THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 333-72912
SUBJECT TO COMPLETION, DATED MARCH 1, 2002
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 21, 2001)
[FLEETBOSTON FINANCIAL LOGO]
20,000,000 PREFERRED SECURITIES
FLEET CAPITAL TRUST VIII
% PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY
FLEETBOSTON FINANCIAL CORPORATION
------------------
Fleet Capital Trust VIII is a Delaware business trust. The trust will sell
% Preferred Securities, the "preferred securities," representing undivided
beneficial interests in the trust to the public and will sell common securities
representing undivided beneficial interests in the trust to FleetBoston
Financial Corporation. The trust will use the proceeds from these sales to buy
an equal principal amount of junior subordinated debentures due
of FleetBoston Financial Corporation and will distribute the cash payments it
receives on the junior subordinated debentures it owns to the holders of the
preferred and common securities. The trust will redeem the preferred securities
on , which date may be extended to a date not later than ,
and may redeem them earlier, subject in the case of redemption to any required
prior approval of the Federal Reserve Board.
For each preferred security that you own, you will receive cumulative cash
distributions at an annual rate equal to % on the liquidation amount of $25
per preferred security on , , and of each year,
beginning . FleetBoston Financial Corporation can defer interest
payments on the junior subordinated debentures at any time for up to 20
consecutive quarterly periods. If FleetBoston Financial Corporation does defer
interest payments, the trust will also defer payment of distributions on the
preferred and common securities. However, deferred distributions will themselves
accrue interest at an annual rate equal to %, compounded quarterly, to the
extent permitted by law.
FleetBoston Financial Corporation will fully and unconditionally guarantee
the payment by the trust of the preferred securities based on obligations
discussed in the accompanying prospectus.
The trust will apply to have the preferred securities listed on the New
York Stock Exchange under the symbol "FBF PrM." If approved for listing, trading
of the preferred securities is expected to commence within 30 days after the
preferred securities are first issued.
------------------
INVESTING IN THE PREFERRED SECURITIES INVOLVES RISKS WHICH ARE DESCRIBED IN
THE "RISK FACTORS" SECTION BEGINNING ON PAGE S-7 OF THIS PROSPECTUS SUPPLEMENT.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus supplement or
the accompanying prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The preferred securities are not deposits and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other governmental agency.
------------------
PER PREFERRED
SECURITY TOTAL
------------- -----
Public offering price(1).................................... $25.00 $
Underwriting commission to be paid by FleetBoston Financial
Corporation(2)............................................ $ $
Proceeds to Fleet Capital Trust VIII........................ $25.00 $
---------------
(1) Plus accumulated distributions from March , 2002, if settlement occurs
after that date.
(2) Because Fleet Capital Trust VIII will use all of the proceeds from the sale
of the preferred securities and its common securities to purchase junior
subordinated debentures of FleetBoston Financial Corporation, FleetBoston
Financial Corporation will pay all underwriting discounts and commissions.
The underwriters may also purchase up to an additional 3,000,000 preferred
securities at the public offering price within 30 days from the date of this
prospectus supplement to cover over-allotments.
The preferred securities will be ready for delivery in book-entry form
through The Depository Trust Company on or about March , 2002.
------------------
SALOMON SMITH BARNEY
FLEET SECURITIES, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY
PRUDENTIAL SECURITIES
UBS WARBURG
The date of this prospectus supplement is March , 2002.
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Summary Information -- Q&A.................................. S-3
Risk Factors................................................ S-7
Fleet Capital............................................... S-11
FleetBoston Financial Corporation Selected Consolidated
Financial Data............................................ S-13
Capitalization.............................................. S-15
Accounting Treatment........................................ S-18
Description of the Preferred Securities..................... S-18
Description of the Guarantee................................ S-28
Description of the Junior Subordinated Debentures........... S-28
Effect of Obligations under the Junior Subordinated
Debentures and the Guarantee.............................. S-36
United States Federal Income Taxation....................... S-37
ERISA Considerations........................................ S-42
Underwriting................................................ S-45
PROSPECTUS
About This Prospectus....................................... 2
Where You Can Find More Information......................... 2
Forward-looking Statements.................................. 4
FleetBoston Financial Corporation........................... 5
The Trusts.................................................. 5
Consolidated Ratios of Earnings to Fixed Charges............ 6
Use of Proceeds............................................. 7
Regulation and Supervision.................................. 7
Description of the Junior Subordinated Debentures........... 8
Description of the Preferred Securities..................... 13
Description of the Preferred Securities Guarantees.......... 16
Effect of Obligations under the Junior Subordinated
Debentures and the Preferred Securities Guarantees........ 19
Plan of Distribution........................................ 20
Legal Matters............................................... 21
Experts..................................................... 22
-------------------------
You should rely only on the information contained in this document or that
we have referred you to. We have not authorized anyone to provide you with any
other information.
The trust may sell preferred securities after the date of this prospectus
supplement, and this prospectus supplement and the prospectus may be delivered
to you after the date of this prospectus supplement. However, you should realize
that the affairs of FleetBoston Financial Corporation or the trust may have
changed since the date of this prospectus supplement. This prospectus supplement
will not reflect those changes.
You should not consider this prospectus supplement or the prospectus to be
an offer or solicitation relating to the preferred securities in any
jurisdiction in which such an offer or solicitation is not authorized.
Furthermore, you should not consider this prospectus supplement or the
prospectus to be an offer or solicitation relating to the preferred securities
if the person making the offer or solicitation is not qualified to do so, or if
it is unlawful for you to receive such an offer or solicitation.
S-2
SUMMARY INFORMATION -- Q&A
The following information supplements, and should be read together with,
the information contained in other parts of this prospectus supplement and in
the accompanying prospectus. This summary highlights selected information from
this prospectus supplement and the accompanying prospectus to help you
understand the preferred securities. You should carefully read this prospectus
supplement and the accompanying prospectus to understand fully the terms of the
preferred securities, as well as the tax and other considerations that are
important to you in making a decision about whether to invest in the preferred
securities. You should pay special attention to the "Risk Factors" section
beginning on page S-7 of this prospectus supplement to determine whether an
investment in the preferred securities is appropriate for you. The preferred
securities are one of the series of preferred securities referred to in the
accompanying prospectus.
For your convenience, we make reference to specific page numbers in this
prospectus supplement and the accompanying prospectus for more detailed
information on some of the terms and concepts used throughout this prospectus
supplement.
WHAT ARE THE PREFERRED SECURITIES?
Each preferred security represents an undivided beneficial interest in the
assets of Fleet Capital Trust VIII, "FLEET CAPITAL." Each preferred security
will entitle the holder to receive quarterly cash distributions as described in
this prospectus supplement. The underwriters are offering preferred securities
at a price of $25 for each preferred security.
WHO IS FLEET CAPITAL?
Fleet Capital is a Delaware business trust.
Fleet Capital will sell its preferred securities to the public and its
common securities to FleetBoston Financial Corporation, "FLEETBOSTON." The
preferred securities and the common securities together are referred to in this
prospectus supplement and the accompanying prospectus as the "TRUST SECURITIES."
Fleet Capital will use the proceeds from these sales to buy a series of junior
subordinated debentures from FleetBoston with the same financial terms as the
preferred securities. FleetBoston will, on a subordinated basis, fully and
unconditionally guarantee the payment by Fleet Capital of the preferred
securities, the "GUARANTEE."
There are five trustees of Fleet Capital. Three of the Fleet Capital
trustees are officers of FleetBoston, the "REGULAR TRUSTEES." The Bank of New
York will act as the institutional trustee of Fleet Capital and one of its
affiliates will act as the Delaware trustee.
WHO IS FLEETBOSTON?
FleetBoston is a diversified financial services company offering a
comprehensive array of financial solutions to approximately 20 million customers
in more than 20 countries. Among FleetBoston's key lines of business are:
- Consumer Financial Services -- includes domestic retail banking,
community banking, student loan processing and credit card services;
- Wholesale Banking -- composed of commercial finance, including
asset-based lending and leasing; corporate banking, including specialized
industry lending and institutional banking; commercial banking, including
middle market commercial lending, trade services and cash management, as
well as government banking services, including cash management,
investment services and municipal, state and national government agency
underwriting; and small business services, including lending, deposits
and cash management;
S-3
- Wealth Management and Brokerage -- composed of wealth management,
including specialized asset management, estate settlement and deposit and
credit products for high-net-worth customers, proprietary and third party
mutual funds and other investment products for retail and institutional
customers, and retirement planning, large institutional asset management
and not-for-profit investment services; and retail brokerage and
securities clearing;
- International Banking -- includes FleetBoston's international operations
in key Latin American markets, as well as in Asia; and
- Capital Markets -- includes investment banking services, brokerage
market-making and principal investing.
On March 1, 2001, FleetBoston completed its acquisition of Summit Bancorp,
which was accounted for as a pooling of interests. All financial information set
forth or incorporated by reference in this prospectus supplement and the
accompanying prospectus has been restated for all periods to give effect to the
Summit acquisition.
At December 31, 2001, FleetBoston's total assets on a consolidated basis
were $203.6 billion, its consolidated total deposits were $129.3 billion and its
consolidated total stockholders' equity was $17.6 billion. Based on total
assets, FleetBoston is the seventh largest financial holding company in the
United States.
FleetBoston's principal office is located at 100 Federal Street, Boston,
Massachusetts 02110, telephone number (617) 434-2200.
WHEN WILL YOU RECEIVE QUARTERLY DISTRIBUTIONS?
If you purchase the preferred securities, you are entitled to receive
cumulative cash distributions at an annual rate of % of the liquidation
amount of $25 per preferred security. Distributions will accumulate from the
date Fleet Capital issues the preferred securities and will be paid quarterly in
arrears on , , and of each year, beginning
.
WHEN CAN PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
FleetBoston can, on one or more occasions, defer interest payments on the
junior subordinated debentures for up to 20 consecutive quarterly periods unless
an event of default under the indenture has occurred and is continuing (see page
S-32). A deferral of interest payments cannot extend, however, beyond the
maturity date of the junior subordinated debentures, which is , which
date may be accelerated under the limited circumstances described under
"Conditional Right to Shorten Maturity" below or extended as described under
"Option to Extend Maturity Date" below.
If FleetBoston defers interest payments on the junior subordinated
debentures, Fleet Capital will also defer distributions on the preferred
securities. During this deferral period, distributions will continue to accrue
on the preferred securities at an annual rate of % of the liquidation
amount of $25 per preferred security. Also, the deferred distributions will
themselves accrue interest (to the extent permitted by law) at an annual rate of
%, compounded quarterly. Once FleetBoston makes all interest payments on
the junior subordinated debentures, with accrued interest, it can again postpone
interest payments on the junior subordinated debentures if no event of default
under the indenture has occurred and is continuing.
During any period in which FleetBoston defers interest payments on the
junior subordinated debentures, FleetBoston will not be permitted to:
- declare or pay a dividend or make any other payment or distribution on
its capital stock;
- redeem, purchase or make a liquidation payment on any of its capital
stock;
S-4
- make an interest, principal or premium payment on, or repurchase or
redeem, any of its debt securities that rank equal with or junior to the
junior subordinated debentures; or
- make any guarantee payments relating to any of the above.
There are limited exceptions to these restrictions which are described on
page S-32.
If FleetBoston defers the payment of interest on the junior subordinated
debentures, the preferred securities will be treated as being reissued with
original issue discount for United States federal income tax purposes. This
means that, beginning at the time of deferral, you will be required to recognize
interest income with respect to distributions even during the period those
distributions are deferred and include those amounts in your gross income for
United States federal income tax purposes before you receive any cash
distributions relating to those interest payments. See "United States Federal
Income Taxation" beginning on page S-37.
WHEN CAN FLEET CAPITAL REDEEM THE PREFERRED SECURITIES?
Fleet Capital will redeem all of the outstanding preferred securities when
the junior subordinated debentures are paid at maturity on , which
date may be accelerated under the limited circumstances described under
"Description of the Junior Subordinated Debentures -- Option to Accelerate the
Maturity Date" below or extended as described under "-- Option to Extend
Maturity Date" below. If FleetBoston redeems any junior subordinated debentures
before their maturity, Fleet Capital will use the cash it receives on the
redemption of the junior subordinated debentures to redeem, on a pro rata basis,
preferred securities and common securities having an aggregate liquidation
amount equal to the aggregate principal amount of the junior subordinated
debentures redeemed.
FleetBoston can redeem some or all of the junior subordinated debentures
before their maturity at 100% of their principal amount plus accrued interest to
the date of redemption:
- on one or more occasions any time on or after ; and
- before , if specified changes in tax or regulatory law occur
(each of which is a "SPECIAL EVENT" and each of which is more fully
described beginning on page S-31), and within 90 days of the occurrence
of the special event.
Any redemption of the junior subordinated debentures may require approval
of the Federal Reserve Board.
WHEN CAN FLEETBOSTON SHORTEN THE MATURITY OF THE JUNIOR SUBORDINATED DEBENTURES?
If adverse changes in the tax law described on pages S-31 and S-34 occur,
FleetBoston will have the right, prior to the termination of Fleet Capital, to
shorten the maturity of the junior subordinated debentures. FleetBoston may only
shorten the maturity to the extent necessary so that the interest paid on the
junior subordinated debentures will continue to be tax deductible by
FleetBoston, and only if it obtains any required prior approval of the Federal
Reserve Board. The shortened term of the junior subordinated debentures may not
be less than 15 years from the date of their original issuance.
WHEN CAN FLEETBOSTON EXTEND THE MATURITY DATE OF THE JUNIOR SUBORDINATED
DEBENTURES?
FleetBoston can extend the maturity of the junior subordinated debentures
to a date no later than , so long as at the time the
election is made and at the time the extension commences:
- no event of default under the indenture has occurred and is continuing;
- Fleet Capital is not in arrears on payments of distributions on the
preferred securities and no deferred distributions on the preferred
securities are accumulated; and
S-5
- the junior subordinated debentures are and after the extension will be
rated at least BBB- by Standard & Poor's Ratings Services, at least Baa3
by Moody's Investors Service, Inc. or at least the equivalent by any
other nationally recognized statistical rating organization.
WHAT IS FLEETBOSTON'S GUARANTEE OF THE PREFERRED SECURITIES?
FleetBoston will fully and unconditionally guarantee the preferred
securities based on:
- its obligations under the guarantee;
- its obligations under the declaration of trust which governs the terms of
the preferred securities (see page S-18); and
- its obligations under the indenture which governs the terms of the junior
subordinated debentures (see page S-28).
If FleetBoston does not make a payment on the junior subordinated
debentures, Fleet Capital will not have sufficient funds to make payments on the
preferred securities. The guarantee does not cover payments when Fleet Capital
does not have sufficient funds to make payments on the preferred securities.
FleetBoston's obligations under the guarantee are subordinate to its obligations
to make payments on all of its other liabilities except its obligations under
similar guarantees.
WHEN COULD THE JUNIOR SUBORDINATED DEBENTURES BE DISTRIBUTED TO YOU?
FleetBoston has the right to terminate Fleet Capital at any time. If
FleetBoston decides to exercise its right to terminate Fleet Capital, Fleet
Capital will redeem the preferred securities by distributing the junior
subordinated debentures to holders of the preferred securities and the common
securities on a pro rata basis.
Any distribution of the junior subordinated debentures may require approval
of the Federal Reserve Board.
WILL THE PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE?
Fleet Capital will apply to have the preferred securities listed on the
NYSE under the symbol "FBF PrM." If approved for listing, trading is expected to
commence within 30 days after the preferred securities are first issued. You
should be aware that the listing of the preferred securities will not
necessarily assure that a liquid trading market will be available for the
preferred securities. If Fleet Capital distributes the junior subordinated
debentures, FleetBoston will use its best efforts to list the junior
subordinated debentures on the NYSE or any other exchange or other organization
on which the preferred securities are then listed.
WHAT HAPPENS IF FLEET CAPITAL IS TERMINATED AND THE JUNIOR SUBORDINATED
DEBENTURES ARE NOT DISTRIBUTED?
Fleet Capital may also terminate in circumstances where the junior
subordinated debentures will not be distributed. In those situations, Fleet
Capital will pay the liquidation amount of $25 for each preferred security, plus
unpaid distributions to the date the payment is made. Fleet Capital will be able
to make this distribution of cash only if the junior subordinated debentures are
redeemed by FleetBoston.
IN WHAT FORM WILL THE PREFERRED SECURITIES BE ISSUED?
The preferred securities will be represented by one or more global
certificates that will be deposited with and registered in the name of The
Depository Trust Company, New York, New York, "DTC," or its nominee. This means
that you will not receive a certificate for your preferred securities. Fleet
Capital expects that the preferred securities will be ready for delivery through
DTC on or about March , 2002.
S-6
RISK FACTORS
Your investment in the preferred securities will involve some risks. You
should carefully consider the following discussion of risks, and the other
information in this prospectus supplement and the accompanying prospectus,
before deciding whether an investment in the preferred securities is suitable
for you.
