AGREEMENT AND PLAN OF MERGER

Exhibit 99.1

EXECUTION COPY

 

AGREEMENT AND PLAN OF MERGER

 

By and Between

 

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

 

and

 

GIBRALTAR FINANCIAL CORPORATION

 

Dated as of April 18, 2005

 

 

 

TABLE OF CONTENTS

 

 

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AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER (the “ Agreement ”), dated as of April 18, 2005, by and between BOSTON PRIVATE FINANCIAL HOLDINGS, INC. , a Massachusetts corporation (the “ Buyer ”), and GIBRALTAR FINANCIAL CORPORATION , a savings and loan holding company registered under the Home Owners’ Loan Act of 1933 and incorporated in Florida (the “ Seller ”). The capitalized terms used in this Agreement, unless otherwise defined herein, are defined in Section 9.11.

 

WHEREAS , the boards of directors of each of the Buyer and the Seller have determined that it is in the best interests of their respective shareholders to consummate a business combination between Buyer and Seller, and have adopted and approved this Agreement and approved the business combination transactions provided for herein, in which, subject to the terms and conditions set forth herein, Seller will merge with and into the Buyer (such business combination, including the plan of merger in a form to be mutually agreed upon by Buyer and Seller) (the “ Merger ”);

 

WHEREAS , the parties intend that the Merger shall constitute a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and that this Agreement shall constitute a plan of reorganization for purposes of Sections 354 and 361 of the Code;

 

WHEREAS , concurrently with the execution and delivery of this Agreement, as a condition and inducement to the Seller’s willingness to enter into this Agreement, the Buyer and each member of the Seller’s board of directors are entering into a registration rights agreement dated as of the date hereof covering the shares of the Seller Common Stock owned or controlled by such directors (the “ Registration Rights Agreement ”);

 

WHEREAS , also concurrently with the execution and delivery of this Agreement, as a condition and inducement to the Buyer’s willingness to enter into this Agreement, the Buyer and each member of the Seller’s board of directors are entering into shareholder voting agreements dated as of the date hereof covering in the aggregate 39% of the Seller Common Stock (the “ Shareholder Voting Agreements ”); and

 

WHEREAS , the parties desire to make certain representations, warranties and agreements in connection with the Merger and to prescribe certain conditions to the Merger;

 

NOW, THEREFORE , in consideration of the foregoing and the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows:

 

ARTICLE I—THE MERGER

 

1.1 The Merger. Subject to the terms and conditions of this Agreement, in accordance with the Massachusetts Business Corporation Act (the “ MBCA ”) and Chapter 607 of the 2004 Florida Statutes (the “ Florida Statutes ”), at the Effective Time, the Seller shall merge with and into the Buyer. The Buyer shall be the surviving corporation (the “ Surviving Corporation ”) in the Merger, and shall continue its corporate existence under the laws of The Commonwealth of Massachusetts.

 

1.2 Alternative Transaction Structures. The parties agree that the Buyer may change the method of effecting the business combination with the Seller, and the Seller shall cooperate in such efforts, including, without limitation, by entering into an appropriate amendment to this Agreement (to the extent such amendment only changes the method of effecting the business combination and does not substantively affect the rights and obligations of the parties or their respective shareholders hereunder); provided , however , that any actions taken pursuant to this Section 1.2 shall not (a) alter or change the kind or amount of consideration to be issued to holders of shares of common stock, par value $0.01 per share, of the Seller (“ Seller Common Stock ”) or the treatment of the Seller Options, or the other equity-based compensation plans as provided for in this Agreement,

 

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(b) reasonably be expected to prevent, impede or delay receipt of any Requisite Regulatory Approval or the consummation of the transactions contemplated hereby, or (c) otherwise cause any closing condition not to be capable of being fulfilled (unless duly waived by the party or parties entitled to the benefits thereof).

 

1.3 Effective Time. The Merger shall become effective at the time and on the date when the articles of merger (the “ Articles of Merger ”) are received for filing and subsequently endorsed by the Secretary of State of The Commonwealth of Massachusetts. The term “ Effective Time ” shall be the date and time when the Merger becomes effective as set forth in the Articles of Merger.

 

1.4 Closing. The closing of the Merger (the “ Closing ”) will take place at 9:00 a.m. New York time on a date (the “ Closing Date ”) and at a place to be specified by the parties, which shall be no later than five (5) business days after the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Article VII (other than those conditions that relate to action to be taken at the Closing), unless extended by mutual agreement of the parties.

 

1.5 Effects of the Merger. At and after the Effective Time, the Merger shall have the effects set forth herein and in the applicable provisions of the MBCA and the Florida Statutes.

 

1.6 Articles of Organization and Bylaws. The Articles of Organization of the Buyer, as in effect immediately prior to the Effective Time, shall be the Articles of Organization of the Surviving Corporation, until thereafter amended as provided therein and in accordance with applicable law. The Bylaws of the Buyer, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation, until thereafter amended as provided therein and in accordance with applicable law.

 

1.7 Seller Bank Board Representation. At the Effective Time, the Board of Directors of Seller Bank shall consist of the current directors of Seller Bank and two additional persons designated by Buyer.

 

ARTICLE II—EFFECT OF THE MERGER ON THE SELLER CAPITAL STOCK;

EXCHANGE OF SHARES

 

2.1 Conversion or Cancellation of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of any stockholder:

 

(a) Seller Common Stock . Each share of Seller Common Stock issued and outstanding immediately prior to the Effective Time, other than Exception Shares, Dissenting Shares and Excess ESPP Shares, shall be converted into the right to receive, at the election of each holder thereof, but subject to the election and allocation procedures and other provisions of this Section 2.1 and possible adjustment as set forth in Section 2.4, either:

 

(i) that number of shares of Buyer Common Stock equal to the Exchange Ratio (the “ Per Share Stock Consideration ”), or

 

(ii) an amount in cash, without interest, equal to the Deal Value Per Share (the “ Per Share Cash Consideration ” and, together with the Per Share Stock Consideration, the “ Consideration ”).

 

(b) Certain Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

 

(i) “ Aggregate Cash Amount ” means, subject to Section 2.1(c), One Hundred Thirty Million Dollars ($130,000,000) less the SARs Cash Amount; provided , however , that if, at the Effective Time, the aggregate number of shares of Seller Common Stock issuable upon exercise of then outstanding Seller Options exceeds the difference between (A) 115,225 less (B) the aggregate number of shares of Seller Common Stock issued upon exercise of Seller Options after the date hereof and prior to the Effective Time (such excess being referred to herein as the “ Excess Option Shares ”), then the

 

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“Aggregate Cash Amount” shall be reduced by the product of (C) the Excess Option Shares and (D) an amount equal to the excess of the Deal Value Per Share over the weighted average exercise price of the options related to the Excess Option Shares at the Effective Time, in each case rounded to the nearest whole cent.

 

(ii) “ Aggregate Seller Share Amount ” shall equal 1,117,386 shares of Seller Common Stock (includes shares of Seller Restricted Stock); provided , however , that the Aggregate Seller Share Amount shall be increased by virtue of the issuance of any shares of Seller Common Stock upon the exercise from and after the date hereof and prior to the Effective Time of Seller Options outstanding on the date hereof.

 

(iii) “ Aggregate Buyer Share Amount ” shall, subject to Section 2.1(c), be equal to 4,255,336 shares of Buyer Common Stock; provided , however , that the “Aggregate Buyer Share Amount” shall be (x) increased by the product of (A) 7.6318 multiplied by (B) the number of shares of Seller Common Stock issued upon the exercise from and after the date hereof and prior to the Effective Time of Stock Options outstanding on the date hereof, and (y) decreased by the product of (A) the Exchange Ratio multiplied by the number of Exception Shares cancelled pursuant to Section 2.1(e) hereof, other than the 386 treasury shares as of the date hereof.

 

(iv) “ Aggregate Closing Transaction Value ” means the amount, in U.S. dollars, equal to the sum of (A) the product of (i) the Aggregate Buyer Share Amount multiplied by (ii) the Measurement Price, plus (B) $130,000,000, plus (C) the Aggregate SARs Exercise Price.

 

(v) “ Aggregate SARs Amount ” means the number of Seller SARs outstanding and not forfeited at the Effective Time; provided , however , that in no event shall the Aggregate SARs Amount exceed 100,875 (the number of Seller SARs outstanding as of the date hereof).

