefits associated with an endorsement split-dollar life insurance arrangement that provides a benefit to an employee that extends to postretirement periods.  The liability and related compensation cost are to be determined in accordance with the appropriate previously issued financial standards. The Task Force concluded that this Issue should be effective through either (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption, or (b) a change in accounting principle through retrospective application to all prior periods.   The Task Force reached a consensus that this Issue should be effective for fiscal years beginning after December 15, 2007. Management is in the process of determining the impact that adoption of EITF No. 06-4 will have on the company’s financial position and results of operation.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”).  This Statement provides a single definition of fair value based on the exchange price notion and establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), with the intention to increase consistency and comparability in fair value measurements. This Standard also expands the required disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice related to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. This Statement establishes a fair value hierarchy segregating fair value measurements using (Level 1) quoted market prices in active markets for identical assets or liabilities; (Level 2) significant other observable inputs; (Level 3) significant unobservable inputs.  The expanded disclosures focus on the inputs used to measure fair value and the effects of the measurements on earnings within Level 3 of the fair value hierarchy.  SFAS No. 157 is effective for fiscal years that begin after November 15, 2007, and interim periods within those fiscal years.  Management does not anticipate that the adoption of SFAS No. 157 will have a material impact on the company’s financial position or results of operation.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment for FASB Statement No. 115”.  This Statement permits entities to choose to measure many financial instruments and certain other items at fair value.  The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.   This Statement allows the fair value option to be applied to eligible items, irrevocably, on an instrument by instrument basis with unrealized gains and losses on the instruments reported in earnings at each subsequent reporting date.  SFAS No. 159 is effective for fiscal years that begin after November 15, 2007, and interim periods within those fiscal years.   Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157.  This statement permits application to eligible items existing at the effective date (or early adoption date).  Management expects to adopt SFAS No 159 as of the effective date and does not anticipate that the adoption will have a material impact on the company’s financial position or results of operation.

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Liquidity

Liquidity is the ability to meet cash needs arising from, among other things, fluctuations in loans, investments, deposits and borrowings.  Liquidity management is the coordination of activities so that cash needs are anticipated and met readily and efficiently. Liquidity policies are set and monitored by the company’s Asset-Liability Committee of the Board of Directors. The company’s liquidity is maintained by projecting cash needs, balancing maturing assets with maturing liabilities, monitoring various liquidity ratios, monitoring deposit flows, maintaining liquidity within the investment portfolio and maintaining borrowing capacity in the brokered CD market and at the FHLB.

The company’s asset-liability management objectives are to maintain liquidity, provide and enhance access to a diverse and stable source of funds, provide competitively priced and attractive products to customers, conduct funding at a low cost relative to current market conditions and engage in sound balance sheet management strategies.

The company funds earning assets with deposits, brokered CDs, repurchase agreements, FHLB borrowings, commercial lines of credit, junior subordinated debentures and earnings.

Capital Resources

As of March 31, 2007, both the company and the bank qualify as “well capitalized” under applicable regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the Federal Deposit Insurance Corporation.  To be categorized as well capitalized, the company and the bank must maintain minimum total, Tier 1 and, in the case of the bank, leverage capital ratios as set forth in the table below.

The company’s actual capital amounts and ratios are presented as of March 31, 2007 in the table below. The bank’s capital amounts and ratios do not differ materially from the amounts and ratios presented for the company.

	Actual				Minimum Capital for Capital Adequacy  Purposes				Minimum Capital To Be Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount			Ratio
Total Capital (to risk weighted assets)	$	93,949	11.28	%	$	66,629	8.00	%	$	83,286		10.00	%
Tier 1 Capital (to risk weighted assets)	83,129		9.98	%	33,314		4.00	%	49,972			6.00	%
Tier 1 Capital (to average assets)	83,129		8.71	%	38,196		4.00	%	47,745		*	5.00	%*

* This requirement does not apply to the company and is reflected in the table merely for informational purposes with respect to the bank.  For the bank to qualify as “well capitalized”, it must also maintain a leverage capital ratio (Tier 1 capital to average assets) of at least 5%.

The company maintains a dividend reinvestment plan (the “DRP”).  The DRP enables stockholders, at their discretion, to elect to reinvest dividends paid on their shares of the company’s common stock by purchasing additional shares of common stock from the company at a purchase price equal to fair market value.   Shareholders utilized the DRP to invest $267 thousand of the $619 thousand cash dividend paid on March 1, 2007, into 16,136 shares of the company’s common stock.

On April 17, 2007, the company announced a quarterly dividend of $0.08 to be paid on June 1, 2007 to shareholders of record as of May 11, 2007.  The quarterly dividend represents a 14% increase over the 2006 dividend rate.

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Results of Operations

Three Months Ended March 31, 2007 vs. Three Months Ended March 31, 2006

Unless otherwise indicated, the reported results are for the three months ended March 31, 2007 with the “comparable period” and “prior year” being the three months ended March 31, 2006.

The company reported first quarter 2007 net income of $2.222 million compared to $2.056 million during the first quarter of the prior year, an increase of 8%.  Diluted earnings per common share were $0.28 for the quarter compared to $0.26 for the prior year, an increase of 8%.

Net Interest Income

The company’s net interest income was $10.0 million for the three months ended March 31, 2007, a decrease of $55 thousand compared to $10.1 million for the prior year.  Total interest and dividend income for the 2007 period increased by $1.5 million, while total interest expense increased by $1.5 million over the prior year.

Net Interest Margin

Tax equivalent net interest margin decreased to 4.59% for the quarter ending March 31, 2007 from a margin of 4.79% in the prior year.  The 20 basis point decrease was primarily due to an increase of 64 basis points in the total cost of funds partially offset by an increase in the yield on interest earning assets of 43 basis points.

Interest Income

Interest income amounted to $15.6 million, an increase of $1.5 million, or 10%, compared to $14.1 million in the prior year.  The increase resulted primarily from a $31.2 million, or 4%, increase in the average balance of interest earning assets and, to a lesser extent, a 43 basis point increase in the average tax equivalent yield on interest earning assets.

Average loan balances increased $62.8 million, or 9%, compared to the prior year, amounting to $772.1 million, while the average balance of investment securities and short-term investments (together “investments”) decreased by $31.5 million, or 19%, to $132.8 million for the three months ended March 31, 2007.   The decrease in average investment balances was primarily due to paydowns, calls, maturities and sales of investments since March 31, 2006, the proceeds of which were redeployed to fund loan growth over the period.

This shift in average balances from lower yielding investments into higher yielding loans resulted in the 43 basis point increase in the average tax equivalent yield on interest earning assets to 7.09%, with loan yields increasing 35 basis points to 7.49% and the tax equivalent yield realized on investments increasing 14 basis points to 4.76%.  These yield increases were due to loan growth and loans repricing at the higher market rates and the sales of lower yielding securities in the fourth quarter of 2006.

Total interest income on loans amounted to $14.3 million, an increase of $1.8 million compared to the same period in the prior year, due primarily to growth in average balances and to a lesser degree to the increase in yields.  Total investment income amounted to $1.4 million, a decrease of $307 thousand compared to the same period in the prior year, due primarily to the decrease in the average investment balances.

Interest Expense

Interest expense amounted to $5.6 million, an increase of $1.5 million compared to the prior year.  The increase resulted primarily from a 64 basis point increase in the average cost of total deposits, borrowed funds and debentures to 2.57% compared to 1.93% in the comparable period.  This increase in cost of funds was primarily due to the increased market rates and the resulting shift in customer balances from low cost to higher yielding deposit products, and an overall 3.6% increase in the average balance of total deposits, borrowed funds and debentures.

20

Interest expense on interest checking, savings and money market accounts increased $399 thousand over the comparable period, to $2.0 million.  This increase resulted from a 43 basis point increase in the average cost of interest checking, savings and money market accounts to 1.90%, due to higher market interest rates.  This increase in interest expense was partially offset by a reduction in the average balance of these accounts of $15.2 million, to $422.7 million for the three month period ended March 31, 2007.

Interest expense on certificates of deposit (“CDs”) increased $1.3 million over the comparable period, to $3.1 million.  The average balance of CDs increased $70.2 million, or 35%, over the comparable period in the prior year to $270.5 million.  The increase in the average CD balance resulted from a $38.3 million, or 96%, increase in the average balance of brokered CDs that the company utilized as an alternative to FHLB borrowings, and a $31.9 million, or 20%, increase in internally generated CD growth.  The average cost of CDs also increased to 4.61%, an increase of 110 basis points over the comparable period in the prior year, due to higher market rates, consumer price sensitivity and the higher costing brokered CD balances.

Interest expense on borrowed funds, consisting of FHLB borrowings and repurchase agreements, decreased $208 thousand over the same period last year.  The average balance of borrowed funds, primarily FHLB borrowings, decreased $23.2 million to $18.0 million, as the company began its expanded use of brokered CDs and decreased use of FHLB borrowings. The average cost of borrowed funds increased 92 basis points to 5.26%, due to an increase in market interest rates.

The average balance of non-interest bearing demand deposits remained relatively consistent and represented 18% and 19% of total average deposits and borrowings for the three months ended March 31, 2007 and 2006, respectively.

The following table sets forth the extent to which changes in interest rates and changes in the average balances of interest-earning assets and interest-bearing liabilities have affected interest income and expense during the three months ended March 31, 2007 and March 31, 2006, respectively.  For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (1) volume (change in average portfolio balance multiplied by prior year average rate); (2) interest rate (change in average interest rate multiplied by prior year average balance); and (3) rate and volume (the remaining difference).

21

AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS

	Three Months Ended March 31, 2007						Three Months Ended March 31, 2006						Changes due to
(Dollars in thousands)	Average  Balance		Interest		Average  Yield		Average  Balance		Interest		Average  Yield		Total			Volume		Rate		Rate/ Volume
Assets:
Loans (1)	$	772,129	$	14,269	7.49	%	$	709,363	$	12,482	7.14	%	$	1,787		1,105		612		70
Investments (2) (3)	132,823		1,352		4.76	%	164,353		1,659		4.62	%	(307		)	(364	)	58		(1	)
Total interest earnings assets	904,952		15,621		7.09	%	873,716		14,141		6.66	%	1,480			741		670		69
Other assets	63,323						53,103
Total assets	$	968,275					$	926,819
Liabilities and stockholders’ equity:
Int chkg, savings and money market	$	422,666	1,981		1.90	%	$	437,836	1,582		1.47	%	399			(55	)	464		(10	)
Certificates of deposit (4)	270,523		3,077		4.61	%	200,315		1,733		3.51	%	1,344			608		543		193
Borrowed funds	17,957		233		5.26	%	41,205		441		4.34	%	(208		)	(249	)	93		(52	)
Junior subordinated debentures	10,825		294		10.88	%	10,825		294		10.88	%	—			—		—		—
Total interest-bearing deposits, borrowed funds and debentures	721,971		5,585		3.14	%	690,181		4,050		2.38	%	1,535			304		1,100		131
Net interest rate spread (2)					3.95	%					4.28	%
Demand deposits	160,004		—				161,081		—
Total deposits, borrowed funds and debentures	881,975		5,585		2.57	%	851,262		4,050		1.93	%
Other liabilities	8,226						6,779
Total liabilities	890,201						858,041
Stockholders’ equity	78,074						68,778
Total liabilities and stockholders’ equity	$	968,275					$	926,819
Net interest income			$	10,036					$	10,091			$	(55	)	437		(430	)	(62	)
Net interest margin (2)					4.59	%					4.79	%

(1)Average loans include non-accrual loans and are net of average deferred loan fees.

(2)Average balances are presented at average amortized cost and average interest rates are presented on a tax equivalent basis.  The tax equivalent effect, which was not included in the interest amount above, was $230 and $240 for the periods ended March 31, 2007 and March 31, 2006, respectively.

(3)Investments include investment securities and short-term investments.

(4)Certificates of deposit include brokered and non-brokered CDs.

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Provision for Loan Loss

The provision for loan losses was $83 thousand compared to $273 thousand for the prior year.

The reduced provision reflects net recoveries, level of loan growth and the continued favorable asset quality during the period.  The provision reflects management’s estimate of loan loss reserves necessary to support the level of credit risk inherent in the portfolio during the period.

There have been no material changes to the company’s allowance for loan loss methodology used to estimate loan loss exposure as reported in the company’s Annual Report on Form 10-K for the year ended December 31, 2006. The provision for loan losses is a significant factor in the company’s operating results.

For further discussion regarding the provision for loan losses and management’s assessment of the adequacy of the allowance for loan losses see “Financial Condition - Asset Quality and the Allowance for Loan Losses” above and “Risk Elements/Asset Quality” and “Allowance for Loan Losses” in the Financial Condition section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the company’s 2006 Annual Report on Form 10-K.

Non-Interest Income

Non-interest income increased $397 thousand, or 24%, to $2.1 million.  The increase was primarily attributable to increases in investment advisory fees, bank-owned life insurance income and deposit service fees.

Investment advisory fees increased by $149 thousand, or 24%, for the three months ended March 31, 2007 compared to the same period in 2006. The change resulted from new business generated and increases in the value of the portfolio due to increases in market values.

Bank-owned life insurance income increased by $107 thousand over the prior period due to income on additional policies purchased the second quarter of 2006.

Deposit service fees increased by $89 thousand over the prior period due to an increase in transaction activity on commercial deposit accounts.

Non-Interest Expense

Non-interest expense increased $302 thousand, or 4%, compared to the prior year and amounted to $8.5 million for the period ended March 31, 2007.  The increase was primarily attributable to increases in salaries and employee benefits and occupancy.