FLEETBOSTON'S OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED
DEBENTURES ARE SUBORDINATED
FleetBoston's obligations under the guarantee are unsecured and will rank
in priority of payment:
- junior to all of FleetBoston's other liabilities, except those
liabilities made equal or junior to the guarantee by their terms;
- equal with all of FleetBoston's senior most preferred and preference
stock now or in the future issued by it, and with any guarantee now or in
the future issued by it in respect of any preferred or preference stock
of any of its affiliates, including FleetBoston's guarantee of the
outstanding preferred or capital securities of Fleet Capital Trust I,
Fleet Capital Trust II, Fleet Capital Trust III, Fleet Capital Trust IV,
Fleet Capital Trust V, Fleet Capital Trust VI, Fleet Capital Trust VII,
BankBoston Capital Trust I, BankBoston Capital Trust II, BankBoston
Capital Trust III, BankBoston Capital Trust IV and Summit Capital Trust
I; and
- senior to FleetBoston's common stock.
This means that FleetBoston cannot make any payments on the guarantee if it
defaults on a payment of any of its other liabilities, except those liabilities
made equal or junior to the guarantee by their terms. In the event of the
bankruptcy, liquidation or dissolution of FleetBoston, its assets would be
available to pay obligations under the guarantee only after all payments had
been made on its other liabilities, except those liabilities made equal or
junior to the guarantee by their terms.
FleetBoston's obligations under the junior subordinated debentures are
unsecured and will rank junior in priority of payment to FleetBoston's "SENIOR
INDEBTEDNESS" and "OTHER FINANCIAL OBLIGATIONS" (see pages S-29 and S-30 for
definitions of these terms). FleetBoston cannot make any payments of principal,
including redemption payments, or interest on the junior subordinated debentures
if it defaults on a payment on its senior indebtedness. In the event of the
bankruptcy, liquidation or dissolution of FleetBoston, its assets would be
available to pay obligations under the junior subordinated debentures only after
all payments had been made on its senior indebtedness and other financial
obligations. As of December 31, 2001, senior indebtedness and other financial
obligations of FleetBoston aggregated approximately $11.1 billion (holding
company only). In addition, because FleetBoston is a financial holding company,
the junior subordinated debentures are effectively subordinated to all existing
and future liabilities of FleetBoston's subsidiaries, including depositors.
The preferred securities, the guarantee and the junior subordinated
debentures do not limit the ability of FleetBoston and its subsidiaries to incur
additional indebtedness, including indebtedness that ranks senior in priority of
payment to the junior subordinated debentures and the guarantee.
For more information please refer to "Description of the Junior
Subordinated Debentures -- Subordination" beginning on page S-30 and
"Description of the Preferred Securities Guarantees" beginning on page 16 of the
accompanying prospectus.
GUARANTEE ONLY COVERS PAYMENTS IF FLEET CAPITAL HAS CASH AVAILABLE
The ability of Fleet Capital to pay scheduled distributions on the
preferred securities, the redemption price of the preferred securities and the
liquidation amount of each preferred security is solely dependent upon
FleetBoston making the related payments on the junior subordinated debentures
when due.
S-7
If FleetBoston defaults on its obligation to pay principal or interest on
the junior subordinated debentures, Fleet Capital will not have sufficient funds
to pay distributions, the redemption price or the liquidation amount of each
preferred security. In those circumstances, you will not be able to rely upon
the guarantee for payment of these amounts.
Instead, you:
- may directly sue FleetBoston or seek other remedies to collect your pro
rata share of payments owed; or
- rely on the institutional trustee to enforce Fleet Capital's rights under
the junior subordinated debentures.
FLEETBOSTON'S ABILITY TO DEFER INTEREST PAYMENTS ON THE JUNIOR SUBORDINATED
DEBENTURES WILL CAUSE DISTRIBUTIONS ON THE PREFERRED SECURITIES TO CEASE, WILL
HAVE FEDERAL INCOME TAX CONSEQUENCES FOR YOU AND MAY AFFECT THE TRADING PRICE OF
THE PREFERRED SECURITIES
So long as FleetBoston is not in default in the payment of interest on the
junior subordinated debentures, FleetBoston can, on one or more occasions, defer
interest payments on the junior subordinated debentures for up to 20 consecutive
quarterly periods. If FleetBoston defers interest payments on the junior
subordinated debentures, Fleet Capital will defer distributions on the preferred
securities during any deferral period. However, distributions would still
accumulate and those deferred distributions will themselves accrue interest at
an annual rate of %, to the extent permitted by law.
If FleetBoston defers the payment of interest on the junior subordinated
debentures, you will be required to recognize interest income for United States
federal income tax purposes in respect of your pro rata share of the interest on
the junior subordinated debentures held by Fleet Capital before you receive any
cash distributions relating to those interest payments. In addition, if you sell
the preferred securities before the end of any deferral period or before the
record date relating to distributions which are paid, you will not receive the
cash distributions relating to any accrued and unpaid interest even though you
will be required to recognize that interest in income for United States federal
income tax purposes.
FleetBoston has no current intention of deferring interest payments on the
junior subordinated debentures. However, if FleetBoston exercises its right in
the future, the preferred securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the junior subordinated
debentures. If you sell the preferred securities during an interest deferral
period, you may not receive the same return on your investment as someone who
continues to hold the preferred securities. In addition, the existence of
FleetBoston's right to defer payments of interest on the junior subordinated
debentures may mean that the market price for the preferred securities, which
represent an undivided beneficial interest in the junior subordinated
debentures, may be more volatile than other securities that do not have these
rights.
See "United States Federal Income Taxation" beginning on page S-37 for more
information regarding the United States federal income tax consequences of
purchasing, holding and selling the preferred securities.
PREFERRED SECURITIES MAY BE REDEEMED BEFORE IF A SPECIAL EVENT
OCCURS
If a special event occurs and is continuing, FleetBoston has the right to
redeem all of the junior subordinated debentures. The term "special event" is
defined on page S-31. If such a redemption happens, Fleet Capital will use the
cash it receives on the redemption of the junior subordinated debentures to
redeem all of the preferred and common securities within 90 days of the event.
The redemption price would be $25 per preferred security plus unpaid
distributions to the date of redemption. The redemption of the preferred
securities would be a taxable event to you for United States federal income tax
purposes.
S-8
Please see "Description of the Preferred Securities -- Redemption
Procedures" on page S-21 and "Description of the Junior Subordinated
Debentures -- Optional Redemption" on page S-31 for more information.
FLEETBOSTON MAY SHORTEN THE MATURITY OF THE JUNIOR SUBORDINATED DEBENTURES,
WHICH WILL RESULT IN EARLY REDEMPTION OF THE PREFERRED SECURITIES; YOU MAY BE
TAXED ON THE PROCEEDS AND YOU MAY NOT BE ABLE TO REINVEST THE PROCEEDS AT THE
SAME OR A HIGHER RATE OF RETURN
Upon the occurrence and continuation of adverse tax events as explained in
"Description of the Junior Subordinated Debentures -- Option to Accelerate the
Maturity Date" on page S-34, FleetBoston may, instead of redeeming the junior
subordinated debentures, shorten the stated maturity of the junior subordinated
debentures to a date not less than 15 years from the date of original issuance,
subject to any required approval of the Federal Reserve Board. In that event,
the mandatory redemption date for the preferred securities will be
correspondingly shortened.
Under current United States federal income tax law, the redemption of the
preferred securities would be a taxable event to you.
In addition, you may not be able to reinvest the money you receive upon
redemption at a rate that is equal to or higher than the rate of return you
received on the preferred securities.
FLEETBOSTON MAY EXTEND THE MATURITY OF THE JUNIOR SUBORDINATED DEBENTURES, WHICH
WILL DELAY THE MANDATORY REDEMPTION DATE FOR THE PREFERRED SECURITIES BY UP TO
19 YEARS
FleetBoston can extend the maturity of the junior subordinated debentures
to a date no later than , so long as at the time the election is made
and at the time the extension commences:
- no event of default under the indenture has occurred and is continuing;
- Fleet Capital is not in arrears on payments of distributions on the
preferred securities and no deferred distributions on the preferred
securities are accumulated; and
- the junior subordinated debentures are and after the extension will be
rated at least BBB- by Standard & Poor's Ratings Services, at least Baa3
by Moody's Investors Service, Inc. or at least the equivalent by any
other nationally recognized statistical rating organization.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES MAY HAVE A POSSIBLE ADVERSE
EFFECT ON TRADING PRICE
FleetBoston has the right to terminate Fleet Capital at any time. If
FleetBoston decides to exercise its right to terminate Fleet Capital, Fleet
Capital will redeem the preferred and common securities by distributing the
junior subordinated debentures to holders of the preferred securities and common
securities on a pro rata basis. Any distribution of the junior subordinated
debentures may require approval of the Federal Reserve Board.
Under current United States federal income tax laws, a distribution of
junior subordinated debentures to you on the dissolution of Fleet Capital should
not be a taxable event to you. However, if Fleet Capital is characterized for
United States federal income tax purposes as an association taxable as a
corporation or there is a change in law at the time Fleet Capital is dissolved,
the distribution of junior subordinated debentures to you may be a taxable event
to you.
FleetBoston has no current intention of causing the termination of Fleet
Capital and the distribution of the junior subordinated debentures. FleetBoston
anticipates that it would consider exercising this right in the event that
expenses associated with maintaining Fleet Capital were substantially greater
than currently expected, such as if a special event occurred. FleetBoston cannot
predict the other circumstances under which this right would be exercised.
S-9
FleetBoston cannot predict the market prices for the junior subordinated
debentures that may be distributed. Accordingly, the junior subordinated
debentures that you receive on a distribution, or the preferred securities you
hold pending such a distribution, may trade at a discount to the price that you
paid to purchase the preferred securities.
Because you may receive junior subordinated debentures, you should make an
investment decision with regard to the junior subordinated debentures, in
addition to the preferred securities. You should carefully review all the
information regarding the junior subordinated debentures contained in this
prospectus supplement and the accompanying prospectus.
LIMITED VOTING RIGHTS
You will have limited voting rights. In particular, only FleetBoston can
elect or remove any of Fleet Capital's trustees.
See "Fleet Capital" on page S-11 and "Description of the Preferred
Securities -- Voting Rights" beginning on page 14 in the accompanying
prospectus.
TRADING PRICE OF THE PREFERRED SECURITIES MAY NOT REFLECT THE VALUE OF ACCRUED
BUT UNPAID INTEREST
If you use the accrual method of accounting for tax purposes and dispose of
your preferred securities between quarterly distributions, you will be required
to:
- include accrued but unpaid interest as ordinary income for United States
federal tax purposes; and
- add the accrued but unpaid income to your adjusted tax basis in the
preferred securities disposed of.
If you sell the preferred securities for less than your adjusted tax basis
in the preferred securities, you will recognize a capital loss which generally
may not be used to offset ordinary income for United States federal tax
purposes. See "United States Federal Income Taxation" beginning on page S-37.
THERE IS NOT AN ESTABLISHED TRADING MARKET FOR THE PREFERRED SECURITIES
Prior to this offering, there has been no public market for the preferred
securities. Fleet Capital will apply to have the preferred securities listed on
the New York Stock Exchange. Trading of the preferred securities on the New York
Stock Exchange is expected to commence within a 30-day period after the initial
delivery of the preferred securities. The underwriters have advised FleetBoston
and Fleet Capital that they intend to make a market in the preferred securities
prior to commencement of trading on the New York Stock Exchange, but are not
obligated to do so and may discontinue market making at any time without notice.
No assurance can be given as to the liquidity of the trading market for the
preferred securities.
NO PROTECTION IN HIGHLY LEVERAGED TRANSACTIONS
Under the indenture which governs the terms of the junior subordinated
debentures, you will not be protected from a highly leveraged transaction,
including a change of control of FleetBoston or other similar transaction. Such
a transaction may have the effect of increasing FleetBoston's liabilities that
are senior to the junior subordinated debentures.
S-10
FLEET CAPITAL
This section supplements, and to the extent inconsistent with, replaces,
the section entitled "The Trusts" in the accompanying prospectus.
Fleet Capital is a statutory business trust formed under Delaware law
pursuant to:
- a declaration of trust, dated as of March 16, 1998, as amended, executed
by FleetBoston, as sponsor, and the trustees of Fleet Capital, the "FLEET
CAPITAL TRUSTEES"; and
- the filing of a certificate of trust with the Secretary of State of the
State of Delaware on March 16, 1998, as amended.
The declaration will be amended and restated in its entirety, as so amended
and restated, the "DECLARATION," substantially in the form filed as an exhibit
to the registration statement which contains this prospectus supplement and the
accompanying prospectus. The declaration will be qualified as an indenture under
the Trust Indenture Act of 1939, as amended, the "TRUST INDENTURE ACT."
Fleet Capital exists for the exclusive purposes of:
(1) issuing the trust securities representing undivided beneficial
interests in the assets of Fleet Capital;
(2) investing the gross proceeds of the trust securities in the junior
subordinated debentures; and
(3) engaging only in other necessary or incidental activities.
Upon issuance of the preferred securities, the purchasers will own all of
the preferred securities. See "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company"
beginning on page S-25. FleetBoston will directly or indirectly acquire common
securities in an aggregate liquidation amount equal to at least 3% of the total
capital of Fleet Capital.
Pursuant to the declaration, the number of Fleet Capital trustees will
initially be five. FleetBoston, as the direct or indirect holder of all the
common securities, will have the right to appoint, remove or replace any Fleet
Capital trustee and to increase or decrease the number of Fleet Capital
trustees, unless an event of default under the indenture occurs. In that case,
the holders of a majority in liquidation amount of the preferred securities will
have the right to remove and appoint the property trustee and the Delaware
trustee. Three of the Fleet Capital trustees, the "REGULAR TRUSTEES," will be
persons who are employees or officers of, or who are affiliated with,
FleetBoston. The fourth trustee will be a financial institution that is
unaffiliated with FleetBoston which will serve as institutional trustee under
the declaration and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act, the "INSTITUTIONAL TRUSTEE." Initially,
The Bank of New York will be the institutional trustee until removed or replaced
by the holder of the common securities. For purposes of compliance with the
provisions of the Trust Indenture Act, The Bank of New York will act as trustee
under the guarantee, the "GUARANTEE TRUSTEE," and as trustee under the indenture
which governs the junior subordinated debentures, the "DEBT TRUSTEE." The fifth
trustee will be an entity that maintains its principal place of business in the
state of Delaware. Initially, The Bank of New York (Delaware), an affiliate of
the institutional trustee, will act as Delaware trustee.
The institutional trustee will hold title to the junior subordinated
debentures for the benefit of the holders of the trust securities and will have
the power to exercise all rights, powers and privileges under the indenture as
the holder of the junior subordinated debentures. In addition, the institutional
trustee will maintain exclusive control of a segregated non-interest bearing
bank account to hold all payments made in respect of the junior subordinated
debentures for the benefit of the holders of the trust securities. The
S-11
institutional trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the trust securities out
of funds from that account.
The guarantee trustee will hold the guarantee for the benefit of the
holders of the preferred securities.
FleetBoston will pay all fees and expenses related to Fleet Capital and the
offering of the trust securities. See "Description of the Junior Subordinated
Debentures -- Miscellaneous" beginning on page S-36.
S-12
FLEETBOSTON FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following summary sets forth unaudited selected consolidated financial
data for FleetBoston and its subsidiaries for each of the years in the five-year
period ended December 31, 2001. The following summary should be read in
conjunction with the financial information incorporated herein by reference to
other documents. See "Where You Can Find More Information" in the accompanying
prospectus. All data has been restated to reflect the Summit acquisition.
Certain amounts in prior periods have been reclassified to conform to
current-year presentation.
