Document:

EXHIBIT
10.14

 

COHERENT, INC.

 

2001 STOCK PLAN

 

1.     Purposes of the
Plan.  The purposes of this
2001 Stock Plan are:

 

•      to attract and retain the
best available personnel for positions of substantial responsibility,

•      to provide additional
incentive to Employees, Directors and Consultants, and

•      to promote the success of
the Company’s business by motivating the Employees and Consultants to superior
performance.

 

Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.

 

2.     Definitions.  As used herein, the following definitions
shall apply:

 

(a)   “Administrator”
means the Board or any of its Committees as shall be administering the Plan, in
accordance with Section 4 of the Plan.

 

(b)   “Applicable Laws”
means the requirements relating to the administration of stock option plans
under U. S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is
listed or quoted and the applicable laws of any foreign country or jurisdiction
where Options are, or will be, granted under the Plan.

 

(c)   “Board”
means the Board of Directors of the Company.

 

(d)   “Code”
means the Internal Revenue Code of 1986, as amended.

 

(e)   “Committee”
means a committee of Directors appointed by the Board in accordance with
Section 4 of the Plan, which shall consist solely of Independent Directors
who are not eligible to receive stock option grants under the Plan.

 

(f)    “Common Stock”
means the common stock of the Company.

 

(g)   “Company”
means Coherent, Inc., a Delaware corporation.

 

(h)   “Consultant”
means any natural person, including an advisor, engaged by the Company or a
Parent or Subsidiary to render services to such entity.

 

(i)    “Director”
means a member of the Board.

 

(j)    “Disability”
means total and permanent disability as defined in Section 22(e)(3) of the
Code.

 

(k)   “Employee”
means any person, including Officers and Directors, employed by the Company or
any Parent or Subsidiary of the Company. A Service Provider shall not cease to
be treated as an Employee in the case of (i) any leave of absence approved
by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. For purposes
of Incentive Stock Options, no such leave may exceed ninety days, unless
reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive
Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director’s fee by the
Company shall be sufficient to constitute “employment” by the Company.

 

(l)    “Exchange Act”
means the Securities Exchange Act of 1934, as amended.

 

(m)  “Fair Market Value”
means, as of any date, the value of Common Stock determined as follows:

 

(i)         If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the 

 

 

closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system for the last market trading
day prior to the time of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;

 

(ii)        If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The
Wall Street Journal or such other source as the Administrator deems
reliable; or

 

(iii)       In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

 

(n)   “Incentive Stock
Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.

 

(o)   “Independent
Director” means a Director of the Company who is not also an
Employee of the Company and who qualifies as an “outside director” within the
meaning of Code Section 162(m) and Section 16(b) of the Exchange Act.

 

(p)   “Nonstatutory
Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

 

(q)   “Notice of Grant”
means a written or electronic notice evidencing certain terms and conditions of
an individual Option grant. The Notice of Grant is part of the Option
Agreement.

 

(r)    “Officer”
means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.

 

(s)   “Option”
means a stock option granted pursuant to the Plan.

 

(t)    “Option
Agreement” means an agreement between the Company and an Optionee
evidencing the terms and conditions of an individual Option grant. The Option
Agreement is subject to the terms and conditions of the Plan.

 

(u)   “Optioned Stock”
means the Common Stock subject to an Option.

 

(v)   “Optionee”
means the holder of an outstanding Option granted under the Plan.

 

(w)  “Parent”
means a “parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.

 

(x)    “Plan”
means this Coherent, Inc. 2001 Stock Plan.

 

(y)  “Rule 16b-3” means Rule 16b-3 of
the Exchange Act or any successor to Rule 16b-3, as in effect when
discretion is being exercised with respect to the Plan.

 

(z)    “Section 16(b)”
means Section 16(b) of the Exchange Act.

 

(aa) “Service Provider”
means an Employee or Consultant.

 

(bb) “Share”
means a share of the Common Stock, as adjusted in accordance with
Section 12 of the Plan.

 

(cc) “Subsidiary”
means a “subsidiary corporation”, whether now or hereafter existing, as defined
in Section 424(f) of the Code.

 

3.     Stock Subject
to the Plan.  Subject to the
provisions of Section 12 of the Plan, the maximum aggregate number of
Shares that may be optioned and sold under the Plan is 2,800,000 Shares. The
Shares may be authorized, but unissued, or reacquired Common Stock.

 

If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program,
the unpurchased Shares which were subject thereto shall become available for
future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have
actually been issued under the Plan upon exercise of an Option shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.

 

 

4.     Administration
of the Plan.

 

(a)   Procedure.

 

(i)         Section 162(m).
To the extent that the Administrator determines it to be desirable to qualify
Options granted hereunder as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the Plan shall be administered by a
Committee of two or more Independent Directors.

 

(ii)        Rule 16b-3.
To the extent desirable to qualify transactions hereunder as exempt under
Rule 16b-3, the transactions contemplated hereunder shall be structured to
satisfy the requirements for exemption under Rule 16b-3.

 

(iii)       Other
Administration. Other than as provided above, the Plan shall be
administered by (A) the Board or (B) a Committee of Independent
Directors with the ability to obtain the advice of independent counsel, which
committee shall be constituted to satisfy Applicable Laws.

 

(b)   Powers of the
Administrator. Subject to the provisions of the Plan, including,
without limitation Section 9(a)(iii), and in the case of a Committee,
subject to the specific duties delegated by the Board to such Committee, the
Administrator shall have the authority, in its discretion:

 

(i)         to determine the Fair Market Value;

 

(ii)        to select the Service Providers to whom Options
may be granted hereunder;

 

(iii)       to determine the number of shares of Common
Stock to be covered by each Option granted hereunder;

 

(iv)       to approve forms of agreement for use under the
Plan;

 

(v)        to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common
Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

 

(vi)       to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;

 

(vii)      to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;

 

(viii)     to modify or amend each Option (subject to
Section 14(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;

 

(ix)       to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;

 

(x)        to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option previously
granted by the Administrator;

 

(xi)       to make all other determinations deemed
necessary or advisable for administering the Plan.

 

(c)   Effect of
Administrator’s Decision. The Administrator’s decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options.

 

5.     Eligibility.  Nonstatutory Stock Options may be granted to
Service Providers. Incentive Stock Options may be granted only to Employees.

 

 

6.     Limitations.

 

(a)   Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 6(a), Incentive Stock Options shall be taken into account in
the order in which they were granted. The Fair Market Value of the Shares shall
be determined as of the time the Option with respect to such Shares is granted.

 

(b)   Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee’s relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee’s right or the Company’s right to terminate such relationship at any
time, with or without cause.

 

(c)   The following limitations shall apply to grants of
Options:

 

(i)         No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 250,000 Shares.

 

(ii)        In connection with his or her initial service,
a Service Provider may be granted Options to purchase up to an additional
250,000 Shares, which shall not count against the limit set forth in
subsection (i) above.