 

(vi) “ Aggregate SARs Exercise Price ” means the sum, in U.S. dollars, of the exercise prices of the Seller SARs outstanding as of the Effective Time; provided , however , that the Aggregate SARs Exercise Price shall not exceed $2,559,198.75 (the sum of the exercise prices of the Seller SARs outstanding as of the date hereof).

 

(vii) “ Measurement Price ” means the average of the closing per share prices of the Buyer Common Stock on the NASDAQ National Market, as reported in the New York City edition of The Wall Street Journal or, if not so reported therein, in another authoritative source mutually agreed upon by the Buyer and Seller, for the five (5) full consecutive trading days ending on the trading day immediately prior to the Closing Date.

 

(viii) “ Deal Value Per Share ” means the amount, in U.S. dollars, obtained by dividing (A) the Aggregate Closing Transaction Value by (B) the sum of (i) the Aggregate Seller Share Amount, plus (ii) the Aggregate SARs Amount, rounded to the nearest whole cent.

 

(ix) “ Exchange Ratio ” means that number of shares of Buyer Common Stock as shall be obtained by dividing the Deal Value Per Share by the Measurement Price, rounded to the nearest one-ten-thousandth.

 

(x) “ Per SARs Cash Amount ” means, for each Seller SAR outstanding as of the Effective Time, the amount, in U.S. dollars, equal to the product of (A) the number of shares of Seller Common Stock attributable to such Seller SAR, multiplied by (B) the positive difference between (i) the Deal Value Per Share, and (ii) the exercise price per share of Seller Common Stock attributable to such Seller SAR.

 

(xi) “ SARs Cash Amount ” means the sum, in U.S. dollars, of the Per SARs Cash Amounts for the Aggregate SARs Amount.

 

(c) Adjustments to Preserve Tax Treatment.

 

(i) In the event that the quotient obtained by dividing (x) the product of (i) the Aggregate Buyer Share Amount and (ii) the Final Buyer Share Value by (y) the sum of (A) the Aggregate Cash Amount,

 

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(B) the Other Cash Consideration, and (C) the product of (i) the Aggregate Buyer Share Amount and (ii) the Final Buyer Share Value, is less than 0.425, the Aggregate Buyer Share Amount shall be increased by the Share Adjustment Amount and the Aggregate Cash Amount shall be decreased by the product of (x) the Final Buyer Share Value and (y) the Share Adjustment Amount. The “ Share Adjustment Amount ” shall be equal to the quotient obtained by dividing (x) the difference obtained by subtracting (i) the product of (a) the Aggregate Buyer Share Amount and (b) the Final Buyer Share Value from (ii) the product of (a) 0.425 and (b) the sum of (1) the Aggregate Cash Amount, (2) Other Cash Consideration and (3) the product of the Aggregate Buyer Share Amount and the Final Buyer Share Value by (y) the Final Buyer Share Value.

 

(ii) In the event that the Aggregate Buyer Share Amount and the Aggregate Cash Amount are adjusted as provided for in this Section 2.1(c), all references in this Agreement to the “Aggregate Buyer Share Amount” and the “Aggregate Cash Amount” shall refer to the Aggregate Buyer Share Amount and the Aggregate Cash Amount as adjusted in this Section 2.1(c).

 

(iii) For purposes of this Agreement, “ Final Buyer Share Value ” means the arithmetic average of the daily high and low per share price of Buyer Common Stock on the NASDAQ National Market on the Closing Date or, if the Closing Date is not a trading day, the trading day prior to the Closing Date; and “ Other Cash Consideration ” means the sum of (i) the product of the number of Dissenting Shares (except to the extent that the holder of such Dissenting Shares, as of the Closing Date, has effectively withdrawn or lost his right to dissent from the Merger under the Florida Statutes) and the Per Share Cash Consideration; (ii) the amount paid for the Excess ESPP Shares pursuant to Section 2.10; (iii) the amount of cash paid in lieu of fractional shares of Buyer Common Stock; and (iv) any other amounts received by a holder of Seller stock prior to the Merger, either in a redemption of Seller stock or in a distribution with respect to Seller stock (but only to the extent such amount is treated as other property or money received in the exchange for purposes of Section 356 of the Code, or would be so treated if the Seller shareholder also had received stock of Buyer in exchange for stock owned by the shareholder in the Seller).

 

(d) Bank Common Stock . Each share of Bank Common Stock outstanding immediately prior to the Effective Time shall remain outstanding and shall be unaffected by the Merger.

 

(e) Cancellation of Old Shares . Each Exception Share shall cease to be outstanding, shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. Each share of Seller Common Stock issued and outstanding immediately prior to the Effective Time, other than Exception Shares, is hereinafter defined as an “ Old Share ”. Old Shares shall cease to be outstanding, shall be canceled and retired and shall cease to exist, and each holder of a certificate (an “ Old Certificate ”) formerly representing Old Shares shall thereafter cease to have any rights with respect to such shares, except the right to receive, without interest, upon exchange of such Old Certificate in accordance with Section 2.3, the Consideration. “ Exception Shares ” means shares of Seller Common Stock owned or held by Buyer or by the Seller, other than shares owned or held in a bona fide fiduciary or agency capacity (“ Trust Account Shares ”) or in satisfaction of a debt previously contracted in good faith (“ DPC Shares ”).

 

(f) Election . Subject to the allocation procedures set forth in Section 2.1(g), each record holder of Seller Common Stock will be entitled (i) to elect to receive shares of Buyer Common Stock for all or some of the shares of Seller Common Stock (“ Stock Election Shares ”) held by such record holder, (ii) to elect to receive cash for all or some of the shares of Seller Common Stock (“ Cash Election Shares ”) held by such record holder or (iii) to indicate that such holder makes no such election for all or some of the shares of Seller Common Stock (“ No-Election Shares ”) held by such record holder. All such elections (each, an “ Election ”) shall be made on a form designed for that purpose and agreed to by Buyer and Seller (an “ Election Form ”). Any shares of Seller Common Stock for which the record holder has not, as of the Election Deadline (as defined below), properly submitted to the Exchange Agent a properly completed Election Form will be deemed No-Election Shares. A record holder acting in different capacities or acting on behalf of other persons in any way will be entitled to submit an Election Form for each capacity in which

 

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such record holder so acts with respect to each person for which it so acts. The exchange agent (the “ Exchange Agent ”) will be a bank or trust company in the United States selected by Buyer and reasonably acceptable to Seller. In order to make a valid election, the properly completed Election Form must be accompanied by certificates of the shares of Seller Common Stock to which such Form of Election relates or by an appropriate customary guarantee of delivery of such certificates, as set forth in such Form of Election, from a member of any registered national securities exchange or a commercial bank or trust company in the United States (provided that such certificates are in fact delivered to the Exchange Agent by the time required in such guarantee of delivery; failure to deliver shares of Seller Common Stock covered by such a guarantee of delivery within the time set forth on such guarantee shall be deemed to invalidate any otherwise properly made Election, unless otherwise determined by Buyer, in its sole discretion). Notwithstanding anything contained herein to the contrary, each share of Seller Common Stock owned by a subsidiary of Buyer or by a subsidiary of Seller (in each case, other than Exception Shares) shall be converted in the Merger solely into Buyer Common Stock.