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
CONSOLIDATED SUMMARY OF OPERATIONS:
Interest income (fully taxable equivalent).......... $ 13,850 $ 16,472 $ 15,491 $ 14,601 $ 13,390
Interest expense.................................... 6,396 8,497 7,400 6,948 6,046
-------- -------- -------- -------- --------
Net interest income (fully taxable equivalent)...... 7,454 7,975 8,091 7,653 7,344
Provision for credit losses......................... 2,330(a) 1,295 1,061 916 581
-------- -------- -------- -------- --------
Net interest income after provision for credit
losses (fully taxable equivalent)................. 5,124 6,680 7,030 6,737 6,763
Noninterest income.................................. 5,340 9,461 7,366 5,625 4,508
Noninterest expense................................. 8,913 9,610 10,253 7,847 6,878
Net income.......................................... $ 931(b) $ 3,910(c) $ 2,476(d) $ 2,771(e) $ 2,606(f)
PER COMMON SHARE:
Basic earnings per share............................ $ .84(b) $ 3.58(c) $ 2.21(d) $ 2.48(e) $ 2.32(f)
Diluted earnings per share.......................... .83(b) 3.52(c) 2.16(d) 2.42(e) 2.27(f)
Weighted average basic shares outstanding (in
millions)......................................... 1,074.2 1,081.4 1,095.7 1,094.7 1,081.1
Weighted average diluted shares outstanding (in
millions)......................................... 1,083.7 1,098.7 1,121.5 1,119.7 1,105.0
Book value.......................................... $ 16.61 $ 17.31 $ 15.92 $ 14.78 $ 13.43
Cash dividends declared............................. 1.34 1.23 1.11 1.00 .92
RATIO OF EARNINGS TO FIXED CHARGES(G):
Excluding interest on deposits...................... 1.51x 2.58x 2.23x 2.65x 3.01x
Including interest on deposits...................... 1.23 1.75 1.54 1.63 1.70
CONSOLIDATED BALANCE SHEET -- AVERAGE BALANCES:
Total assets........................................ $208,882 $223,887 $223,232 $201,033 $180,769
Securities held to maturity......................... 577 5,907 7,820 6,636 6,853
Securities available for sale....................... 25,648 29,391 27,403 24,469 20,117
Loans and leases, net of unearned income............ 129,925 139,518 139,268 130,691 120,841
Due from brokers/dealers............................ 4,122 3,603 3,240 3,766 2,884
Interest bearing deposit liabilities................ 98,219 102,069 109,756 106,430 100,285
Short-term borrowings............................... 20,950 25,796 26,819 25,389 20,313
Due to brokers/dealers.............................. 3,854 4,829 4,150 4,503 3,463
Long-term debt(h)................................... 27,855 31,191 26,198 13,062 8,880
Stockholders' equity................................ 19,330 18,134 17,479 16,319 14,671
S-13
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
CONSOLIDATED RATIOS:
Net interest margin (fully taxable equivalent)...... 4.15% 4.17% 4.19% 4.35% 4.60%
Return on average assets............................ .45(b) 1.75(c) 1.11(d) 1.38(e) 1.44(f)
Return on average common stockholders' equity....... 4.77(b) 22.04(c) 14.45(d) 17.51(e) 18.74(f)
Average stockholders' equity to average assets...... 9.25 8.10 7.83 8.12 8.12
Tier 1 risk-based capital ratio..................... 7.37 8.08 7.15 7.56 8.15
Total risk-based capital ratio...................... 10.95 11.87 11.44 11.65 11.72
Period-end reserve for credit losses to period-end
loans and leases, net of unearned income.......... 2.83 2.01 1.97 1.98 1.95
Net charge-offs to average loans and leases, net of
unearned income................................... 1.07 .89 .74 .67 .59
Period-end nonperforming assets to related assets... 1.44 .84 .69 .62 .74
-------------------------
(a) Includes impact of charges related to Argentina ($725 million pre-tax, $434
million post-tax), the domestic economic downturn ($175 million pre-tax,
$105 million post-tax) and the transfer of problem credits to accelerated
disposition status ($150 million pre-tax, $89 million post-tax) recorded in
2001.
(b) Includes, in addition to the charges described in note (a), impact of
merger-related and restructuring charges ($1 billion pre-tax, $657 million
post-tax); write-downs taken against the carrying value of the principal
investing portfolio ($1.1 billion pre-tax, $679 million post-tax); charges
related to the estimated impact of Argentine government actions with respect
to FleetBoston's Argentine operations ($200 million pre-tax, $120 million
post-tax); write-downs taken against the carrying value of Argentine
government bonds ($175 million pre-tax, $105 million post-tax); and a loss
from the sale of the mortgage banking business ($428 million pre-tax, $285
million post-tax) recorded in 2001. Also includes impact of gains on branch
divestitures ($410 million pre-tax, $252 million post-tax) and the sale of
an investment in the NYCE Corporation ($146 million pre-tax, $91 million
post-tax) recorded in 2001.
(c) Includes impact of gains on branch divestitures ($843 million pre-tax, $420
million post-tax) and merger-related and restructuring charges ($249 million
pre-tax, $151 million post-tax) recorded in 2000.
(d) Includes impact of merger- and restructuring-related charges and other costs
($1.1 billion pre-tax, $777 million post-tax) recorded in 1999.
(e) Includes impact of merger- and restructuring-related charges and other costs
($220 million pre-tax, $135 million post-tax) recorded in 1998.
(f) Includes impact of merger- and restructuring-related charges ($83 million
pre-tax, $54 million post-tax) recorded in 1997.
(g) For the purpose of computing the ratio of earnings to fixed charges,
"EARNINGS" consist of income before income taxes plus fixed charges,
excluding capitalized interest. "FIXED CHARGES" consist of interest on
short-term debt and long-term debt, including interest related to
capitalized leases and capitalized interest, and one-third of rent expense,
which approximates the interest component of such expense. In addition,
where indicated, fixed charges include interest on deposits.
(h) Amounts include guaranteed preferred beneficial interests in FleetBoston's
junior subordinated debentures.
S-14
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of
FleetBoston and its subsidiaries at December 31, 2001, and FleetBoston's
capitalization as of that date as adjusted to reflect (1) the issuance on
February 19, 2002 of $505 million of senior notes and (2) the sale of the
preferred securities offered hereby. The table should be read in conjunction
with FleetBoston's consolidated financial statements and notes thereto included
in the documents incorporated by reference herein. See "Where You Can Find More
Information" in the accompanying prospectus. The information in the following
table assumes that the underwriters do not exercise their over-allotment option.
AT DECEMBER 31, 2001
----------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN MILLIONS)
Senior and subordinated debt................................ $22,726 $23,231
Company-obligated mandatorily redeemable preferred
securities of Fleet Capital Trust I(1).................... 84 84
Company-obligated mandatorily redeemable capital securities
of Fleet Capital Trust II(2).............................. 250 250
Company-obligated mandatorily redeemable preferred
securities of Fleet Capital Trust III(3).................. 120 120
Company-obligated mandatorily redeemable preferred
securities of Fleet Capital Trust IV(4)................... 150 150
Company-obligated mandatorily redeemable capital securities
of Fleet Capital Trust V(5)............................... 250 250
Company-obligated mandatorily redeemable preferred
securities of Fleet Capital Trust VI(6)................... 300 300
Company-obligated mandatorily redeemable capital securities
of Fleet Capital Trust VII(7)............................. 500 500
Company-obligated mandatorily redeemable preferred
securities of Fleet Capital Trust VIII(8)................. --
Company-obligated mandatorily redeemable capital securities
of BankBoston Capital Trust I(9).......................... 250 250
Company-obligated mandatorily redeemable capital securities
of BankBoston Capital Trust II(10)........................ 250 250
Company-obligated mandatorily redeemable capital securities
of BankBoston Capital Trust III(11)....................... 250 250
Company-obligated mandatorily redeemable capital securities
of BankBoston Capital Trust IV(12)........................ 250 250
Company-obligated mandatorily redeemable capital securities
of Summit Capital Trust I(13)............................. 150 150
------- -------
Total long-term debt........................................ 25,530
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value............................ 271 271
Common stock, $.01 par value................................ 11 11
Common surplus.............................................. 4,055 4,055
Retained earnings........................................... 14,078 14,078
Accumulated other comprehensive income...................... 774 774
Treasury stock.............................................. (1,581) (1,581)
------- -------
Total stockholders' equity.................................. 17,608 17,608
------- -------
Total long-term debt and stockholders' equity............... $43,138 $
======= =======
-------------------------
(1) Issued on February 4, 1997. The sole assets of Fleet Capital Trust I are
8.00% Junior Subordinated Deferrable Interest Debentures due 2027 with a
principal amount of approximately $86.3 million. Those debentures mature on
February 15, 2027, which may be (i) shortened to a date not earlier than
April 15, 2001 or (ii) extended to a date not later than February 15, 2046.
FleetBoston owns all
S-15
of the common securities of this trust. Upon redemption of the debentures,
the preferred securities are mandatorily redeemable.
(2) Issued on December 11, 1996. The sole assets of Fleet Capital Trust II are
7.92% Junior Subordinated Deferrable Interest Debentures due 2026 with a
principal amount of approximately $257.7 million. Those debentures mature
on December 11, 2026. FleetBoston owns all of the common securities of this
trust. Upon redemption of the debentures, the capital securities are
mandatorily redeemable.
(3) Issued on January 29, 1998. The sole assets of Fleet Capital Trust III are
7.05% Junior Subordinated Deferrable Interest Debentures due 2028 with a
principal amount of approximately $123.7 million. Those debentures mature
on March 31, 2028. FleetBoston owns all of the common securities of this
trust. Upon redemption of the debentures, the preferred securities are
mandatorily redeemable.
(4) Issued on April 28, 1998. The sole assets of Fleet Capital Trust IV are
7.17% Junior Subordinated Deferrable Interest Debentures with a principal
amount of approximately $154.6 million. Those debentures mature on March
31, 2028. FleetBoston owns all of the common securities of this trust. Upon
redemption of the debentures, the preferred securities are mandatorily
redeemable.
(5) Issued on December 18, 1998. The sole assets of Fleet Capital Trust V are
Floating Rate Junior Subordinated Deferrable Interest Debentures due 2028
with a principal amount of approximately $257.7 million. Those debentures
mature on December 18, 2028. FleetBoston owns all of the common securities
of this trust. Upon redemption of the debentures, the capital securities
are mandatorily redeemable.
(6) Issued on June 30, 2000. The sole assets of Fleet Capital Trust VI are
8.80% Junior Subordinated Deferrable Interest Debentures due 2030 with a
principal amount of approximately $309.3 million. Those debentures mature
on June 30, 2030. FleetBoston owns all of the common securities of this
trust. Upon redemption of the debentures, the preferred securities are
mandatorily redeemable.
(7) Issued on September 17, 2001. The sole assets of Fleet Capital Trust VII
are 7.20% Junior Subordinated Deferrable Interest Debentures due 2031 with
a principal amount of approximately $515.5 million. Those debentures mature
on December 15, 2031, unless extended to a date not later than December 15,
2050, or redeemed earlier. FleetBoston owns all of the common securities of
this trust. Upon redemption of the debentures, the capital securities are
mandatorily redeemable.
(8) As described in this prospectus supplement, the sole assets of Fleet
Capital Trust VIII will be the junior subordinated debentures with a
principal amount of approximately $ million. The junior subordinated
debentures will bear interest at an annual rate equal to % on the
liquidation amount of $25 per preferred security and will mature on
, unless extended to a date not later than , or
redeemed earlier. FleetBoston owns all of the common securities of Fleet
Capital. Upon redemption of the junior subordinated debentures, the
preferred securities will be mandatorily redeemable.
(9) Issued on November 26, 1996. The sole assets of BankBoston Capital Trust I
are 8.25% Series A Junior Subordinated Deferrable Interest Debentures due
December 15, 2026 with a principal amount of approximately $257.7 million.
FleetBoston owns all of the common securities of this trust. Upon
redemption of the debentures, the capital securities are mandatorily
redeemable.
(10) Issued on December 10, 1996. The sole assets of BankBoston Capital Trust II
are 7.75% Series A Junior Subordinated Deferrable Interest Debentures due
December 15, 2026 with a principal amount of approximately $257.7 million.
FleetBoston owns all of the common securities of this trust. Upon
redemption of the debentures, the capital securities are mandatorily
redeemable.
(11) Issued on June 4, 1997. The sole assets of BankBoston Capital Trust III are
Floating Rate Junior Subordinated Deferrable Interest Debentures due June
15, 2027 with a principal amount of
S-16
approximately $257.7 million. FleetBoston owns all of the common securities
of this trust. Upon redemption of the debentures, the capital securities
are mandatorily redeemable.
(12) Issued on June 8, 1998. The sole assets of BankBoston Capital Trust IV are
Floating Rate Junior Subordinated Deferrable Interest Debentures due June
8, 2028 with a principal amount of approximately $257.7 million.
FleetBoston owns all of the common securities of this trust. Upon
redemption of the debentures, the capital securities are mandatorily
redeemable.
(13) Issued on March 20, 1997. The sole assets of Summit Capital Trust I are
8.40% Junior Subordinated Deferrable Interest Debentures due March 15, 2027
with a principal amount of approximately $154.6 million. FleetBoston owns
all of the common securities of this trust. Upon redemption of the
debentures, the capital securities are mandatorily redeemable.
S-17
ACCOUNTING TREATMENT
The financial statements of Fleet Capital will be consolidated into
FleetBoston's consolidated financial statements, with the preferred securities
classified as a component of long-term debt of FleetBoston. The financial
statement footnotes of FleetBoston will include appropriate disclosures about
the preferred securities, the guarantee and the junior subordinated debentures.
FleetBoston will record distributions that Fleet Capital pays on the preferred
securities as interest expense in FleetBoston's consolidated statement of
income.
DESCRIPTION OF THE PREFERRED SECURITIES
The preferred securities will be issued pursuant to the terms of an amended
and restated declaration of trust. The declaration has been qualified as an
indenture under the Trust Indenture Act. The institutional trustee, The Bank of
New York, will act as trustee for the preferred securities under the declaration
for purposes of compliance with the provisions of the Trust Indenture Act. The
terms of the preferred securities will include those stated in the declaration
and those made part of the declaration by the Trust Indenture Act.
Set forth below is a summary of the material terms and provisions of the
preferred securities. This summary supplements, and to the extent inconsistent,
replaces, the description set forth under the caption "Description of the
Preferred Securities" in the accompanying prospectus. This summary, which
describes the material provisions of the preferred securities, is not intended
to be complete and is qualified by the declaration, the form of which is filed
as an exhibit to the registration statement which contains this prospectus
supplement, by the Delaware Business Trust Act and by the Trust Indenture Act.
GENERAL
The declaration authorizes the regular trustees to issue the trust
securities on behalf of Fleet Capital. The trust securities represent undivided
beneficial interests in the assets of Fleet Capital. All of the common
securities will be owned, directly or indirectly, by FleetBoston. The common
securities rank equally, and payments will be made on a pro rata basis, with the
preferred securities. However, if a "DECLARATION EVENT OF DEFAULT" as defined
under "-- Declaration Events of Default" on page S-23, occurs and is continuing,
the rights of the holders of the common securities to receive payments will be
subordinated to the rights of the holders of the preferred securities.
The declaration does not permit Fleet Capital to issue any securities other
than the trust securities or to incur any indebtedness. Under the declaration,
the institutional trustee will hold the junior subordinated debentures purchased
by Fleet Capital for the benefit of the holders of the trust securities.
Payments on the preferred securities are guaranteed by FleetBoston to the
extent described under "Description of the Preferred Securities Guarantees"
beginning on page 16 in the accompanying prospectus. The guarantee will be held
by The Bank of New York, as guarantee trustee, for the benefit of the holders of
the preferred securities. The guarantee does not cover payment of distributions
or payments upon redemption of the preferred securities or liquidation of Fleet
Capital when Fleet Capital does not have sufficient available funds to make
those distributions or payments. In that event, the remedy of a holder of
preferred securities is to vote to direct the institutional trustee to enforce
the institutional trustee's rights under the junior subordinated debentures or,
if there is a default in the payment of distributions, including when Fleet
Capital does not have sufficient available funds to pay those distributions, the
holder may take "DIRECT ACTION," as defined in the accompanying prospectus on
page 15. See "-- Declaration Events of Default" and "-- Voting Rights" below and
"Description of the Preferred Securities -- Voting Rights" in the accompanying
prospectus beginning on page 14.
DISTRIBUTIONS
Distributions on the preferred securities will be fixed at an annual rate
equal to % on the liquidation amount of $25 per preferred security.
Distributions which are unpaid for more than one quarter will accumulate
additional distributions at that same rate, compounded quarterly. The term
"distribution"
S-18
as used in this prospectus supplement and the accompanying prospectus includes
any interest payable on unpaid distributions unless otherwise stated.
The amount of distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. The amount of distributions
payable for any period shorter than a full quarterly period will be computed on
the basis of the actual number of days elapsed per 30-day month. If any
distribution payment date is not a business day, then the distribution will be
made on the next succeeding day that is a business day and without any interest
or other payment in respect of the delay. However, if the next business day is
in the next calendar year, payment of distributions will be made on the
preceding business day.
Distributions on the preferred securities:
(1) will be cumulative;
(2) will accrue from ; and
(3) except as otherwise described below, will be payable quarterly in
arrears on , , and of
each year, commencing .
So long as FleetBoston is not in default in the payment of interest on the
junior subordinated debentures, FleetBoston may defer payments of interest on
the junior subordinated debentures by extending the interest payment period from
time to time on the junior subordinated debentures, an "EXTENSION PERIOD." If
FleetBoston exercises this extension option, quarterly distributions on the
preferred securities would also be deferred during any such extension period.
Because interest would continue to accrue on the junior subordinated debentures,
any deferred distributions would also continue to accrue with interest at an
annual rate equal to % compounded quarterly. This right to extend the
interest payment period for the junior subordinated debentures is limited to a
period not exceeding 20 consecutive quarters, and may not extend beyond
(or such date not later than if FleetBoston elects to
extend this date), the "STATED MATURITY" of the junior subordinated debentures.
Upon the termination of any extension period and the payment of all amounts then
due, FleetBoston may commence a new extension period, subject to the above
requirements. See "Description of the Junior Subordinated
Debentures -- Interest" beginning on page S-31 and "-- Option to Extend Interest
Payment Period" beginning on page S-32.