 

(iii)       The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company’s capitalization as
described in Section 12.

 

7.     Term of Plan.  Subject to Section 18 of the Plan, the
Plan shall become effective upon its adoption by the Board. It shall continue
in effect for a term of ten (10) years unless terminated earlier under
Section 14 of the Plan.

 

8.     Term of Option.  The term of each Option shall be stated in
the Option Agreement. In the case of an Incentive Stock Option, the term shall
be ten (10) years from the date of grant or such shorter term as may be
provided in the Option Agreement. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant or such shorter term as may be provided in the Option
Agreement.

 

9.     Option Exercise
Price and Consideration.

 

(a)   Exercise Price. The
per share exercise price for the Shares to be issued pursuant to exercise of an
Option shall be determined by the Administrator, subject to the following:

 

(i)         In the case of an Incentive Stock Option:

 

(A)       granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date of grant.

 

(B)        granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.

 

(ii)        In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.

 

(iii)       The exercise price for the Shares to be issued
pursuant to an already granted Option may not be changed without the consent of
the Company’s shareholders. This shall include, without limitation, a repricing
of the Option as well as an option exchange program whereby the Optionee agrees
to cancel an existing Option in exchange for an Option to be granted in the
future with an exercise price equal to the Fair Market Value of the Shares on
the date of grant.

 

(b)   Waiting Period
and Exercise Dates. At the time an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and
shall determine any conditions that must be satisfied before the Option may be
exercised.

 

 

(c)   Form of
Consideration. The Administrator shall determine the acceptable form
of consideration for exercising an Option, including the method of payment. In
the case of an Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such consideration may
consist entirely of:

 

(i)         cash;

 

(ii)        check;

 

(iii)       other Shares which (A) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six months on the date of surrender, and (B) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised;

 

(iv)       any combination of the foregoing methods of
payment; or such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws; or

 

(v)        such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.

 

10.   Exercise of
Option.

 

(a)   Procedure for
Exercise; Rights as a Shareholder. Any Option granted hereunder
shall be exercisable according to the terms of the Plan and at such times and
under such conditions as determined by the Administrator and set forth in the
Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.

 

An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the Option is
exercised. Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement and the
Plan. Shares issued upon exercise of an Option shall be issued in the name of
the Optionee or, if requested by the Optionee, in the name of the Optionee and
his or her spouse. Until the Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
Shares promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 12 of the Plan.

 

Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.

 

(b)   Termination of
Relationship as Service Provider. If an Optionee ceases to be
Service Provider, other than upon the Optionee’s death or Disability, the
Optionee may exercise his or her Option within such period of time as is
specified in the Option Agreement to the extent that the Option is vested on
the date of termination (but in no event later than the expiration of the term
of such Option as set forth in the Option Agreement). In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
ninety (90) days following the Optionee’s termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

 

(c)   Disability of
Optionee. If an Optionee ceases to be a Service Provider as a result
of the Optionee’s Disability, the Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the
Optionee’s termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

 

(d)   Death of Optionee.
If an Optionee dies while a Service Provider, the Option may be exercised
within such period of time as is specified in the Option Agreement (but in no
event later than the expiration of the term of such Option as set forth in the
Notice of

 

 

Grant), by the Optionee’s estate or by a person who acquires the right
to exercise the Option by bequest or inheritance, but only to the extent that
the Option is vested on the date of death. In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve
(12) months following the Optionee’s termination. If, at the time of
death, the Optionee is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option shall immediately revert to the
Plan. The Option may be exercised by the executor or administrator of the
Optionee’s estate or, if none, by the person(s) entitled to exercise the Option
under the Optionee’s will or the laws of descent or distribution. If the Option
is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

 

(e)   Buyout Provisions.
The Administrator may at any time offer to buy out for a payment in cash or
Shares an Option previously granted based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at the time that
such offer is made.

 

11.   Non-Transferability
of Options.  Unless
determined otherwise by the Administrator, an Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee. If the Administrator makes an
Option transferable, such Option shall contain such additional terms and
conditions as the Administrator deems appropriate.

 

12.   Adjustments Upon
Changes in Capitalization, Dissolution, Merger or Asset Sale.

 

(a)   Changes in Capitalization.
Subject to any required action by the shareholders of the Company, the number
of shares of Common Stock covered by each outstanding Option and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option, as well as the price per
share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been “effected without receipt of consideration.” Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.

 

(b)   Dissolution or
Liquidation. In the event of the proposed dissolution or liquidation
of the Company, the Administrator shall notify each Optionee as soon as
practicable prior to the effective date of such proposed transaction. The
Administrator in its discretion may provide for an Optionee to have the right
to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares
as to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.

 

(c)   Merger or Asset
Sale. In the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company,
each outstanding Option shall be assumed or an equivalent option substituted by
the successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume or
substitute for the Option, the Optionee shall fully vest in and have the right
to exercise the Option as to all of the Optioned Stock, including Shares as to
which it would not otherwise be vested or exercisable. If an Option becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee in
writing or electronically that the Option shall be fully vested and exercisable
for a period of fifteen (15) days from the date of such notice, and the
Option shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option shall be considered assumed if, following the merger
or sale of assets, the option confers the right to purchase or receive, for
each Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.

 

 

13.   Date of Grant.  The date of grant of an Option shall be, for
all purposes, the date on which the Administrator makes the determination
granting such Option, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.

 

14.   Amendment and
Termination of the Plan.

 

(a)   Amendment and
Termination. The Board may at any time amend, alter, suspend or
terminate the Plan.

 

(b)   Shareholder
Approval. The Company shall obtain shareholder approval of any Plan
amendment to the extent necessary and desirable to comply with Applicable Laws.

 

(c)   Effect of
Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Optionee, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator’s ability to
exercise the powers granted to it hereunder with respect to Options granted
under the Plan prior to the date of such termination.

 

15.   Conditions Upon
Issuance of Shares.

 

(a)   Legal Compliance.
Shares shall not be issued pursuant to the exercise of an Option unless the
exercise of such Option and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

 

(b)   Investment
Representations. As a condition to the exercise of an Option, the
Company may require the person exercising such Option to represent and warrant
at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.

 

16.   Inability to
Obtain Authority.  The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.

 

17.   Reservation of
Shares.  The Company, during
the term of this Plan, will at all times reserve and keep available such number
of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

18.   Shareholder
Approval.  The Plan shall be
subject to approval by the shareholders of the Company within twelve
(12) months after the date the Plan is adopted. Such shareholder approval
shall be obtained in the manner and to the degree required under Applicable
Laws.Exhibit
10.1

 

	
  

  
	
  Confirmation of
  Forward Stock Sale

  
	
  Transactions

  

 

 

December 11,
2003

 

ML Ref:
0383828

 

 

	
  To:

  	
  Boston Private
  Financial Holdings, Inc.