 

(g) Allocation Procedures . The allocation among the holders of shares of Seller Common Stock of rights to receive the Per Share Stock Consideration or the Per Share Cash Consideration will be made as follows:

 

(i) Number of Stock Elections Less Than the Stock Conversion Number . If the aggregate number of Stock Election Shares (on the basis of valid Election Forms received as of the Election Deadline) is less than the number obtained by dividing the Aggregate Buyer Share Amount by the Exchange Ratio (the “ Stock Conversion Number ”), then

 

(A) each Stock Election Share will be, as of the Effective Time, converted into the right to receive the Per Share Stock Consideration,

 

(B) the Exchange Agent will allocate from among the No-Election Shares, pro rata to the holders of No-Election Shares in accordance with their respective numbers of No-Election Shares, a sufficient number of No-Election Shares so that the sum of such number and the number of Stock Election Shares equals as closely as practicable the Stock Conversion Number, and each such allocated No-Election Share (each, a “ Stock-Selected No-Election Share ”) will be, as of the Effective Time, converted into the right to receive the Per Share Stock Consideration, provided that if the sum of all No-Election Shares and Stock Election Shares is equal to or less than the Stock Conversion Number, all No-Election Shares will be Stock-Selected No-Election Shares,

 

(C) if the sum of Stock Election Shares and No-Election Shares is less than the Stock Conversion Number, the Exchange Agent will allocate from among the Cash Election Shares, pro rata to the holders of Cash Election Shares in accordance with their respective numbers of Cash Election Shares, a sufficient number of Cash Election Shares so that the sum of such number, the number of all Stock Election Shares and the number of all No-Election Shares equals as closely as practicable the Stock Conversion Number, and each such allocated Cash Election Share (each, a “ Converted Cash Election Share ”) will be, as of the Effective Time, converted into the right to receive the Per Share Stock Consideration, and

 

(D) each No-Election Share and Cash Election Share that is not a Stock-Selected No-Election Share or a Converted Cash Election Share (as the case may be) will be, as of the Effective Time, converted into the right to receive the Per Share Cash Consideration; or

 

(ii) Number of Stock Elections Greater Than the Stock Conversion Number . If the aggregate number of Stock Election Shares (on the basis of valid Election Forms received by the Election Deadline) is greater than the Stock Conversion Number, then

 

(A) each Cash Election Share and No-Election Share will be, as of the Effective Time, converted into the right to receive the Per Share Cash Consideration,

 

(B) the Exchange Agent will allocate from among the Stock Election Shares, pro rata to the holders of Stock Election Shares in accordance with their respective numbers of Stock Election

 

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Shares, a sufficient number of Stock Election Shares (“ Converted Stock Election Shares ”) so that the difference of (x) the number of Stock Election Shares less (y) the number of the Converted Stock Election Shares equals as closely as practicable the Stock Conversion Number, and each Converted Stock Election Share will be, as of the Effective Time, converted into the right to receive the Per Share Cash Consideration; provided that if an Election Form designates by stock certificate number the priority in which the Stock Election Shares governed by such Election Form are to be reallocated pursuant to this clause (B), such Stock Election Shares shall be deemed reallocated in accordance with such priority, and

 

(C) each Stock Election Share that is not a Converted Stock Election Share will be, as of the Effective Time, converted into the right to receive the Per Share Stock Consideration.

 

(iii) Number of Stock Elections is Equal to the Stock Conversion Number . If the aggregate number of Stock Election Shares (on the basis of Election Forms received by the Election Deadline) is equal to the Stock Conversion Number, then

 

(A) each Stock Election Share will be, as of the Effective Time, converted into the right to receive the Per Share Stock Consideration, and

 

(B) each Cash Election Share and No-Election Share will be, as of the Effective Time, converted into the right to receive the Per Share Cash Consideration.

 

2.2 Fractional Shares. Notwithstanding any other provision of this Article II, no fractional shares of Buyer Common Stock will be issued pursuant to the Merger. Instead, Buyer will pay or cause to be paid to the holder of any Old Shares that would, pursuant to Section 2.1, otherwise be entitled to receive fractional shares of Buyer Common Stock an amount in cash, rounded to the nearest cent and without interest, equal to the product of (i) the fraction of a share to which such holder would otherwise have been entitled and (ii) Measurement Price.

 

2.3 Exchange of Old Certificates for New Certificates.

 

(a) Exchange Agent . Until the sixth month anniversary of the Effective Time, Buyer shall make available or cause to be made available to the Exchange Agent certificates (each, a “ New Certificate ”) representing the shares of Buyer Common Stock (each, a “ New Share ”) and cash in amounts sufficient to allow the Exchange Agent to make all deliveries of New Certificates and payments that may be required in exchange for Old Certificates pursuant to this Article II. Upon such anniversary, any such New Certificates and cash remaining in the possession of the Exchange Agent (together with any dividends or earnings in respect thereof) shall be delivered to Buyer. Any holder of Old Certificates who has not theretofore exchanged his or her Old Certificates for New Certificates and/or cash pursuant to this Article II shall thereafter be entitled to look exclusively to Buyer, and only as a general creditor thereof in the case of cash, for the shares of Buyer Common Stock and/or cash to which he or she may be entitled upon exchange of such Old Certificates pursuant to this Article II. Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto, shall be liable to any holder of Old Certificates for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

 

(b) Exchange Procedures . At least twenty business days prior to the expected Election Deadline, Buyer shall cause the Exchange Agent to mail or deliver to each Person who is a holder of record of Seller Common Stock an Election Form and a form of letter of transmittal in form reasonably satisfactory to Buyer and Seller containing instructions for use in effecting the surrender of Old Certificates in exchange for New Certificates and any payments pursuant to this Article II. To be effective, the Election Form must be properly completed, signed and actually received by the Exchange Agent not later than 5:00 p.m., New York City time, on the business day that is ten (10) trading days prior to the Closing Date (which date shall be publicly announced by Buyer as soon as practicable prior to such date) (the “ Election Deadline ”) and accompanied by the Old Certificates as to which such Election Form is being made, duly endorsed in blank or otherwise in a form acceptable for transfer on the books of Seller (or accompanied by an appropriate guarantee of delivery by an eligible organization) in the case of shares that are not held in book entry form. For shares that are held in

 

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book entry form, Buyer shall establish procedures for the delivery of such shares, which procedures shall be reasonably acceptable to Seller. The Exchange Agent shall make all computations contemplated by Section 2.1 hereof, and after consultation with Buyer and Seller, all such computations will be conclusive and binding on the parties hereto and on the former holders of Seller Common Stock absent manifest error. Any shares of Seller Common Stock for which the record holder has not, as of the Election Deadline, properly submitted to the Exchange Agent a properly completed Election Form will be deemed No-Election Shares; provided , that the Exchange Agent shall, in its reasonable discretion, be permitted to waive immaterial defects in any completed Election Form. Any Election Form may be revoked, by the stockholder who submitted such Election Form to the Exchange Agent, only by written notice received by the Exchange Agent prior to the Election Deadline. In addition, all Election Forms shall automatically be revoked if the Exchange Agent is notified in writing by Buyer and Seller that the Merger has been abandoned. Promptly after the Effective Time, each holder who has surrendered to the Exchange Agent an Old Certificate for cancellation together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, shall be entitled to receive in exchange therefor a New Certificate representing the New Shares and/or a check in the amount to which such holder is entitled pursuant to this Article II, and the Old Certificate so surrendered shall forthwith be canceled. No interest will accrue or be paid with respect to any property to be delivered upon surrender of Old Certificates. If any New Certificate is to be issued, or cash payment made, in a name other than that in which the Old Certificate surrendered in exchange therefor is registered, it shall be a condition of such exchange that the Person requesting such exchange shall pay any transfer or other taxes required by reason of the issuance of such New Certificate or the making of such cash payment in a name other than that of the registered holder of the Old Certificate surrendered, or shall establish to the satisfaction of Buyer and the Exchange Agent that any such taxes have been paid or are not applicable.

 

(c) Distributions with Respect to Unexchanged Shares . Notwithstanding any other provision of this Agreement, no dividends or other distributions in respect of New Shares with a record date after the Effective Time shall be paid to any Person holding an Old Certificate until such Old Certificate has been surrendered for exchange as provided herein. Subject to the effect of applicable laws and the immediately preceding sentence, following surrender of any such Old Certificates, there shall be paid to the holder of the New Certificates issued in exchange therefor, without interest, at the time of such surrender, the amount of dividends or other distributions with a record date on or after the Effective Time theretofore payable with respect to the New Shares represented thereby, as well as any dividends with respect to Seller Common Stock declared prior to the Effective time but unpaid.

 

(d) Transfers . At or after the Effective Time, there shall be no transfers on the stock transfer books of Buyer or Seller of Old Shares.

 

(e) Lost, Stolen or Destroyed Certificates . If any Old Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Old Certificate to be lost, stolen or destroyed and, if required by Buyer or the Exchange Agent, the posting by such Person of a bond in such reasonable amount as Buyer or the Exchange Agent may direct as indemnity against any claim that may be made against it with respect to such Old Certificate, Buyer or the Exchange Agent shall, in exchange for such lost, stolen or destroyed Old Certificate, issue or cause to be issued a New Certificate and/or pay or cause to be paid the amounts, if any, deliverable in respect to the Old Shares formerly represented by such Old Certificate pursuant to this Article II.

