Boston Private Announces $75 Million Investment by The Carlyle Group

Randal Quarles finds a financial services company he likes.

"In these challenging economic times, we have looked at many investment opportunities in the financial services sector and have seen few that we have found as attractive. We are attracted to Boston Private's strong history of growth and their diversified business structure that derives revenues not only from the private banking business but from strong fee-based businesses," said Quarles as part the announcement that Carlyle will invest $75 million in Boston Private Financial Holdings, Inc. (NASDAQ: BPFH).

Carlyle will purchase two series of non-voting preferred stock, one of which is mandatorily convertible into common stock and one of which is convertible only if Boston Private shareholders approve the conversion. The shares of mandatorily convertible preferred stock will, on an as-converted basis, represent 9.99% of the pro-forma outstanding common shares (including the shares issued in Boston Privates public offering and the shares issuable on conversion of the mandatorily convertible preferred stock). The mandatorily convertible preferred stock will convert automatically following a shareholders' meeting we expect to hold later this year at an initial conversion price of $5.52 per share. The conversion price was based on the average closing price of Boston Private common stock during the week of July 7, 2008.

The contingent convertible preferred stock will, on an as-converted basis, when combined with the mandatorily convertible preferred stock, represent approximately 19% of Boston Private's pro-forma common shares outstanding. The conversion price of the contingent preferred stock will also be $5.52 per share.

Both series of preferred stock initially will be entitled to receive dividends payable on Boston Private's common stock on an as-converted basis. If Boston Private does not hold a shareholders' meeting prior to the record date for Boston Private's 4th quarter dividend period, the mandatorily convertible preferred stock will carry a fixed dividend of 20% (accruing from September 30, 2008) until a meeting is held. If Boston Private shareholders do not approve the conversion of the contingent preferred stock prior to the record date for our 4th quarter dividend period, the contingent preferred stock will carry a fixed dividend initially of 14% (accruing from September 30, 2008), increasing to 15.5% and ultimately to 20% in the following two six-month periods if our shareholders do not approve the conversion at a subsequent meeting.

For every five shares of common stock issuable upon conversion of its preferred stock, Carlyle will receive warrants to purchase two shares of Boston Private's common stock during the next five years at a price of $6.62 per share (20% over Carlyle's initial common stock purchase price). As a result, Carlyle's economic interest in Boston Private, assuming conversion of all of its preferred stock and exercise of all of its warrants, would be 24.99%.

"The terms of Carlyle's investment with Boston Private closely aligns its interests with those of our current shareholders, without the various forms of special downside protection seen in many other private equity investments in this sector. Their willingness to partner with us and make this type of investment in Boston Private is a gratifying validation that our business model is positively differentiated from our competitors," said Timothy Vaill, Chairman and CEO of Boston Private.