  
	
   

  	
  Ten Post Office Square

  
	
   

  	
  Boston, MA 02109

  
	
   

  	
   

  
	
  From:

  	
  Merrill Lynch International

  
	
   

  	
  Ropemaker
  Place

  
	
   

  	
  25
  Ropemaker Street

  
	
   

  	
  London,
  England EC2Y 9L4

  
	
   

  	
   

  
	
  From:

  	
  Merrill Lynch, Pierce, Fenner & Smith Incorporated,

  Solely as Agent

  
	
   

  	
  tel: (212) 449-3149

  
	
   

  	
  fax: (212) 449-2697

  

 

 

Dear Sirs,

 

The purpose of this letter agreement (this
“Confirmation”) is to confirm the terms and conditions of the transaction
entered into between us on the Trade Date specified below (the
“Transaction”).  This Confirmation
constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified
below.

 

1.                                       The definitions and provisions contained in the 2000 ISDA
Definitions (the “2000 Definitions”) and the 2002 ISDA Equity Derivatives
Definitions (the “2002 Definitions” and, together with the 2000 Definitions,
the “Definitions”), each as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation.  In the event of any inconsistency between
the 2002 Definitions and the 2000 Definitions, the 2002 Definitions will
govern.  In the event of any
inconsistency between the Definitions and this Confirmation, this Confirmation
will govern.

 

Party A and Party B undertake
to use all reasonable efforts promptly to negotiate, execute and deliver an
agreement (the “Agreement”) in the form of the 1992 ISDA Master Agreement
(Multicurrency-Cross Border) (the “ISDA Form”).  Until we execute and

 

 

deliver that Agreement, this
Confirmation, together with all other documents referring to the ISDA Form
confirming transaction entered into between us shall supplement, form a part
of, and be subject to an agreement in the form of the ISDA Form as if we had
executed an agreement in such form with the a Schedule thereto with the
elections and variables set forth in Part 5 of this Confirmation.  In the event of any inconsistency between
the provisions of that agreement and this Confirmation, this Confirmation will
prevail for purposes of this Transaction.

 

This Confirmation shall
supplement, form a part of, and be subject to such Agreement.  Until you and we execute and deliver the
Agreement, this Confirmation (together with all other Confirmations of
Transactions previously entered into between us, notwithstanding anything to
the contrary therein) shall supplement, form a part of, and be subject to the
1992 ISDA Master Agreement as if, on the Trade Date of the first such
Transaction between us, you and we had executed that agreement (without any
Schedule thereto but as supplemented in the manner provided in
Section 5 hereof).

 

Party A and Party B each
represents to the other that it has entered into this Transaction in reliance
upon such tax, accounting, regulatory, legal, and financial advice as it deems
necessary and not upon any view expressed by the other.

 

2.                                       The terms of the particular Transaction to which this Confirmation
relates are as follows:

 

General Terms:

 

	
  Party A:

  	
   

  	
  Merrill Lynch International.

  
	
   

  	
   

  	
   

  
	
  Party B:

  	
   

  	
  Boston Private Financial Holdings, Inc.

  
	
   

  	
   

  	
   

  
	
  Trade Date:

  	
   

  	
  December 11, 2003.

  
	
   

  	
   

  	
   

  
	
  Effective
  Date:

  	
   

  	
  December 17, 2003

  
	
   

  	
   

  	
   

  
	
  Base Amount:

  	
   

  	
  Initially, 2,300,000 Shares. On each
  Settlement Date, the Base Amount shall be reduced by the number of Settlement
  Shares for such Settlement Date.

  
	
   

  	
   

  	
   

  
	
  Maturity
  Date:

  	
   

  	
  December 17, 2004

  
	
   

  	
   

  	
   

  
	
  Forward
  Price:

  	
   

  	
  On the Effective Date, the Initial Forward
  Price, and on any other day, (i) the Forward Price on the immediately
  preceding calendar day multiplied by the sum of (A) 1 plus (B) the Daily Rate
  for such day, minus (ii) the amount of any cash dividend paid on such
  day (other than any cash dividend for which

  

 

2

 

	
   

  	
   

  	
  the ex-dividend date occurred prior to the
  Effective Date); provided that if on any Settlement Date
  an ex-dividend date for a cash dividend has occurred, but such dividend has
  not yet been paid, then, solely for the purpose of calculating the Settlement
  Amount for such Settlement Date, the present value (as determined by the
  Calculation Agent) of such dividend shall be deducted from the Forward Price
  on such Settlement Date.

  
	
   

  	
   

  	
   

  
	
  Initial
  Forward Price:

  	
   

  	
  USD $22.886 per Share.

  
	
   

  	
   

  	
   

  
	
  Daily Rate:

  	
   

  	
  For any day, (i)(A) USD-Federal Funds-H.15 minus (B) the Spread divided by (ii) 365.

  
	
   

  	
   

  	
   

  
	
  Spread:

  	
   

  	
  1.50%.

  
	
   

  	
   

  	
   

  
	
  Shares:

  	
   

  	
  Common Stock, $1.00 par value per share, of
  Boston Private Financial Holdings, Inc. (the “Issuer”) (Exchange identifier:
  “BPFH”).

  
	
   

  	
   

  	
   

  
	
  Exchange:

  	
   

  	
  NASDAQ.

  
	
   

  	
   

  	
   

  
	
  Related
  Exchange(s):

  	
   

  	
  The principal exchanges(s) for options
  contracts or futures contracts, if any, with respect to the Shares.

  
	
   

  	
   

  	
   

  
	
  Clearance
  System:

  	
   

  	
  DTC.

  
	
   

  	
   

  	
   

  
	
  Calculation
  Agent:

  	
   

  	
  Merrill Lynch International.

  

 

Settlement Terms:

 

	
  Settlement
  Date:

  	
   

  	
  Any Exchange Business Day following the
  Effective Date and up to and including the Maturity Date, as designated by
  Party B in a written notice (a “Settlement
  Notice”) delivered to Party A at least (i) ten Exchange Business Days
  prior to such Settlement Date, which may be the Maturity Date, if Physical
  Settlement applies, and (ii) twenty Exchange Business Days prior to such
  Settlement Date, which may be the Maturity Date, if Cash Settlement or Net
  Stock Settlement applies; provided that the Maturity Date shall be
  a Settlement Date if on such date the Base Amount is greater than zero; and provided further that no more

  

 

3

 

	
   

  	
   

  	
  than three Settlement Dates other than the
  Maturity Date may be designated by Party B.

  
	
   

  	
   

  	
   

  
	
  Settlement
  Shares:

  	
   

  	
  With respect to any Settlement Date, a
  number of Shares, not to exceed the Base Amount, designated as such by Party
  B in the related Settlement Notice; provided that on the Maturity Date the
  number of Settlement Shares shall be equal to the Base Amount.