 

2.4 Adjustment of Consideration. In the event that, subsequent to the date of this Agreement but prior to the Effective Time, the shares of Buyer Common Stock issued and outstanding shall, through a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the capitalization of Buyer, increase or decrease in number or be changed into or exchanged for a different kind or number of securities, then an appropriate and proportionate adjustment shall be made to the Per Share Cash Consideration and the Per Share Stock Consideration.

 

2.5 Shares of Dissenting Stockholders. Notwithstanding anything in this Agreement to the contrary, any shares of Seller Common Stock that are issued and outstanding as of the Effective Time and that are held by a

 

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stockholder who has properly exercised his appraisal rights under Section 607.1303 of the Florida Statutes (the “ Dissenting Shares ”) shall not be converted into the right to receive the Consideration unless and until the holder shall have failed to perfect, or shall have effectively withdrawn or lost, his right to dissent from the Merger under the Florida Statutes and to receive such consideration as may be determined to be due with respect to such Dissenting Shares pursuant to and subject to the requirements of the Florida Statutes. If any such holder shall have so failed to perfect or have effectively withdrawn or lost such right after the Election Deadline, each share of such holder’s Seller Common Stock shall thereupon be deemed to have been converted into and to have become, as of the Effective Time, the right to receive, without any interest thereon, the Per Share Stock Consideration or the Per Share Cash Consideration, or a combination thereof, as determined by Buyer in its sole discretion. The Seller shall give Buyer (i) prompt notice of any notice or demands for appraisal or payment for shares of Seller Common Stock received by Seller and (ii) the opportunity to participate in and direct all negotiations and proceedings with respect to any such demands or notices. Seller shall not, without the prior written consent of Buyer, make any payment with respect to, or settle, offer to settle or otherwise negotiate, any such demands.

 

2.6 Withholding Rights. Buyer shall be entitled to deduct and withhold from the Consideration such amounts as it is required to deduct and withhold under the Code and the rules and regulations promulgated thereunder, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Buyer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller stockholder in respect to which such deduction and withholding was made by Buyer.

 

2.7 Seller Options. Any outstanding options, warrants or other rights to acquire Seller Common Stock (“ Seller Options ”) outstanding immediately prior to the Effective Time shall be treated as follows:

 

(a) At and as of the Effective Time, Buyer shall assume each and every outstanding Seller Option, and all obligations of Seller under a Seller Benefit Plan. With respect to each and every Seller Option so assumed by Buyer under this Agreement: (A) such Seller Option shall be exercisable for that number of whole shares of Buyer Common Stock equal to (1) the number of shares of Seller Common Stock that were purchasable under such Seller Option immediately prior to the Effective Time of the Merger multiplied by (2) the 7.6318, with such product rounded down to the nearest whole number of shares of Buyer Common Stock; and (B) the per share exercise price for the shares of Buyer Common Stock issuable upon exercise of such Seller Option shall be equal to (1) the exercise price per share of Seller Common Stock at which such Seller Option was exercisable immediately prior to the Effective Time of the Merger divided by (2) 7.6318, with such quotient rounded up to the nearest whole cent, provided that the exercise price and the number of shares of Buyer Common Stock purchasable pursuant to the Seller Option shall be determined in a manner consistent with the requirements of Section 409A of the Code. As soon as reasonably practicable after the Effective Time of the Merger, Buyer shall issue to each holder of an outstanding Seller Option a document evidencing the assumption of such holder’s Seller Option pursuant to this Section.

 

(b) Other than as provided in subsection (a) above, the terms of the Seller Options shall continue to have the same terms and conditions after the Effective Time of the Merger as were applicable to such Seller Options immediately prior to the Effective Time of the Merger and, subject to the limitations of the Code, the Seller Options which qualify as incentive stock options immediately prior to the Effective Time shall continue to qualify as incentive stock options of Buyer after the Effective Time.

 

(c) At or prior to the Effective Time, Buyer shall take all corporate action reasonably necessary to reserve for issuance a sufficient number of shares of Buyer Common Stock for delivery upon exercise of Seller Options assumed by it in accordance with this Section. On the date of the Effective Time, Buyer shall file a registration statement on Form S-8 (or any successor or other appropriate form) with respect to the shares of Buyer Common Stock subject to such options and shall use all reasonable efforts to maintain the effectiveness of such registration statement (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such options remain outstanding.

 

(d) Each Seller Option that is outstanding as of immediately prior to the Effective Time, but is not then exercisable, shall become exercisable and paid in accordance with the Seller Stock Option Plan.

 

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2.8 Seller SARs. Upon the Effective Time, each holder of a Seller SAR shall be entitled to receive payments calculated and paid in accordance with the terms and conditions of such Seller SAR and the terms and conditions of the Seller SAR Plan; provided , however , that the “Change of Control Price” (as defined in the Seller SAR Plan) for purposes of each share of Seller Common Stock attributed to the Seller SAR shall be the Deal Value Per Share. Amounts otherwise payable with respect to each Seller SAR that are forfeited by a holder of such Seller SAR on or prior to the first anniversary of the Effective Time shall be treated in the manner set forth on Section 2.8 of the Seller Disclosure Schedule.

 

2.9 Restricted Seller Common Stock. Immediately prior to the Effective Time, all outstanding restricted shares of Seller Common Stock granted under a Seller Plan (“ Seller Restricted Stock ”) shall become fully vested and cease to be subject to any risk of forfeiture. At the Effective Time, each share of Seller Common Stock shall be converted into the right to receive the Consideration and each holder of shares of Seller Restricted Stock shall be subject to the exchange, allocation and other provisions of Section 2.1 of this Agreement.

 

2.10 Seller Employee Stock Purchase Plan.

 

(a) The Seller has taken all action as is necessary to provide that from the date hereof up to the Effective Time, no further shares of Seller Common Stock will be purchased under the Seller’s Employee Stock Purchase Plan. Immediately prior to the Effective Time, and subject to the consummation of the Merger, each share of Seller Common Stock issued pursuant to Seller’s Employee Stock Purchase Plan after the date of this Agreement (“ Excess ESPP Shares ”) shall be converted into the right to receive an amount in cash (without interest) equal to the purchase price actually paid by the holder of such shares when such holder purchased the Excess ESPP Shares and the Seller shall terminate its Employee Stock Purchase Plan.

 

2.11 Tax Treatment of Merger. Buyer and Seller intend that the Merger will qualify as a tax-free reorganization under Section 368(a) of the Code and shall file all tax returns and reports consistent therewith.

 

ARTICLE III—REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer, except as set forth in the Buyer Disclosure Schedule, hereby represents and warrants to the Seller as follows:

 

3.1 Corporate Organization.

 

(a) The Buyer is a corporation duly organized, validly existing and in good standing under the laws of The Commonwealth of Massachusetts.

 

(b) The Buyer has all requisite corporate power and authority to own, lease or operate all of its properties and assets and to carry on its business as it is now being conducted. The Buyer is duly licensed or qualified to do business and is in corporate good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased or operated by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Buyer. The Buyer is a bank holding company registered with the FRB under the Bank Holding Company Act of 1956, as amended. The Articles of Organization, certified by the Secretary of State of the Commonwealth of Massachusetts, and bylaws of the Buyer (the “ Buyer Bylaws ”), certified by the Buyer’s Secretary, copies of which have previously been made available to the Seller, are true, complete and correct copies of such documents as currently in effect, and no amendments are pending. The Buyer is not in violation of any provision of its Articles of Organization or the Buyer Bylaws. The minute books of the Buyer made available to the Seller reflect in all material respects all corporate actions taken since January 1, 2002 by the Buyer’s shareholders and board of directors (including committees of the Buyer’s board of directors).

 

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(c) Each of Buyer’s Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each of the Subsidiaries has all requisite power and authority to own, lease or operate all of its properties and assets and to carry on its business as it is now being conducted. Each of the Subsidiaries is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased, or operated by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Buyer and its Subsidiaries taken as a whole.

 

(d) Except as set forth in Section 3.1(d) of the Buyer Disclosure Schedule, the Buyer has no Subsidiaries and no Equity Investments (other than investments in such Subsidiaries).