Salaries and employee benefits increased $213 thousand, or 4% compared to the prior year, to $5.3 million. The increase primarily resulted from staffing increases necessary to support the company’s strategic growth initiatives, salary adjustments and corresponding increases in health insurance premiums and taxes, and employee stock compensation expense, partially offset by a reduction in accruals related to performance-based incentive compensation.

Occupancy expense increased by $194 thousand, or 14%, to $1.6 million primarily due to ongoing increases in maintenance and service costs, and facility expansion necessary to support the company’s growth and strategic initiatives.

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

The company’s primary market risk is interest rate risk and interest rate risk management is centered on the company’s Asset-Liability Committee (“the committee”). The committee is comprised of five outside directors of the company and three executive officers of the company, who are also members of the Board of Directors. In addition, several directors who are not on the committee rotate in on a regular basis. Annually, the committee approves the company’s asset-liability policy, which provides management with guidelines for controlling interest rate risk, as measured through net interest income sensitivity, within certain tolerance levels.  The committee also establishes and monitors guidelines for the company’s liquidity and capital ratios.

The asset-liability strategies are reviewed on a periodic basis by management and presented and discussed with the committee on at least a quarterly basis.  The asset-liability strategies and guidelines are revised based on changes in interest rate levels, general economic conditions, competition in the marketplace, the current interest rate risk position of the company, anticipated growth and other factors.

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One of the principal factors in maintaining planned levels of net interest income is the ability to design effective strategies to manage the impact of interest rate changes on future net interest income.  Quarterly, management completes a net interest income sensitivity analysis, which is presented to the committee.  This analysis includes a simulation of the company’s net interest income under various interest rate scenarios.  Management utilizes a static balance sheet, instantaneous rate shock, and parallel shift methodology in conducting the simulations.  Variations in the interest rate environment affect numerous factors, including prepayment speeds, reinvestment rates, maturities of investments (due to call provisions), and interest rates on various asset and liability accounts.

In addition, on an annual basis management runs several alternative simulations used to further evaluate the interest rate sensitivity inherent in the existing balance sheet.  These simulations include an Economic Value of Equity (“EVE”) analysis in which the balance sheet is marked to market and then shocked up and down by 200 basis points.  EVE is performed to evaluate the sensitivity of the company’s net equity to changing interest rate environments.  The company also runs simulations that include balance sheet growth and certain alternative curve scenarios such as steep, flat or inverted yield curves, again to further evaluate or enhance the quarterly simulations.

There have been no material changes in the results of the company’s net interest income sensitivity analysis as reported in the company’s Annual Report on Form 10-K for the year ended December 31, 2006.  At March 31, 2007 management considers the company’s primary interest rate risk exposure to be margin compression that may result from changes in interest rates and/or changes in the mix of the company’s balance sheet components.  Specifically, these components include fixed versus variable rate loans and investments on the asset side, and higher cost deposits and borrowings versus lower cost deposits on the liability side.

Under the company’s current balance sheet position, the company’s net interest margin generally performs better in a rising rate environment, while it generally decreases when the yield curve is flat, inverted or declining.

Under a flat yield curve scenario, margin compression occurs as the spread between the cost of funding and the yield on interest earning assets narrows. Under this scenario the degree of margin compression is highly dependent on the company’s ability to fund asset growth through lower cost deposits.  However, if the curve is flattening, while short-term rates are rising, the adverse impact on margin may be somewhat delayed, as increases in the prime rate will initially result in the company’s asset yields re-pricing more quickly than funding costs.

Under an inverted yield curve situation, shorter-term rates exceed longer-term rates, and the impact on margin is similar but more adverse than the flat curve scenario. Again, however, the extent of the impact on margin is highly dependent on the company’s balance sheet mix.

Under a declining yield curve scenario, margin compression will eventually occur as the yield on interest earning assets decreases more rapidly than decreases in funding costs.  The primary causes would be the impact of interest rate decreases (including decreases in the prime rate) on adjustable rate loans and the fact that decreases in deposit rates may be limited.

The company is currently experiencing aspects of the flat and inverted yield curve scenarios.  The Federal Open Market Committee of the Federal Reserve Board has not adjusted the fed funds target rate since June of 2006 after increasing the rate 425 basis points over a two-year period.  Initially, the company’s net interest margin increased as loan yields re-priced more quickly than did liabilities.  Once the Federal Reserve Board stopped increasing rates however, liability costs increased more rapidly than loan yields, resulting in a decreasing net interest margin.  The increase in funding costs has been further intensified by market competition and heightened interest sensitivity by depositors, further narrowing margin spread.

Item 4 – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The company maintains a set of disclosure controls and procedures and internal controls designed to ensure that the information required to be disclosed in reports that it files or submits to the United States Securities and Exchange commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

The company carried out an evaluation as of the end of the period covered by this report, under the supervision and with the participation of the company’s management, including its chief executive officer and chief financial officer, of the effectiveness of the design and operation of the company’s disclosure controls and procedures pursuant to Exchange Act Rule

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13a-15(b).  Based upon that evaluation, the company’s chief executive officer and chief financial officer concluded that the company’s disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There has been no change in the company’s internal control over financial reporting that has occurred during the company’s most recent fiscal quarter (i.e., the three months ended March 31, 2007) that has materially affected, or is reasonably likely to materially affect, such internal controls.

PART II OTHER INFORMATION

Item 1 - Legal Proceedings

There are no material pending legal proceedings to which the company or its subsidiaries are a party, other than ordinary routine litigation incidental to the business of the company.  Management believes the results of any current pending litigation would be immaterial to the consolidated financial condition or results of operations of the company.

Item 1A – Risk Factors

Management believes that there have been no material changes in the company’s risk factors as reported in the Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

The company has not sold any equity securities that were not registered under the Securities Act of 1933 during the three months ended March 31, 2007.  Neither the company nor any “affiliated purchaser” (as defined in the SEC’s Rule 10b-18(a)(3)) has repurchased any of the company’s outstanding shares, nor caused any such shares to be repurchased on its behalf, during the three months ended March 31, 2007.

Item 3 - Defaults upon Senior Securities

Not Applicable

Item 4 - Submission of Matters to a Vote of Security Holders

Not Applicable

Item 5 - Other Information

Not Applicable

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Item 6 - Exhibits

Exhibit No. and Description

3.2	Amended and Restated By-Laws of the company, as adopted by the company’s Board of Directors on May 1, 2007
10.49.1	Specimen Incentive Stock Option Agreement under Enterprise Bancorp, Inc. Amended and Restated 1998 Stock Incentive Plan and 2003 Stock Incentive Plan, as amended.  [Applicable to grants after December 31, 2006.]
10.49.2	Specimen Nonqualified Stock Option Agreement under Enterprise Bancorp, Inc. Amended and Restated 1998 Stock Incentive Plan and 2003 Stock Incentive Plan, as amended.  [Applicable to grants after December 31, 2006.]
10.49.3	Specimen Incentive Stock Option Agreement  (includes Company right of repayment) under Enterprise Bancorp, Inc. Amended and Restated 1998 Stock Incentive Plan and 2003 Stock Incentive Plan, as amended.  [Applicable to grants after December 31, 2006.]
10.49.4	Specimen Nonqualified Stock Option Agreement (includes Company right of repayment) under Enterprise Bancorp, Inc. Amended and Restated 1998 Stock Incentive Plan and 2003 Stock Incentive Plan, as amended. [Applicable to grants after December 31, 2006.]
31.1	Certification of Principal Executive Officer under Securities Exchange Act Rule 13a-14(a)
31.2	Certification of Principal Financial Officer under Securities Exchange Act Rule 13a-14(a)
32	Certification of Principal Executive Officer and Principal Financial Officer under 18 U.S.C. § 1350 Furnished Pursuant to Securities Exchange Act Rule 13a-14(b)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ENTERPRISE BANCORP, INC.
DATE:  May 10, 2007	By:	/s/ James A. Marcotte
		James A. Marcotte
	Executive Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

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EX-3.2

Exhibit 3.2

AS APPROVED BY THE BOARD OF DIRECTORS ON MAY 1, 2007

AMENDED AND RESTATED BY-LAWS

of

ENTERPRISE BANCORP, INC.

ARTICLE I

ORGANIZATION

The name of this Corporation is “Enterprise Bancorp, Inc.”.  The main office of the Corporation shall be located in Lowell, Massachusetts and may be changed from time to time by the Directors of the Corporation. Other Offices hereafter established shall be located and operated in accordance with law.  The Corporation shall have and may exercise all powers and authority, express and implied, available to it under applicable law.

ARTICLE II

STOCKHOLDERS

SECTION l. Annual Meeting.  The annual meeting of shareholders shall be held on the first Tuesday in May at 4:00 p.m. at the main office of the Corporation in Massachusetts, unless a different hour, date or place within Massachusetts (or elsewhere in the United States) is fixed by the Board of Directors, the Chairman of the Board or the Chief Executive Officer.  If no annual meeting has been held on the date fixed as above provided, a special meeting in lieu thereof may be held, and such special meeting shall be treated for all purposes as an annual meeting.

SECTION 2. Stockholder Notice of Matters to be considered at Annual Meeting.  If the Board of Directors, or a designated committee thereof, determines that the information provided in a stockholder’s notice, given pursuant to the requirements of Section 8 of Article VI of the Articles of Organization, does not satisfy the informational requirements of said Section 8 of Article VI in any material respect, the Secretary of the Corporation shall promptly notify such stockholder of the deficiency in the notice.  The stockholder shall have an opportunity to cure the deficiency by providing additional information to the Secretary within such period of time, not to exceed five days from the date such deficiency notice is mailed to the stockholder, as the Board of Directors or such committee shall reasonably determine.  If the deficiency is not cured within such period, or if the Board of Directors or such committee determines that the additional information provided by the stockholder, together with information previously provided, does not satisfy the requirements of Section 8 of Article VI in any material respect, then the Board of Directors may reject such stockholder’s proposal.  The Secretary of the Corporation shall notify a stockholder in writing whether his proposal has been made in accordance with the time and informational requirements of Section 8 of Article VI.  Notwithstanding the procedure set forth in this paragraph, if neither the Board of Directors nor such committee makes a determination as to the validity of any stockholder proposal, the presiding officer of the annual meeting shall determine and declare at the annual meeting whether the stockholder proposal was made in

accordance with the terms of Section 8 of Article VI of the Articles of Organization.  If the presiding officer of the annual meeting determines that a stockholder proposal was made in accordance with the terms of Section 8 of Article VI of the Articles of Organization, he shall so declare at the annual meeting and ballots shall be made available for use at the meeting with respect to any such proposal.  If the presiding officer of the annual meeting determines that a stockholder proposal was not made in accordance with the terms of Section 8 of Article VI of the Articles of Organization, he shall so declare at the annual meeting and any such proposal shall not be acted upon at the annual meeting.  If there is an Interested Stockholder, any determinations to be made by the Board of Directors or a designated committee thereof pursuant to the provisions of this paragraph shall also require the concurrence of a majority of the Continuing Directors then in office.

This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, Directors and committees of the Board of Directors, but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated, filed and received as herein provided.

As used in these By-Laws, the terms “Interested Stockholder”, “Affiliate” and “Continuing Director” shall have the same respective meanings assigned to them in the Articles of Organization, as amended from time to time.  Any determination of beneficial ownership of securities under these By-Laws shall be made in the manner specified in the Articles of Organization, as amended from time to time.

SECTION 3. Special Meetings.  Special meetings of the shareholders for any purpose or purposes shall be called as provided for in the Articles of Organization.

SECTION 4. Notice of Meetings; Adjournments.  A written notice of all annual and special meetings of shareholders stating the hour, date, place and purposes of such meetings shall be given at least eleven days before the meeting to each stockholder entitled to vote or to each stockholder who, under the Articles of Organization or under these By-Laws, is entitled to such notice by mailing it addressed to such stockholder at the address of such stockholder as it appears on the stock transfer books of the Corporation.  Such notice shall be given by the Secretary or an Assistant Secretary, by any other officer or by a person designated either by the Secretary, an Assistant Secretary, by the person or persons calling the meeting, or by the Board of Directors. Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid.  When any shareholders meeting, either annual or special, is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting.  It shall not be necessary to give any notice of the hour, date or place of any meeting adjourned for less than thirty days or of the business to be transacted thereat, other than an announcement at the meeting at which such adjournment is taken of the hour, date and place to which the meeting is adjourned.  A written waiver of notice, executed before or after a meeting by a stockholder or by an authorized attorney of a stockholder and filed with the records of the meeting, shall be deemed equivalent to notice of the meeting.  The Chairman of the Board or, in his absence,

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the Chief Executive Officer or, in his absence, the Vice Chairman or, in his absence, the President or, in his absence, such other officer or Director of the Corporation as may be appointed temporary chair by the majority of the Directors then in attendance, shall preside at all stockholder meetings and shall have the power, among other things, to adjourn such meeting at any time and from time to time, subject to Section 5 of this Article II.

SECTION 5. Quorum.  The holders of a majority in interest of all stock issued, outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders; but if less than a quorum is present at a meeting, a majority in interest of the shareholders present may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice, except as provided in Section 4 of this Article II.  At such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed.  The shareholders present at a duly constituted meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

SECTION 6. Voting and Proxies.  Stockholders, unless otherwise provided by law, shall have such voting rights as are provided in the Articles of Organization.  Stockholders may vote either in person or by written proxy dated not more than eleven (11) months before the meeting named therein.  Proxies shall be filed with the secretary of the meeting, or of any adjournment thereof, before being voted.  Except as otherwise limited therein, proxies shall entitle the persons authorized thereby to vote at any adjournment of such meeting, but they shall not be valid after final adjournment of such meeting.  A proxy with respect to stock held in the name of two or more persons shall be valid if executed by or on behalf of any one of them unless at or prior to the exercise of the proxy the Corporation receives a specific written notice to the contrary from any one of them.  A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger.