  
	
   

  	
   

  	
   

  
	
  Settlement:

  	
   

  	
  Physical, Cash, or Net Stock, at the
  election of Party B as set forth in the Settlement Notice; provided that Physical Settlement shall
  apply (i) if no Settlement Method is selected, (ii) a Suspension Period
  exists on any day during the 15 Exchange Business Days immediately preceding
  a Settlement Date, or (iii) a Stock Borrow Event has occurred.

  
	
   

  	
   

  	
   

  
	
  Physical
  Settlement:

  	
   

  	
  On any Settlement Date in respect of which
  Party B has elected, or is deemed to have elected, Physical Settlement, Party
  B shall deliver to Party A a number of Shares equal to the Settlement Shares
  for such Settlement Date, and Party A shall deliver to Party B, by wire
  transfer of immediately available funds to an account designated by Party B,
  an amount in cash equal to the Physical Settlement Amount for such Settlement
  Date, on a delivery versus payment basis.

  
	
   

  	
   

  	
   

  
	
  Physical
  Settlement Amount:

  	
   

  	
  For any Settlement Date in respect of which
  Party B has elected, or is deemed to have elected, Physical Settlement, an
  amount in cash equal to the product of the Forward Price on such Settlement
  Date and the number of Settlement Shares for such Settlement Date.

  
	
   

  	
   

  	
   

  
	
  Cash
  Settlement:

  	
   

  	
  On any Settlement Date in respect of which
  Party B has elected Cash Settlement, if the Cash Settlement Amount is a
  positive number, Party A will pay the Cash Settlement Amount to Party B.  If the Cash Settlement Amount is a
  negative number, Party B will pay the absolute value of the Cash Settlement
  Amount to Party A.  Such amounts shall
  be paid on the Settlement Date.

  

 

4

 

	
  Cash
  Settlement Amount:

  	
   

  	
  An amount
  determined by the Calculation Agent equal to: (i)(A) the Forward Price minus (B) the volume-weighted average
  price of the Shares over the immediately preceding 15 Exchange Business Days,
  or such other number of Exchange Business Days as may be agreed upon mutually
  by Party A and Party B. (“Current Market Value”) multiplied by (ii) the Settlement Shares.

  
	
   

  	
   

  	
   

  
	
  Net Stock
  Settlement:

  	
   

  	
  On any Settlement Date in respect of which
  Party B has elected Net Stock Settlement, if the Cash Settlement Amount is a
  (i) positive number, Party A shall deliver a number of Shares to Party B
  equal to the Net Stock Settlement Shares, and (ii) negative number, Party B
  shall deliver a number of Shares to Party A equal to the Net Stock Settlement
  Shares.

  
	
   

  	
   

  	
   

  
	
  Net Stock
  Settlement Shares:

  	
   

  	
  With respect to a Settlement Date, the
  absolute value of the Cash Settlement Amount divided by the fair market value
  per share of the Shares as determined by the Calculation Agent.

  
	
   

  	
   

  	
   

  
	
  Net Stock
  Settlement Fee:

  	
   

  	
  For any Settlement Date in respect of which
  Party B has elected Net Stock Settlement, Party B shall pay to Party A on
  such Settlement Date a fee of $0.03 multiplied by the Settlement Shares.

  
	
   

  	
   

  	
   

  
	
  Settlement
  Currency:

  	
   

  	
  USD.

  
	
   

  	
   

  	
   

  
	
  Failure to
  Deliver:

  	
   

  	
  Applicable.

  
	
   

  	
   

  	
   

  
	
  Payment of
  Early Termination Fee:

  	
   

  	
  If, at the request of Party B, any
  Settlement Date occurs on or prior to June 17, 2004, Party B shall pay
  to Party A in cash on such Settlement Date the Early Termination Fee for such
  Settlement Date.

  
	
   

  	
   

  	
   

  
	
  Early
  Termination Fee:

  	
   

  	
  For any Settlement Date, the product of (i)
  the number of Settlement Shares for such Settlement Date, (ii) 1.50% divided
  by 365, (iii) the Initial Forward Price and (iv) the number of calendar days
  in the period from but excluding such Settlement Date to and including
  June 17, 2004.

  

 

5

 

Suspension of Cash or Net 

Stock Settlement:

 

	
  Suspension Period:

  	
   

  	
  Any day on which Party A determines based
  on the advice of counsel that Cash or Net Stock Settlement may violate
  applicable securities laws.  Party A
  shall notify Party B if it receives such advice from its counsel.   Notwithstanding any provision in this
  Agreement to the contrary, (a) Party B agrees that it shall not elect Cash or
  Net Stock Settlement if Cash or Net Stock Settlement may violate applicable
  securities laws, and (b) Physical Settlement shall apply if a Suspension
  Period is in effect at any time during the 15 Exchange Business Days
  immediately preceding a Settlement Date.

  

 

Adjustments:

 

	
  Method of
  Adjustment:

  	
   

  	
  Calculation Agent Adjustment.

  

 

Extraordinary Events:

 

Consequences of Merger Events:

 

	
  (a)

  	
  Share-for-Share:

  	
  Cancellation and Payment.

  
	
   

  	
   

  	
   

  
	
  (b)

  	
  Share-for-Other:

  	
  Cancellation and Payment.

  
	
   

  	
   

  	
   

  
	
  (c)

  	
  Share-for-Combined:

  	
  Cancellation and Payment.

  
	
   

  	
   

  	
   

  
	
  (d)

  	
  Nationalization or

  Insolvency:

  	
  Cancellation and Payment.

  

 

Account Details:

 

	
  Payments to
  Party A:

  	
   

  	
  To be advised under separate cover or
  telephone confirmed prior to each Payment Date.

  
	
   

  	
   

  	
   

  
	
  Payments to
  Party B:

  	
   

  	
  To be advised under separate cover or
  telephone confirmed prior to each Payment Date.

  
	
   

  	
   

  	
   

  
	
  Delivery of
  Shares to Party A:

  	
   

  	
  To be advised.

  

 

6

 

3.                                       Other Provisions:

 

Conditions to Effectiveness:

 

The effectiveness of this
Confirmation on the Effective Date shall be subject to (i) the condition that
the representations and warranties of Party B contained in the Purchase
Agreement dated the date hereof among Party B, Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, and Sandler O’Neill &
Partners, L.P. (the “Purchase Agreement”) and any certificate delivered
pursuant thereto by Party B be true and correct on the Effective Date as if
made as of the Effective Date, (ii) the condition that Party B have performed
all of the obligations required to be performed by it under the Purchase
Agreement on or prior to the Effective Date and (iii) the satisfaction of all
of the conditions set forth in Section 5 of the Pricing Agreement.

 

Additional Representations,
Warranties and Agreements of Party B:  Party B hereby represents and warrants to,
and agrees with, Party A as of the date hereof that:

 

(a)          Any
Shares, when issued and delivered in accordance with the terms of the
Transaction, will be duly authorized and validly issued, fully paid and
nonassessable, and the issuance thereof will not be subject to any preemptive
or similar rights.