 

(e) The Articles of Incorporation and Bylaws or equivalent organizational documents of each of the Buyer’s Subsidiaries, copies of which have previously been made available to the Seller, are true, correct and complete copies of such documents as currently in effect and no amendments are pending to such documents. None of the Buyer’s Subsidiaries is in violation of any provision of its Articles of Incorporation, Bylaws or equivalent organizational documents. The minute books of each of the Buyer’s Subsidiaries made available to the Seller contain in all material respects true and complete records of all meetings held and corporate actions taken since January 1, 2002 of its shareholders and board of directors (including committees of its board of directors).

 

3.2 Capitalization.

 

(a) The authorized capital stock of the Buyer consists of 70,000,000 shares of Buyer Common Stock and 2,000,000 shares of Buyer Preferred Stock. As of the date hereof, there are (i) 27,991,741 shares of Buyer Common Stock issued and outstanding; (ii) no shares of Buyer Common Stock held in the treasury of the Buyer; and (iii) no shares of Buyer Preferred Stock issued and outstanding. In addition, as of the date hereof, there are 4,043,723 shares of Buyer Common Stock reserved for issuance upon exercise of outstanding stock options. The Buyer has no shares of Buyer Common Stock reserved for issuance other than as described above. All issued and outstanding shares of Buyer Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof except as required by law. Except for the Buyer stock option plans (which include director and employee stock options) or as reflected in Section 3.2(a) of the Buyer Disclosure Schedule, the Buyer does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments, rights agreements or agreements of any character calling for the Buyer to issue, deliver or sell, or cause to be issued, delivered or sold any shares of Buyer Common Stock or any other equity security of the Buyer or any Subsidiary of the Buyer or any securities convertible into, exchangeable for or representing the right to subscribe for, purchase or otherwise receive any shares of Buyer Common Stock or any other equity security of the Buyer or any Subsidiary of the Buyer or obligating the Buyer or any such Subsidiary to grant, extend or enter into any such subscriptions, options, warrants, calls, commitments, rights agreements or any other similar agreements. Except as set forth in Section 3.2(a) of the Buyer Disclosure Schedule, there are no outstanding contractual obligations of the Buyer to repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity interests in, the Buyer or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary of the Buyer. There are no shares of Buyer Common Stock outstanding which are subject to vesting over time or upon the satisfaction of any condition precedent, or which are otherwise subject to any right or obligation of repurchase or redemption on the part of the Buyer.

 

(b) The Buyer Common Stock to be issued in the Merger has been, or prior to the Closing will be, duly and validly reserved for issuance, and when issued in accordance with the terms of this Agreement, will be validly issued, fully paid, non-assessable and free of any preemptive rights.

 

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3.3 Authority; No Violation.

 

(a) The Buyer has all requisite corporate power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents to which the Buyer is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly approved by the board of directors of the Buyer. No other corporate proceedings on the part of the Buyer are necessary to consummate the Merger and the other transactions contemplated hereby and by the other Transaction Documents. This Agreement and the other Transaction Documents to which the Buyer is a party have been duly and validly executed and delivered by the Buyer and (assuming due authorization, execution and delivery by the Seller and any other parties thereto), constitute the valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their respective terms, expect as enforceability may be restricted, limited or delayed by applicable bankruptcy or other laws affecting creditors’ rights generally or by equitable principles.

 

(b) Neither the execution and delivery of this Agreement or the other Transaction Documents to which the Buyer is a party by the Buyer nor the consummation by the Buyer of the transactions contemplated hereby or thereby, will, assuming that all consents, authorizations, permits, waivers and approvals referred to in Section 3.4 have been obtained and all registrations, declarations, filings and notifications described in Section 3.3(b) of the Buyer Disclosure Schedule have been made and any waiting periods thereunder have terminated or expired, (i) conflict with or violate any provision of the Articles of Organization or bylaws of the Buyer, (ii) conflict with or violate any statute, law, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to the Buyer or by which any property or asset of the Buyer is bound or affected or (iii) result in any breach of or any loss of any benefit under, or constitute a change of control or default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of a lien, security interest, charge or other encumbrance upon any of the properties or assets of the Buyer pursuant to, any note, bond, mortgage, indenture, contract, deed of trust, license, lease, agreement or other instrument or obligation to which the Buyer is a party as issuer, guarantor or obligor, or by which it or any of its properties or assets may be bound or affected, except, with respect to (ii) and (iii) above, for any such conflicts, violations, breaches or defaults which would not, either individually or in the aggregate, reasonably be expected to (1) prevent or materially delay consummation of the Merger, (2) otherwise prevent or materially delay performance by the Buyer of any of its material obligations under this Agreement or any of the other Transaction Documents or (3) have a Material Adverse Effect on the Buyer.

 

3.4 Consents and Approvals. No consents, authorizations, waivers or approvals of, or filings or registrations with, or notifications to any Governmental Authority or with any third party are necessary in connection with (a) the execution and delivery by the Buyer of this Agreement or any other Transaction Document, or (b) the consummation by the Buyer of the Merger and the other transactions contemplated hereby or thereby, except (i) approval and notice to the FRB, OTS, MBBI, MHPF and Florida Commissioner, and such other consents, authorizations, waivers, approvals, filings, notices and registrations the failure of which to obtain or make would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Buyer, prevent or materially delay consummation of the Merger, prevent or materially delay performance by the Buyer of any of its material obligations under this Agreement or any of the Transaction Documents and (ii) such consents, authorizations, waivers, approvals, filings, notices and registrations as are listed in Section 3.4 of the Buyer Disclosure Schedule. The Buyer has no knowledge of any fact or circumstance relating to the Buyer or its Subsidiaries that is reasonably likely to materially impede or delay receipt of any consents of Governmental Authorities.

 

3.5 Reports.

 

(a) The Seller has had access through publicly-available information to (i) Buyer’s Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC (the “ Buyer 10-K ”), (ii) all proxy

 

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statements relating to Buyer’s meetings of shareholders to be held after January 1, 2005 and (iii) all other documents filed by Buyer with the SEC under the Exchange Act or the Securities Act since January 1, 2005 (the “ Buyer SEC Reports ”). As of their respective dates, such documents complied, and all documents filed by Buyer with the SEC under the Exchange Act or the Securities Act between the date of this Agreement and the Closing Date will comply, in all material respects with applicable SEC requirements and did not, or in the case of documents filed on or after the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The certifications of the chief executive officer and chief financial officer of Buyer required by Rules 13a-14 and 15d-14 of the Exchange Act with respect to the Buyer SEC Reports, as applicable, are true and correct as of the date of this Agreement, as they relate to a particular Buyer SEC Report, as though made as of the date of this Agreement. Buyer has established and maintains disclosure controls and procedures, has conducted the procedures in accordance with their terms and has otherwise operated in compliance with the requirements under Rules 13a-15 and 15d-15 of the Exchange Act.

 

(b) Except as set forth in Section 3.5(b) of the Buyer Disclosure Schedule, since January 1, 2002, the Buyer and its Subsidiaries have timely filed, and subsequent to the date hereof will timely file, all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were and are required to be filed with (i) the FRB; and (ii) the FDIC (all such reports, registrations and statements, together with any amendments thereto, are collectively referred to herein as the “ Buyer Reports ”) and have paid all fees and assessments due and payable in connection with any of the foregoing. As of their respective dates, the Buyer Reports complied and, with respect to filings made after the date of this Agreement, will at the date of filing comply, in all material respects with all of the statutes, rules and regulations enforced or promulgated by the Governmental Authority with which they were filed and did not contain and, with respect to filings made after the date of this Agreement, will not at the date of filing contain, any untrue statement of a material fact. Except for normal periodic examinations conducted by a Bank Regulator in the regular course of the business of the Buyer and its Subsidiaries, since January 1, 2002, no Bank Regulator has initiated any proceeding or, to the knowledge of the Buyer, investigation into the business or operations of the Buyer or any of its Subsidiaries. Except as set forth in Section 3.5(b) of the Buyer Disclosure Schedule, the Buyer and its Subsidiaries have resolved in all material respects all violations, criticisms or exceptions by any Bank Regulator with respect to any such normal periodic examination.

 

(c) The Buyer and its Subsidiaries have established and maintain internal controls and procedures to ensure that its financial statements are prepared so as to be fairly presented in conformity with GAAP, including policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Buyer; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Buyer and its Subsidiaries are being made only in accordance with authorizations of management and directors of the Buyer; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Buyer’s assets that could have a material effect on its financial statements.