SECTION 7. Action at Meeting.  When a quorum is present, any matter properly before the meeting shall be decided by a vote of the holders of a majority of the shares of stock present and voting on such matter, except where a larger vote is required by law, by the Articles of Organization or by these By-Laws.  Any election by shareholders shall be determined by a plurality of the votes cast, except where a larger vote is required by law, by the Articles of Organization or by these By-Laws.  No ballot shall be required for elections provided, however, that any stockholder personally present at a meeting may request a ballot to register the vote of such stockholder.

SECTION 8. No Stockholder Action by Written Consent.  Subject to the rights of the holders of any series of preferred stock as set forth in the Articles of Organization to elect additional directors under specific circumstances or to consent to specific actions taken by the Corporation, any action required or permitted to be taken by the stockholders of the

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Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

ARTICLE III

DIRECTORS

SECTION 1. Powers.  The business and affairs of the Corporation shall be managed by a Board of Directors who may exercise all the powers and authority of the Corporation except as otherwise provided by law, by the Articles of Organization or by these By-Laws.

SECTION 2. Composition and Term.  The Board of Directors shall be composed of:  (a) those persons designated in the Articles of Organization of the Corporation, such persons to serve as Directors until the respective expiration dates of their terms as set forth therein and until their successors are elected and qualified; and (b) such other persons who may be elected as Directors from time to time as provided herein.  Subject to the rights of the holders of any series of preferred stock as set forth in the Articles of Organization to elect Directors under specified circumstances, the number of Directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the Board of Directors (provided that if at any time of such action there is an Interested Stockholder, a majority vote of the Continuing Directors then in office shall also be required), but shall consist of not fewer than three individuals.  The Board of Directors shall be divided into three classes, such classes to be as nearly equal in number as practicable.  One of such classes of Directors shall be elected annually by the shareholders.  Except as otherwise provided in accordance with these By-Laws, the members of each class shall be elected for a term of three years and until their successors are elected and qualified.  The staggered terms of office of the three classes of Directors will result in only approximately one-third of the Directors being elected each year.

SECTION 3. Director Nominations.  Nominations of candidates for election as Directors at any annual meeting of shareholders may be made by, or at the direction of, a majority of the Board of Directors (unless there is an Interested Stockholder, in which case the affirmative vote of a majority of the Continuing Directors shall also be required) or by any stockholder entitled to vote at such annual meeting.  Only persons nominated in accordance with the procedures set forth in this Section 3 shall be eligible for election as Directors at an annual meeting.

Nominations, other than those made by, or at the direction of, the Board of Directors (or by the Continuing Directors, if required), shall be made pursuant to timely notice in writing to the Secretary of the Corporation as set forth in this Section 3. To be timely, a stockholder’s notice shall be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than sixty days nor more than one hundred and fifty days prior to the date of the scheduled annual meeting, regardless of postponements, deferrals or adjournments of that meeting to a later date; provided, however, that if less than seventy days notice or prior public disclosure of the date of the scheduled annual meeting is given or

4

made, notice by the stockholder to be timely must be so delivered or received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled annual meeting was mailed or the day on which such public disclosure was made.  Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director and as to the stockholder giving the notice (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation’s capital stock which are beneficially owned by such person on the date of such stockholder notice, and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies with respect to nominees for election as Directors, pursuant to regulations promulgated by the Securities and Exchange Commission (“SEC”), or any successor agency thereto,  under the Securities Exchange Act of 1934, as amended, including, but not limited to, such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation’s books, of such stockholder and any other stockholders known by such stockholder to be supporting such nominees and (ii) the class and number of shares of the Corporation’s capital stock which are beneficially owned by such stockholder on the date of such stockholder notice and by any other stockholders known by such stockholder to be supporting such nominees on the date of such stockholder notice.  At the request of the Board of Directors, any person nominated by, or at the direction of, the Board of Directors for election as a Director at an annual meeting shall furnish to the Secretary of the Corporation that information required to be set forth in the stockholder’s notice of nomination which pertains to the nominee.  Notwithstanding the foregoing, the Board of Directors shall have the right to conduct a due diligence investigation relating to the qualifications of any nominee proposed for election to the Board of Directors by any stockholder, the relationship of that nominee to the stockholder and any relationship such person may have with any entity other than the Corporation (i) in which such person holds an equity interest of 2% or more; (ii) from whom such person has any indemnification or other agreement with respect to the actions such person will take as a Director of the Corporation; (iii) at whose instance such person has agreed to be a nominee for election as a Director of the Corporation (a “Related Entity”), and to require an undertaking by such person that if elected as a Director of the Corporation, such person will abstain from voting on any matter in which any entity described in subsections has a direct, material, pecuniary interest.

No person shall be elected as a Director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.  Ballots bearing the names of all the persons who have been nominated for election as Directors at an annual meeting in accordance with the procedures set forth in this Section 3 shall be made available for use at the annual meeting.

The Board of Directors may reject any nomination by a stockholder not timely made in accordance with the requirements of this Section 3. If the Board of Directors, or a designated committee thereof, determines that the information provided in a stockholder’s

5

notice does not satisfy the informational requirements of this Section 3 in any material respect, the Secretary of the Corporation shall promptly notify such stockholder of the deficiency in the notice.  The stockholder shall have an opportunity to cure the deficiency by providing additional information to the Secretary within such period of time, not to exceed five days from the date such deficiency notice is given to the stockholder, as the Board of Directors or such committee shall reasonably determine.  If the deficiency is not cured within such period, or if the Board of Directors or such committee reasonably determines that the additional information provided by the stockholder, together with information previously provided, does not satisfy the requirements of this Section 3 in any material respect, then the Board of Directors may reject such stockholder’s nomination.  The Secretary of the Corporation shall notify a stockholder in writing whether his nomination has been made in accordance with the time and informational requirements of this Section 3.  Notwithstanding the procedure set forth in this paragraph, if neither the Board of Directors nor such committee makes a determination as to the validity of any nominations by a stockholder, the presiding officer of the annual meeting shall determine and declare at the annual meeting whether a nomination was made in accordance with the terms of this Section 3.  If the presiding officer determines that a nomination was made in accordance with the terms of this Section 3, he shall so declare at the annual meeting and ballots shall be made available for use at the meeting with respect to such nominee.  If the presiding officer determines that a nomination was not made in accordance with the terms of this Section 3, he shall so declare at the annual meeting and such nomination shall be disregarded.  If there is an Interested Stockholder, any determinations to be made by the Board of Directors or a designated committee thereof pursuant to the provisions of this paragraph shall also require the concurrence of a majority of the Continuing Directors then in office.

SECTION 4. Qualification.  Each Director shall have such qualifications as are required by applicable law.  To the extent required by law, each Director, when appointed or elected, shall take an oath that he will faithfully perform the duties of his office.  Any such oath shall be taken before a notary public or justice of the peace, who is not an officer of the Corporation, and a record of such oath shall be made a part of the records of the Corporation.

SECTION 5. Resignation.  Any Director may resign at any time by written notice to the Chairman of the Board, the Chief Executive Officer or the Board of Directors.  A resignation shall be effective when accepted by the Board of Directors.

SECTION 6. Removal.  Any Director may be removed from office as provided in the Articles of Organization.

SECTION 7. Vacancies.  Any vacancy occurring on the Board of Directors as a result of resignation, removal, death or increase in the authorized number of Directors may be filled by vote of a majority of the remaining Directors (unless there is an Interested Stockholder, in which case the affirmative vote of a majority of the Continuing Directors shall also be required).  A Director elected to fill such a vacancy shall be elected to serve for the

6

remainder of the full term of the class of Directors in which the vacancy occurred or the new directorship was created and until such director’s successor has been elected and qualified.

SECTION 8. Compensation.  The members of the Board of Directors and the members of either standing or special committees shall receive such compensation as the Board of Directors may determine.  Directors who are also employees of the Corporation shall not receive compensation for serving on the Board of Directors.

SECTION 9. Regular Meetings.  A regular meeting of the Board of Directors shall be held without other notice than this By-Law on the same date and at the same place as the annual meeting of shareholders; provided, however, if the Board of Directors is unable to meet at this time, then any business that it would have taken up at such meeting may be completed at its next regularly scheduled meeting or, at the discretion of the Board, at an earlier-called special meeting following such annual meeting of shareholders.  The Board of Directors may provide the hour, date and place for the holding of regular meetings by resolution without other notice than such resolution.  The Board of Directors shall meet at least once in each calendar quarter at a place or places fixed from time to time by the Board of Directors, the Chairman of the Board or the Chief Executive Officer.

SECTION 10. Special Meetings.  Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the Chief Executive Officer or a majority of the Directors, unless there is an Interested Stockholder, in which case by a majority of the Continuing Directors.  The person or persons authorized to call special meetings of the Board of Directors may fix the hour, date and place for holding a special meeting.

SECTION 11. Notice of Special Meetings.  Notice of the hour, date and place of all special meetings of the Board of Directors shall be given to each Director by the Secretary or an Assistant Secretary, or in the case of the death, absence, incapacity or refusal of such persons, by the officer or one of the Directors calling the meeting.   In any case, it shall be deemed that sufficient notice has been given to a Director if notice is delivered to such Director at least forty-eight (48) hours before the meeting, which notice may be delivered by mail or personal hand delivery, by telegram or confirmed telex, by facsimile or other electronic transmission if actual receipt by the Director is confirmed, or by telephone if delivered by phone directly to the Director or if actual receipt by the Director of any message left by phone is confirmed, or such Director has actual knowledge of the date, time and place of a meeting at least forty-eight (48) hours before the meeting.  Mail or telegram notices shall be addressed to a Director at the Director’s usual or last known business or residence address.  Notices given by telex, facsimile or other electronic transmission or by telephone shall be addressed to a Director and transmitted to the Director’s usual or last known business or residence telex number, fax number, electronic message address or telephone number.  When any Board of Directors meeting, either regular or special, is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting.  It shall not be necessary to give any notice of the hour, date or place of any meeting adjourned

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for less than thirty days or of the business to be transacted thereat, other than an announcement at the meeting at which such adjournment is taken of the hour, date and place to which the meeting is adjourned.  A written waiver of notice executed before or after a meeting by a Director and filed with the records of the meeting shall be deemed to be equivalent to notice of the meeting.  The attendance of a Director at a meeting shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the express purpose of objecting to the transaction of any business because such meeting is not lawfully called or convened.  Unless otherwise require by law, the Articles of Organization or these By-laws, neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

SECTION 12. Quorum.  A majority of the number of Directors then in office shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than a quorum is present at a meeting, a majority of the Directors present may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice, except as provided in Section 11 of this Article III.  Any business which might have been transacted at the meeting as originally noticed may be transacted at such adjourned meeting at which a quorum is present.

SECTION 13. Action at a Meeting.  The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater number is prescribed by law, by the Articles of Organization or by these By-Laws.

SECTION 14. Action by Consent.  Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if a written consent thereto is signed, or delivered to the Corporation by electronic transmission, by all the Directors and such written or electronically transmitted consent is filed with the records of the meetings of the Directors.  Such consent shall be treated as a vote at a meeting for all purposes.  Such consents may be executed in one or more counterparts or electronically delivered in individual transmissions from each of the Directors, including any combination thereof so long as a consent is properly delivered by each Director, and, with respect to signed counterparts, not every Director need sign the same counterpart.

SECTION 15. Presumption of Assent.  A director of the Corporation who is present at a meeting of the Board of Directors at which action on any Corporation matter is taken shall be presumed to have assented to the action taken unless his dissent or abstention shall be entered in the minutes of the meeting or unless he shall file a written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation within five days after the date a copy of the minutes of the meeting is received.  Such right to dissent shall not apply to a Director who voted in favor of such action.

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SECTION 16. Committees.  The Board of Directors may, by resolution adopted by a majority of the Board of Directors, designate one or more committees, including without limitation an executive committee, each committee to consists of not fewer than three members elected by the Board of Directors from among its members.  The Board of Directors may delegate to an executive committee or such other committees some or all of its powers except those which by law, by the Articles of Organization or by these By-Laws may not be delegated.  Except as the Board of Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Board of Directors or in such rules, its business shall be conducted so far as possible in the same manner as is provided by these By-Laws for the Board of Directors.  All members of such committees shall hold such offices at the pleasure of the Board of Directors.  The Board of Directors may abolish any such committee at any time, subject to applicable law.  Any committee to which the Board of Directors delegates any of its powers or duties shall keep written records of its meetings and shall report its actions to the Board of Directors.  The Board of Directors shall have power to rescind any action of any committee, but no such rescission shall have retroactive effect.

SECTION 17. Manner of Participation.  Members of the Board of Directors or of committees elected by the Board pursuant to Section 16 of this Article III may participate in meetings of the Board or of such committees by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other.  Such participation shall constitute presence in person for all purposes with respect to any such meeting.

ARTICLE IV

OFFICERS

SECTION 1. Enumeration.  The officers of the Corporation shall consist of a President, a Treasurer, a Secretary and such other officers, including, without limitation a Chairman of the Board, a Vice Chairman, a Chief Executive Officer,  a Chief Operating Officer, a Chief Financial Officer and one or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as the Board of Directors may determine to be necessary or appropriate for the management of the Corporation.