 

(b)         Party
B has reserved and will keep available, free from preemptive rights, out of its
authorized but unissued Shares, solely for the purpose of issuance upon
settlement of the Transaction as herein provided, the full number of Shares as
shall then be issuable upon Physical Settlement of the Transaction.  All Shares so issuable shall, upon such
issuance, be accepted for listing on the Exchange.

 

(c)          Party
B agrees not to repurchase any Shares if, immediately following such
repurchase, the Base Amount would be equal to or greater than 4.9% of the
number of then-outstanding Shares.

 

(d)         Party
B is not insolvent, nor will Party B be rendered insolvent as a result of this
Transaction.

 

Compliance
with Securities Laws:

 

Party A represents and warrants
as follows:

 

(a)          in connection with bids and purchases of Shares
in connection with this Transaction, Party A shall comply, or cause compliance,
with the timing and volume provisions of Rule 10b-18(b)(2) and (4) under the
Exchange Act;

 

7

 

(b)   in
connection with bids and purchases of Shares in connection with this
Transaction, Party A shall use its best efforts to comply, or cause compliance,
with the price provisions of Rule 10b-18(b)(3) under the Exchange Act; provided, however,
that  Party A shall not be obligated to
comply with clauses (a) and (b) above in the event and only to the extent that
Party A is required to purchase any Shares as a result of a Stock Borrow Event
(as hereinafter defined).

 

Party B represents and warrants
as follows:

 

(a)   neither Party B nor
any of its affiliates shall take any action that would cause any purchases of
Shares by Party A in connection with this Transaction not to comply with Rule
10b-18 under the Securities Exchange Act of 1934 (the “Exchange Act”).

 

Covenant
of Party B:

 

The parties
acknowledge and agree that any Shares delivered by Party B to Party A on any
Settlement Date and returned by Party A to securities lenders from whom Party A
borrowed Shares in connection with hedging its exposure to the Transaction will
be freely saleable without further registration or other restrictions under the
Securities Act of 1933, as amended, in the hands of those securities
lenders.  Accordingly, Party B agrees
that the Settlement Shares that it delivers to Party A on each Settlement Date
will not bear a restrictive legend and that such Settlement Shares will be
deposited in, and the delivery thereof shall be effected through the facilities
of, the Clearance System.

 

Covenants
of Party A:

 

(a)          Party A
shall use its best efforts to maintain its hedge of its exposure to the
Transaction by borrowing sufficient Shares from lenders.

 

(b)         Party A
shall use any Shares delivered by Party B to Party A on any Settlement Date to
return to securities lenders. 

 

Acceleration
Events:  An Acceleration Event shall occur if:

 

(a)          Notwithstanding
any other provision hereof, if, in the judgment of the Calculation Agent, Party
A is unable to hedge Party A’s exposure to the Transaction because (i) of the
lack of sufficient Shares being made available for Share borrowing by lenders,
or (ii) it is otherwise commercially impracticable, (each of (i) and (ii) a
“Stock Borrow Event”) then Party A shall have the right to designate any
Exchange Business Day to be a Settlement Date on at least two Exchange Business
Days’ notice, and to select the number

 

8

 

of Settlement
Shares for such Settlement Date; provided that the number of Settlement
Shares for any Settlement Date so designated by Party A shall not exceed the
number of Shares as to which such inability exists, and provided further that Physical Settlement
shall apply; or

 

(b)         Notwithstanding
any other provision hereof, if the closing sale price per Share on the Exchange
for the regular trading session on any Exchange Business Day occurring after
the Trade Date is less than or equal to $8.00, Party A shall have the right to
designate any Exchange Business Day to be a Settlement Date on at least fifteen
Exchange Business Days’ notice, and to select the number of Settlement Shares
for such Settlement Date.  Upon the
designation of such Settlement Date, Party B shall promptly notify Party A of
the settlement method, provided
that if Party B fails to do so, Physical Settlement shall apply.

 

Assignment:

 

Party A may
assign or transfer any of its rights or duties hereunder to any affiliate of
Party A or any entity organized or sponsored by Party A without the prior
written consent of Party B; provided, however, that such assignee’s
obligations shall be guaranteed by Merrill Lynch & Co., Inc. in accordance
with the Agreement.

 

Matters relating to Agent:

 

(a)          As a
broker-dealer registered with the U.S. Securities and Exchange Commission,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its capacity as
Agent, will be responsible for (i) effecting the Transaction, (ii) issuing all
required confirmations and statements to Party A and Party B and (iii)
maintaining books and records relating to the Transaction.

 

(b)         Merrill
Lynch, Pierce, Fenner & Smith Incorporated shall act as “agent” for Party A
and Party B within the meaning of Rule 15a-6 under the Securities Exchange Act
of 1934 in connection with the Transaction.

 

(c)          The
Agent, in its capacity as such, shall have no responsibility or liability
(including, without limitation, by way of guarantee, endorsement or otherwise)
to Party A or Party B or otherwise in respect of the Transaction, including,
without limitation, in respect of the failure of Party A or Party B to pay or
perform under this Confirmation, except for its gross negligence or willful
misconduct in performing its duties as Agent hereunder.

 

(d)         Each of
Party A and Party B agree to proceed solely against the other to collect or
recover any securities or monies owing to Party A or Party B, as the case may be,
in connection with or as a result of the Transaction.

 

9

 

(e)          The
Agent will be Party A’s agent for service of process for the purpose of
Section 13(c) of the Agreement.

 

Indemnity

 

Party B agrees to indemnify
Party A and its affiliates and their respective directors, officers, agents and
controlling parties (Party A and each such affiliate or person being an
“Indemnified Party”) from and against any and all losses, claims, damages and
liabilities, joint and several, to which such Indemnified Party may become
subject under, in connection with, relating to, or arising out of, this
Agreement or Transaction with respect to any applicable securities laws and
will reimburse any Indemnified Party for all reasonable expenses (including
reasonable legal fees and reasonable expenses) as they are incurred in
connection with the investigation of, preparation for, or defense of any
pending or threatened claim or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party thereto. Party B will not be
liable under this Indemnity paragraph to the extent that any loss, claim,
damage, liability or expense is found in a final judgment by a court to have
resulted from Party A’s gross negligence, fraud, bad faith and/or willful
misconduct.

 

Miscellaneous

 

	
  Non-Reliance:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  Additional Acknowledgements:

  	
   

  	
  Applicable

  

 

4.                                       The Agreement is further supplemented by the following provisions:

 

Share Settlement upon Certain
Events:

 

Notwithstanding anything to the
contrary herein, in the Agreement or in the Definitions, if at any time (i) an
Early Termination Date occurs and Party B would be required to make a payment
pursuant to Sections 6(d) and 6(e) of the Agreement, (ii) an Early Termination
Fee is payable by Party B, or (iii) a Merger Event occurs and Party B would be
required to make a payment pursuant to Sections 12.2 and 12.7 of the 2002
Definitions, then in lieu of such payment, Party B at its election, may deliver
to Party A, at the time such payment would have been due and in the manner
provided under “Physical Settlement” in the 2002 Definitions, a number of
Shares (or, in the case of a Merger Event, common equity securities of the
surviving entity) equal to the quotient obtained by dividing (A) the amount
that would have been so payable by (B) the fair market value per Share (or per
unit of such common equity security) of the Shares (or units) so delivered at
the time of such delivery, as determined by the Calculation Agent (which fair
market value shall take into account whether the Shares so delivered

 

10

 

are freely tradeable).  The Transaction will not be considered for
purposes of determining any Settlement Amount under Section 6(e) of the
Agreement.