If FleetBoston exercises this deferral right, then during any extension
period:
(1) FleetBoston will not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire, or make a
liquidation payment relating to, any of its capital stock other than:
- repurchases, redemptions or other acquisitions of shares of capital
stock of FleetBoston in connection with any employee benefit plans
or any other contractual obligation of FleetBoston, other than a
contractual obligation ranking equally with or junior to the junior
subordinated debentures;
- as a result of an exchange or conversion of any class or series of
FleetBoston's capital stock for any other class or series of
FleetBoston's capital stock; or
- the purchase of fractional interests in shares of FleetBoston's
capital stock pursuant to the conversion or exchange provisions of
that FleetBoston capital stock or the security being converted or
exchanged;
(2) FleetBoston will not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
issued by FleetBoston which rank equally with or junior to the junior
subordinated debentures; and
(3) FleetBoston will not make any guarantee payments with respect to the
foregoing, other than pursuant to the guarantee.
S-19
If distributions are deferred, the deferred distributions and accumulated
but unpaid distributions will be paid to holders of the preferred securities as
they appear on the books and records of Fleet Capital on the record date next
following the termination of that extension period.
Distributions on the preferred securities must be paid on the dates payable
to the extent that Fleet Capital has funds available for the payment of those
distributions. Fleet Capital's funds available for distribution to the holders
of the preferred securities will be limited to payments received from
FleetBoston on the junior subordinated debentures. See "Description of the
Junior Subordinated Debentures" beginning on page S-28. The payment of
distributions out of moneys held by Fleet Capital is guaranteed by FleetBoston
to the extent set forth under "Description of the Preferred Securities
Guarantees" beginning on page 16 in the accompanying prospectus.
PAYMENT AND RECORD DATES
Fleet Capital will pay distributions to the holders of the preferred
securities as they appear on the books and records of Fleet Capital on the
relevant record dates. As long as the preferred securities are in book-entry
form, the record date will be one business day prior to the relevant payment
date. A "BUSINESS DAY" is any day other than Saturday, Sunday or any other day
on which banking institutions in New York City (in the State of New York) are
permitted or required by any applicable law to close. If the preferred
securities are not in book-entry form, the record date will be the first day of
the month in which the relevant payment date occurs. The record dates and
payment dates for the preferred securities are the same as the record dates and
payment dates for the junior subordinated debentures.
If Fleet Capital does not pay a distribution because FleetBoston fails to
make the corresponding interest payment on the junior subordinated debentures,
that defaulted distribution will be payable to the person in whose name the
preferred security is registered on the special record date established by the
regular trustees. This record date will correspond to the special record date or
other specified date determined in accordance with the indenture. This means
that the defaulted distribution may not be paid to the person in whose name the
preferred security is registered on the original record date. However,
distributions will not be considered payable on any distribution payment date
falling within an extension period unless FleetBoston has elected to make a full
or partial payment of interest accrued on the junior subordinated debentures on
that distribution payment date.
Fleet Capital will pay distributions on the preferred securities through
the institutional trustee, who will hold amounts received on the junior
subordinated debentures for the benefit of the holders of the trust securities.
Subject to any applicable laws and regulations and the provisions of the
declaration, each payment of distributions will be made as described under
"--Book-Entry Only Issuance -- The Depository Trust Company" beginning on page
S-25.
REDEMPTION
The junior subordinated debentures will be redeemable prior to the stated
maturity at the option of FleetBoston at a redemption price equal to 100% of the
principal amount, plus accrued interest to the date of redemption:
(1) in whole or in part, from time to time, on or after ; or
(2) at any time prior to , in whole but not in part, upon
the occurrence and continuation of a special event as defined under
"Description of the Junior Subordinated Debentures -- Optional
Redemption" on page S-31.
Fleet Capital will use the proceeds from any repayment or redemption of the
junior subordinated debentures to simultaneously redeem, on a pro rata basis,
trust securities having an aggregate liquidation amount equal to the aggregate
principal amount of the junior subordinated debentures so repaid or redeemed,
the "REDEMPTION PRICE." Fleet Capital must give holders of trust securities not
less than 30 nor more than 60 days' notice of any early redemption. See
"Description of the Junior Subordinated Debentures -- Optional Redemption" on
page S-31. If fewer than all of the outstanding preferred
S-20
securities are to be redeemed, Fleet Capital will redeem the preferred
securities pro rata as described under "--Book-Entry Only Issuance -- The
Depository Trust Company" beginning on page S-25. Any early redemption may
require prior approval of the Federal Reserve Board if approval is then required
under applicable law, rules, guidelines or policies.
REDEMPTION PROCEDURES
Fleet Capital may not redeem fewer than all of the outstanding preferred
securities unless it has paid all accrued and unpaid distributions on all
preferred securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If Fleet Capital gives a notice of redemption of the preferred securities
and FleetBoston has paid to Fleet Capital a sufficient amount of cash in
connection with the related redemption or maturity of the junior subordinated
debentures, then immediately prior to the close of business on the redemption
date:
(1) distributions will cease to accrue on the preferred securities called
for redemption;
(2) the preferred securities called for redemption will no longer be deemed
to be outstanding; and
(3) all rights of holders of the preferred securities called for redemption
will cease, except the right of the holders of those preferred
securities to receive the redemption price, but without interest.
Any notice of redemption will be irrevocable. If any date fixed for
redemption of preferred securities is not a business day, then payment of the
redemption price will be made on the next succeeding day that is a business day
(and without any interest or other payment because of the delay) except that, if
the business day falls in the next calendar year, the payment will be made on
the immediately preceding business day.
If FleetBoston fails to repay junior subordinated debentures on maturity or
on the date fixed for a redemption or if payment of the redemption price is
improperly withheld or refused and not paid by Fleet Capital or by FleetBoston
under its guarantee, distributions on those preferred securities will continue
to accrue to the date of payment. In that case, the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
redemption price.
Fleet Capital will not be required to:
(1) issue, or register the transfer or exchange of, any trust securities
during a period beginning at the opening of business 15 days before the
mailing of a notice of redemption of trust securities and ending at the
close of business on the day of the mailing of the relevant notice of
redemption; and
(2) register the transfer or exchange of any trust securities so selected
for redemption, in whole or in part, except the unredeemed portion of
any trust securities being redeemed in part.
Subject to the foregoing and applicable law, including, without limitation,
United States federal securities laws and the regulations of the Federal Reserve
Board, FleetBoston or its subsidiaries may at any time, and from time to time,
purchase outstanding preferred securities by tender, in the open market or by
private agreement.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
FleetBoston will have the right at any time to liquidate Fleet Capital and
cause the junior subordinated debentures to be distributed to the holders of the
trust securities. This may require the prior approval of the Federal Reserve
Board if approval is then required under applicable law, rules, guidelines or
policies. If the junior subordinated debentures are distributed to the holders
of the preferred securities, FleetBoston will use its best efforts to cause the
junior subordinated debentures to be listed on any exchange as the preferred
securities are then listed.
S-21
On the date for any distribution of junior subordinated debentures upon
dissolution of Fleet Capital:
(1) the trust securities will no longer be deemed to be outstanding;
(2) The Depository Trust Company, or its nominee, as the record holder of
the preferred securities, will receive a registered global certificate
or certificates representing the junior subordinated debentures
registered in its name; and
(3) any certificates representing trust securities not held by the
depositary or its nominee, until those certificates are presented to
FleetBoston or its agent for transfer or reissuance, will be deemed to
represent junior subordinated debentures having:
- an aggregate principal amount equal to the aggregate stated
liquidation amount of the trust securities;
- an interest rate identical to the distribution rate of the trust
securities; and
- accrued and unpaid interest equal to accrued and unpaid
distributions on the trust securities.
FleetBoston and Fleet Capital cannot assure you as to the market prices for
either the preferred securities or the junior subordinated debentures that may
be distributed in exchange for the preferred securities if Fleet Capital were to
dissolve and liquidate. Accordingly, the preferred securities or the junior
subordinated debentures may trade at a discount to the price paid to purchase
the preferred securities offered by this prospectus supplement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
If Fleet Capital liquidates, dissolves, winds-up or terminates for any of
the reasons specified below other than clause (8), each a "LIQUIDATION," holders
of the preferred securities will be entitled to receive out of the assets of
Fleet Capital, after satisfaction of liabilities to creditors, distributions in
an amount equal to the aggregate of the stated liquidation amount of $25 per
preferred security, plus accumulated and unpaid distributions to the date of
payment, the "LIQUIDATION DISTRIBUTION." These distributions will not be paid
if, in connection with a liquidation, junior subordinated debentures with terms
that match the preferred securities have been distributed on a pro rata basis to
the holders of the preferred securities.
If, upon any liquidation, the liquidation distribution can be paid only in
part because Fleet Capital does not have sufficient assets to pay in full the
entire liquidation distribution, then the amounts payable directly by Fleet
Capital on the preferred securities will be paid on a pro rata basis.
The holders of the common securities will be entitled to receive
distributions upon any liquidation pro rata with the holders of the preferred
securities. However, if a declaration event of default has occurred and is
continuing, the preferred securities will have a preference over the common
securities with regard to those distributions.
Pursuant to the declaration, Fleet Capital will terminate:
(1) on March 16, 2053, the expiration of the term of Fleet Capital;
(2) upon the bankruptcy of FleetBoston or Fleet Capital;
(3) upon the filing of a certificate of dissolution or its equivalent with
respect to FleetBoston;
(4) upon the filing of a certificate of cancellation for Fleet Capital
after obtaining the consent of the holders of at least a majority in
liquidation amount of the trust securities, voting together as a single
class to file the certificate of cancellation;
(5) upon the revocation of FleetBoston's charter and the expiration of 90
days after the date of revocation without the charter being reinstated;
(6) upon the distribution of junior subordinated debentures to the holders
of the trust securities;
(7) upon the entry of a decree of a judicial dissolution of FleetBoston or
Fleet Capital; or
(8) upon the redemption of all the trust securities.
S-22
DECLARATION EVENTS OF DEFAULT
An "INDENTURE EVENT OF DEFAULT" is an event of default under the indenture
and also constitutes a "DECLARATION EVENT OF DEFAULT," which is an event of
default under the declaration relating to the trust securities. See "Description
of the Junior Subordinated Debentures -- Events of Default, Waiver and Notice"
in the accompanying prospectus beginning on page 11 for a description of
indenture events of default.
Under the declaration, the holder of the common securities will be deemed
to have waived any declaration event of default relating to the common
securities until all declaration events of default relating to the preferred
securities have been cured, waived or otherwise eliminated. Until all
declaration events of default relating to the preferred securities have been
cured, waived or otherwise eliminated, the institutional trustee will be acting
solely on behalf of the holders of the preferred securities. Only the holders of
the preferred securities will have the right to direct the institutional trustee
with respect to certain matters under the declaration, and therefore the
indenture. If a declaration event of default relating to the preferred
securities is waived by the holders of the preferred securities, the holders of
the common securities have agreed that the waiver also constitutes a waiver of
the declaration event of default relating to the common securities for all
purposes under the declaration without any further act, vote or consent of the
holders of the common securities.
If the institutional trustee fails to enforce its rights under the junior
subordinated debentures after a holder of preferred securities has made a
written request, the holder of preferred securities may directly institute a
legal proceeding against FleetBoston to enforce these rights without first suing
the institutional trustee or any other person or entity. If a declaration event
of default has occurred and is continuing and the event is attributable to the
failure of FleetBoston to pay interest or principal on the junior subordinated
debentures on the date the interest or principal is otherwise payable, or in the
case of redemption, the redemption date, then a holder of preferred securities
may also bring a direct action. This means that a holder may directly sue
FleetBoston to enforce payment of the principal or interest on the junior
subordinated debentures having a principal amount equal to the aggregate
liquidation amount of the preferred securities of the holder on or after the
respective due date specified in the junior subordinated debentures. The holder
need not first (1) direct the institutional trustee to enforce the terms of the
junior subordinated debentures or (2) sue FleetBoston to enforce the
institutional trustee's rights under the junior subordinated debentures.
In connection with the direct action, FleetBoston will be subrogated to the
rights of the holder of preferred securities under the declaration to the extent
of any payment made by FleetBoston to that holder of preferred securities in the
direct action. This means that FleetBoston will be entitled to payment of
amounts that a holder of preferred securities receives in respect of an unpaid
distribution that resulted in the bringing of a direct action to the extent that
the holder receives or has already received full payment relating to the unpaid
distribution from Fleet Capital. The holders of preferred securities will not be
able to exercise directly any other remedy available to the holders of the
junior subordinated debentures.
Upon the occurrence of an indenture event of default, the institutional
trustee as the sole holder of the junior subordinated debentures will have the
right under the indenture to declare the principal of and interest on the junior
subordinated debentures to be immediately due and payable. FleetBoston and Fleet
Capital are each required to file annually with the institutional trustee an
officer's certificate as to its compliance with all conditions and covenants
under the declaration.
VOTING RIGHTS
Except as described in the accompanying prospectus under "Description of
the Preferred Securities -- Voting Rights" beginning on page 14, under the
Delaware Business Trust Act, under the Trust Indenture Act and under
"Description of the Preferred Securities Guarantees -- Modification of the
Preferred Securities Guarantees; Assignment" on page 18 in the accompanying
prospectus, and as otherwise required by law and the declaration, the holders of
the preferred securities will have no voting rights.
S-23
MODIFICATION OF THE DECLARATION
The declaration may be modified and amended if approved by the regular
trustees, and in certain circumstances, the institutional trustee and the
Delaware Trustee. However, if any proposed amendment provides for, or the
regular trustees otherwise propose to effect:
(1) any action that would adversely affect the powers, preferences or
special rights of the trust securities, whether by way of amendment to
the declaration or otherwise; or
(2) the dissolution, winding-up or termination of Fleet Capital other than
pursuant to the terms of the declaration,
then the holders of the trust securities voting together as a single class will
be entitled to vote on the amendment or proposal. That amendment or proposal
will not be effective except with the approval of at least a majority in
liquidation amount of the trust securities affected thereby. If, however, any
amendment or proposal referred to in clause (1) above would adversely affect
only the preferred securities or the common securities, then only holders of the
affected class will be entitled to vote on the amendment or proposal. The
amendment or proposal will not be effective except with the approval of a
majority in liquidation amount of that class of trust securities.
Despite the foregoing, no amendment or modification may be made to the
declaration if the amendment or modification would:
(1) cause Fleet Capital to be classified for United States federal income
taxation purposes as other than a grantor trust;
(2) reduce or otherwise adversely affect the powers of the institutional
trustee; or
(3) cause Fleet Capital to be deemed an "investment company" which is
required to be registered under the Investment Company Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
Fleet Capital may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. Fleet Capital may, with the consent of the regular trustees and
without the consent of the holders of the trust securities, the institutional
trustee or the Delaware trustee, consolidate, amalgamate, merge with or into, or
be replaced by a trust organized as such under the laws of any State of the
United States; provided, that:
(1) if Fleet Capital is not the survivor, the successor entity either:
(a) expressly assumes all of the obligations of Fleet Capital under
the trust securities; or
(b) substitutes for the trust securities other securities having
substantially the same terms as the trust securities, so long as
the successor securities rank the same as the trust securities
rank regarding distributions and payments upon liquidation,
redemption and otherwise;
(2) FleetBoston expressly acknowledges a trustee of the successor entity
possessing the same powers and duties as the institutional trustee, in
its capacity as the holder of the junior subordinated debentures;
(3) the preferred securities or any successor securities are listed, or any
successor securities will be listed upon notification of issuance, on
any national securities exchange or with another organization on which
the preferred securities are then listed or quoted;
(4) the merger, consolidation, amalgamation or replacement does not cause
the preferred securities, including any successor securities, to be
downgraded by any nationally recognized statistical rating
organization;
S-24
(5) the merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the holders
of the trust securities, including any successor securities, in any
material respect, other than with respect to any dilution of the
holders' interest in the new entity;
(6) the successor entity has a purpose identical to that of Fleet Capital;
(7) prior to the merger, consolidation, amalgamation or replacement, Fleet
Capital has received an opinion of a nationally recognized independent
counsel to Fleet Capital experienced in those matters that:
(a) the merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the
holders of the trust securities, including any successor
securities, in any material respect, other than with respect to
any dilution of the holders' interest in the new entity;
(b) following the merger, consolidation, amalgamation or replacement,
neither Fleet Capital nor the successor entity will be required to
register as an investment company under the Investment Company
Act; and
(c) following the merger, consolidation, amalgamation or replacement,
Fleet Capital (or the successor entity) will be treated as a
grantor trust for United States federal income tax purposes; and
(8) FleetBoston guarantees the obligations of the successor entity under
the successor securities at least to the extent provided by the
guarantee.
Despite the foregoing, Fleet Capital will not, except with the consent of
holders of 100% in liquidation amount of the trust securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it, if
the consolidation, amalgamation, merger or replacement would cause Fleet Capital
or the successor entity to be classified as other than a grantor trust for
United States federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The preferred securities will be book-entry securities. Upon issuance, all
book-entry securities will be represented by one or more fully registered global
preferred securities, without distribution coupons. Each global preferred
security will be deposited with, or on behalf of, The Depository Trust Company,
"DTC," a securities depository, and will be registered in the name of DTC or a
nominee of DTC. DTC will thus be the only registered holder of the preferred
securities and will be considered the sole owner of the preferred securities for
purposes of the declaration.