SECTION 2. Appointment.  The Chairman of the Board, the Vice Chairman, the President, the Treasurer, the Secretary and all officers of the level of Vice President and above shall be appointed by the Board of Directors at the meeting of the Board of Directors held on the same date and at the same place as the annual meeting of the shareholders or at such other regularly scheduled or special meeting following such annual meeting as contemplated by Section 9 of Article III above.  All other officers of the Corporation may be appointed by the Board of Directors or the Chief Executive Officer at such time and from time to time as the Board or the Chief Executive Officer, as the case may be, shall deem to be necessary or appropriate.

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SECTION 3. Qualification.  Any two or more offices may be held by any one person.  Any officer may be required by the Board of Directors to give bond for the faithful performance of his duties in such amount and with such sureties as the Board of Directors may determine.

SECTION 4. Tenure.  All officers shall hold office from the date of their respective appointments until the first meeting of the Board of Directors following the next annual meeting of shareholders, or for such shorter terms as the Board of Directors or the Chief Executive Officer, if an officer is appointed by the Chief Executive Officer, may fix at the time such officers are chosen.  Any officer may resign at any time by written notice to the Chairman of the Board, the Chief Executive Officer or the Board of Directors.  Such resignation shall be effective upon receipt unless the resignation otherwise provides.  Appointment of an officer, employee or agent shall not of itself create contract rights.  The Board of Directors may, however, authorize the Corporation to enter into an employment contract with any officer in accordance with law, but no such contract right shall impair the right of the Board of Directors to remove any officer at any time in accordance with Section 5 of this Article IV.

SECTION 5. Removal.  The Board of Directors may remove any officer with or without cause by a vote of a majority of the entire number of Directors then in office; provided, however, that if at the time of such action there is an Interested Stockholder, such action shall in addition require a majority vote of the Continuing Directors then in office; and further provided, however, that such removal, other than for cause, shall be without prejudice to the contract rights, if any, of the persons involved.  If an officer has been appointed by the Chief Executive Officer, then such officer may also be removed with or without cause by the Chief Executive Officer.

SECTION 6. Absence or Disability.  In the event of the absence or disability of any officer, the Board of Directors or the Chief Executive Officer, if such officer has been appointed by the Chief Executive Officer, may designate another officer to act temporarily in place of such absent or disabled officer.

SECTION 7. Vacancies.  Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors or, if such vacancy is with respect to an office that may otherwise be filled by appointment by the Chief Executive Officer, by the Chief Executive Officer.

SECTION 8. Chief Executive Officer.  The Chief Executive Officer shall, subject to the direction of the Board of Directors, have general supervision and control of the Corporation’s business.

SECTION 9. Chairman and Vice Chairman.  The Chairman of the Board of Directors shall preside, when present, at all meetings of the Board of Directors and of the Corporation’s stockholders.  If the Chairman of the Board is absent from any meeting of the

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Board of Directors, then the Vice Chairman shall preside at such meeting of the Board of Directors.  If both the Chairman of the Board and the Chief Executive Officer are absent from any meeting of the stockholders, then the Vice Chairman shall preside at such meeting of the stockholders.  The Chairman of the Board and the Vice Chairman may also have such other powers and perform such other duties, if any, as the Board of Directors may from time to time designate.

SECTION 10. The President.  Unless the Board of Directors shall otherwise provide, the President shall serve in the capacity of Chief Executive Officer.  If the President does not serve in such capacity, then the President shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.

SECTION 11. Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Treasurer and Other Officers.  Any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer and any other officers whose powers and duties are not otherwise specifically provided for herein shall have such powers and shall perform such duties as are customarily incident to such office and as the Board of Directors or the Chief Executive Officer may from time to time designate.

SECTION 12. Secretary and Assistant Secretaries.  The Secretary or, in the absence of the Secretary, any Assistant Secretary shall keep a record of the meetings of shareholders and a record of the meetings of the Board of Directors.  Otherwise a Temporary Secretary designated by the person presiding at the meeting shall perform the Secretary’s duties.  Unless the Board of Directors shall otherwise designate, the Secretary shall also serve as the Corporation’s registered agent for all purposes required by law.

ARTICLE V

CAPITAL STOCK

SECTION 1. Certificates of Stock.  Unless otherwise provided by the Board of Directors, each stockholder shall be entitled to a certificate of the capital stock of the Corporation in such form as may from time to time be prescribed by the Board of Directors.  Such certificate shall be signed either manually or in facsimile by (i) the Chairman of the Board, the Chief Executive Officer, the President or any Executive Vice President and (ii) the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary.  In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the time of its issue.  Every certificate for shares of stock which are subject to any restriction on transfer and every certificate issued when the Corporation is authorized to issue more than one class or series of stock shall contain such legend with respect thereto as is required by law.

SECTION 2. Transfers.  Subject to any restrictions on transfer and unless otherwise provided by the Board of Directors, shares of stock may be transferred on the books of the

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Corporation by the surrender to the Corporation or its transfer agent of the certificate therefore properly endorsed or accompanied by a written assignment and power of attorney properly executed, with transfer stamps (if necessary) affixed, and with such proof of the authenticity of signature as the Corporation or its transfer agent may reasonably require.

SECTION 3. Record Holders.  Except as otherwise required by law, by the Articles of Organization or by these By-Laws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-Laws.  It shall be the duty of each stockholder to notify the Corporation of his post office address.

SECTION 4. Record Date.  The Board of Directors may fix in advance a time of not more than seventy (70) days before the date of any meeting of the shareholders as the date for the payment of any dividend or the making of any distribution to shareholders or the last day on which the consent or dissent of shareholders may be effectively expressed for any purpose, as the record date for determining the shareholders having the right to notice of and to vote at such meeting, and any adjournment thereof, or the right to receive such dividend or distribution or the right to give such consent or dissent.  In such case, only shareholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the Corporation after the record date.  Without fixing such record date, the Board of Directors may for any of such purposes close the transfer books for all or any part of such period.  If no record date is fixed and the transfer books are not closed, (a) the record date for determining shareholders having the right to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, and (b) the record date for determining shareholders for any other purpose shall be at the close of business on the date on which the Board of Directors acts with respect thereto.

SECTION 5. Replacement of Certificates.  In case of the alleged loss, destruction or mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such terms as the Board of Directors may prescribe.

SECTION 6. Issuance of Capital Stock.  Except as provided by law, the Board of Directors shall have the authority to issue or reserve for issue from time to time the whole or any part of the capital stock of the Corporation which may be authorized from time to time, to such persons or organizations, for such consideration, whether cash, property, services or expenses and on such terms as the Board of Directors may determine, including, without limitation, the granting of options, warrants or conversion or other rights to subscribe to said capital stock.

SECTION 7. Dividends.  Subject to applicable law, the Articles of Organization and these By-Laws, the Board of Directors may from time to time declare, and the Corporation may pay, dividends on shares of its capital stock entitled to dividends.

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ARTICLE VI

INDEMNIFICATION

SECTION 1. Definitions.  For purposes of this Article: (a) “Officer” means any person who serves or has served as a Director of the Corporation or in any other office filled by appointment by the Board of Directors and any heirs or personal representatives of such person; (b) “Non-Officer Employee” means any person who serves or has served as an employee of the Corporation but who is not or was not an Officer and any heirs or personal representatives of such person; (c) “Proceeding” means any action, suit or proceeding, whether civil, criminal, derivative, administrative or investigative, brought or threatened in or before any court, tribunal, administrative or legislative body or agency and any claim which could be the subject of a Proceeding; and (d) “Expenses” means any liability fixed by a judgment, order, decree or award in a Proceeding, any amount reasonably paid in settlement of a Proceeding and any professional fees or other disbursements reasonably incurred in a Proceeding.

SECTION 2. Officers.  Except as provided in Sections 4 and 5 of this Article VI, each Officer of the Corporation shall be indemnified by the Corporation against all Expenses incurred by such Officer in connection with any Proceedings in which such Officer is involved as a result of serving or having served (a) as an Officer or employee of the Corporation; (b) as a director, officer or employee of any corporation, organization, partnership, joint venture, trust or other entity the majority of the equity of which is owned by the Corporation; or (c) in any capacity with any other corporation, organization, partnership, joint venture, trust or other entity at the request or direction of the Board of Directors.

SECTION 3. Non-Officer Employees.  Except as provided in Sections 4 and 5 of this Article VI, each Non-Officer Employee of the Corporation may, in the discretion of the Board of Directors, be indemnified against any or all Expenses incurred by such Non-Officer Employee in connection with any Proceeding in which such Non-Officer Employee is involved as a result of serving or having served (a) as a Non-Officer Employee of the Corporation; (b) as a director, officer or employee of any corporation, organization, partnership, joint venture, trust or other entity the majority of the equity of which is owned by the Corporation; or (c) in any capacity with any other corporation, organization, partnership, joint venture, trust or other entity at the request or direction of the Corporation.

SECTION 4. Service at the Request or Direction of the Board of Directors.  No indemnification shall be provided to an Officer or Non-Officer Employee with respect to serving or having served in any of the capacities described in Section 2(c) or 3(c) above unless the following two conditions are met: (a) such service was requested or directed in each specific case by vote of the Board of Directors prior to the occurrence of the event to which the indemnification relates, and (b) the Corporation maintains insurance coverage for the type of indemnification sought.  In no event shall the Corporation be liable for indemnification under Section 2(c) or 3(c) for any amount in excess of the proceeds of

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insurance received with respect to such coverage as the Corporation in its discretion may elect to carry.  The Corporation may but shall not be required to maintain insurance coverage with respect to indemnification under Section 2(c) or 3(c) above.  Notwithstanding any other provision of this Section 4, the Board of Directors may provide an Officer or Non-Officer Employee with indemnification under Section 2(c) or 3(c) above as to a specific Proceeding even if one or both of the two conditions specified in this Section 4 have not been met and even if the amount of the indemnification exceeds the amount of the proceeds of any insurance which the Corporation may have elected to carry, provided that the Board of Directors in its discretion determines it to be in the best interests of the Corporation to do so.

SECTION 5. Good Faith.  Notwithstanding the foregoing, indemnification shall be provided to an Officer pursuant to Section 2 above or may be provided to a Non-Officer Employee pursuant to Section 3 above only with respect to a matter as to which such person shall have been adjudicated in a Proceeding to have satisfied the following relevant standard of conduct:  (i) such person acted in good faith; (ii) such person reasonably believed that his conduct was in or at least not opposed to the best interests of the Corporation; and (iii) in the case of any criminal proceeding, such person had no reasonable cause to believe that his conduct was unlawful.  In the event that a Proceeding is compromised or settled on any basis, or if the Officer or Non-Officer Employee otherwise enters a plea of nolo contendere in such Proceeding, or if there shall otherwise not be any adjudication in such Proceeding as to the Officer’s or Non-Officer Employee’s relevant standard of conduct, then whether or not indemnification shall be provided to said Officer pursuant to Section 2 above or may be provided to said Non-Officer Employee pursuant to Section 3 above with respect to a matter shall depend upon the determination of whether such person satisfied the foregoing relevant standard of conduct to be made in accordance with the following sentence.  The determination shall be made by a majority vote of those Directors who are not involved in such Proceeding; provided, however, if more than half of the Directors are involved in such Proceeding, the determination shall be made by a majority vote of a committee of three disinterested Directors chosen by the disinterested Directors at a regular or special meeting; and provided further, however, if there are less than three disinterested Directors, the determination shall be based upon the opinion of the Corporation’s regular outside counsel, unless such counsel has been involved in any way in such Proceeding or in any matter that is the subject of or otherwise related in any way to such Proceeding, in which case the determination shall be based upon the opinion of an independent outside counsel that has no such prior involvement in the Proceeding or any related matter.  The termination of any Proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere, shall not, of itself and without an accompanying determination as to whether the Officer or Non-Officer Employee has satisfied the relevant standard of conduct as provided herein, be determinative as to whether or not such Officer or Non-Officer Employee satisfied the relevant standard of conduct described in this Section 5.

SECTION 6. Prior to Final Disposition.  To the extent authorized by the Board of Directors, by the committee of Directors referred to in Section 5 of this Article VI or by the opinion of the counsel referred to in such Section 5, any indemnification provided for under

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this Article VI may include payment by the Corporation of Expenses incurred in defending a Proceeding in advance of the final disposition of such Proceeding upon receipt of an undertaking by the Officer or Non-Officer Employee seeking indemnification to repay such payment if such Officer or Non-Officer Employee shall be adjudicated or determined to be not entitled to indemnification under this Article VI.

SECTION 7. Insurance.  The Corporation may purchase and maintain insurance to protect itself and any Officer or Non-Officer Employee against any liability of any character asserted against or incurred by the Corporation or any such Officer or Non-Officer Employee, or arising out of any such status, whether or not the Corporation would have the power to indemnify such person against such liability by law or under the provisions of this Article VI.

SECTION 8. Other Indemnification Rights.  Nothing in this Article VI shall limit any lawful rights to indemnification existing independently of this Article VI.

SECTION 9. Merger or Consolidation.  If the Corporation is merged into or consolidated with another corporation and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article VI with respect to any Proceeding arising out of or relating to any actions, transactions or facts occurring at or prior to the date of such merger or consolidation.

SECTION 10. Savings Clause.  If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify and advance expenses to each indemnitee as to any expenses (including reasonable attorneys’ fees), judgments, fines, liabilities, losses, and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law.