 

Agreement Regarding Set-off:

 

The last sentence of the first
paragraph of Section 6(e) of the Agreement shall not apply with respect to
the Transaction to the extent that any of the events described in
Section 5(a)(vii) of the Agreement occurs with respect to Party B.

 

Bankruptcy
Rights:

 

In the event of Party B’s
bankruptcy, Party A acknowledges and agrees that this Confirmation is not
intended to convey to it rights with respect to this Transaction that are
senior to the claims of common stockholders. 
For the avoidance of doubt, the parties acknowledge and agree that Party
A’s rights with respect to any other claim arising from this Transaction prior
to Party B’s bankruptcy shall remain in full force and effect and shall not be
otherwise abridged or modified in connection herewith.

 

Miscellaneous:

 

(a)          Addresses
for Notices.  For the purpose of
Section 12(a):

 

Address for notices or
communications to Party A:

 

	
  Address:

  	
   

  	
  c/o Merrill Lynch, Pierce, Fenner &
  Smith

  
	
   

  	
   

  	
  Incorporated

  
	
   

  	
   

  	
  Four World Financial Center

  
	
   

  	
   

  	
  North Tower, 5th Floor

  
	
   

  	
   

  	
  New York, NY 10080

  
	
  Attention:

  	
   

  	
  Equity-Linked Capital Markets

  
	
  Telephone No.:

  	
   

  	
  (212) 449-6763

  
	
  Facsimile No.:

  	
   

  	
  (212) 738-1069

  

 

Address for notices or communications to
Party B:

 

	
  Address:

  	
   

  	
  Senior Vice President and General Counsel

  
	
   

  	
   

  	
  Boston Private Financial Holdings, Inc.

  
	
   

  	
   

  	
  Ten Post Office Square

  
	
   

  	
   

  	
  Boston, MA 02109

  
	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
  Megan Chambers, Esq.

  

 

11

 

(b)         Waiver of Right to Trial by
Jury.  Each party waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any suit, action or proceeding relating to this Confirmation or any
Credit Support Document.  Each party (i) certifies that no representative, agent or attorney
of the other party has represented, expressly or otherwise, that such other
party would not, in the event of such a suit action or proceeding, seek to
enforce the foregoing waiver and (ii) acknowledges that it and the other party
have been induced to enter into this Confirmation by, among other things, the
mutual waivers and certifications in this Section.

 

5.                                       ISDA Master Agreement

 

With respect to the Agreement, Party A and Party B
each agree as follows:

 

Specified Entities:

 

(i) in
relation to Party A, for the purposes of:

 

	
  Section 5(a)(v):

  	
  not applicable

  
	
  Section 5(a)(vi):

  	
  not applicable

  
	
  Section 5(a)(vii):

  	
  not applicable

  
	
  Section 5(b)(iv):

  	
  not applicable

  

 

and (ii) in relation to Party B, for the purposes of:

 

	
  Section 5(a)(v):

  	
  not applicable

  
	
  Section 5(a)(vi):

  	
  not applicable

  
	
  Section 5(a)(vii):

  	
  not applicable

  
	
  Section 5(b)(iv):

  	
  not applicable

  

 

“Specified Transaction” will
have the meaning specified in Section 14 of this Agreement.

 

The “Cross Default” provisions of Section 5(a)(vi)
of the Agreement will apply to Party A and to Party B.

 

“Specified Indebtedness” will have the meaning specified in
Section 14 of the Agreement.

 

“Threshold Amount”  with
respect to Party A means USD 100,000,000 (or the U.S. dollar equivalent in any
other currency or currencies) and with respect to Party B means USD 10,000,000.

 

The “Credit Event Upon Merger”
provisions of Section 5(b)(iv) of the Agreement will apply to Party
A and to Party B.

 

12

 

The “Automatic
Early Termination” provision of Section 6(a)
of the Agreement will not apply to Party A and to Party B.

 

Payments on Early Termination for the purpose of Section 6(e)
of the Agreement:  (i) Loss shall
apply; and (ii) the Second Method shall apply.

 

“Termination Currency” means
USD.

 

Additional Termination Event.  The following shall constitute an Additional Termination Event:
None

 

Tax Representations:

 

(I)                                    For
the purpose of Section 3(e) of the Agreement, each party represents to the
other party that it is not required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of any Tax
from any payment (other than interest under Section 2(e), 6(d)(ii), or
6(e) of the Agreement) to be made by it to the other party under the
Agreement.  In making this
representation, each party may rely on (i) the accuracy of any representations
made by the other party pursuant to Section 3(f) of the Agreement, (ii)
the satisfaction of the agreement contained in Section 4(a)(i) or
4(a)(iii) of the Agreement, and the accuracy and effectiveness of any document
provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of
the Agreement, and (iii) the satisfaction of the agreement of the other party
contained in Section 4(d) of the Agreement; provided that it will not be a
breach of this representation where reliance is placed on clause (ii) above and
the other party does not deliver a form or document under
Section 4(a)(iii) of the Agreement by reason of material prejudice to its
legal or commercial position.

 

(II)                                For
the purpose of Section 3(f) of the Agreement, each party makes the
following representations to the other party:

 

(i)                         Party
A represents that it is a corporation organized under the laws of England and
Wales.

 

(ii)                      Party
B represents that it is a corporation incorporated under the laws of the State
of Massachusetts.

 

Tax Forms:  For the purpose of Section 4(a)(i) of
the Agreement, each party agrees to deliver the following documents to the
other party:

 

For the purpose of Sections
3(d), 4(a)(i) and (ii) of the Agreement, each party agrees to
deliver the following documents:

 

13

 

Tax forms, documents or
certificates to be delivered are:

 

Each party agrees to complete (accurately and in a
manner reasonably satisfactory to the other party), execute, and deliver to the
other party, United States Internal Revenue Service Form W-9 or W-8 BEN, or any
successor of such form(s): (i) before the first payment date under this
agreement; (ii) promptly upon reasonable demand by the other party; and
(iii) promptly upon learning that any such form(s) previously provided by
the other party has become obsolete or incorrect.