Purchasers of preferred securities may only hold interests in the global
notes through DTC if they are a participant in the DTC system. Purchasers may
also hold interests through a securities intermediary -- banks, brokerage houses
and other institutions that maintain securities accounts for customers -- that
has an account with DTC or its nominee. DTC will maintain accounts showing the
preferred security holdings of its participants, and these participants will in
turn maintain accounts showing the preferred security holdings of their
customers. Some of these customers may themselves be securities intermediaries
holding preferred securities for their customers. Thus, each beneficial owner of
a book-entry preferred security will hold that preferred security indirectly
through a hierarchy of intermediaries, with DTC at the "top" and the beneficial
owner's own securities intermediary at the "bottom."
The preferred securities of each beneficial owner of a book-entry security
will be evidenced solely by entries on the books of the beneficial owner's
securities intermediary. The actual purchaser of the preferred securities will
generally not be entitled to have the preferred securities represented by the
global securities registered in its name and will not be considered the owner
under the declaration. In most cases, a beneficial owner will also not be able
to obtain a paper certificate evidencing the holder's ownership of preferred
securities. The book-entry system for holding preferred securities eliminates
the need for physical
S-25
movement of certificates and is the system through which most publicly traded
common stock is held in the United States. However, the laws of some
jurisdictions require some purchasers of securities to take physical delivery of
their securities in definitive form. These laws may impair the ability to
transfer book-entry securities.
A beneficial owner of book-entry securities represented by a global
preferred security may exchange the securities for definitive (paper) preferred
securities only if:
(1) DTC is unwilling or unable to continue as depositary for the global
preferred security and FleetBoston is unable to find a qualified
replacement for DTC within 90 days;
(2) at any time DTC ceases to be a clearing agency registered under the
Securities Exchange Act of 1934; or
(3) FleetBoston in its sole discretion decides to allow some or all
book-entry securities to be exchangeable for definitive preferred
securities in registered form.
Any global preferred security that is exchangeable will be exchangeable in
whole for definitive preferred securities in registered form, with the same
terms and of an equal aggregate principal amount, in denominations of $25 and
whole multiples of $25. Definitive preferred securities will be registered in
the name or names of the person or persons specified by DTC in a written
instruction to the registrar of the securities. DTC may base its written
instruction upon directions it receives from its participants.
In this prospectus supplement and accompanying prospectus, for book-entry
preferred securities, references to actions taken by preferred security holders
will mean actions taken by DTC upon instructions from its participants, and
references to payments and notices of redemption to preferred security holders
will mean payments and notices of redemption to DTC as the registered holder of
the preferred securities for distribution to participants in accordance with
DTC's procedures.
DTC has advised us that DTC is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered under section 17A of the Securities
Exchange Act of 1934. The rules applicable to DTC and its participants are on
file with the SEC.
FleetBoston and the trustees will not have any responsibility or liability
for any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the book-entry securities or for maintaining,
supervising or reviewing any records relating to the beneficial ownership
interests.
DTC may discontinue providing its services as securities depositary with
respect to the preferred securities at any time by giving reasonable notice to
Fleet Capital. Under those circumstances, if a successor securities depositary
is not obtained, preferred securities certificates are required to be printed
and delivered. Additionally, the regular trustees, with the consent of
FleetBoston, may decide to discontinue use of the system of book-entry transfers
through DTC or any successor depositary with respect to the preferred
securities. In that event, certificates for the preferred securities will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that FleetBoston and Fleet Capital believe to be
reliable, but neither FleetBoston nor Fleet Capital takes responsibility for the
accuracy of that information.
PAYMENT
Payments on the preferred securities represented by the global certificates
will be made to DTC, which will credit the relevant accounts at DTC on the
applicable distribution dates. In the case of certificated securities, payments
will be made by check mailed to the address of the holder as that address
appears on the records of FleetBoston's registrar and transfer agent.
S-26
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
If the preferred securities do not remain in book-entry only form, the
following provisions will apply:
(1) the institutional trustee will act as paying agent and may designate an
additional or substitute paying agent at any time;
(2) registration of transfers of preferred securities will be effected
without charge by or on behalf of Fleet Capital, but upon payment, with
the giving of such indemnity as Fleet Capital or FleetBoston may
require, in respect of any tax or other government charges that may be
imposed in relation to it; and
(3) Fleet Capital will not be required to register or cause to be
registered the transfer of preferred securities after those preferred
securities have been called for redemption.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
Prior to the occurrence of a default with respect to the trust securities
and after the curing of any defaults that may have occurred, the institutional
trustee undertakes to perform only such duties as are specifically set forth in
the declaration. After such a default, the institutional trustee will exercise
the same degree of care as a prudent individual would exercise in the conduct of
his or her own affairs. The institutional trustee is under no obligation to
exercise any of the powers vested in it by the declaration at the request of any
holder of preferred securities, unless offered indemnity satisfactory to it by
the holder against the costs, expenses and liabilities that the institutional
trustee might incur by exercising those powers. The holders of preferred
securities will not be required to offer that indemnity if the holders, by
exercising their voting rights, direct the institutional trustee to take any
action following a declaration event of default. The institutional trustee also
serves as trustee under the guarantee and the indenture. FleetBoston and certain
of its subsidiaries conduct certain banking transactions with the institutional
trustee in the ordinary course of their business.
GOVERNING LAW
The declaration and the preferred securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The regular trustees are authorized and directed to operate Fleet Capital
in such a way so that Fleet Capital will not be required to register as an
"investment company" under the Investment Company Act or characterized as other
than a grantor trust for United States federal income tax purposes. FleetBoston
is authorized and directed to conduct its affairs so that the junior
subordinated debentures will be treated as indebtedness of FleetBoston for
United States federal income tax purposes. In this connection, FleetBoston and
the regular trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of Fleet Capital or the Restated
Articles of Incorporation of FleetBoston, that each of FleetBoston and the
regular trustees determine in their discretion to be necessary or desirable to
achieve that end, as long as that action does not adversely affect the interests
of the holders of the preferred securities or vary the terms of the preferred
securities.
Holders of the preferred securities have no preemptive rights.
S-27
DESCRIPTION OF THE GUARANTEE
FleetBoston will agree, to the extent set forth in the guarantee, to pay in
full to the holders of the preferred securities the guarantee payments, as
defined in the accompanying prospectus, except to the extent paid by Fleet
Capital, as and when due, regardless of any defense, right of setoff or
counterclaim which Fleet Capital may have or assert. FleetBoston's obligation to
make a payment under the guarantee may be satisfied by direct payment of the
required amounts by FleetBoston to the holders of preferred securities or by
causing Fleet Capital to pay those amounts to those holders.
The guarantee, when taken together with FleetBoston's obligations under the
junior subordinated debentures and the indenture and its obligations under the
declaration, including its obligations to pay costs, expenses, debts and
liabilities of Fleet Capital, other than with respect to the trust securities,
provides a full and unconditional guarantee on a subordinated basis by
FleetBoston of payments due on the preferred securities.
The guarantee will be qualified as an indenture under the Trust Indenture
Act. The Bank of New York will act as guarantee trustee. The terms of the
guarantee will be those set forth in that guarantee and those made part of the
guarantee by the Trust Indenture Act. The guarantee will be held by the
guarantee trustee for the benefit of the holders of the preferred securities. A
summary description of the guarantee appears beginning on page 16 in the
accompanying prospectus under the caption "Description of the Preferred
Securities Guarantees."
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the junior
subordinated debentures in which Fleet Capital will invest the proceeds from the
issuance and sale of the trust securities. This description supplements the
description of the general terms and provisions of the junior subordinated
debentures set forth on page 8 in the accompanying prospectus under the caption
"Description of the Junior Subordinated Debentures." While the following
description is not intended to be complete and is qualified by the indenture,
dated as of June 30, 2000, between FleetBoston and The Bank of New York as
trustee, the "DEBT TRUSTEE," as supplemented from time to time, as so
supplemented, the "INDENTURE," all material terms of the junior subordinated
debentures are set forth in this prospectus supplement and in the accompanying
prospectus. The base indenture and the form of supplemental indenture are filed
as exhibits to the registration statement which contains this prospectus
supplement and the accompanying prospectus.
GENERAL
The junior subordinated debentures will be issued as unsecured debt of
FleetBoston under the indenture. The junior subordinated debentures will
initially be limited in aggregate principal amount to approximately $515.5
million, or $592.8 million if the underwriters' over-allotment option is
exercised in full. This amount is the sum of the aggregate stated liquidation
value of the trust securities.
The junior subordinated debentures are not subject to any sinking fund
provision. The entire principal amount of the junior subordinated debentures
will mature and become due and payable, together with any accrued and unpaid
interest on the junior subordinated debentures, including compound interest, as
defined on page S-32 under "-- Option to Extend Interest Payment Period" and
additional interest, as defined on page S-33 under "-- Additional Interest," if
any, on or earlier, in the case of early redemption or an
acceleration of the maturity date, or later, in the case of an extension of the
maturity date, each as described below.
If junior subordinated debentures are distributed to holders of preferred
securities in liquidation of the holders' interests in Fleet Capital, those
junior subordinated debentures will initially be issued as a global security. As
described in this prospectus supplement, under limited circumstances junior
subordinated debentures may be issued in certificated form in exchange for a
global security. See "--Book-Entry and Settlement" on page S-35. If junior
subordinated debentures are issued in certificated form, those junior
subordinated debentures will be in denominations of $25 and integral multiples
of $25 and may be transferred or exchanged at the offices described below.
Payments on junior subordinated debentures issued
S-28
as a global security will be made to DTC, to a successor depositary or, in the
event that no depositary is used, to a paying agent for the junior subordinated
debentures. In the event junior subordinated debentures are issued in
certificated form, principal and interest will be payable, the transfer of the
junior subordinated debentures will be registrable and junior subordinated
debentures will be exchangeable for junior subordinated debentures of other
denominations of a like aggregate principal amount, at the corporate trust
office of the institutional trustee in New York, New York. At its option,
FleetBoston may make payment of interest by check mailed to the address of the
holder entitled to that payment or by wire transfer to an account appropriately
designated by the holder entitled to that payment.
FleetBoston does not intend to issue and sell the junior subordinated debt
securities to any purchasers other than Fleet Capital.
There are no covenants or provisions in the indenture that would afford the
holders of the junior subordinated debentures protection in the event of a
highly leveraged transaction or other similar transaction involving FleetBoston
that may adversely affect those holders.
SUBORDINATION
To the extent described in the indenture, the junior subordinated
debentures are subordinated and junior in right of payment to all present and
future senior indebtedness and other financial obligations of FleetBoston (each
as defined below) and rank equal with and are equivalent to creditor obligations
of those holding general unsecured claims not entitled to statutory priority
under the United States Bankruptcy Code or otherwise. No payment may be made of
principal, including redemption payments, premium, if any, or interest on the
junior subordinated debentures if:
(1) there is a default in the payment of the principal of, premium, if any,
interest on or otherwise in respect of any senior indebtedness, whether
at maturity or at a date fixed for prepayment or by declaration or
otherwise; or
(2) any event of default with respect to any senior indebtedness has
occurred and is continuing, or would occur as a result of that payment
on the junior subordinated debentures, if the event of default would
permit the holders of that senior indebtedness, or a trustee on behalf
of those holders, to accelerate the maturity of the senior
indebtedness.
Upon any distribution of assets of FleetBoston to creditors upon any
dissolution, winding-up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all of the principal of, and interest on, all senior indebtedness and other
financial obligations of FleetBoston must be paid in full before the holders of
the junior subordinated debentures are entitled to receive or retain any
payment.
The term "SENIOR INDEBTEDNESS" means, with respect to FleetBoston:
(1) the principal, premium, if any, and interest in respect of:
(a) indebtedness of FleetBoston for money borrowed; and
(b) indebtedness evidenced by securities, debentures, bonds or other
similar instruments issued by FleetBoston;
(2) all capital lease obligations of FleetBoston;
(3) all obligations of FleetBoston issued or assumed as the deferred
purchased price of property, all conditional sale obligations of
FleetBoston and all obligations of FleetBoston under any title
retention agreement (but excluding trade accounts payable arising in
the ordinary course of business);
(4) all obligations of FleetBoston for the reimbursement of any letter of
credit, banker's acceptance, security purchase facility or similar
credit transaction;
S-29
(5) all obligations of the type referred to in clauses (1) through (4)
above of other persons for the payment of which FleetBoston is
responsible or liable as obligor, guarantor or otherwise; and
(6) all obligations of the type referred to in clauses (1) through (5)
above of other persons secured by any lien on any property or asset of
FleetBoston, whether or not the obligation is assumed by FleetBoston,
except that senior indebtedness will not include:
(a) any such indebtedness that is by its terms subordinated to or
ranks equally with the junior subordinated debentures; and
(b) any indebtedness between and among FleetBoston or its affiliates,
including all other debt securities and guarantees in respect to
those debt securities, issued to:
- any other Fleet capital trust or a trustee of that Fleet capital
trust; and
- any other trust, or a trustee of that trust, partnership or other
entity affiliated with FleetBoston that is a financing vehicle of
FleetBoston in connection with the issuance by that financing
vehicle of preferred securities or other securities that rank
equal with, or junior to, the preferred securities.
The term "OTHER FINANCIAL OBLIGATIONS" means all obligations of FleetBoston
to make payment pursuant to the terms of financial instruments, such as:
(1) securities contracts and foreign currency exchange contracts;
(2) derivative instruments, such as swap agreements (including interest
rate and foreign exchange rate swap agreements), cap agreements, floor
agreements, collar agreements, interest rate agreements, foreign
exchange rate agreements, options, commodity futures contracts,
commodity option contracts; and
(3) in the case of both (1) and (2) above, similar financial instruments,
other than:
(a) obligations on account of senior indebtedness; and
(b) obligations on account of indebtedness for money borrowed ranking
equally with or subordinate to the junior subordinated debentures.
Upon satisfaction of all claims of all senior indebtedness and other
financial obligations, the rights of the holders of the junior subordinated
debentures will be subrogated to the rights of the holders of senior
indebtedness and other financial obligations of FleetBoston to receive payments
or distributions applicable to senior indebtedness and other financial
obligations until all amounts owing on the junior subordinated debentures are
paid in full. That senior indebtedness and other financial obligations will
continue to be senior indebtedness and other financial obligations and be
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of that senior indebtedness or
other financial obligations.
The indenture does not limit the aggregate amount of senior indebtedness or
other financial obligations that may be issued or entered into by FleetBoston.
As of December 31, 2001, senior indebtedness and other financial
obligations of FleetBoston aggregated approximately $11.1 billion (holding
company only). In addition, because FleetBoston is a holding company, the junior
subordinated debentures are effectively subordinated to all existing and future
liabilities of FleetBoston's subsidiaries, including depositors.
S-30
OPTIONAL REDEMPTION
FleetBoston will have the right to redeem the junior subordinated
debentures prior to their stated maturity:
(1) in whole or in part, from time to time, on or after ; or
(2) at any time prior to , in whole but not in part, upon the
occurrence and continuation of a special event, as defined below;
in either case, upon not less than 30 nor more than 60 days' notice. The
redemption price will be equal to 100% of the principal amount to be redeemed,
plus accrued interest to the date of redemption. The redemption may require
prior approval of the Federal Reserve Board if approval is then required under
applicable law, rules, guidelines or policies.
A "SPECIAL EVENT" means a tax event or a regulatory capital event, each as
defined below.
A "TAX EVENT" means that the regular trustees will have received an opinion
of nationally recognized independent tax counsel experienced in those matters
that, as a result of:
(1) any amendment to, or change, including any announced prospective
change, in, the laws or any regulations thereunder of the United States
or any political subdivision or taxing authority of or in the United
States; or
(2) any official administrative pronouncement or judicial decision
interpreting or applying those laws or regulations, which amendment or
change is effective or the pronouncement or decision is announced on or
after the date of original issuance of the junior subordinated
debentures,
there is more than an insubstantial risk that:
(1) Fleet Capital is, or will be within 90 days of the date of the opinion,
subject to United States federal income tax with respect to income
received or accrued on the junior subordinated debentures;
(2) interest payable by FleetBoston on the junior subordinated debentures
is not, or within 90 days of the date of the opinion will not be,
deductible by FleetBoston, in whole or in part, for United States
federal income tax purposes; or
(3) Fleet Capital is, or will be within 90 days of the date of the opinion,
subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
A "REGULATORY CAPITAL EVENT" means that FleetBoston will have received an
opinion of independent bank regulatory counsel experienced in those matters
that, as a result of:
(1) any amendment to or change, including any announced prospective change,
in the laws or any regulations thereunder of the United States or any
rules, guidelines or policies of the Federal Reserve Board; or
(2) any official amendment or change is effective or that pronouncement or
decision is announced on or after the date of original issuance of the
preferred securities,
there is more than an insubstantial risk that the preferred securities will no
longer constitute, or within 90 days of the date of either of those events, will
not constitute, Tier 1 capital or its then equivalent for regulatory capital
purposes; provided, however, that the distribution of the junior subordinated
debentures in connection with the liquidation of Fleet Capital by FleetBoston
and the treatment of the junior subordinated debentures as other than Tier 1
capital will not constitute a regulatory capital event unless the liquidation
shall have occurred in connection with a tax event.