SECTION 11. Subsequent Legislation.  If the Massachusetts General Laws are amended after adoption of this Article VI to expand further the indemnification permitted to an indemnitee, then the Corporation shall indemnify all such persons to the fullest extent permitted by the Massachusetts General Laws, as so amended.

ARTICLE VII

MISCELLANEOUS PROVISIONS

SECTION 1. Amendment of By-Laws.  These By-Laws may be adopted, altered, amended, changed or repealed as provided in the Articles of Organization.

SECTION 2. Fiscal Year.  Except as otherwise determined by the Board of Directors, the fiscal year of the Corporation shall be the twelve months ending December 31 or on such other date as may be required by law.

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SECTION 3. Seal.  The Board of Directors shall have power to adopt and alter the seal of the Corporation.

SECTION 4. Execution of Instruments.  All deeds, leases, transfers, contracts, bonds, notes and other obligations to be entered into by the Corporation in the ordinary course of its business without Board of Directors’ action may be executed on behalf of the Corporation by the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer or any other officer, employee or agent of the Corporation as the Board of Directors or the Executive Committee may authorize.

SECTION 5. Voting of Securities.  Unless otherwise provided by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer or the Treasurer may waive notice of and act on behalf of the Corporation, or appoint another person or persons to act as proxy or attorney in fact for the Corporation with or without discretionary power and/or power of substitution, at any meeting of shareholders of any other organization, any of whose securities are held by the Corporation.  Any person or persons authorized or otherwise designated in the manner provided herein shall have full right, power and authority to vote any shares of stock issued by another corporation in the name of the Corporation.

SECTION 6. Articles of Organization.  All references in these By-Laws to the Articles of Organization shall be deemed to refer to the Articles of Organization of the Corporation, as may be amended and/or restated and otherwise in effect from time to time.

SECTION 7. Registered Office.  Unless the Board of Directors shall otherwise designate, the Corporation’s principal place of business shall also serve as the Corporation’s registered office for all purposes required by law.

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EX-10.49.1

Exhibit 10.49.1

ENTERPRISE BANCORP, INC.

Incentive Stock Option Agreement

This Agreement made as of this Xth day of XXXXX, 20XX by and between Enterprise Bancorp, Inc., a Massachusetts corporation (the “Company”), and NAME (the “Optionee”).

WITNESSETH THAT:

WHEREAS, the Company has instituted a program entitled “Enterprise Bancorp, Inc.  [Amended and Restated 1998] [2003] Stock Incentive Plan” (the “Plan”); and

WHEREAS, the Compensation Committee of the Board of Directors, or the full Board of Directors, as the case may be, of the Company has authorized the grant of stock options upon the terms and conditions set forth below; and

WHEREAS, the Compensation Committee or the full Board of Directors, as the case may be, has authorized the grant of this stock option pursuant and subject to the terms of the Plan, a copy of which is attached hereto and incorporated herein; and

WHEREAS, the Compensation Committee or the full Board of Directors, as the case may be, has designated this stock option an incentive stock option in accordance with Section 5 of the Plan;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Optionee agree as follows.

1.             Grant.  Subject to the terms of the Plan and this Agreement, the Company hereby grants to the Optionee a stock option (the “Option”) to purchase from the Company XXX shares of its common stock, $0.01 par value per share (“Stock”). This Option is intended to constitute an incentive stock option within the meaning of Section 422 of the Code.

2.             Exercise Price.  This Option may be exercised at the exercise price of $XX.XX per share of Stock, subject to adjustment as provided herein and in the Plan.

3.             Term and Exercisability of Option.  This Option shall expire on the earlier of [not later than the grant date + ten years – one day] or the last day of the exercise period determined pursuant to subsection (c) of this Section 3. At any time before its expiration, this Option may be exercised to the extent set forth in the schedule attached to this Agreement as Exhibit 1, which is incorporated herein and made a part hereof by this reference, provided that:

(a)           at the time of exercise the Optionee is not in violation of any employee confidentiality, noncompetition or other agreement with the Company or a Subsidiary;

(b)           the Optionee’s employment relationship with the Company or an ISO Subsidiary (“Relationship”) must be in effect on the relevant date under the schedule set

forth at Exhibit 1 in order for any scheduled increment in the exercisable portion of the Option to become effective; and

(c)           this Option may not be exercised if three months or more have elapsed following the date of termination of the Relationship between the Optionee and the Company or a Subsidiary, except that if the Relationship terminates by reason of the Optionee’s permanent and total disability (as determined by the Compensation Committee or the full Board of Directors, as the case may be, on the basis of medical advice satisfactory to it) or death, “twelve months” shall be substituted for “three months” in this sentence.

4.             Method of Exercise.  Prior to its expiration and to the extent that the right to purchase shares of Stock has vested hereunder, this Option may be exercised from time to time by written notice to the Company, substantially in the form attached hereto as Exhibit 2, stating the number of shares with respect to which this Option is being exercised and accompanied by either (a) payment in full of the exercise price for the number of shares to be delivered, by means of payment acceptable to the Company in accordance with Section 5(c) of the Plan, or (b) a description of a “cashless exercise” procedure and such other documents and undertakings as are necessary to satisfy that procedure. As soon as practicable after its receipt of such notice, the Company shall, without transfer or issue tax to the Optionee (or other person entitled to exercise this Option), deliver, or cause to be delivered, to the Optionee (or other person entitled to exercise this Option), at the principal executive offices of the Company or such other place as shall be mutually acceptable, a stock certificate or certificates for such shares out of theretofore authorized but unissued shares or reacquired shares of its Stock as the Company may elect; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law. If and to the extent that the Company also provides to its shareholders generally a means to hold title to shares on a noncertificated basis, then any shares to be issued to the Optionee upon the exercise of this Option may be issued on such a noncertificated basis if mutually agreed upon by the Company and the Optionee and otherwise permissible under applicable law and the rules of any applicable stock exchange. Payment of the exercise price may be made in cash or cash equivalents or, in accordance with the terms and conditions of Section 5(c) of the Plan, in whole or in part in shares of Common Stock of the Company; provided, however, that the Compensation Committee or the full Board of Directors, as the case may be, reserves the right upon receipt of any written notice of exercise from the Optionee to require payment in cash with respect to the shares contemplated in such notice; and provided, further, that the Optionee may not make payment in shares of Stock that he acquired upon the earlier exercise of any incentive stock option, unless he has held the shares until at least two years after the date the incentive stock option was granted and at least one year after the date the incentive stock option was exercised. If the Optionee (or other person entitled to exercise this Option) fails to pay for and accept delivery of all of the shares specified in such notice upon tender of delivery thereof, his right to exercise this Option with respect to such shares not paid for may be terminated by the Company.

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5.             Nonassignability of Option.  This Option shall not be assignable or transferable by the Optionee except by will or by the laws of descent and distribution. During the life of the Optionee, this Option shall be exercisable only by him, by a conservator or guardian duly appointed for him by reason of his incapacity or by the person appointed by the Optionee in a durable power of attorney acceptable to the Company’s counsel.

6.             Compliance with Securities Act; Lock-Up Agreement.  The Company shall not be obligated to sell or issue any shares of Stock or other securities pursuant to the exercise of this Option unless the shares of Stock or other securities with respect to which this Option is being exercised are at that time effectively registered or exempt from registration under the Securities Act and applicable state securities laws. In the event shares or other securities shall be issued that shall not be so registered, the Optionee hereby represents, warrants and agrees that he will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel. The Optionee further hereby agrees that as a condition to the purchase of shares upon exercise of this Option, he will execute an agreement in a form acceptable to the Company to the effect that the shares shall be subject to any underwriter’s lock-up agreement in connection with a public offering of any securities of the Company that may from time to time apply to shares held by officers and employees of the Company, and such agreement or a successor agreement must be in full force and effect.

7.             Legends.  The Optionee hereby acknowledges that the stock certificate or certificates evidencing shares of Stock or other securities issued pursuant to any exercise of this Option may bear a legend setting forth the restrictions on their transferability described in Section 6 hereof, if such restrictions are then in effect.  If any such shares or other securities are issued on a noncertificated basis in accordance with Section 4 hereof, then the Company shall adopt alternative measures to ensure that any such restrictions are properly observed.

8.             Rights as Stockholder.  The Optionee shall have no rights as a stockholder with respect to any shares covered by this Option until the date of issuance of a stock certificate to him for such shares or such shares are otherwise issued on a noncertificated basis in accordance with Section 4 hereof.  No adjustment shall be made for dividends or other rights for which the record date is prior to the date on which any such shares are so issued.

9.            Termination or Amendment of Plan.  The Board may terminate or amend the Plan at any time. No such termination or amendment will affect rights and obligations under this Option, to the extent it is then in effect and unexercised.

10.          Effect Upon Employment.  Nothing in this Option or the Plan shall be construed to impose any obligation upon the Company or any Subsidiary to employ the Optionee or to retain the Optionee in its employ.

11.          Time for Acceptance.  Unless the Optionee shall evidence his acceptance of this Option by execution of this Agreement within thirty days after its delivery to him, the Option and this Agreement shall be null and void.

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12.          Notice of Disqualifying Disposition.  The Optionee agrees to notify the Company promptly in the event that he sells, transfers, exchanges or otherwise disposes of any shares of Stock issued upon the exercise of the Option before the later of (a) the second anniversary of the date of grant of the Option and (b) the first anniversary of the date the shares were issued upon his exercise of the Option.

13.           [Intentionally Omitted]

14.          General Provisions.

(a)           Amendment; Waivers.  This Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof and, except as otherwise permitted by the express terms of the Plan and this Agreement, it may not be modified or amended nor may any provision hereof be waived, except by a further written agreement duly signed by each of the parties; provided, however, that a modification or amendment that does not materially diminish the rights of the Optionee hereunder, as they may exist immediately before the effective date of the modification or amendment, shall be effective upon written notice of its provisions to the Optionee. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance.

(b)          Binding Effect.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns.

(c)           Governing Law.  This Agreement has been executed in Massachusetts and shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.

(d)           Construction.  This Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Agreement, the Plan shall control. The titles of the sections of this Agreement and of the Plan are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the context otherwise requires. Capitalized terms not defined herein shall have the meanings given to them in the Plan.

(e)           Notices.  Any notice in connection with this Agreement shall be deemed to have been properly delivered if it is in writing and is delivered by hand or facsimile or sent by registered mail, postage prepaid, to the party addressed as follows, unless another address has been substituted by notice so given:

To the Optionee:	To his address as set forth on the signature page hereof.
To the Company:	Enterprise Bancorp, Inc.
	222 Merrimack Street
	Lowell, Massachusetts 01852
	Attn: Mr. James A. Marcotte

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed as a sealed instrument by its officer thereunto duly authorized as of the date set forth below.

Date of grant: XXXX XX, 20XX

ENTERPRISE BANCORP, INC.

Signed:

John P. Clancy, Jr.

Chief Executive Officer

5

ACCEPTANCE

I hereby accept the foregoing Option, an incentive stock option, in accordance with its terms and conditions and in accordance with the terms and conditions of the Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003] Stock Incentive Plan.

Date	(Signature of Optionee)
Notice Address:
Date of grant: XXXX XX, 20XX

6

EXHIBIT 1

Employee name (“Optionee”):	NAME
Date of grant:	DATE
Number of shares granted:	NUMBER
Exercise price:	$XX.XX per share (subject to adjustment as provided in this Agreement and in the Plan)
Vesting schedule:

	Incremental Amount			Cumulative Amount
	% of shares		# of shares	% of shares		# of shares
Date:
On or after: DATE	25	%	NUMBER	25	%	NUMBER
On or after: DATE	25	%	NUMBER	50	%	NUMBER
On or after: DATE	25	%	NUMBER	75	%	NUMBER
On or after: DATE	25	%	NUMBER	100	%	NUMBER

Signed :
	John P. Clancy, Jr.
	Chief Executive Officer

Exhibit 2 to Incentive Stock

 Option Agreement

[FORM FOR EXERCISE OF INCENTIVE STOCK OPTION]
[SAMPLE ONLY]

Enterprise Bancorp, Inc.
222 Merrimack Street
Lowell, Massachusetts 01852

RE:Exercise of Incentive Stock Option under Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003]  Stock Incentive Plan

Gentlemen:

I hereby elect to exercise the stock option granted to me on                  , 200      by and to the extent of purchasing                       shares of the Common Stock of Enterprise Bancorp, Inc. for the exercise price of $                     per share, subject to the terms and conditions of the Incentive Stock Option Agreement between myself and Enterprise Bancorp, Inc. dated as of                                    , 200      (the “Agreement”).

Enclosed please find payment, in cash or in such other property as is permitted under the Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003] Stock Incentive Plan (the “Plan”), of the purchase price for the shares.

I hereby confirm that I have investigated and considered the possible income tax consequences of my exercising the option, of any sale or other disposition by me of any shares acquired upon the exercise of the option and, if I am making payment of any part of the purchase price by delivery of shares of stock of Enterprise Bancorp, Inc., of my making such payment in that form.

I further agree to any securities lock-up agreement between one or more underwriters and shareholders of the Company who are officers or employees of the Company or a Subsidiary, and any successor to that agreement, with regard to the shares acquired upon this exercise of my stock option.

I hereby specifically confirm to Enterprise Bancorp, Inc. that I am acquiring the shares for investment and not with a view to their sale or distribution, and that the shares shall be held subject to all of the terms and conditions of the Plan and the Agreement.