 

(d) The Buyer has conducted an evaluation under the supervision and with the participation of its management, including the Buyer’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its internal controls and procedures, and has concluded based on such evaluation and as of the date thereof, (i) there were no material weaknesses in internal control over financial reporting and (ii) there was no fraud, whether or not material, that involved management or other employees of the Buyer or any of its Subsidiaries who have a significant role in the Buyer’s internal controls over financial reporting.

 

3.6 Absence of Undisclosed Liabilities. Except as set forth in the Buyer SEC Reports or in Section 3.6 of the Buyer Disclosure Schedule, as of December 31, 2004, Buyer and the Buyer Subsidiaries had no material liabilities of any nature, whether accrued, absolute, contingent or otherwise (including, without limitation,

 

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liabilities as guarantor or otherwise with respect to obligations of others or liabilities for taxes due or then accrued or to become due), required to be reflected or disclosed in the balance sheet dated December 31, 2004 (or the notes thereto) included in the Buyer 10-K (the “ Buyer Balance Sheet ”) that were not adequately reflected or reserved against on the Buyer Balance Sheet. Except as set forth in Section 3.6 of the Buyer Disclosure Schedule, Buyer has no material liabilities of any nature, whether accrued, absolute, contingent or otherwise, other than liabilities (i) adequately reflected or reserved against on the Buyer Balance Sheet, (ii) incurred since December 31, 2004 in the ordinary course of business, or (iii) that would not, individually or in the aggregate, reasonably be expected to have a Buyer Material Adverse Effect.

 

3.7 Financial Statements. The Buyer has made available to the Seller copies of the consolidated balance sheets of the Buyer and its Subsidiaries as of December 31, 2004 and December 31, 2003, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the fiscal years 2002 through 2004, inclusive, accompanied by the audit report of KPMG LLP, independent registered public accounting firm for the Buyer. The Buyer Balance Sheet and the other financial statements referred to herein (including the related notes, where applicable) present fairly, in all material respects, and the financial statements of Seller prepared by Seller after the date hereof will present fairly, in all material respects, the consolidated financial position and results of the consolidated operations and cash flows and changes in stockholders’ equity of the Buyer and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; and each of such statements (including the related notes, where applicable) has been and will be prepared in accordance with GAAP, except as otherwise set forth in the notes thereto (subject, in the case of unaudited interim statements, to normal year-end adjustments). The books and records of Buyer and its Subsidiaries have been, and are being, maintained in accordance with GAAP, to the extent applicable, and applicable legal and regulatory requirements.

 

3.8 Absence of Certain Changes or Events. The Buyer and each of Buyer’s Subsidiaries have conducted its respective business in the ordinary course consistent with their past practices and (b) there has not been any change, circumstance or event which has had, or would reasonably be expected to have, a Material Adverse Effect on the Buyer.

 

3.9 Financing. The Buyer has or will have at the Closing immediately available to it all the funds necessary to perform its obligations under this Agreement, including consummating the transactions contemplated by this Agreement on the terms contemplated hereby and paying all of its fees and expenses relating to such transactions.

 

3.10 Compliance with Applicable Laws and Reporting Requirements.

 

(a) The Buyer and its Subsidiaries hold all material permits, licenses, variances, authorizations, exemptions, orders, registrations and approvals of all Governmental Authorities which are required for the operation of their respective businesses (the “ Permits ”). The Buyer and each of its Subsidiaries is in compliance with the terms of the Permits and all applicable laws and regulations, except where the failure so to hold or comply, individually or in the aggregate, has not had or would not reasonably be expected to have a Material Adverse Effect on the Buyer. Except as set forth in Section 3.10(a) of the Buyer Disclosure Schedule, the businesses of the Buyer and its Subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Authority except for possible violations which, individually or in the aggregate, do not have, and would not reasonably be expected to have, a Material Adverse Effect on the Buyer. No investigation by any Governmental Authority with respect to the Buyer or any of its Subsidiaries is pending or threatened, other than, in each case, those the outcome of which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Buyer.

 

(b) Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Buyer, the Buyer and its Subsidiaries have properly administered all accounts for which it acts as a fiduciary, including accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the

 

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governing documents, applicable state and federal law and regulation and common law. None of the Buyer, any of its Subsidiaries, or any director, officer or employee of the Buyer or any of its Subsidiaries, has committed any breach of trust or fiduciary duty with respect to any such fiduciary account that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Buyer, and, except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Buyer, the accountings for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.

 

(c) Except for normal periodic examinations conducted by a Bank Regulator in the regular course of the business of the Buyer and its Subsidiaries, since January 1, 2002, no Bank Regulator has initiated any proceeding or, to the knowledge of the Buyer, investigation into any part of the business or operations of the Buyer or any of its Subsidiaries.

 

(d) The business and operations of the Buyer and of each of its Subsidiaries through which the Seller conducts its finance activities (including mortgage banking and mortgage lending activities and consumer finance activities) (together, the “ Buyer Finance Subsidiaries ”), have been conducted in compliance in all material respects with all applicable statutes and regulations regulating the business of consumer lending, including state usury laws, the Truth in Lending Act, RESPA, the Consumer Credit Protection Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Homeowners Ownership and Equity Protection Act, the Fair Debt Collections Act and other federal, state, local and foreign laws regulating lending (“ Finance Laws ”), and have complied in all material respects with all applicable collection practices in seeking payment under any loan or credit extension of such Buyer Finance Subsidiaries. In addition, there is no pending or, to the knowledge of the Buyer, threatened charge by any Governmental Authority that any of the Buyer Finance Subsidiaries has violated, nor any pending or, to the knowledge of the Seller, threatened investigation by any Governmental Authority with respect to possible violations of, any applicable Finance Laws where such violations would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Buyer.

 

3.11 Regulatory Capitalization. Each of Boston Private Bank & Trust Company, Borel Private Bank & Trust Company, and First State Bank of California (collectively, the “ Buyer Banks ”), is “well capitalized,” as such term is defined in the rules and regulations promulgated by the FDIC. The Buyer would be “well capitalized” as such term is defined in the rules and regulations promulgated by the FRB. The Buyer meets the requirements of the FRB to elect to become a “financial holding company” under applicable federal law.

 

3.12 CRA, Anti-Money Laundering, OFAC and Customer Information Security. Neither the Buyer nor any Buyer Bank is aware of, has been advised of, or has reason to believe (because of the Buyer Banks’ December 31, 2004 Home Mortgage Disclosure Act data filed with the FDIC on or prior to March 1, 2005, or otherwise) that any facts or circumstances exist, which would cause a Buyer Bank: (i) to be deemed not to be in satisfactory compliance in any material respect with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by federal or state bank regulators of lower than “satisfactory;” or (ii) to be deemed to be operating in violation of the Bank Secrecy Act, the Patriot Act, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (iii) to be deemed not to be in satisfactory compliance in any material respect with the applicable privacy of customer information requirements contained in any federal and state privacy laws and regulations, including without limitation, in Title V of the Gramm-Leach-Bliley Act of 1999 and the regulations promulgated thereunder, as well as the provisions of the information security program adopted by each Buyer Bank pursuant to 12 C.F.R. Part 570, except, with respect to clauses (i), (ii) and (iii) above, where such failure to be in compliance or where such operation in violation, individually or in the aggregate, has not had or would not reasonably be expected to have a Material Adverse Effect on the Buyer. Neither Buyer nor any Buyer Bank is aware of any facts or circumstances which would cause any of them to believe that any non-public customer information has been disclosed to or accessed by an unauthorized third party in a manner which would cause either Buyer or a Buyer Bank to undertake any remedial action, except for such facts or circumstances, individually or in the aggregate, as would not reasonably be

 

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expected to have a Material Adverse Effect on the Buyer. Furthermore, the board of directors of each Buyer Bank has adopted, and each Buyer Bank has implemented, an anti-money laundering program that contains adequate and appropriate customer identification verification procedures that comply with Section 326 of the Patriot Act and such anti-money laundering program meets the requirements in all material respects of Section 352 of the Patriot Act and the regulations thereunder, except where the failure so to comply or meet requirements, individually or in the aggregate, would not be reasonably be expected to have a Material Adverse Effect on the Buyer.