 

Other documents to be
delivered:-

 

	
  Party Required to

  Deliver Document

  	
   

  	
  Document
  Required to be

  Delivered

  	
   

  	
  When
  Required

  	
   

  	
  Covered
  by

  Section 3(d)

  Representation

  
	
  Party A and Party B

  	
   

  	
  Evidence of the authority and true
  signatures of each official or representative signing this Confirmation

  	
   

  	
  Upon or before execution and delivery of
  this Confirmation

  	
   

  	
  Yes

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Party A and Party B

  	
   

  	
  Certified copy of the resolution of the
  Board of Directors or equivalent document authorizing the execution and
  delivery of this Confirmation

  	
   

  	
  Upon or before execution and delivery of
  this Confirmation

  	
   

  	
  Yes

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Party A and Party B

  	
   

  	
  Copy of its most recent annual report
  containing audited financial statements

  	
   

  	
  Promptly upon request by the other party

  	
   

  	
  Yes

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Party A

  	
   

  	
  Guarantee of its Credit Support Provider,
  substantially in the form of Exhibit A attached hereto, together with
  evidence of the authority and true signatures of the signatories, if
  applicable

  	
   

  	
  Upon or before execution and delivery of
  this Confirmation

  	
   

  	
  Yes

  

 

Addresses for Notices:  For the purpose of Section 12(a) of the
Agreement:

 

Address for notices or communications
to Party A:

 

	
  Address:

  	
  Merrill Lynch International

  
	
   

  	
  Merrill Lynch Financial Centre

  
	
   

  	
  2 King Edward Street, London EC1A 1HQ

  
	
  Attention:

  	
  Manager, Fixed Income Settlements

  
	
  Facsimile No.:

  	
  207 995 2004

  	
  Telephone No.: 207 9995 3769

  

 

14

 

(For all purposes)

 

Additionally, a copy of all notices pursuant
to Sections 5, 6, and 7 as well as any changes to Party B’s address, telephone
number or facsimile number should be sent to:

 

	
  GMI
  Counsel

  
	
  Merrill
  Lynch World Headquarters

  
	
  4
  World Financial Center

  
	
  New York,
  New York 10080

  
	
  Attention: 
  Global Equity Derivatives

  
	
  Facsimile No.: 212 449-6576

  	
  Telephone No.: 212 449-6309

  

 

Address for notices
or communications to Party B for all purposes:

 

Megan Chambers, Esq.

Senior Vice President and
General Counsel

Boston Private Financial
Holdings, Inc.

Ten Post Office Square

Boston, MA 02109

 

With a copy
to:

 

Goodwin Procter LLP

Exchange Place

Boston, MA
02109

Attention:
William P. Mayer, Esq.

 

Process Agent:  For the purpose of Section 13(c) of the
Agreement, Party A appoints as its process agent:

 

Merrill Lynch,
Pierce, Fenner & Smith Incorporated

222 Broadway,
16th Floor

New York, NY
10038

Attention:
Litigation Department

 

[Party B does not appoint a Process
Agent.]

 

Multibranch Party.  For the purpose of Section 10(c) of the Agreement:
Neither Party A nor Party B is a Multibranch Party.

 

Calculation Agent.  The Calculation Agent is Party A.

 

Credit Support Document.

 

15

 

Party A: 
Guarantee of Merrill Lynch & Co. in the form attached hereto as
Exhibit A.

 

Party B:  [None]

 

Credit Support Provider.

 

With respect to Party A: Merrill Lynch & Co. and
with respect to Party B, Not Applicable.

 

Governing Law. 
This Confirmation will be governed by, and
construed in accordance with, the laws of the State of New York.

 

Netting of Payments. 
The provisions of Section 2(c) of the Agreement shall not be
applicable to this Transaction; provided, however, that with
respect to this Agreement or any other ISDA Master Agreement between the
parties, any Share delivery obligations on any day of Party B, on the
one hand, and Party A, on the other hand, shall be netted.  The resulting Share delivery obligation of a
party upon such netting shall be rounded down to the nearest number of whole
Common Shares, such that neither party shall be required to deliver any
fractional Common Shares.

 

Accuracy of Specified Information.  Section 3(d)
of the Agreement is hereby amended by adding in the third line thereof after
the word “respect” and before the period the words “or, in the case of audited
or unaudited financial statements or balance sheets, a fair presentation of the
financial condition of the relevant person.”

 

Basic Representations.  Section 3(a)
of the Agreement is hereby amended by the deletion of “and” at the end of Section 3(a)(iv);
the substitution of a semicolon for the period at the end of Section 3(a)(v)
and the addition of Sections 3(a)(vi), as follows:

 

Eligible Contract Participant; Line of Business.  It is an “eligible
contract participant” as defined in the Commodity Futures Modernization Act of
2000 and it has entered into this Confirmation and this Transaction in
connection with its business or a line of business (including financial
intermediation), or the financing of its business.

 

Amendment of
Section 3(a)(iii).  Section 3(a)(iii)
of the Agreement is modified to read as follows:

 

No
Violation or Conflict. 
Such execution, delivery and performance do not materially violate or
conflict with any law known by it to be applicable to it, any provision of its
constitutional documents, any order or judgment of any court or agency of
government applicable to it or any of its assets or any material contractual
restriction relating to Specified Indebtedness binding on or affecting it or
any of its assets.

 

16

 

Amendment of Section 3(a)(iv).
 Section 3(a)(iv)
of the Agreement is modified by inserting the following at the beginning
thereof:

 

“To such party’s best
knowledge,”

 

Additional Representations:

 

Party B
Representations.  Party B (i) has such knowledge and
experience in financial and business affairs as to be capable of evaluating the
merits and risks of entering into this Transaction; (ii) has consulted with its
own legal, financial, accounting and tax advisors in connection with this
Transaction; and (iii) is entering into this Transaction for a bona fide
business purpose to hedge an existing position.

 

Party B is not and has not been the subject
of any civil proceeding of a judicial or administrative body of competent
jurisdiction that could reasonably be expected to impair materially Party B’s
ability to perform its obligations hereunder.

 

Party B will by the next succeeding Business
Day notify Party A upon obtaining knowledge of the occurrence of any event that
would constitute an Event of Default, a Potential Event of Default or a
Potential Adjustment Event.

 

As of the date hereof, Party B is not
insolvent.

 

FDICIA Representation. 
Party A represents that it is a “financial institution” for purposes of
Section 402 of the Federal Deposit Insurance Corporation Improvement Act
of 1991, as amended (the “Statute”), and the regulations promulgated pursuant
thereto because either (A) it is a broker or dealer, a depository institution
or a futures commission merchant (as such terms are defined in the Statute) or
(B) it will engage in financial contracts (as so defined) as a counterparty on
both sides of one or more financial markets (as so defined) and either (I) had
one or more financial contracts of a total gross dollar value of at least $1
billion in notional principal amount outstanding on any day during the previous
15-month period with counterparties that are not its affiliates or (II) had
total gross mark-to-market positions of at least $100 million (aggregated
across counterparties) in one or more financial contracts on any day during the
previous 15-month period with counterparties that are not its affiliates.