S-31
INTEREST
The junior subordinated debentures will bear interest at an annual rate of
% from the original date of issuance, payable quarterly in arrears on
, , and of each year, commencing
. Each date on which interest is payable is called an "INTEREST
PAYMENT DATE."
Interest will be paid to the person in whose name the junior subordinated
debenture is registered on the relevant record date. If the junior subordinated
debentures remain in book-entry form, the record dates for the junior
subordinated debentures will be one business day prior to the relevant interest
payment date. If the junior subordinated debentures are not in book-entry form,
the record dates for the junior subordinated debentures will be the first day of
the month in which the relevant interest payment date occurs.
The period beginning on and including and ending on but
excluding the first interest payment date and each successive period beginning
on and including an interest payment date and ending on but excluding the next
succeeding interest payment date is called an "INTEREST PERIOD."
The amount of interest payable for any interest period will be computed on
the basis of a 360-day year of twelve 30-day months. The amount of interest
payable for any period shorter than a full quarterly period will be computed on
the basis of the actual number of days elapsed per 30-day month. If any interest
payment date is not a business day, then the interest payment will be made on
the next succeeding day that is a business day and without any interest or other
payment in respect of the delay. However, if the next business day is in the
next calendar year, payment of interest will be made on the preceding business
day.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
FleetBoston can defer interest payments by extending the interest payment
period for a period not exceeding 20 consecutive quarterly periods. However, no
extension period may extend beyond the maturity of the junior subordinated
debentures. At the end of that extension period, FleetBoston will pay all
interest then accrued and unpaid, including any additional interest as described
under "--Additional Interest" below, together with interest thereon compounded
at the rate specified for the junior subordinated debentures to the extent
permitted by applicable law, "COMPOUND INTEREST."
During any such extension period:
(1) FleetBoston will not declare or pay any dividend on, make any
distribution relating to, or redeem, purchase, acquire or make a
liquidation payment relating to any of its capital stock, other than:
(a) purchases or acquisitions of shares of FleetBoston common stock in
connection with any employee benefit plans or any other
contractual obligation of FleetBoston, other than a contractual
obligation ranking equally with or junior to the junior
subordinated debentures;
(b) as a result of the exchange or conversion of one class or series
of FleetBoston's capital stock for another class or series of
FleetBoston's capital stock; or
(c) the purchase of fractional interests in shares of FleetBoston's
capital stock pursuant to the conversion or exchange provisions of
that FleetBoston capital stock or the security being converted or
exchanged;
(2) FleetBoston will not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
issued by FleetBoston that rank equally with or junior to the junior
subordinated debentures; and
(3) FleetBoston will not make any guarantee payments with respect to the
foregoing, other than pursuant to the guarantee.
S-32
Prior to the termination of any such extension period, FleetBoston may
further defer payments of interest by extending that extension period. However,
the extension period, including all such previous and further extensions, may
not exceed 20 consecutive quarters. No extension period, however, may extend
beyond the stated maturity of the junior subordinated debentures. Upon the
termination of any extension period and the payment of all amounts then due,
FleetBoston may commence a new extension period, subject to the terms set forth
in this section. No interest during an extension period, except at the end of
that extension period, will be due and payable.
FleetBoston has no present intention of exercising its right to defer
payments of interest by extending the interest payment period on the junior
subordinated debentures. If the institutional trustee is the sole holder of the
junior subordinated debentures, FleetBoston will give the regular trustees, the
institutional trustee and the debt trustee notice of its selection of the
extension period one business day prior to the earlier of:
(1) the date distributions on the preferred securities are payable; or
(2) the date the regular trustees are required to give notice to the NYSE
or any other applicable self-regulatory organization or to holders of
the preferred securities of the record date or the date the
distribution is payable.
The institutional trustee will give notice of FleetBoston's selection of
the extension period to the holders of the preferred securities. If the
institutional trustee is not the sole holder of the junior subordinated
debentures, FleetBoston will give the holders of the junior subordinated
debentures notice of its selection of the extension period at least ten business
days prior to the earlier of:
(1) the interest payment date; or
(2) if the junior subordinated debentures are then listed, the date upon
which FleetBoston is required to give notice to any applicable
self-regulatory organization or to holders of the junior subordinated
debentures of the record or payment date of the related interest
payment.
ADDITIONAL INTEREST
If, at any time Fleet Capital or the institutional trustee will be required
to pay any taxes, duties, assessments or governmental charges of whatever
nature, other than withholding taxes, imposed by the United States, or any other
taxing authority, then FleetBoston will be required to pay additional interest
on the junior subordinated debentures. "ADDITIONAL INTEREST" will be an amount
sufficient so that the net amounts received and retained by Fleet Capital and by
the institutional trustee after paying any such taxes, duties, assessments or
other governmental charges will be equal to the amounts Fleet Capital and the
institutional trustee would have received had no such taxes, duties, assessments
or other governmental charges been imposed. This means that Fleet Capital will
be in the same position it would have been if it did not have to pay such taxes,
duties, assessments or other charges.
OPTION TO EXTEND MATURITY DATE
FleetBoston can extend the maturity date of the junior subordinated
debentures to a date no later than , so long as at the time the
election is made and at the time the extension commences:
- No event of default under the junior subordinated debentures has occurred
and is continuing;
- Fleet Capital is not in arrears on payments of distributions on the
preferred securities and no deferred distributions on the preferred
securities are accumulated; and
- the junior subordinated debentures are and after the extension will be
rated at least BBB- by Standard & Poor's Ratings Services, at least Baa3
by Moody's Investors Service, Inc. or at least the equivalent by any
other nationally recognized statistical rating organization.
If FleetBoston elects to extend the maturity date of the junior
subordinated debentures, it will give notice to the indenture trustee, and the
indenture trustee will give notice of the extension to the holders of
S-33
the junior subordinated debentures no more than 90 and no less than 30 days
prior to the effectiveness of the extension.
OPTION TO ACCELERATE THE MATURITY DATE
If a tax event occurs, FleetBoston will have the right, before a
dissolution of Fleet Capital, to accelerate the maturity date of the junior
subordinated debentures to the minimum extent required so that interest on the
junior subordinated debentures will be tax deductible for FleetBoston for United
States federal income tax purposes. In no event, however, may the resulting
maturity of the junior subordinated debentures be less than 15 years from the
date of the original issuance.
FleetBoston may accelerate the maturity date only if it has received an
opinion of counsel to FleetBoston experienced in such matters that:
- after the acceleration, interest paid on the junior subordinated
debentures will be deductible for United States federal income tax
purposes; and
- the acceleration will not cause a taxable event to holders of the
preferred securities; and
- any required prior approval of the Federal Reserve Board to accelerate
the maturity date of the junior subordinated debentures.
If there is an acceleration, FleetBoston will give notice to the indenture
trustee of the acceleration. The indenture trustee will then give notice of the
acceleration to the holders of the junior subordinated debentures between 30 and
60 days before the effectiveness of the acceleration.
INDENTURE EVENTS OF DEFAULT
The indenture events of default are described on page 11 of the
accompanying prospectus under "Description of the Junior Subordinated
Debentures -- Events of Default, Waiver and Notice."
If any indenture event of default occurs and is continuing, the
institutional trustee, as the holder of the junior subordinated debentures, will
have the right to declare the principal of and the interest on the junior
subordinated debentures, including any compound interest and additional
interest, if any, and any other amounts payable under the indenture to be
immediately due and payable. The institutional trustee may also enforce its
other rights as a creditor relating to the junior subordinated debentures. An
indenture event of default also constitutes a declaration event of default. The
holders of preferred securities in certain circumstances have the right to
direct the institutional trustee to exercise its rights as the holder of the
junior subordinated debentures. See "Description of the Preferred
Securities -- Declaration Events of Default" on page S-23 and "-- Voting Rights"
beginning on page 14 of the accompanying prospectus.
If the institutional trustee fails to enforce its rights under the junior
subordinated debentures after a holder of the preferred securities has made a
written request, the holder of the preferred securities may institute a legal
proceeding directly against FleetBoston to enforce the institutional trustee's
rights under the junior subordinated debentures without first instituting any
legal proceeding against the institutional trustee or any other person or
entity.
Despite the foregoing, if a declaration event of default has occurred and
is continuing and that event is attributable to the failure of FleetBoston to
pay interest or principal on the junior subordinated debentures when that
interest or principal is otherwise payable, FleetBoston acknowledges that, in
that event, a holder of preferred securities may sue for payment on or after the
respective due date specified in the junior subordinated debentures. Despite any
payments made to the holder of preferred securities by FleetBoston in connection
with a direct action, FleetBoston will remain obligated to pay the principal of
or interest on the junior subordinated debentures held by Fleet Capital or the
institutional trustee. FleetBoston will be subrogated to the rights of the
holder of those preferred securities relating to payments on the preferred
securities to the extent of any payments made by FleetBoston to that holder in
any direct action.
S-34
Except as provided in the preceding paragraph and in the guarantee, the
holders of preferred securities will not be able to exercise directly any other
remedy available to the holders of the junior subordinated debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of preferred securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of Fleet
Capital, the junior subordinated debentures will be issued in the form of one or
more global certificates, each a "GLOBAL SECURITY," registered in the name of
the depositary. Except under the limited circumstances described below, junior
subordinated debentures represented by the global security will not be
exchangeable for, and will not otherwise be issuable as, junior subordinated
debentures in definitive form. The global securities described above may not be
transferred except by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the depositary
or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of those securities in definitive form. These
laws may impair the ability to transfer beneficial interests in such a global
security.
Except as provided below under "-- Discontinuance of the Depositary's
Services," owners of beneficial interests in a global security will not be
entitled to receive physical delivery of junior subordinated debentures in
definitive form and will not be considered the holders, as defined in the
indenture, of the global security for any purpose under the indenture. A global
security representing junior subordinated debentures is only exchangeable for
another global security of like denomination and tenor to be registered in the
name of the depositary or its nominee or to a successor depositary or its
nominee. This means that each beneficial owner must rely on the procedures of
the depositary, or if that person is not a participant, on the procedures of the
participant through which that person owns its interest, to exercise any rights
of a holder under the indenture.
THE DEPOSITARY
If junior subordinated debentures are distributed to holders of preferred
securities in liquidation of those holders' interests in Fleet Capital, DTC will
act as the depositary for the junior subordinated debentures. As of the date of
this prospectus supplement, the description in this prospectus supplement of
DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the preferred securities apply
in all material respects to any debt obligations represented by one or more
global securities held by DTC. FleetBoston may appoint a successor to DTC or any
successor depositary if DTC or the successor depositary is unable or unwilling
to continue as a depositary for the global securities. For a description of DTC
and the specific terms of the depositary arrangements, see "Description of the
Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company" beginning on page S-25.
None of FleetBoston, Fleet Capital, the institutional trustee, any paying
agent and any other agent of FleetBoston, or the debt trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a global security
for those junior subordinated debentures or for maintaining, supervising or
reviewing any records relating to those beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A global security will be exchangeable for junior subordinated debentures
registered in the names of persons other than the depositary or its nominee only
if:
(1) the depositary notifies FleetBoston that it is unwilling or unable to
continue as a depositary for that global security and no successor
depositary is appointed;
(2) the depositary, at any time, ceases to be a clearing agency registered
under the Securities Exchange Act of 1934 when the depositary is
required to be so registered to act as depositary and no successor
depositary is appointed;
(3) FleetBoston, in its sole discretion, determines that the global
security will be so exchangeable; or
S-35
(4) an indenture event of default occurs with respect to those junior
subordinated debentures.
Any global security that is exchangeable pursuant to the preceding sentence
will be exchangeable for junior subordinated debentures registered in such names
as the depositary directs. It is expected that those instructions will be based
upon directions received by the depositary from its participants with respect to
ownership of beneficial interests in the global security.
GOVERNING LAW
The indenture and the junior subordinated debentures will be governed by,
and construed in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
The indenture will provide that FleetBoston will pay all fees and expenses
related to:
(1) the offering of the trust securities and the junior subordinated
debentures;
(2) the organization, maintenance and dissolution of Fleet Capital;
(3) the retention of the regular trustees; and
(4) the enforcement by the institutional trustee of the rights of the
holders of the preferred securities.
FleetBoston will have the right at all times to assign any of its
respective rights or obligations under the indenture to a direct or indirect
wholly-owned subsidiary of FleetBoston. If that occurs, FleetBoston will remain
liable for all of their respective obligations. Subject to the foregoing, the
indenture will be binding upon and inure to the benefit of the parties to the
indenture and their respective successors and assigns. The indenture provides
that it may not otherwise be assigned by the parties to the indenture.
EFFECT OF OBLIGATIONS UNDER THE JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEE
As set forth in the declaration, the sole purpose of Fleet Capital is to
issue the trust securities and to invest the proceeds from the issuance and sale
in the junior subordinated debentures.
As long as FleetBoston makes payments of interest and other payments on the
junior subordinated debentures when due, those payments will be sufficient to
cover distributions and payments due on the trust securities. This is due to the
following factors:
(1) the aggregate principal amount of junior subordinated debentures will
be equal to the sum of the aggregate stated liquidation amount of the
trust securities;
(2) the interest rate and the interest and other payment dates on the
junior subordinated debentures will match the distribution rate and
distribution and other payment dates for the trust securities;
(3) FleetBoston will pay, and Fleet Capital will not be obligated to pay,
directly or indirectly, all costs, expenses, debt, and obligations of
Fleet Capital, other than with respect to the trust securities; and
(4) the declaration further provides that the regular trustees may not
cause or permit Fleet Capital to engage in any activity that is not
consistent with the purposes of Fleet Capital.
Payments of distributions, to the extent there are available funds, and
other payments due on the preferred securities, to the extent there are
available funds, are guaranteed by FleetBoston to the extent described under
"Description of the Preferred Securities Guarantees" on page 16 in the
accompanying prospectus. If FleetBoston does not make interest payments on the
junior subordinated debentures, Fleet Capital will not have sufficient funds to
pay distributions on the preferred securities. The guarantee does not apply to
any payment of distributions unless and until Fleet Capital has sufficient funds
for the
S-36
payment of those distributions. See "Description of the Preferred Securities
Guarantees" on page 16 in the accompanying prospectus.
The guarantee covers the payment of distributions and other payments on the
preferred securities only if and to the extent that FleetBoston has made a
payment of interest or principal on the junior subordinated debentures. The
guarantee, when taken together with FleetBoston's obligations under the junior
subordinated debentures and the indenture and its obligations under the
declaration will provide a full and unconditional guarantee of amounts payable
on the preferred securities.
If FleetBoston fails to make interest or other payments on the junior
subordinated debentures when due, taking account of any extension period, the
declaration allows the holders of the preferred securities to direct the
institutional trustee to enforce its rights under the junior subordinated
debentures. If the institutional trustee fails to enforce these rights, any
holder of preferred securities may directly sue FleetBoston to enforce the
institutional trustee's rights without first suing the institutional trustee or
any other person or entity. See "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company"
beginning on page S-25 and "Description of the Preferred Securities -- Voting
Rights," beginning on page 14 of the accompanying prospectus. A holder of
preferred securities may institute a direct action if a declaration event of
default has occurred and is continuing and that event is attributable to the
failure of FleetBoston to pay interest or principal on the junior subordinated
debentures on the date the interest or principal is otherwise payable. A direct
action may be brought without first (1) directing the institutional trustee to
enforce the terms of the junior subordinated debentures or (2) suing FleetBoston
to enforce the institutional trustee's rights under the junior subordinated
debentures. In connection with the direct action, FleetBoston will be subrogated
to the rights of the holder of preferred securities under the declaration to the
extent of any payment made by FleetBoston to that holder of preferred securities
in the direct action. Consequently, FleetBoston will be entitled to payment of
amounts that a holder of preferred securities receives in respect of an unpaid
distribution to the extent that the holder receives or has already received full
payment relating to that unpaid distribution from Fleet Capital.
FleetBoston acknowledges that the guarantee trustee will enforce the
guarantee on behalf of the holders of the preferred securities. If FleetBoston
fails to make payments under the guarantee, the guarantee allows the holders of
preferred securities to direct the guarantee trustee to enforce its rights
thereunder. If the guarantee trustee fails to enforce the guarantee, any holder
of preferred securities may directly sue FleetBoston to enforce the guarantee
trustee's rights under the guarantee. The holder need not first sue Fleet
Capital, the guarantee trustee, or any other person or entity. A holder of
preferred securities may also directly sue FleetBoston to enforce the holder's
right to receive payment under the guarantee. The holder need not first (1)
direct the guarantee trustees to enforce the terms of the guarantee or (2) sue
Fleet Capital or any other person or entity.