 

3.13 Broker’s Fees. Neither the Buyer nor any of its officers, directors, employees, Affiliates or agents has employed any broker, finder or financial advisor or incurred any liability for any fees or commissions in connection with any of the transactions contemplated by this Agreement, except for fees and commissions incurred in connection with the engagement of Keefe, Bruyette & Woods, Inc. and for legal, accounting and other professional fees payable in connection with the Merger and the other transactions contemplated hereby. The Buyer will be responsible for the payment of all such fees.

 

3.14 Legal Proceedings. Except as set forth in Section 3.14 of the Buyer Disclosure Schedule, there is no suit, action or proceeding pending, or to the knowledge of Buyer, threatened against or affecting Buyer or its Subsidiaries (and Buyer is not aware of the basis for any such suit, action, or proceeding) (i) that, individually or in the aggregate, is material to Buyer and its Subsidiaries, taken as a whole, or (ii) that is reasonably likely to prevent or delay Buyer in any material respect from performing its obligations under, or consummating the transactions contemplated by, this Agreement.

 

3.15 The Buyer Information. None of the information supplied or to be supplied by Buyer specifically for inclusion or incorporation by reference in (i) the Registration Statement will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Proxy Statement/Prospectus and any amendment or supplement thereto will, at the date of mailing to shareholders and at the time of the Seller Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which such statement is made not misleading.

 

3.16 Agreements with Governmental Authorities. Except as set forth in Section 3.16 of the Buyer Disclosure Schedule, neither the Buyer nor any of its Subsidiaries is subject to any cease and desist or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since January 1, 2002, a recipient of any supervisory letter from, or since January 1, 2002, has adopted any policies, procedures or board resolutions at the request or suggestion of any Bank Regulator or other Governmental Authority that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business, other than those of general application that apply to similarly situated bank holding companies or their Subsidiaries (each item in this sentence, whether or not set forth in the Buyer Disclosure Schedule, a “ Buyer Regulatory Agreement ”), nor has the Buyer or any of its Subsidiaries been advised since January 1, 2002 by any Bank Regulator or other Governmental Authority that it is considering issuing, initiating, ordering or requesting any such Buyer Regulatory Agreement.

 

3.17 Reorganization. Buyer and its affiliates have not taken or agreed to take any action, have not failed to take any action and do not know of any fact, agreement, plan or other circumstance, in each case that would or could reasonably be expected to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

 

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ARTICLE IV—REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

The Seller, except as set forth in the Seller Disclosure Schedule, represents and warrants to the Buyer as follows:

 

4.1 Corporate Organization.

 

(a) The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. The Seller has all requisite corporate power and authority to own, lease or operate all of its properties and assets and to carry on its business as it is now being conducted. The Seller is duly licensed or qualified to do business and is in corporate good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased or operated by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and in corporate good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Seller. The Seller is a savings and loan holding company registered with the OTS under the Home Owners’ Loan Act of 1933, as amended. The Articles of Incorporation, certified by the Secretary of State of the State of Florida, and bylaws of the Seller (the “ Seller Bylaws ”), certified by the Seller’s Secretary, copies of which have previously been made available to the Buyer, are true, complete and correct copies of such documents as currently in effect, and no amendments are pending. The Seller is not in violation of any provision of its Articles of Incorporation or the Seller Bylaws. The minute books of the Seller made available to the Buyer reflect in all material respects all corporate actions taken since January 1, 2002 by the Seller’s shareholders and board of directors (including committees of the Seller’s board of directors).

 

(b) Each of Seller’s Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each of the Subsidiaries has all requisite power and authority to own, lease or operate all of its properties and assets and to carry on its business as it is now being conducted. Each of the Subsidiaries is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased, or operated by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Seller and its Subsidiaries taken as a whole.

 

(c) Except as set forth in Section 4.1(c) of the Seller Disclosure Schedule, the Seller has no Subsidiaries and no Equity Investments (other than investments in such Subsidiaries).

 

(d) The Articles of Incorporation and Bylaws or equivalent organizational documents of each of the Seller’s Subsidiaries, copies of which have previously been made available to the Buyer, are true, correct and complete copies of such documents as currently in effect and no amendments are pending to such documents. None of the Seller’s Subsidiaries is in violation of any provision of its Articles of Incorporation, Bylaws or equivalent organizational documents. The minute books of each of the Seller’s Subsidiaries made available to the Buyer contain in all material respects true and complete records of all meetings held and corporate actions taken since January 1, 2002 of its shareholders and board of directors (including committees of its board of directors).

 

4.2 Capitalization.

 

(a) The authorized capital stock of the Seller consists of 11,000,000 shares of Seller Common Stock. As of the date hereof, there are 1,117,386 (including 1,000 restricted stock awards) shares of Seller Common Stock issued and outstanding. As of the date hereof, there are 386 shares of Seller Common Stock held in the treasury of the Seller. Except for Trust Account Shares and DPC Shares, as of the date hereof, no shares of Seller Common Stock are held by the Seller’s Subsidiaries. In addition, as of the date hereof, there are 115,225 shares of Seller Common Stock reserved for issuance upon exercise of outstanding Stock Options. The Seller has no shares of Seller Common Stock reserved for issuance other than as described above. All issued and outstanding shares of Seller Common Stock have been duly authorized and validly

 

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issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof except as required by law. Except for the Seller Stock Option Plans (which include director and employee stock options) or as reflected in Section 4.2(a) of the Seller Disclosure Schedule, the Seller does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments, rights agreements or agreements of any character calling for the Seller to issue, deliver or sell, or cause to be issued, delivered or sold any shares of Seller Common Stock or any other equity security of the Seller or any Subsidiary of the Seller or any securities convertible into, exchangeable for or representing the right to subscribe for, purchase or otherwise receive any shares of Seller Common Stock or any other equity security of the Seller or any Subsidiary of the Seller or obligating the Seller or any such Subsidiary to grant, extend or enter into any such subscriptions, options, warrants, calls, commitments, rights agreements or any other similar agreements. Except as set forth in Section 4.2(a) of the Seller Disclosure Schedule, there are no outstanding contractual obligations of the Seller to repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity interests in, the Seller or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary of the Seller. Section 4.2(a) of the Seller Disclosure Schedule, as of the date hereof, sets forth (i) the name of each holder of a Stock Option, (ii) the date each Stock Option was granted, (iii) the number of shares of Seller Common Stock subject to each such Stock Option, (iv) the expiration date of each such Stock Option, and (v) the price at which each such Stock Option may be exercised. Section 4.2(a) of the Seller Disclosure Schedule, as of the date hereof, sets forth with respect to each Seller SAR (A) the name of the grantee, (B) the date of the grant, (C) the per share price and vesting schedule, and (D) the amount of cash to be paid upon settlement of Seller SAR. Section 4.2(a) of the Seller Disclosure Schedule, as of the date hereof, sets forth with respect to each share of Seller Restricted Stock (A) the name of the grantee, (B) the date of the grant, and (C) the vesting schedule. Except as noted in the immediately preceding sentence, there are no shares of Seller Common Stock outstanding which are subject to vesting over time or upon the satisfaction of any condition precedent, or which are otherwise subject to any right or obligation of repurchase or redemption on the part of the Seller.

 

(b) The authorized capital stock of the Seller Bank consists of 1,000,000 shares of common stock, par value $0.01 per share (“ Bank Common Stock ”). As of the date hereof, (i) one share of Bank Common Stock is issued and outstanding, which is owned directly by the Seller, and which is duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof except as required by law, (ii) no shares of Bank Common Stock are held in the treasury of the Seller Bank, and (iii) no shares of Bank Common Stock are held by any of Seller’s Subsidiaries or Affiliates. Each share of Bank Common Stock owned by the Seller is free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Seller’s voting rights, charges and other encumbrances of any nature whatsoever.