	Very truly yours,
Date	(Signed by                 or other party duly
	exercising option)

2

EX-10.49.2

Exhibit 10.49.2

ENTERPRISE BANCORP, INC.

Nonqualified Stock Option Agreement

This Agreement made as of this Xth day of XXXX, 20XX by and between Enterprise Bancorp, Inc., a Massachusetts corporation (the “Company”), and NAME (the “Optionee”).

WITNESSETH THAT:

WHEREAS, the Company has instituted a program entitled “Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003]  Stock Incentive Plan” (the “Plan”); and

WHEREAS, the Compensation Committee of the Board of Directors, or the full Board of Directors, as the case may be, of the Company has authorized the grant of stock options upon the terms and conditions set forth below; and

WHEREAS, the Compensation Committee or the full Board of Directors, as the case may be, has authorized the grant of this stock option pursuant and subject to the terms of the Plan, a copy of which is attached hereto and incorporated herein; and

WHEREAS, the Compensation Committee or the full Board of Directors, as the case may be, has designated this stock option a nonqualified stock option in accordance with Section 5 of the Plan;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Optionee agree as follows.

1.             Grant.  Subject to the terms of the Plan and this Agreement, the Company hereby grants to the Optionee a stock option (the “Option”) to purchase from the Company #OF shares of its common stock, $0.01 par value per share (“Stock”). This Option is not intended to be an incentive stock option or to qualify for special federal income tax treatment under Section 422 of the Code.

2.             Exercise Price.  This Option may be exercised at the exercise price of $XX.XX per share of Stock, subject to adjustment as provided herein and in the Plan.

3.             Term and Exercisability of Option.  This Option shall expire on the earlier of [not later than the grant date + ten years – one day] or the last day of the exercise period determined pursuant to subsection (c) of this Section 3. At any time before its expiration, this Option may be exercised to the extent set forth in the schedule attached to this Agreement as Exhibit 1, which is incorporated herein and made a part hereof by this reference, provided that:

(a)           at the time of exercise the Optionee is not in violation of any employee confidentiality, noncompetition or other agreement with the Company or a Subsidiary;

(b)           the Optionee must maintain the employment, contractual or other service relationship with the Company or a Subsidiary that was in effect at the time of the initial

grant of this Option (the “Relationship”) without change on the relevant date set forth in Exhibit 1 in order for any scheduled increment in the exercisable portion of the Option to become effective;

(c)           this Option may not be exercised if three months or more have elapsed following the date of termination, or any change in the nature, of the Relationship between the Optionee and the Company or a Subsidiary; provided, however, that if the Relationship terminates as a result of the Optionee’s retirement at age 62 or older, “thirty-six months” shall be substituted for “three months” in this sentence; and provided, further, that if the Relationship terminates by reason of the Optionee’s permanent and total disability (as determined by the Compensation Committee or the full Board of Directors, as the case may be, on the basis of medical advice satisfactory to it) or death, the Option must be exercised within twelve months of the Optionee’s death or disability; and

(d)           For purposes of subsections (b) and (c) of this Section 3, the nature of the Relationship between the Optionee and the Company shall not be deemed to have changed if the fundamental nature of the Relationship, meaning the Optionee serving as an employee or as a non-employee director or as a third-party consultant, advisor or other vendor, as the case may be, does not change, regardless of any changes in the Optionee’s title, compensation or other terms of employment or service, as the case may be, which do not change the fundamental nature of the Relationship.  A fundamental change in the nature of the Relationship would include, for example, a change from the Optionee serving as an employee of the Company to serving as a third-party consultant to the Company or a change from the Optionee serving as an employee director of the Company to serving as a non-employee director of the Company.

4.             Method of Exercise.  Prior to its expiration and to the extent that the right to purchase shares of Stock has vested hereunder, this Option may be exercised from time to time by written notice to the Company, substantially in the form attached hereto as Exhibit 2, stating the number of shares with respect to which this Option is being exercised and accompanied by either (a) payment in full of the exercise price for the number of shares to be delivered, by means of payment acceptable to the Company in accordance with Section 5(c) of the Plan, or (b) a description of a “cashless exercise” procedure and such other documents and undertakings as are necessary to satisfy that procedure. As soon as practicable after its receipt of such notice, the Company shall, without transfer or issue tax to the Optionee (or other person entitled to exercise this Option), deliver, or cause to be delivered, to the Optionee (or other person entitled to exercise this Option), at the principal executive offices of the Company or such other place as shall be mutually acceptable, a stock certificate or certificates for such shares out of theretofore authorized but unissued shares or reacquired shares of its Stock as the Company may elect; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law.  If and to the extent that the Company also provides to its shareholders generally a means to hold title to shares on a noncertificated basis, then any shares to be issued to the Optionee upon the exercise of this Option may be issued on such a noncertificated basis if mutually agreed upon by the Company and the Optionee and otherwise permissible under applicable law and the rules of any applicable stock exchange. Payment of the exercise price may

2

be made in cash or cash equivalents or, in accordance with the terms and conditions of Section 5(c) of the Plan, in whole or in part in shares of Common Stock of the Company; provided, however, that the Compensation Committee or the full Board of Directors, as the case may be, reserves the right upon receipt of any written notice of exercise from the Optionee to require payment in cash with respect to the shares contemplated in such notice; and provided, further, that the Optionee may not make payment in shares of Stock that he acquired upon the earlier exercise of any incentive stock option, unless he has held the shares until at least two years after the date the incentive stock option was granted and at least one year after the date the incentive stock option was exercised. If the Optionee (or other person entitled to exercise this Option) fails to pay for and accept delivery of all of the shares specified in such notice upon tender of delivery thereof, his right to exercise this Option with respect to such shares not paid for may be terminated by the Company.

5.             Withholding Taxes.  The Optionee hereby agrees, as a condition to any exercise of this Option, to provide to the Company an amount sufficient to satisfy the Company’s obligation to withhold certain federal, state and local taxes arising by reason of such exercise (the “Withholding Amount”), if any, by (a) authorizing the Company and/or a Subsidiary to withhold the Withholding Amount from his cash compensation or (b) remitting the Withholding Amount to the Company in cash; provided, however, that to the extent that the Withholding Amount is not provided by one or a combination of such methods, the Company may at its election withhold from the Stock that would otherwise be delivered upon exercise of this Option that number of shares having a Fair Market Value, on the date of exercise, sufficient to eliminate any deficiency in the Withholding Amount.

6.             Nonassignability of Option.  This Option shall not be assignable or transferable by the Optionee except by will or by the laws of descent and distribution.  During the life of the Optionee, this Option shall be exercisable only by him, by a conservator or guardian duly appointed for him by reason of his incapacity or by the person appointed by the Optionee in a durable power of attorney acceptable to the Company’s counsel.

7.             Compliance with Securities Act; Lock-Up Agreement.  The Company shall not be obligated to sell or issue any shares of Stock or other securities pursuant to the exercise of this Option unless the shares of Stock or other securities with respect to which this Option is being exercised are at that time effectively registered or exempt from registration under the Securities Act and applicable state securities laws. In the event shares or other securities shall be issued that shall not be so registered, the Optionee hereby represents, warrants and agrees that he will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel. The Optionee further hereby agrees that as a condition to the purchase of shares upon exercise of this Option, he will execute an agreement in a form acceptable to the Company to the effect that the shares shall be subject to any underwriter’s lock-up agreement in connection with a public offering of any securities of the Company that may from time to time apply to shares held by officers and employees of the Company, and such agreement or a successor agreement must be in full force and effect.

8.             Legends.  The Optionee hereby acknowledges that the stock certificate or certificates evidencing shares of Stock or other securities issued pursuant to any exercise of this

3

Option may bear a legend setting forth the restrictions on their transferability described in Section 7 hereof, if such restrictions are then in effect. If any such shares or other securities are issued on a noncertificated basis in accordance with Section 4 hereof, then the Company shall adopt alternative measures to ensure that any such restrictions are properly observed.

THIS SPACE INTENTIONALLY LEFT BLANK

4

9.             Rights as Stockholder.  The Optionee shall have no rights as a stockholder with respect to any shares covered by this Option until the date of issuance of a stock certificate to him for such shares or such shares are otherwise issued on a noncertificated basis in accordance with Section 4 hereof. No adjustment shall be made for dividends or other rights for which the record date is prior to the date on which any such shares are so issued.

10.           Termination or Amendment of Plan.  The Board may terminate or amend the Plan at any time. No such termination or amendment will affect rights and obligations under this Option to the extent it is then in effect and unexercised.

11.           Effect Upon Employment and Performance of Services.  Nothing in this Option or the Plan shall be construed to impose any obligation upon the Company or any Subsidiary to employ the Optionee or to retain the Optionee in its employ or to engage or retain the services of the Optionee.

12.           Time for Acceptance.  Unless the Optionee shall evidence his acceptance of this Option by execution of this Agreement within thirty days after its delivery to him, the Option and this Agreement shall be null and void.

13.           [Intentionally Omitted]

14.           General Provisions.

(a)           Amendment; Waivers.  This Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof and, except as otherwise permitted by the express terms of the Plan and this Agreement, it may not be modified or amended nor may any provision hereof be waived, except by a further written agreement duly signed by each of the parties; provided, however, that a modification or amendment that does not materially diminish the rights of the Optionee hereunder, as they may exist immediately before the effective date of the modification or amendment, shall be effective upon written notice of its provisions to the Optionee. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance.

(b)           Binding Effect.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns.

(c)           Governing Law.  This Agreement has been executed in Massachusetts and shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.

(d)           Construction.  This Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Agreement, the Plan shall control. The titles of the sections of this Agreement and of the Plan are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the

5

context otherwise requires. Capitalized terms not defined herein shall have the meanings given to them in the Plan.

(e)           Notices.  Any notice in connection with this Agreement shall be deemed to have been properly delivered if it is in writing and is delivered by hand or facsimile or sent by registered mail, postage prepaid, to the party addressed as follows, unless another address has been substituted by notice so given:

To the Optionee:	To his address as set forth on the signature page hereof.
To the Company:	Enterprise Bancorp, Inc.
	222 Merrimack Street
	Lowell, Massachusetts 01852
	Attn: Mr. James A. Marcotte

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed as a sealed instrument by its officer thereunto duly authorized as of the date set forth below.

Date of grant: XXXXX XX, 20XX

ENTERPRISE BANCORP, INC.

Signed:

John P. Clancy, Jr.

Chief Executive Officer

6

ACCEPTANCE

I hereby accept the foregoing Option, an incentive stock option, in accordance with its terms and conditions and in accordance with the terms and conditions of the Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003] Stock Incentive Plan.

Date	(Signature of Optionee)
Notice Address:
Date of grant: XXXX XX, 20XX

EXHIBIT 1

Employee name (“Optionee”):	NAME
Date of grant:	DATE
Number of shares granted:	NUMBER
Exercise price:	$XX.XX per share (subject to adjustment as provided in this Agreement and in the Plan)
Vesting schedule:

	Incremental Amount			Cumulative Amount
	% of shares		# of shares	% of shares		# of shares
Date:
On or after: DATE	25	%	NUMBER	25	%	NUMBER
On or after: DATE	25	%	NUMBER	50	%	NUMBER
On or after: DATE	25	%	NUMBER	75	%	NUMBER
On or after: DATE	25	%	NUMBER	100	%	NUMBER

Signed :
	John P. Clancy, Jr.
	Chief Executive Officer

Exhibit 2 to

Nonqualified Stock

Option Agreement

[FORM FOR EXERCISE OF NONQUALIFIED STOCK OPTION]

[SAMPLE ONLY]

Enterprise Bancorp, Inc.

222 Merrimack Street

Lowell, Massachusetts 01852

RE:Exercise of Nonqualified Stock Option under Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003]  Stock Incentive Plan

Gentlemen:

I hereby elect to exercise the stock option granted to me on                         , 200      by and to the extent of purchasing                          shares of the Common Stock of Enterprise Bancorp, Inc. for the exercise price of $                                  per share, subject to the terms and conditions of the Nonqualified Stock Option Agreement between myself and Enterprise Bancorp, Inc. dated as of                  , 200      (the “Agreement”).

Enclosed please find payment, in cash or in such other property as is permitted under the Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003]  Stock Incentive Plan (the “Plan”), of the purchase price for the shares.

I hereby confirm that I have investigated and considered the possible income tax consequences of my exercising the option, of any sale or other disposition by me of any shares acquired upon the exercise of the option and, if I am making payment of any part of the purchase price by delivery of shares of stock of Enterprise Bancorp, Inc., of my making such payment in that form.

I hereby agree to provide to Enterprise Bancorp, Inc. an amount sufficient to satisfy its obligation to withhold certain taxes, in accordance with the Agreement.

I further agree to any securities lock-up agreement between one or more underwriters and shareholders of the Company who are officers or employees of the Company or a Subsidiary, and any successor to that agreement, with regard to the shares acquired upon this exercise of my stock option.

I hereby specifically confirm to Enterprise Bancorp, Inc. that I am acquiring the shares for investment and not with a view to their sale or distribution, and that the shares shall be held subject to all of the terms and conditions of the Plan and the Agreement.

	Very truly yours,
Date	(Signed by                   or other party duly
	exercising option)

9

EX-10.49.3

Exhibit 10.49.3

ENTERPRISE BANCORP, INC.

Incentive Stock Option Agreement

This Agreement made as of this Xth day of XXXXX, 20XX by and between Enterprise Bancorp, Inc., a Massachusetts corporation (the “Company”), and NAME (the “Optionee”).