 

Acknowledgements:

 

(1) The parties acknowledge and agree that
there are no other representations, agreements or other undertakings of the
parties in relation to this Transaction, except as set forth in this
Confirmation.

 

(2)  The parties hereto intend for:

 

17

 

(a)                                  this Transaction to be a “securities contract” as defined in
Section 741(7) of Title 11 of the United States Code (the “Bankruptcy Code”), qualifying for the
protections under Section 555 of the Bankruptcy Code;

 

(b)                                 a party’s right to liquidate this Transaction and to exercise any
other remedies upon the occurrence of any Event of Default under the Agreement
with respect to the other party to constitute a “contractual right” as defined
in the Bankruptcy Code;

 

(c)                                  any cash, securities or other property provided as performance
assurance, credit, support or collateral with respect to this Transaction to
constitute  “margin payments” as defined
in the Bankruptcy Code; and

 

(d)                                 all payments for, under or in connection with this Transaction, all
payments for the Shares and the transfer of such Shares to constitute
“settlement payments” as defined in the Bankruptcy Code.

 

Amendment of Section 6(d)(ii). 
Section 6(d)(ii) of the Agreement is modified by
deleting the words “on the day” in the second line thereof and substituting
therefor “on the day that is three Local Business Days after the day”. Section 6(d)(ii)
is further modified by deleting the words “two Local Business Days” in the
fourth line thereof and substituting therefor “three Local Business Days.”

 

Amendment of Definition of
Reference Market-Makers.  The definition of “Reference
Market-Makers” in Section 14 is hereby amended by adding in the
fourth line thereof after the word “credit” the words “or to enter into
transactions similar in nature to Transactions.”

 

Consent to Recording.  Each
party consents to the recording of the telephone conversations of trading and
marketing personnel of the parties and their Affiliates in connection with this
Confirmation.

 

Severability.  If any term, provision, covenant or
condition of this Confirmation, or the application thereof to any party or
circumstance, shall be held to be invalid or unenforceable in whole or in part
for any reason, the remaining terms, provisions, covenants, and conditions
hereof shall continue in full force and effect as if this Confirmation had been
executed with the invalid or unenforceable provision eliminated, so long as
this Confirmation as so modified continues to express, without material change,
the original intentions of the parties as to the subject matter of this
Confirmation and the deletion of such portion of this Confirmation will not
substantially impair the respective benefits or expectations of parties to this
Agreement; provided, however, that this severability provision
shall not be applicable if any provision of Section 2, 5, 6
or 13 of the Agreement (or any definition or provision in Section 14
to the extent that it relates to, or is used in or in connection with any such
Section) shall be so held to be invalid or unenforceable.

 

Affected Parties.  For purposes of Section 6(e) of
the Agreement, each party shall be deemed to be an Affected Party in connection
with Illegality and any Tax Event.

 

18

 

Please confirm that the foregoing correctly
sets forth the terms of our agreement by signing and returning this
Confirmation.

 

	
   

  	
  Yours faithfully,

  
	
   

  	
   

  
	
   

  	
  MERRILL LYNCH INTERNATIONAL

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Brian Carroll

  	
   

  
	
   

  	
  Name: Brian Carroll

  
	
   

  	
  Title: Assistant Vice President

  

 

 

	
  Confirmed as of the date first written
  above:

  
	
   

  
	
  BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Walter M. Pressey

  	
   

  
	
  Name: Walter M. Pressey

  
	
  Title: President and Chief Financial
  Officer

  
	
   

  
	
   

  
	
  MERRILL LYNCH, PIERCE, FENNER & SMITH

  INCORPORATED, as Agent

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Keri Peacock

  	
   

  
	
  Name: Keri Peacock

  
	
  Title: Vice President

  
					

 

EXHIBIT A

 

GUARANTEE OF MERRILL LYNCH &
CO., INC.

 

FOR VALUE RECEIVED, receipt of
which is hereby acknowledged, MERRILL LYNCH & CO., INC., a corporation duly
organized and existing under the laws of the State of Delaware (“ML &
Co.”), hereby unconditionally guarantees to Boston Private Financial Holdings,
Inc.  (the
“Company”), the due and punctual payment of any and all amounts payable by
Merrill Lynch International, a company organized under the laws of England and
Wales  (“ML”), under the terms of the
Master Agreement between the Company and ML, dated as of December 11,
2003  (the “Agreement”), including, in
case of default, interest on any amount due, when and as the same shall become
due and payable, whether on the scheduled payment dates, at maturity, upon
declaration of termination or otherwise, according to the terms thereof.  In case of the failure of ML punctually to
make any such payment, ML & Co. hereby agrees to make such payment, or
cause such payment to be made, promptly upon demand made by the Company to ML
& Co.; provided, however that delay by the Company in giving such demand
shall in no event affect ML & Co.’s obligations under this Guarantee.  This Guarantee shall remain in full force
and effect or shall be reinstated (as the case may be) if at any time any
payment guaranteed hereunder, in whole or in part, is rescinded or must
otherwise be returned by the Company upon the insolvency, bankruptcy or
reorganization of ML or otherwise, all as though such payment had not been
made.

 

ML & Co. hereby agrees that
its obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Agreement; the absence of any action to
enforce the same; any waiver or consent by the Company concerning any
provisions thereof; the rendering of any judgment against ML or any action to
enforce the same; or any other circumstances that might otherwise constitute a
legal or equitable discharge of a guarantor or a defense of a guarantor.  ML & Co. covenants that this guarantee will
not be discharged except by complete payment of the amounts payable under the
Agreement.  This Guarantee shall
continue to be effective if ML merges or consolidates with or into another
entity, loses its separate legal identity or ceases to exist.

 

ML & Co. hereby waives
diligence; presentment; protest; notice of protest, acceleration, and dishonor;
filing of claims with a court in the event of insolvency or bankruptcy of ML;
all demands whatsoever, except as noted in the first paragraph hereof; and any
right to require a proceeding first against ML.

 

ML & Co. hereby certifies
and warrants that this Guarantee constitutes the valid obligation of ML &
Co. and complies with all applicable laws.

 

This Guarantee shall be
governed by, and construed in accordance with, the laws of the State of New
York.

 

This Guarantee may be
terminated at any time by notice by ML & Co. to the Company given in
accordance with the notice provisions of the Agreement, effective upon receipt
of such notice by the Company or such later date as may be specified in such
notice; provided, however,

 

2

 

that this Guarantee shall continue in full
force and effect with respect to any obligation of ML under the Agreement
entered into prior to the effectiveness of such notice of termination.

 

This Guarantee becomes
effective concurrent with the effectiveness of the Agreement, according to its
terms.

 

IN WITNESS WHEREOF, ML &
Co. has caused this Guarantee to be executed in its corporate name by its duly
authorized representative.

 

	
   

  	
  MERRILL LYNCH & CO., INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  

 

3

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