 

(c) Section 4.2(c) of the Seller Disclosure Schedule lists each of the Seller’s Subsidiaries and Equity Investments on the date of this Agreement and indicates for each such Subsidiary and Equity Investment as of such date: (i) the percentage and type of equity securities owned or controlled, directly or indirectly, by the Seller; (ii) the jurisdiction of organization; and (iii) the federal and/or state bank regulatory or other authority (including, without limitation, the specific regulatory provision) under which its shares are held, directly or indirectly, by the Seller. Section 4.2(c) of the Seller Disclosure Schedule also lists all real property managed by each of the Subsidiaries of Seller, and for whom it manages such property. Except as set forth in Section 4.2(c) of the Seller Disclosure Schedule, the Seller (x) has made available to the Buyer all of the organizational or similar documents regarding the control, governance or voting power in respect of each Equity Investment, (y) has no obligation to make any capital contributions, or otherwise provide assets or cash, to any Equity Investment and (z) does not, directly or indirectly, control any Equity Investment. Except as set forth in Section 4.2(c) of the Seller Disclosure Schedule, no Subsidiary of the Seller has or is bound by any outstanding subscriptions, options, warrants, calls, commitments, rights agreements or agreements of any character calling for it to issue, deliver or sell, or cause to be issued, delivered or sold any of its equity securities or any equity security of the Seller or any securities convertible into, exchangeable for or representing the right to subscribe for, purchase or otherwise receive any such

 

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equity security or obligating such subsidiary to grant, extend or enter into any such subscriptions, options, warrants, calls, commitments, rights agreements or other similar agreements. There are no outstanding contractual obligations of any Subsidiary of the Seller to repurchase, redeem or otherwise acquire any of its capital stock or other equity interests. All of the shares of capital stock of each of the Subsidiaries and Equity Investments of the Seller held, directly or indirectly, by the Seller are validly issued, fully paid and nonassessable and, except for directors’ qualifying shares, are owned by the Seller free and clear of any claim, lien, encumbrance or agreement with respect thereto.

 

(d) The Seller Bank has its deposits insured by the Savings Association Insurance Fund of the FDIC in accordance with the FDIA to the fullest extent permitted by law. The Seller Bank is not obligated to make any payments for past due premiums and assessments and the Seller Bank has filed all reports required by the FDIA since January 1, 2002. The Seller Bank has no deposits insured by the Bank Insurance Fund of the FDIC. No proceedings for the revocation or termination of such deposit insurance are pending or, to the knowledge of the Seller, threatened.

 

4.3 Authority; No Violation.

 

(a) The Seller has all requisite corporate power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents to which the Seller is a party, and the consummation of the transactions contemplated hereby and thereby have been duly and validly adopted and approved by the unanimous vote of the board of directors of the Seller. The board of directors of the Seller has directed that this Agreement and the transactions contemplated hereby, including the Merger, be submitted to the shareholders of the Seller for adoption and approval at a meeting of such shareholders and, except for the adoption and approval of this Agreement and the Merger by the Seller’s shareholders, no other corporate proceedings on the part of the Seller are necessary to consummate the Merger and the other transactions contemplated hereby and by the other Transaction Documents. This Agreement and the other Transaction Documents to which Seller is a party have been duly and validly executed and delivered by the Seller and (assuming due authorization, execution and delivery by the Buyer and the other parties thereto) constitute the valid and binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms, expect as enforceability may be restricted, limited or delayed by applicable bankruptcy or other laws affecting creditors’ rights generally or by equitable principles.

 

(b) Neither the execution and delivery of this Agreement or the other Transaction Documents to which the Seller is a party by the Seller nor the consummation by the Seller of the transactions contemplated hereby or thereby, will, assuming that all consents, authorizations, permits, waivers and approvals referred to in Section 4.3(a) and in Section 4.4 of the Seller Disclosure Schedule have been obtained and all registrations, declarations, filings and notifications described in Section 4.3(b) of the Seller Disclosure Schedule have been made and any waiting periods thereunder have terminated or expired, (i) conflict with or violate any provision of the Seller’s Articles of Incorporation, the Seller Bylaws, the organizational documents of any of Seller’s Subsidiaries, or the Seller Shareholders’ Agreement (to the extent such agreement is then in full force and effect), (ii) conflict with or violate any statute, law, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to the Seller or any of Seller’s Subsidiaries or by which any property or asset of the Seller or any of Seller’s Subsidiaries is bound or affected or (iii) result in any breach of or any loss of any benefit under, or constitute a change of control or default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of a lien, security interest, charge or other encumbrance upon any of the properties or assets of the Seller or any of Seller’s Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, deed of trust, license, lease, agreement or other instrument or obligation to which the Seller or any of Seller’s Subsidiaries is a party as issuer, guarantor or obligor, or by which they or any of their respective properties or assets may be bound or affected, except, with respect to (ii) and (iii) above, for any such conflicts, violations, breaches or defaults

 

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which would not, either individually or in the aggregate, reasonably be expected to (1) prevent or materially delay consummation of the Merger, (2) otherwise prevent or materially delay performance by the Seller or any of Seller’s Subsidiaries of any of its material obligations under this Agreement or any of the other Transaction Documents or (3) have a Material Adverse Effect on the Seller.

 

4.4 Consents and Approvals. No consents, authorizations, waivers or approvals of, or filings or registrations with, or notifications to any Governmental Authority or with any third party are necessary in connection with (a) the execution and delivery by the Seller of this Agreement or any other Transaction Document, or (b) the consummation by the Seller of the Merger and the other transactions contemplated hereby or thereby, except (i) approval and notice to the FRB, OTS, MBBI, MHPF and Florida Commissioner, and such other consents, authorizations, waivers, approvals, filings, notices and registrations the failure of which to obtain or make would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Seller, prevent or materially delay consummation of the Merger, prevent or materially delay performance by the Seller of any of its material obligations under this Agreement or any of the other Transaction Documents and (ii) such consents, authorizations, waivers, approvals, filings, notices and registrations as are listed in Section 4.4 of the Seller Disclosure Schedule. The affirmative vote (the “ Requisite Affirmative Vote ”) of holders of 66  ² / 3 % of the outstanding shares of Seller Common Stock entitled to vote, is the only vote of the holders of any shares or series of capital stock or other securities of the Seller necessary to adopt this Agreement and approve the Merger. The Seller has no knowledge of any fact or circumstance relating to the Seller or its Subsidiaries that is reasonably likely to materially impede or delay receipt of any consents of Governmental Authorities.

 

4.5 Financial Statements. The Seller has made available to the Buyer copies of the audited consolidated balance sheets of the Seller and its Subsidiaries as of December 31 for the fiscal years 2003 and 2004, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the fiscal years 2002 through 2004, inclusive, accompanied by the audit report of Hacker, Johnson & Smith PA, independent registered public accounting firm for the Seller. The December 31, 2004 consolidated balance sheet of the Seller and its Subsidiaries (the “ Seller Balance Sheet ”) and the other financial statements referred to herein (including the related notes, where applicable) and the other financial statements of the Seller referred to in this Section (including the related notes, where applicable) present fairly, in all material respects, and the financial statements of Seller prepared by Seller after the date hereof will present fairly, in all material respects, the consolidated financial position and results of the consolidated operations and cash flows and changes in shareholders’ equity of the Seller and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; and each of such statements (including the related notes, where applicable) has been and will be prepared in accordance with GAAP, except as otherwise set forth in the notes thereto (subject, in the case of unaudited interim statements, to normal year-end adjustments). The books and records of the Seller and its Subsidiaries have been, and are being, maintained in accordance with GAAP, to the extent applicable, and applicable legal and regulatory requirements.

 

4.6 Broker’s Fees; Fairness Opinion.

 

(a) Neither the Seller nor any of its officers, directors, employees, Affiliates or agents has employed any broker, finder or financial advisor or incurred any liability for any fees or commissions in connection with any of the transactions contemplated by this Agreement, except for fees and commissions incurred in connection with the engagement of Sandler O’Neill & Partners, L.P. (the “ Seller’s Advisor ”) and for legal, accounting and other professional fees payable in connection with the Merger and the other transactions contemplated hereby. The Seller will be responsible for the payment of all such fees. The fee payable to the Seller’s Advisor in connection with the transactions contemplated by this Agreement is as described in an engagement letter between the Seller and the Seller’s Advisor, a true and complete copy of which has heretofore been furnished to the Buyer.

 

(b) The Seller has received the opinion of the Seller’s Advisor to the effect that, as of the date hereof, the Consideration to be received by the shareholders of the Seller pursuant to the Merger is fair from a

 

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financial point of view to such shareholders, and such opinion has not been amended or rescinded and remains in full force and effect as of the date of this Agreement.

 

4.7 Absence of Certain Changes or Events. Since December 31, 2004, the Seller and each of Seller’s Subsidiaries have (a) conducted its respective busi