WITNESSETH THAT:

WHEREAS, the Company has instituted a program entitled “Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003]  Stock Incentive Plan” (the “Plan”); and

WHEREAS, the Compensation Committee of the Board of Directors, or the full Board of Directors, as the case may be, of the Company has authorized the grant of stock options upon the terms and conditions set forth below; and

WHEREAS, the Compensation Committee or the full Board of Directors, as the case may be, has authorized the grant of this stock option pursuant and subject to the terms of the Plan, a copy of which is attached hereto and incorporated herein; and

WHEREAS, the Compensation Committee or the full Board of Directors, as the case may be, has designated this stock option an incentive stock option in accordance with Section 5 of the Plan;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Optionee agree as follows.

1.             Grant.  Subject to the terms of the Plan and this Agreement, the Company hereby grants to the Optionee a stock option (the “Option”) to purchase from the Company XXX shares of its common stock, $0.01 par value per share (“Stock”). This Option is intended to constitute an incentive stock option within the meaning of Section 422 of the Code.

2.             Exercise Price.  This Option may be exercised at the exercise price of $XX.XX per share of Stock, subject to adjustment as provided herein and in the Plan.

3.             Term and Exercisability of Option.  This Option shall expire on the earlier of [not later than the grant date + ten years – one day] or the last day of the exercise period determined pursuant to subsection (c) of this Section 3. At any time before its expiration, this Option may be exercised to the extent set forth in the schedule attached to this Agreement as Exhibit 1, which is incorporated herein and made a part hereof by this reference, provided that:

(a)           at the time of exercise the Optionee is not in violation of any employee confidentiality, noncompetition or other agreement with the Company or a Subsidiary;

(b)           the Optionee’s employment relationship with the Company or an ISO Subsidiary (“Relationship”) must be in effect on the relevant date under the schedule set

forth at Exhibit 1 in order for any scheduled increment in the exercisable portion of the Option to become effective; and

(c)           this Option may not be exercised if three months or more have elapsed following the date of termination of the Relationship between the Optionee and the Company or a Subsidiary, except that if the Relationship terminates by reason of the Optionee’s permanent and total disability (as determined by the Compensation Committee or the full Board of Directors, as the case may be, on the basis of medical advice satisfactory to it) or death, “twelve months” shall be substituted for “three months” in this sentence.

4.             Method of Exercise.  Prior to its expiration and to the extent that the right to purchase shares of Stock has vested hereunder, this Option may be exercised from time to time by written notice to the Company, substantially in the form attached hereto as Exhibit 2, stating the number of shares with respect to which this Option is being exercised and accompanied by either (a) payment in full of the exercise price for the number of shares to be delivered, by means of payment acceptable to the Company in accordance with Section 5(c) of the Plan, or (b) a description of a “cashless exercise” procedure and such other documents and undertakings as are necessary to satisfy that procedure. As soon as practicable after its receipt of such notice, the Company shall, without transfer or issue tax to the Optionee (or other person entitled to exercise this Option), deliver, or cause to be delivered, to the Optionee (or other person entitled to exercise this Option), at the principal executive offices of the Company or such other place as shall be mutually acceptable, a stock certificate or certificates for such shares out of theretofore authorized but unissued shares or reacquired shares of its Stock as the Company may elect; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law. If and to the extent that the Company also provides to its shareholders generally a means to hold title to shares on a noncertificated basis, then any shares to be issued to the Optionee upon the exercise of this Option may be issued on such a noncertificated basis if mutually agreed upon by the Company and the Optionee and otherwise permissible under applicable law and the rules of any applicable stock exchange. Payment of the exercise price may be made in cash or cash equivalents or, in accordance with the terms and conditions of Section 5(c) of the Plan, in whole or in part in shares of Common Stock of the Company; provided, however, that the Compensation Committee or the full Board of Directors, as the case may be, reserves the right upon receipt of any written notice of exercise from the Optionee to require payment in cash with respect to the shares contemplated in such notice; and provided, further, that the Optionee may not make payment in shares of Stock that he acquired upon the earlier exercise of any incentive stock option, unless he has held the shares until at least two years after the date the incentive stock option was granted and at least one year after the date the incentive stock option was exercised. If the Optionee (or other person entitled to exercise this Option) fails to pay for and accept delivery of all of the shares specified in such notice upon tender of delivery thereof, his right to exercise this Option with respect to such shares not paid for may be terminated by the Company.

2

5.             Nonassignability of Option.  This Option shall not be assignable or transferable by the Optionee except by will or by the laws of descent and distribution. During the life of the Optionee, this Option shall be exercisable only by him, by a conservator or guardian duly appointed for him by reason of his incapacity or by the person appointed by the Optionee in a durable power of attorney acceptable to the Company’s counsel.

6.             Compliance with Securities Act; Lock-Up Agreement.  The Company shall not be obligated to sell or issue any shares of Stock or other securities pursuant to the exercise of this Option unless the shares of Stock or other securities with respect to which this Option is being exercised are at that time effectively registered or exempt from registration under the Securities Act and applicable state securities laws. In the event shares or other securities shall be issued that shall not be so registered, the Optionee hereby represents, warrants and agrees that he will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel. The Optionee further hereby agrees that as a condition to the purchase of shares upon exercise of this Option, he will execute an agreement in a form acceptable to the Company to the effect that the shares shall be subject to any underwriter’s lock-up agreement in connection with a public offering of any securities of the Company that may from time to time apply to shares held by officers and employees of the Company, and such agreement or a successor agreement must be in full force and effect.

7.             Legends.  The Optionee hereby acknowledges that the stock certificate or certificates evidencing shares of Stock or other securities issued pursuant to any exercise of this Option may bear a legend setting forth the restrictions on their transferability described in Section 6 hereof, if such restrictions are then in effect.  If any such shares or other securities are issued on a noncertificated basis in accordance with Section 4 hereof, then the Company shall adopt alternative measures to ensure that any such restrictions are properly observed.

8.             Rights as Stockholder.  The Optionee shall have no rights as a stockholder with respect to any shares covered by this Option until the date of issuance of a stock certificate to him for such shares or such shares are otherwise issued on a noncertificated basis in accordance with Section 4 hereof.  No adjustment shall be made for dividends or other rights for which the record date is prior to the date on which any such shares are so issued.

9.            Termination or Amendment of Plan.  The Board may terminate or amend the Plan at any time. No such termination or amendment will affect rights and obligations under this Option, to the extent it is then in effect and unexercised.

10.          Effect Upon Employment.  Nothing in this Option or the Plan shall be construed to impose any obligation upon the Company or any Subsidiary to employ the Optionee or to retain the Optionee in its employ.

11.          Time for Acceptance.  Unless the Optionee shall evidence his acceptance of this Option by execution of this Agreement within thirty days after its delivery to him, the Option and this Agreement shall be null and void.

3

12.          Notice of Disqualifying Disposition.  The Optionee agrees to notify the Company promptly in the event that he sells, transfers, exchanges or otherwise disposes of any shares of Stock issued upon the exercise of the Option before the later of (a) the second anniversary of the date of grant of the Option and (b) the first anniversary of the date the shares were issued upon his exercise of the Option.

13.           Right of Repayment.  In the event that the Optionee accepts employment with or performs services for a competitor of the Company within one year after the date of exercise of this Option or any portion of it, the Optionee shall pay to the Company an amount equal to the excess of the Fair Market Value of the shares as to which the Option was exercised on the date of exercise over the price paid for such shares; provided, however, that the Compensation Committee or the full Board of Directors, as the case may be, in its discretion may release the Optionee from the requirement to make such payment, if the Compensation Committee or the full Board of Directors, as the case may be, determines that the Optionee’s acceptance of such employment or performance of such services is not inimical to the best interests of the Company. The Company may deduct from any compensation or other amount payable by the Company to the Optionee the amount of payment due under the preceding sentence. For purposes of this Section 13, the term “Company” refers to the Company and all Subsidiaries.

14.          General Provisions.

(a)           Amendment; Waivers.  This Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof and, except as otherwise permitted by the express terms of the Plan and this Agreement, it may not be modified or amended nor may any provision hereof be waived, except by a further written agreement duly signed by each of the parties; provided, however, that a modification or amendment that does not materially diminish the rights of the Optionee hereunder, as they may exist immediately before the effective date of the modification or amendment, shall be effective upon written notice of its provisions to the Optionee. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance.

(b)          Binding Effect.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns.

(c)           Governing Law.  This Agreement has been executed in Massachusetts and shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.

(d)           Construction.  This Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Agreement, the Plan shall control. The titles of the sections of this Agreement and of the Plan are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the

4

context otherwise requires. Capitalized terms not defined herein shall have the meanings given to them in the Plan.

(e)           Notices.  Any notice in connection with this Agreement shall be deemed to have been properly delivered if it is in writing and is delivered by hand or facsimile or sent by registered mail, postage prepaid, to the party addressed as follows, unless another address has been substituted by notice so given:

To the Optionee:	To his address as set forth on the signature page hereof.
To the Company:	Enterprise Bancorp, Inc.
	222 Merrimack Street
	Lowell, Massachusetts 01852
	Attn: Mr. James A. Marcotte

5

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed as a sealed instrument by its officer thereunto duly authorized as of the date set forth below.

Date of grant: XXXX XX, 20XX

ENTERPRISE BANCORP, INC.

Signed:

John P. Clancy, Jr.

Chief Executive Officer

6

ACCEPTANCE

I hereby accept the foregoing Option, an incentive stock option, in accordance with its terms and conditions and in accordance with the terms and conditions of the Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003] Stock Incentive Plan.

Date	(Signature of Optionee)
Notice Address:
Date of grant: XXXX XX, 20XX

7

EXHIBIT 1

Employee name (“Optionee”):	NAME
Date of grant:	DATE
Number of shares granted:	NUMBER
Exercise price:	$XX.XX per share (subject to adjustment as provided in this Agreement and in the Plan)
Vesting schedule:

	Incremental Amount			Cumulative Amount
	% of shares		# of shares	% of shares		# of shares
Date:
On or after: DATE	25	%	NUMBER	25	%	NUMBER
On or after: DATE	25	%	NUMBER	50	%	NUMBER
On or after: DATE	25	%	NUMBER	75	%	NUMBER
On or after: DATE	25	%	NUMBER	100	%	NUMBER

Signed :
	John P. Clancy, Jr.
	Chief Executive Officer

Exhibit 2 to Incentive Stock

 Option Agreement

[FORM FOR EXERCISE OF INCENTIVE STOCK OPTION]
[SAMPLE ONLY]

Enterprise Bancorp, Inc.
222 Merrimack Street
Lowell, Massachusetts 01852

RE:Exercise of Incentive Stock Option under Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003]  Stock Incentive Plan

Gentlemen:

I hereby elect to exercise the stock option granted to me on                     , 200     by and to the extent of purchasing                            shares of the Common Stock of Enterprise Bancorp, Inc. for the exercise price of $                         per share, subject to the terms and conditions of the Incentive Stock Option Agreement between myself and Enterprise Bancorp, Inc. dated as of                                  , 200     (the “Agreement”).

Enclosed please find payment, in cash or in such other property as is permitted under the Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003] Stock Incentive Plan (the “Plan”), of the purchase price for the shares.

I hereby confirm that I have investigated and considered the possible income tax consequences of my exercising the option, of any sale or other disposition by me of any shares acquired upon the exercise of the option and, if I am making payment of any part of the purchase price by delivery of shares of stock of Enterprise Bancorp, Inc., of my making such payment in that form.

I further agree to any securities lock-up agreement between one or more underwriters and shareholders of the Company who are officers or employees of the Company or a Subsidiary, and any successor to that agreement, with regard to the shares acquired upon this exercise of my stock option.

I hereby specifically confirm to Enterprise Bancorp, Inc. that I am acquiring the shares for investment and not with a view to their sale or distribution, and that the shares shall be held subject to all of the terms and conditions of the Plan and the Agreement.

	Very truly yours,
Date	(Signed by                    or other party duly
	exercising option)

EX-10.49.4

Exhibit 10.49.4

ENTERPRISE BANCORP, INC.

Nonqualified Stock Option Agreement

This Agreement made as of this Xth day of XXXX, 20XX by and between Enterprise Bancorp, Inc., a Massachusetts corporation (the “Company”), and NAME (the “Optionee”).

WITNESSETH THAT:

WHEREAS, the Company has instituted a program entitled “Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003] Stock Incentive Plan” (the “Plan”); and

WHEREAS, the Compensation Committee of the Board of Directors, or the full Board of Directors, as the case may be, of the Company has authorized the grant of stock options upon the terms and conditions set forth below; and

WHEREAS, the Compensation Committee or the full Board of Directors, as the case may be, has authorized the grant of this stock option pursuant and subject to the terms of the Plan, a copy of which is attached hereto and incorporated herein; and

WHEREAS, the Compensation Committee or the full Board of Directors, as the case may be, has designated this stock option a nonqualified stock option in accordance with Section 5 of the Plan;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Optionee agree as follows.

1.             Grant.  Subject to the terms of the Plan and this Agreement, the Company hereby grants to the Optionee a stock option (the “Option”) to purchase from the Company #OF shares of its common stock, $0.01 par value per share (“Stock”). This Option is not intended to be an incentive stock option or to qualify for special federal income tax treatment under Section 422 of the Code.

2.             Exercise Price.  This Option may be exercised at the exercise price of $XX.XX per share of Stock, subject to adjustment as provided herein and in the Plan.