FleetBoston and Fleet Capital believe that the above mechanisms and
obligations, taken together, are equivalent to a full and unconditional
guarantee by FleetBoston of payments due on the preferred securities. See
"Description of the Preferred Securities Guarantees -- General" beginning on
page 16 in the accompanying prospectus.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
In the opinion of Edwards & Angell, LLP, counsel to FleetBoston and Fleet
Capital ("TAX COUNSEL"), the following is a summary of certain of the material
United States federal income tax consequences of the purchase, ownership and
disposition of preferred securities held as capital assets by a holder who
purchases those preferred securities upon initial issuance. It does not deal
with special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, United States Alien Holders (as
defined below) to the extent that the ownership of those preferred securities
are held in connection with the conduct of a
S-37
trade or business in the United States or persons that will hold the preferred
securities as a position in a "straddle," as part of a "synthetic security" or
"hedge," as part of a "conversion transaction" or other integrated investment or
as other than a capital asset. This summary also does not address the tax
consequences to persons that have a functional currency other than the U.S.
dollar or the tax consequences to shareholders, partners or beneficiaries of a
holder of preferred securities. Further, it does not include any description of
any alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the preferred
securities. This summary is based on the Internal Revenue Code of 1986, as
amended, the "CODE," Treasury regulations under the Code, the "REGULATIONS," and
administrative and judicial interpretations of the Code and the regulations, as
of the date of this prospectus supplement, all of which are subject to change,
possibly on a retroactive basis.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the junior subordinated debentures, tax
counsel will render its opinion that, under then current law and assuming full
compliance with the terms of the indenture and certain other documents, and
based on certain facts and assumptions contained in that opinion, the junior
subordinated debentures will be classified for United States federal income tax
purposes as indebtedness of FleetBoston.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the preferred securities, tax counsel
will render its opinion that, under then current law and assuming full
compliance with the terms of the declaration and the indenture and certain other
documents, and based on certain facts and assumptions contained in that opinion,
Fleet Capital will be classified for United States federal income tax purposes
as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
preferred securities generally will be considered the owner of a pro rata
undivided interest in the junior subordinated debentures, and each holder will
be required to include in its gross income any interest, or original issue
discount, "OID," paid or accrued with respect to its allocable share of those
junior subordinated debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under regulations promulgated under the OID provisions of the Code, a
"remote" contingency that stated interest will not be timely paid will be
ignored in determining whether a debt instrument is issued with OID. FleetBoston
believes that the likelihood of its exercising its option to defer payments of
interest on the junior subordinated debentures is "remote" since exercising that
option would prevent FleetBoston from, among other things, declaring dividends
on any class of its equity securities. Accordingly, FleetBoston intends to take
the position, based on the advice of tax counsel, that the junior subordinated
debentures will not be considered to be issued with OID and, accordingly, stated
interest on the junior subordinated debentures generally will be taxable to a
holder as ordinary income at the time it is paid or accrued in accordance with
the holder's regular method of accounting for United States federal income tax
purposes.
Under the regulations, if FleetBoston were to exercise its option to defer
payments of interest on the junior subordinated debentures, the junior
subordinated debentures would at that time be treated as having been reissued
with OID, and all stated interest on the junior subordinated debentures would
thereafter be treated as OID as long as the junior subordinated debentures
remain outstanding. In that event, all of a holder's taxable interest income
with respect to the junior subordinated debentures would thereafter be accounted
for on an economic accrual basis regardless of the holder's method of tax
accounting, and actual cash distributions of stated interest would not be
reported as taxable income. Consequently, a holder of preferred securities would
be required to include in gross income OID even if FleetBoston does not make
actual cash payments during an extension period.
S-38
These regulations have not yet been addressed in any rulings or other
interpretations by the Internal Revenue Service, and it is possible that the IRS
could take a position contrary to tax counsel's interpretation.
Because income on the preferred securities will constitute interest or OID,
corporate holders of the preferred securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the preferred securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF FLEET
CAPITAL
FleetBoston will have the right at any time to liquidate Fleet Capital and
cause the junior subordinated debentures to be distributed to the holders of the
trust securities. Under current law, such a distribution, for United States
federal income tax purposes, would be treated as a nontaxable event to each
holder, and each holder would receive an aggregate tax basis in the junior
subordinated debentures received equal to the holder's aggregate tax basis in
its preferred securities. A holder's holding period in the junior subordinated
debentures so received in liquidation of Fleet Capital would include the period
during which the preferred securities were held by the holder. If, however,
Fleet Capital is characterized for United States federal income tax purposes as
an association taxable as a corporation at the time of its dissolution, the
distribution of the junior subordinated debentures may constitute a taxable
event to holders of preferred securities.
Under certain circumstances described in this prospectus supplement under
"Description of the Preferred Securities," the junior subordinated debentures
may be redeemed for cash and the proceeds of that redemption distributed to
holders in redemption of their preferred securities. Under current law, such a
redemption would, for United States federal income tax purposes, constitute a
taxable disposition of the redeemed preferred securities, and a holder could
recognize gain or loss as if it sold those redeemed capital securities for cash.
See "--Sales of Preferred Securities" below.
SALES OF PREFERRED SECURITIES
A holder that sells preferred securities, including a redemption of the
preferred securities by Fleet Capital, will recognize gain or loss equal to the
difference between its adjusted tax basis in the preferred securities and the
amount realized on the sale of those preferred securities (other than with
respect to accrued and unpaid interest which has not yet been included in
income, which will be treated as ordinary income). A holder's adjusted tax basis
in the preferred securities generally will be its initial purchase price
increased by OID (if any) previously includable in the holder's gross income to
the date of disposition and decreased by payments received on the preferred
securities in respect of OID (if any). The gain or loss generally will be a
capital gain or loss and generally will be a long-term capital gain or loss if
the preferred securities have been held by that holder for more than one year.
Long-term capital gains of non-corporate holders are generally subject to
reduced capital gain tax rates.
The preferred securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
junior subordinated debentures. A holder who uses the accrual method of
accounting for tax purposes, and a cash method holder, if the junior
subordinated debentures are deemed to have been issued with OID, and who
disposes of his or her preferred securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest on
the junior subordinated debentures through the date of disposition in income as
ordinary income (i.e., interest or, possibly, OID), and to add that amount to
his or her adjusted tax basis in his or her pro rata share of the underlying
junior subordinated debentures deemed disposed of. To the extent the selling
price is less than the holder's adjusted tax basis (which will include all
accrued but unpaid interest that has been included in income), a holder will
recognize a capital loss. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States federal income tax
purposes.
S-39
EXTENSION OR ACCELERATION OF THE MATURITY DATE
If FleetBoston exercises its option to extend or accelerate the maturity
date of the junior subordinated debentures, a holder should not be required to
recognize taxable gain or loss as a result of such extension or acceleration.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "UNITED STATES ALIEN HOLDER" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes.
A "U.S. HOLDER" is a beneficial owner of preferred securities who or which
is:
(1) a citizen or individual resident (or is treated as a citizen or
individual resident) of the United States for federal income tax
purposes;
(2) a corporation or partnership (or other entity treated as a corporation
or partnership for United States federal income tax purposes) created
or organized in or under the laws of the United States or any state of
the United States, including the District of Columbia;
(3) an estate the income of which is includable in its gross income for
federal income tax purposes without regard to its source; or
(4) a trust if, and only if, (a) a court within the United States is able
to exercise primary supervision over the administration of the trust
and one or more United States persons have the authority to control all
substantial decisions of the trust or (b) the trust was in existence on
August 20, 1996 and is treated as a United States holder under
applicable regulations.
Under present United States federal income tax law:
(1) payments by Fleet Capital or any of its paying agents to any holder of
a preferred security who or which is a United States Alien Holder
generally will not be subject to United States federal withholding tax,
so long as
(a) the beneficial owner of the preferred security does not actually
or constructively own 10 percent or more of the total combined
voting power of all classes of stock of FleetBoston entitled to
vote;
(b) the beneficial owner of the preferred security is not a controlled
foreign corporation that is related to FleetBoston through stock
ownership;
(c) the beneficial owner of the preferred security is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code;
and
(d) either (A) the beneficial owner of the preferred security
certifies on a Form W-8BEN to Fleet Capital or its agent, under
penalties of perjury, that it is not a U.S. Holder and provides
its name and address, (B) a qualified securities clearing
organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or
business, a "FINANCIAL INSTITUTION," and holds the preferred
security in that capacity, certifies to Fleet Capital or its
agent, under penalties of perjury, that the statement has been
received from the beneficial owner by it or by a financial
institution between it and the beneficial owner and furnishes
Fleet Capital or its agent with a copy of the statement or (C) if
the beneficial owner is neither an individual nor a corporation
for federal income tax purposes, certain other reporting
requirements are satisfied; and
(2) a United States Alien Holder of a preferred security generally will not
be subject to United States federal withholding tax on any gain
realized upon the sale or other disposition (including a redemption) of
a preferred security.
S-40
PROPOSED LEGISLATION
On January 24, 2002, Representative Charles B. Rangel introduced
legislation in the U.S. House of Representatives which, if enacted in its
current form, would in some cases disallow interest deductions for U.S. federal
income tax purposes for interest paid on debentures with certain similarities to
the junior subordinated debentures. This legislation is proposed to be effective
for instruments issued on or after the date of enactment of such legislation.
Consequently, as drafted, this legislation would not affect the preferred
securities or the junior subordinated debentures or otherwise result in a tax
event as described under "Description of the Junior Subordinated
Debentures -- Optional Redemption" on page S-31 of this prospectus supplement.
However, there can be no assurance that the proposed legislation, final
legislation or any other future legislative proposals will not adversely affect
our ability to deduct interest on the junior subordinated debentures or
otherwise affect the tax treatment of the transactions described in this
prospectus supplement. Such change could, if applicable to the junior
subordinated debentures or preferred securities, give rise to a tax event, which
would permit us to cause a redemption of the preferred securities.
INFORMATION REPORTING TO HOLDERS
Generally, income on the preferred securities will be reported to holders
on Forms 1099, which forms should be mailed to holders of preferred securities
by January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the preferred securities
may be subject to a "backup" withholding tax unless the holder complies with
certain identification requirements. Any withheld amounts will be allowed as a
credit against the holder's United States federal income tax, provided the
required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER FEDERAL, STATE, LOCAL
AND FOREIGN INCOME AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES FEDERAL OR OTHER TAX LAWS.
S-41
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan,
a "PLAN," subject to the Employee Retirement Income Security Act of 1974, as
amended, "ERISA," should consider the fiduciary standards of ERISA in the
context of the plan's particular circumstances before authorizing an investment
in the preferred securities. Accordingly, among other factors, the fiduciary
should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with the documents
and instruments governing the plan, and whether the investment would involve a
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
Section 406 of ERISA and Section 4975 of the Code prohibit plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code, also "PLANS," from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or "disqualified
persons" under the Code, "PARTIES IN INTEREST," with respect to the plan or
account. A violation of these "prohibited transaction" rules may result in civil
penalty or other liabilities under ERISA and/or an excise tax under Section 4975
of the Code for those persons, unless exemptive relief is available under an
applicable statutory, regulatory or administrative exemption. Employee benefit
plans that are governmental plans (as defined in section 3(32) of ERISA),
certain church plans (as defined in Section 3(33) of ERISA) and foreign plans
(as described in Section 4(b)(4) of ERISA) are not subject to the requirements
of ERISA or Section 4975 of the Code. However, governmental plans may be subject
to similar provisions under applicable state laws.
Under a regulation, the "PLAN ASSETS REGULATION," issued by the U.S.
Department of Labor, the assets of Fleet Capital would be deemed to be "plan
assets" of a plan for purposes of ERISA and Section 4975 of the Code if a plan
were to acquire an equity interest in Fleet Capital and no exception was
applicable under the Plan Assets Regulation. An "EQUITY INTEREST" is defined
under the Plan Assets Regulation as any interest in an entity other than an
instrument which is treated as indebtedness under applicable law and which has
no substantial equity features and specifically includes a beneficial interest
in a trust.
Pursuant to the Plan Assets Regulation, the assets of Fleet Capital would
not be deemed to be "plan assets" of investing plans if, among other exceptions,
at all times, less than 25% of the value of each class of equity interests in
Fleet Capital were held by plans, and entities holding assets deemed to be "plan
assets" of any plan, collectively, "BENEFIT PLAN INVESTORS," or if the preferred
securities were "publicly-offered securities" for purpose of the Plan Assets
Regulation. No assurance can be given that the preferred securities held by
benefit plan investors will be less than 25% of the total value of those
preferred securities at the completion of the initial offering or thereafter,
and no monitoring or other measures will be taken with respect to the
satisfaction of the conditions to this exception. For purposes of the Plan
Assets Regulation, a "publicly-offered security" is a security that is (a)
"freely transferable," (b) part of a class of securities that is "widely held,"
and (c)(i) sold to the plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act of 1933
and the class of securities of which such securities is a part is registered
under Section 12 of the Securities Exchange Act of 1934 within 120 days after
the end of the fiscal year of the issuer during which the offering of such
securities to the public occurred or (ii) is part of a class of securities that
is registered under Section 12 of the Securities Exchange Act of 1934 (the
"Registration Requirement"). It is anticipated that the preferred securities
will be offered in a manner which satisfies the Registration Requirement. The
Plan Assets Regulation provides that a security is "widely held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. A security will not fail to be "widely held"
because the number of independent investors falls below 100 subsequent to the
initial offering as a result of events beyond the control of the issuer. It is
anticipated that the preferred securities will be "widely held" within the
meaning of the Plan Assets Regulation, although no assurance can be given in
this regard. The Plan Assets Regulation provides that whether a security is
"freely transferable" is a factual question to be determined on the basis of all
relevant facts and circumstances. The Plan Assets Regulation further provides
that when a security is part of an offering in which the minimum investment is
US $10,000 or less, certain restrictions described in the Plan Assets Regulation
ordinarily will not, alone or
S-42
in combination, affect the finding that such securities are "freely
transferable." It is anticipated that the preferred securities will be "freely
transferable" within the meaning of the Plan Assets Regulation, although no
assurance can be given in this regard.
FleetBoston, the obligor with respect to the junior subordinated debentures
held by Fleet Capital, and its affiliates and the institutional trustee may be
considered parties in interest with respect to many plans and, as a result of
this transaction, may become parties in interest to plans that purchase the
preferred securities. Accordingly, the purchase and/or holding of preferred
securities by a plan with respect to which FleetBoston, the institutional
trustee or any affiliate is or becomes a party in interest may constitute or
result in a prohibited transaction under ERISA or Section 4975 of the Code,
unless those preferred securities are acquired pursuant to and in accordance
with an applicable exemption.
The Department of Labor has issued five prohibited transaction class
exemptions, "PTCES," that may provide exemptive relief if required for direct or
indirect prohibited transactions that may arise from the purchase or holding of
the preferred securities. These exemptions are:
(1) PTCE 84-14, an exemption for certain transactions determined by
independent qualified professional asset managers;
(2) PTCE 90-1, an exemption for certain transactions involving insurance
company pooled separate accounts;
(3) PTCE 91-38, an exemption for certain transactions involving bank
collective investment funds;
(4) PTCE 95-60, an exemption for transactions involving certain insurance
company general accounts; or
(5) PTCE 96-23, an exemption for plan asset transactions managed by
in-house asset managers.
The preferred securities may not be purchased or held by (1) any plan, (2)
any entity whose underlying assets include "plan assets" by reason of any plan's
investment in the entity, a "PLAN ASSET ENTITY," or (3) any person investing
"plan assets" of any plan, unless in each case the purchaser or holder is
eligible for the exemptive relief available under any of the PTCEs listed above
or another applicable similar exemption. Any purchaser or holder of the
preferred securities or any interest in the preferred securities will be deemed
to have represented by its purchase and holding of the preferred securities that
it either,
(1) is not a plan or a plan asset entity and is not purchasing those
securities on behalf of or with "plan assets" of any plan; or
(2) with respect to the purchase or holding, is eligible for the exemptive
relief available under any of the PTCEs listed above or another
applicable exemption with respect to the purchase or holding.
If a purchaser or holder of the preferred securities that is a plan or a
plan asset entity elects to rely on an exemption other than one of the PTCEs
listed above, FleetBoston and Fleet Capital may require a satisfactory opinion
of counsel or other evidence with respect to the availability of that exemption
for the purchase and holding.
In addition, because the assets of Fleet Capital may be "plan assets" for
ERISA purposes, the institutional trustee, as well as any other person
exercising discretion with respect to the assets of Fleet Capital, may become a
fiduciary, party in interest or disqualified person with respect to investing
plans. To avoid certain prohibited transactions under ERISA and the Code that
could result, each investing plan, by its purchase of preferred securities, will
be deemed to have directed Fleet Capital to invest in the junior subordinated
debentures, and to have consented to the appointment of the institutional
trustee.
A plan fiduciary should consider whether the purchase of preferred
securities could result in a delegation of fiduciary authority to the
institutional trustee, and if so, whether this delegation is permissible under
the plan's governing documents.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt transactions, it is important that
fiduciaries or other persons considering purchasing the preferred securities on
behalf of or with "plan assets" of any plan consult with its ERISA counsel
S-43
regarding the potential consequences if the assets of Fleet Capital were deemed
to be "plan assets" and the availability of exemptive relief under any of the
PTCEs listed above or any other applicable exemption.
The sale of preferred securities to a plan is not a representation by Fleet
Capital, FleetBoston, any trustee, the underwriters or any other person
associated with the sale of the preferred securities that those securities meet
relevant legal requirements with respect to investments by plans generally, or
any particular plan.