3.             Term and Exercisability of Option.  This Option shall expire on the earlier of [not later than the grant date + ten years – one day] or the last day of the exercise period determined pursuant to subsection (c) of this Section 3. At any time before its expiration, this Option may be exercised to the extent set forth in the schedule attached to this Agreement as Exhibit 1, which is incorporated herein and made a part hereof by this reference, provided that:

(a)           at the time of exercise the Optionee is not in violation of any employee confidentiality, noncompetition or other agreement with the Company or a Subsidiary;

(b)           the Optionee must maintain the employment, contractual or other service relationship with the Company or a Subsidiary that was in effect at the time of the initial

grant of this Option (the “Relationship”) without change on the relevant date set forth in Exhibit 1 in order for any scheduled increment in the exercisable portion of the Option to become effective;

(c)           this Option may not be exercised if three months or more have elapsed following the date of termination, or any change in the nature, of the Relationship between the Optionee and the Company or a Subsidiary; provided, however, that if the Relationship terminates as a result of the Optionee’s retirement at age 62 or older, “thirty-six months” shall be substituted for “three months” in this sentence; and provided, further, that if the Relationship terminates by reason of the Optionee’s permanent and total disability (as determined by the Compensation Committee or the full Board of Directors, as the case may be, on the basis of medical advice satisfactory to it) or death, the Option must be exercised within twelve months of the Optionee’s death or disability; and

(d)           For purposes of subsections (b) and (c) of this Section 3, the nature of the Relationship between the Optionee and the Company shall not be deemed to have changed if the fundamental nature of the Relationship, meaning the Optionee serving as an employee or as a non-employee director or as a third-party consultant, advisor or other vendor, as the case may be, does not change, regardless of any changes in the Optionee’s title, compensation or other terms of employment or service, as the case may be, which do not change the fundamental nature of the Relationship.  A fundamental change in the nature of the Relationship would include, for example, a change from the Optionee serving as an employee of the Company to serving as a third-party consultant to the Company or a change from the Optionee serving as an employee director of the Company to serving as a non-employee director of the Company.

4.             Method of Exercise.  Prior to its expiration and to the extent that the right to purchase shares of Stock has vested hereunder, this Option may be exercised from time to time by written notice to the Company, substantially in the form attached hereto as Exhibit 2, stating the number of shares with respect to which this Option is being exercised and accompanied by either (a) payment in full of the exercise price for the number of shares to be delivered, by means of payment acceptable to the Company in accordance with Section 5(c) of the Plan, or (b) a description of a “cashless exercise” procedure and such other documents and undertakings as are necessary to satisfy that procedure. As soon as practicable after its receipt of such notice, the Company shall, without transfer or issue tax to the Optionee (or other person entitled to exercise this Option), deliver, or cause to be delivered, to the Optionee (or other person entitled to exercise this Option), at the principal executive offices of the Company or such other place as shall be mutually acceptable, a stock certificate or certificates for such shares out of theretofore authorized but unissued shares or reacquired shares of its Stock as the Company may elect; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law.  If and to the extent that the Company also provides to its shareholders generally a means to hold title to shares on a noncertificated basis, then any shares to be issued to the Optionee upon the exercise of this Option may be issued on such a noncertificated basis if mutually agreed upon by the Company and the Optionee and otherwise permissible under applicable law and the rules of any applicable stock exchange. Payment of the exercise price may

2

be made in cash or cash equivalents or, in accordance with the terms and conditions of Section 5(c) of the Plan, in whole or in part in shares of Common Stock of the Company; provided, however, that the Compensation Committee or the full Board of Directors, as the case may be, reserves the right upon receipt of any written notice of exercise from the Optionee to require payment in cash with respect to the shares contemplated in such notice; and provided, further, that the Optionee may not make payment in shares of Stock that he acquired upon the earlier exercise of any incentive stock option, unless he has held the shares until at least two years after the date the incentive stock option was granted and at least one year after the date the incentive stock option was exercised. If the Optionee (or other person entitled to exercise this Option) fails to pay for and accept delivery of all of the shares specified in such notice upon tender of delivery thereof, his right to exercise this Option with respect to such shares not paid for may be terminated by the Company.

5.             Withholding Taxes.  The Optionee hereby agrees, as a condition to any exercise of this Option, to provide to the Company an amount sufficient to satisfy the Company’s obligation to withhold certain federal, state and local taxes arising by reason of such exercise (the “Withholding Amount”), if any, by (a) authorizing the Company and/or a Subsidiary to withhold the Withholding Amount from his cash compensation or (b) remitting the Withholding Amount to the Company in cash; provided, however, that to the extent that the Withholding Amount is not provided by one or a combination of such methods, the Company may at its election withhold from the Stock that would otherwise be delivered upon exercise of this Option that number of shares having a Fair Market Value, on the date of exercise, sufficient to eliminate any deficiency in the Withholding Amount.

6.             Nonassignability of Option.  This Option shall not be assignable or transferable by the Optionee except by will or by the laws of descent and distribution.  During the life of the Optionee, this Option shall be exercisable only by him, by a conservator or guardian duly appointed for him by reason of his incapacity or by the person appointed by the Optionee in a durable power of attorney acceptable to the Company’s counsel.

7.             Compliance with Securities Act; Lock-Up Agreement.  The Company shall not be obligated to sell or issue any shares of Stock or other securities pursuant to the exercise of this Option unless the shares of Stock or other securities with respect to which this Option is being exercised are at that time effectively registered or exempt from registration under the Securities Act and applicable state securities laws. In the event shares or other securities shall be issued that shall not be so registered, the Optionee hereby represents, warrants and agrees that he will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel. The Optionee further hereby agrees that as a condition to the purchase of shares upon exercise of this Option, he will execute an agreement in a form acceptable to the Company to the effect that the shares shall be subject to any underwriter’s lock-up agreement in connection with a public offering of any securities of the Company that may from time to time apply to shares held by officers and employees of the Company, and such agreement or a successor agreement must be in full force and effect.

8.             Legends.  The Optionee hereby acknowledges that the stock certificate or certificates evidencing shares of Stock or other securities issued pursuant to any exercise of this

3

Option may bear a legend setting forth the restrictions on their transferability described in Section 7 hereof, if such restrictions are then in effect. If any such shares or other securities are issued on a noncertificated basis in accordance with Section 4 hereof, then the Company shall adopt alternative measures to ensure that any such restrictions are properly observed.

THIS SPACE INTENTIONALLY LEFT BLANK

4

9.             Rights as Stockholder.  The Optionee shall have no rights as a stockholder with respect to any shares covered by this Option until the date of issuance of a stock certificate to him for such shares or such shares are otherwise issued on a noncertificated basis in accordance with Section 4 hereof. No adjustment shall be made for dividends or other rights for which the record date is prior to the date on which any such shares are so issued.

10.           Termination or Amendment of Plan.  The Board may terminate or amend the Plan at any time. No such termination or amendment will affect rights and obligations under this Option to the extent it is then in effect and unexercised.

11.           Effect Upon Employment and Performance of Services.  Nothing in this Option or the Plan shall be construed to impose any obligation upon the Company or any Subsidiary to employ the Optionee or to retain the Optionee in its employ or to engage or retain the services of the Optionee.

12.           Time for Acceptance.  Unless the Optionee shall evidence his acceptance of this Option by execution of this Agreement within thirty days after its delivery to him, the Option and this Agreement shall be null and void.

13.           Right of Repayment.  In the event that the Optionee accepts employment with or performs services for a competitor of the Company within one year after the date of exercise of this Option or any portion of it, the Optionee shall pay to the Company an amount equal to the excess of the Fair Market Value of the shares as to which the Option was exercised on the date of exercise over the price paid for such shares; provided, however, that the Compensation Committee or the full Board of Directors, as the case may be, in its discretion may release the Optionee from the requirement to make such payment, if the Compensation Committee or the full Board of Directors, as the case may be, determines that the Optionee’s acceptance of such employment or performance of such services is not inimical to the best interests of the Company. The Company may deduct from any compensation or other amount payable by the Company to the Optionee the amount of payment due under the preceding sentence. For purposes of this Section 13, the term “Company” refers to the Company and all Subsidiaries.

14.           General Provisions.

(a)           Amendment; Waivers.  This Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof and, except as otherwise permitted by the express terms of the Plan and this Agreement, it may not be modified or amended nor may any provision hereof be waived, except by a further written agreement duly signed by each of the parties; provided, however, that a modification or amendment that does not materially diminish the rights of the Optionee hereunder, as they may exist immediately before the effective date of the modification or amendment, shall be effective upon written notice of its provisions to the Optionee. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance.

5

(b)           Binding Effect.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns.

(c)           Governing Law.  This Agreement has been executed in Massachusetts and shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.

(d)           Construction.  This Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Agreement, the Plan shall control. The titles of the sections of this Agreement and of the Plan are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the context otherwise requires. Capitalized terms not defined herein shall have the meanings given to them in the Plan.

(e)           Notices.  Any notice in connection with this Agreement shall be deemed to have been properly delivered if it is in writing and is delivered by hand or facsimile or sent by registered mail, postage prepaid, to the party addressed as follows, unless another address has been substituted by notice so given:

To the Optionee:	To his address as set forth on the signature page hereof.
To the Company:	Enterprise Bancorp, Inc.
	222 Merrimack Street
	Lowell, Massachusetts 01852
	Attn: Mr. James A. Marcotte

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed as a sealed instrument by its officer thereunto duly authorized as of the date set forth below.

Date of grant: XXXXX XX, 20XX
	ENTERPRISE BANCORP, INC.
	Signed:
	John P. Clancy, Jr.
	Chief Executive Officer

6

ACCEPTANCE

I hereby accept the foregoing Option, a nonqualified stock option, in accordance with its terms and conditions and in accordance with the terms and conditions of the Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003] Stock Incentive Plan.

Date (Signature of Optionee)

Notice Address:

Date of grant: XXXX XX, 20XX

EXHIBIT 1

Employee name (“Optionee”):	NAME
Date of grant:	DATE
Number of shares granted:	NUMBER
Exercise price:	$XX.XX per share (subject to adjustment as provided in this Agreement and in the Plan)

Vesting schedule:

	Incremental Amount			Cumulative Amount
Date:	% of shares		# of shares	% of shares		# of shares
On or after: DATE	25	%	NUMBER	25	%	NUMBER
On or after: DATE	25	%	NUMBER	50	%	NUMBER
On or after: DATE	25	%	NUMBER	75	%	NUMBER
On or after: DATE	25	%	NUMBER	100	%	NUMBER

Signed:
	John P. Clancy, Jr.
	Chief Executive Officer

Exhibit 2 to

Nonqualified Stock

Option Agreement

[FORM FOR EXERCISE OF NONQUALIFIED STOCK OPTION]

[SAMPLE ONLY]

Enterprise Bancorp, Inc.

222 Merrimack Street

Lowell, Massachusetts 01852

RE:Exercise of Nonqualified Stock Option under Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003] Stock Incentive Plan

Gentlemen:

I hereby elect to exercise the stock option granted to me on                      , 200    by and to the extent of purchasing                         shares of the Common Stock of Enterprise Bancorp, Inc. for the exercise price of $                          per share, subject to the terms and conditions of the Nonqualified Stock Option Agreement between myself and Enterprise Bancorp, Inc. dated as of                  , 200   (the “Agreement”).

Enclosed please find payment, in cash or in such other property as is permitted under the Enterprise Bancorp, Inc. [Amended and Restated 1998] [2003] Stock Incentive Plan (the “Plan”), of the purchase price for the shares.

I hereby confirm that I have investigated and considered the possible income tax consequences of my exercising the option, of any sale or other disposition by me of any shares acquired upon the exercise of the option and, if I am making payment of any part of the purchase price by delivery of shares of stock of Enterprise Bancorp, Inc., of my making such payment in that form.

I hereby agree to provide to Enterprise Bancorp, Inc. an amount sufficient to satisfy its obligation to withhold certain taxes, in accordance with the Agreement.

I further agree to any securities lock-up agreement between one or more underwriters and shareholders of the Company who are officers or employees of the Company or a Subsidiary, and any successor to that agreement, with regard to the shares acquired upon this exercise of my stock option.

I hereby specifically confirm to Enterprise Bancorp, Inc. that I am acquiring the shares for investment and not with a view to their sale or distribution, and that the shares shall be held subject to all of the terms and conditions of the Plan and the Agreement.

	Very truly yours,
Date	(Signed by                  or other party duly
	exercising option)

9

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
UNDER SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, John P. Clancy, Jr., certify that:

1.I have reviewed this quarterly report on Form 10-Q of Enterprise Bancorp, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 10, 2007	/s/ John P. Clancy, Jr.
	John P. Clancy, Jr.
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
UNDER SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, James A. Marcotte, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Enterprise Bancorp, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 10, 2007	/s/ James A. Marcotte
	James A. Marcotte
	Executive Vice President, Chief Financial Officer and
	Treasurer (Principal Financial Officer)

EX-32

EXHIBIT 32

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
UNDER 18 U.S.C. § 1350 FURNISHED PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(b)

In connection with the Quarterly Report of Enterprise Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended on March 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in his respective capacities indicated below, hereby certifies, pursuant to 18 U.S.C. § 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge and belief, (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ John P. Clancy, Jr.
	John P. Clancy, Jr.
	Chief Executive Officer
	(Principal Executive Officer)
	/s/ James A. Marcotte
	James A. Marcotte
	Executive Vice President, Chief Financial Officer
	and Treasurer (Principal Financial Officer)
May 10, 2007

A signed original of this written statement required by Section 906 has been provided to Enterprise Bancorp, Inc. and will be retained by Enterprise Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.