S-44
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
Fleet Capital has agreed to sell to each of the underwriters named below, and
each of the underwriters, for whom Salomon Smith Barney Inc., Fleet Securities,
Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, Prudential Securities Incorporated and UBS Warburg LLC are acting
as representatives, has severally agreed to purchase, the number of preferred
securities set forth opposite its name below. In the underwriting agreement, the
several underwriters have agreed, subject to the terms and conditions set forth
in the underwriting agreement, to purchase all the preferred securities offered
hereby if any of the preferred securities are purchased. If an underwriter
defaults, the underwriting agreement provides that, in certain circumstances,
the purchase commitments of the non-defaulting underwriters may be increased or
the underwriting agreement may be terminated.
NUMBER OF
PREFERRED
SECURITIES
UNDERWRITER --------------
-----------
Salomon Smith Barney Inc. ..................................
Fleet Securities, Inc. .....................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Morgan Stanley & Co. Incorporated...........................
Prudential Securities Incorporated..........................
UBS Warburg LLC.............................................
Total..........................................
----------
20,000,000
==========
The underwriters propose to offer the preferred securities, in part,
directly to the public at the initial public offering price set forth on the
cover page of this prospectus supplement, and, in part, to selected securities
dealers at that price less a concession of $. per preferred security. The
underwriters may allow, and those dealers may reallow, a concession not in
excess of $. per preferred security to selected brokers and dealers. After the
preferred securities are released for sale to the public, the offering price and
other selling terms may be changed.
Fleet Capital has granted the underwriters an option exercisable for 30
days after the date of this prospectus supplement to purchase up to an aggregate
of 3,000,000 additional preferred securities solely to cover over-allotments, if
any. If the underwriters exercise their over-allotment option, the underwriters
have severally agreed, subject to certain conditions, to purchase approximately
the same percentage thereof that the number of shares of preferred securities to
be purchased by each of them, as shown in the table above, bears to the shares
of preferred securities offered hereby.
In view of the fact that the proceeds of the sale of the preferred
securities will ultimately be used to purchase the junior subordinated
debentures of FleetBoston, the underwriting agreement provides that FleetBoston
will pay as compensation to the underwriters arranging the investment therein of
those proceeds, an amount in immediately available funds of $. per preferred
security, or $ in the aggregate ($ in the aggregate, if the
underwriters exercise in full their over-allotment option), for the accounts of
the several underwriters.
S-45
The following table shows the per preferred security and total public
offering price, underwriting commission to be paid by FleetBoston and the
proceeds to Fleet Capital. This information is presented assuming either no
exercise or full exercise by the underwriters of their over-allotment option.
PER PREFERRED WITHOUT WITH
SECURITY OPTION OPTION
------------- ------- ------
Public offering price(1).......................... $25.00 $ $
Underwriting commission to be paid by
FleetBoston(2).................................. $ $ $
Proceeds to Fleet Capital Trust VIII.............. $25.00 $ $
-------------------------
(1) Plus accumulated distributions from March , 2002, if settlement occurs
after that date.
(2) Because Fleet Capital Trust VIII will use all of the proceeds from the sale
of the preferred securities and its common securities to purchase junior
subordinated debentures of FleetBoston Financial Corporation, FleetBoston
Financial Corporation will pay all underwriting discounts and commissions.
During a period of days from the date of the prospectus supplement,
neither Fleet Capital nor FleetBoston will, without the prior written consent of
the underwriters, directly or indirectly, sell, offer to sell, grant any option
for sale of, or otherwise dispose of, any preferred securities, any security
convertible into or exchangeable into or exercisable for preferred securities or
junior subordinated debentures or any debt securities substantially similar to
the junior subordinated debentures or equity securities substantially similar to
the preferred securities, except for the preferred securities offered in
connection with this offering.
Prior to this offering, there has been no public market for the preferred
securities. Fleet Capital will apply to have the preferred securities listed on
the New York Stock Exchange. If approved for listing, trading of the preferred
securities on the New York Stock Exchange is expected to commence within a
30-day period after the initial delivery of the preferred securities. The
representatives have advised FleetBoston and Fleet Capital that they intend to
make a market in the preferred securities prior to commencement of trading on
the New York Stock Exchange, but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the preferred securities.
In order to meet one of the requirements for listing the preferred
securities on the New York Stock Exchange, the underwriters have undertaken to
sell preferred securities to a minimum of 400 beneficial holders.
Fleet Capital and FleetBoston have agreed to indemnify the underwriters
against, or contribute to payments that the underwriters may be required to make
in respect of, certain liabilities, including liabilities under the Securities
Act of 1933, as amended.
Until the distribution of the preferred securities is completed, rules of
the Securities and Exchange Commission may limit the ability of the underwriters
and any selling group members to bid for and purchase the preferred securities.
As an exception to these rules, the underwriters are permitted to engage in some
transactions that stabilize the price of the preferred securities. Those
transactions consist of bids or purchases for the purposes of pegging, fixing or
maintaining the price of the preferred securities.
If the underwriters create a short position in the preferred securities in
connection with the offering, i.e., if they sell more preferred securities than
are set forth on the cover page of this prospectus supplement, the underwriters
may reduce the short position by purchasing preferred securities in the open
market.
The underwriters may also impose a penalty bid on certain selling group
members. This means that if the underwriters purchase preferred securities in
the open market to reduce the underwriters' short position or to stabilize the
price of the preferred securities, they may reclaim the amount of the selling
concession from the selling group members who sold those preferred securities as
part of the offering.
S-46
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of those purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
None of FleetBoston, Fleet Capital nor any of the underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the preferred
securities. In addition, none of FleetBoston, Fleet Capital nor any of the
underwriters makes any representation that the underwriters will engage in those
transactions or that those transactions, once commenced, will not be
discontinued without notice.
It is expected that delivery of the preferred securities will be made
against payment for them on or about , which is the fifth business
day following the date of this prospectus supplement (such settlement cycle
being referred to in this prospectus supplement as "T+5"). The ability to settle
secondary market trades of the preferred securities effected on the date of
pricing and the succeeding three business days may be affected by T+5
settlement.
Fleet Securities, Inc. is a wholly-owned subsidiary of FleetBoston. The
underwriting arrangements for this offering comply with Rules 2720 and 2810 of
the Conduct Rules of the National Association of Securities Dealers, Inc., the
"NASD." In accordance with those rules, no member of the NASD participating in
the underwriting will be permitted to confirm sales to accounts over which it
exercises discretionary authority without prior specific written approval of the
customer.
Certain of the underwriters may use this prospectus and the accompanying
prospectus supplement for offers and sales related to market-making transactions
in the securities. These underwriters may act as principal or agent in these
transactions, and the sales will be made at prices related to prevailing market
prices at the time of sale.
Some of the underwriters or their affiliates engage in transactions with,
and, from time to time, have performed services for, FleetBoston and its
subsidiaries in the ordinary course of business.
S-47
PROSPECTUS
[FLEETBOSTON FINANCIAL LOGO]
FLEET CAPITAL TRUST VIII
FLEET CAPITAL TRUST IX
FLEET CAPITAL TRUST X
FLEET CAPITAL TRUST XI
FLEET CAPITAL TRUST XII
PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT, BY
FLEETBOSTON FINANCIAL CORPORATION
THE TRUSTS:
The trusts are Delaware business trusts. Each trust may from time to time:
-- sell preferred securities representing undivided beneficial interests in
the trust to the public;
-- sell common securities representing undivided beneficial interests in the
trust to FleetBoston Financial Corporation;
-- use the proceeds from these sales to buy an equal principal amount of
junior subordinated debentures of FleetBoston Financial Corporation;
-- distribute the cash payments it receives on the junior subordinated
debentures it owns to the holders of the preferred and common securities;
and
-- engage in other activities necessary or incidental to the previously
described activities.
DISTRIBUTIONS:
-- For each preferred security that you own, you will receive cumulative cash
distributions at a rate set forth in the accompanying prospectus
supplement on the liquidation amount of the preferred security. The
liquidation amount per preferred security will be set forth in the
accompanying prospectus supplement.
FLEETBOSTON FINANCIAL CORPORATION:
-- FleetBoston Financial Corporation will fully and unconditionally guarantee
the payment by the trust of the preferred securities based on obligations
discussed in this prospectus. This is called the preferred securities
guarantee.
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplements carefully before
you invest.
A security is not a deposit and the securities are not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other governmental agency.
This prospectus may be used to offer and sell securities only if accompanied by
the prospectus supplement for those securities.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is November 21, 2001.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the securities we are offering in two
separate documents that progressively provide more detail:
- this prospectus, which provides general information, some of which may
not apply to your securities; and
- the accompanying prospectus supplement, which describes the specific and
final terms of your securities.
IF THE TERMS OF YOUR SECURITIES VARY BETWEEN THE PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THE FOLLOWING
ORDER OF PRIORITY:
- THE PROSPECTUS SUPPLEMENT; AND
- THE PROSPECTUS.
We include cross-references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The Table of Contents included in the accompanying
prospectus supplement provide the pages on which these captions are located.
------------------------
Unless indicated in the applicable prospectus supplement, neither we nor
the underwriters have taken any action that would permit us to publicly sell
these securities in any jurisdiction outside the United States. If you are an
investor outside the United States, you should inform yourself about and comply
with any restrictions as to the offering of the securities and the distribution
of this prospectus.
i
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, the "SEC," utilizing a "shelf" registration
process. Under this shelf process, we may from time to time sell any combination
of the securities described in this prospectus in one or more offerings up to a
total dollar amount of $4,131,868,750. We may also sell other securities under
the registration statement that will reduce the total dollar amount of
securities that we may sell under this prospectus. This prospectus provides you
with a general description of the securities we may offer. Each time we sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information."
Unless otherwise indicated or unless the context requires otherwise, all
references in this prospectus to "FLEETBOSTON," "WE," "US," "OUR" or similar
references mean FleetBoston Financial Corporation.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement under the Securities
Act of 1933 that registers, among other securities, the offer and sale of the
securities offered by this prospectus. The registration statement, including the
attached exhibits and schedules, contains additional relevant information about
us. The rules and regulations of the SEC allow us to omit certain information
included in the registration statement from this prospectus.
In addition, we file reports, proxy statements and other information with
the SEC under the Securities Exchange Act of 1934. You may read and copy this
information at the following locations of the SEC:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Northeast Regional Office
233 Broadway
New York, New York 10007
Midwest Regional Office
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330.
The SEC also maintains an internet world wide web site that contains
reports, proxy statements and other information about issuers, like us, who file
electronically with the SEC. The address of that site is:
http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005 and the Boston Stock Exchange, 100 Franklin Street, Boston,
Massachusetts 02110.
The SEC allows us to "INCORPORATE BY REFERENCE" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this prospectus, except
for any information that is superseded by information that is included directly
in this document or in a more recent incorporated document.
2
This prospectus incorporates by reference the documents listed below that
we have previously filed with the SEC. They contain important information about
us and our financial condition.
SEC FILINGS PERIOD
----------- ------
Annual Report on Form 10-K.............................. Year ended December 31, 2000, as
filed on February 28, 2001
Quarterly Reports on Form 10-Q.......................... Quarter ended March 31, 2001, as
filed on May 15, 2001
Quarter ended June 30, 2001, as
filed on August 14, 2001
Quarter ended September 30, 2001 as
filed on November 14, 2001
The description of FleetBoston common stock set forth in
the FleetBoston registration statement filed by
Industrial National Corporation (predecessor to
FleetBoston) on Form 8-B dated May 29, 1970, and any
amendment or report filed for the purpose of updating
that description; and
Current Reports on Form 8-K............................. Filed:
-January 17, 2001
-March 1, 2001
-March 14, 2001
-April 17, 2001
-May 4, 2001
-July 18, 2001
-September 17, 2001
-September 26, 2001
-October 17, 2001
-October 19, 2001, as amended by a
Form 8-K/A filed October 23, 2001
-November 19, 2001
We incorporate by reference additional documents that we may file with the
SEC between the date of this prospectus and the date we sell all of the
securities. These documents include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document through us, or from the SEC through the SEC's Internet world wide web
site at the address described above. Documents incorporated by reference are
available from us without charge, excluding any exhibits to those documents,
unless the exhibit is specifically incorporated by reference as an exhibit in
this prospectus. You can obtain documents incorporated by reference in this
prospectus by requesting them in writing or by telephone from us at the
following address:
Investor Relations Department
FleetBoston Financial Corporation
P.O. Box 2016, MA DE 10034F
Boston, Massachusetts 02106-2106
(617) 434-7858
We have not authorized anyone to give any information or make any
representation about us that is different from, or in addition to, those
contained in this prospectus or in any of the materials that we have
incorporated into this prospectus. If anyone does give you information of this
sort, you should not rely on it. If you are in a jurisdiction where offers to
sell, or solicitations of offers to purchase, the securities offered by this
document are unlawful, or if you are a person to whom it is unlawful to direct
these types of activities, then the offer presented in this document does not
extend to you. The information contained in this document speaks only as of the
date of this document unless the information specifically indicates that another
date applies.
We have not included separate financial statements of the trusts in this
prospectus. FleetBoston does not believe that holders of the preferred
securities would find these financial statements helpful because:
- all of the voting securities of each of the trusts will be owned,
directly or indi-
3
rectly, by FleetBoston, a reporting company under the Securities Exchange
Act of 1934;
- each of the trusts has no independent assets, operations, revenues or
cash flows and exists for the sole purpose of issuing the preferred
securities and the common securities, investing the proceeds in junior
subordinated debentures issued by FleetBoston, distributing the cash
payments received on the junior subordinated debentures to the holders of
the preferred and common securities, and engaging in other activities
necessary or incidental to these activities; and
- FleetBoston's obligations described in this prospectus and in any
accompanying prospectus supplement constitute a full and unconditional
guarantee of payments due on the preferred securities.
The trusts do not file reports with the SEC.
FORWARD-LOOKING STATEMENTS
This prospectus, including information included or incorporated by
reference, contains certain forward-looking statements with respect to
FleetBoston's financial condition, results of operations, plans, objectives,
future performance and business, including, without limitation statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "estimates" or similar expressions.
These forward-looking statements involve risks and uncertainties. Actual
results may differ materially from those contemplated by the forward-looking
statements due to many factors, including:
- general political and economic conditions, either domestically or
internationally or in the states in which we are doing business, may be
less favorable than expected;
- the adverse economic effects of the recent terrorist attacks against the
United States and the response of the United States to those attacks may
be greater than expected;
- Latin American economies, particularly the economy of Argentina, may
continue to exhibit weakness and may also adversely impact the economies
of other countries;
- credit quality may continue to deteriorate, resulting in an increase in
the level of FleetBoston's nonperforming assets and chargeoffs;
- interest rate and currency fluctuations, equity and bond market
fluctuations and perceptions, and inflation may be greater than expected;
- global capital markets in general, and the technology and
telecommunication industries in particular, may continue to exhibit
weakness, adversely affecting FleetBoston's principal investing and other
capital markets businesses;
- competitive product and pricing pressures among financial institutions
within FleetBoston's markets may increase significantly;
- legislative or regulatory developments, including regulations adopted
under the Gramm-Leach-Bliley Act and other changes in laws concerning
taxes, banking, securities, insurance and other aspects of the financial
services industry, may adversely affect our business;
- technological changes, including the impact of the Internet on our
business, may be more difficult or expensive than anticipated;
- expected cost savings from mergers, acquisitions and integrations of
acquired businesses and cost saving initiatives may not be fully realized
or may not be realized within the expected time frames; and
- the level of costs or difficulties related to the integration of acquired
businesses may be greater than expected.
4
FLEETBOSTON FINANCIAL CORPORATION
We are a diversified financial services company offering a comprehensive
array of financial solutions to approximately 20 million customers in more than
20 countries. Among our key lines of business are:
- Consumer and Investment Services -- includes domestic retail banking to
consumer and small business customers, community banking, student loan
processing, credit card services, and investment management and retail
brokerage services, including mutual funds and investments, retirement
planning, large institutional asset management and not-for-profit
investment services;
- Wholesale and Global Banking -- includes commercial finance, including
asset-based lending and leasing; international banking in key Latin
American markets; corporate banking, including specialized industry and
institutional lending; and middle market lending, including commercial
lending, government banking services, trade services and cash management;
- Capital Markets -- includes investment banking services, brokerage
market-making and principal investing.
On March 1, 2001, we completed our acquisition of Summit Bancorp, which was
accounted for as a pooling of interests. All financial information set forth or
incorporated by reference in this prospectus and the accompanying prospectus
supplement has been restated for all periods to give effect to the Summit
acquisition.
At September 30, 2001, our total assets on a consolidated basis were $201.9
billion, our consolidated total deposits were $126.4 billion and our
consolidated total stockholders' equity was $19.8 billion. Based on total
assets, we are the seventh largest financial holding company in the United
States.
Our principal office is located at 100 Federal Street, Boston,
Massachusetts 02110, telephone number (617) 434-2200.
THE TRUSTS
Each of the trusts is a statutory business trust formed under Delaware law
pursuant to a declaration of trust, each a "DECLARATION," executed by
FleetBoston, as sponsor for the trust and the Fleet Capital trustees, as defined
below, for the trust and the filing of a certificate of trust with the Delaware
Secretary of State.
Each trust exists for the exclusive purposes of:
- issuing the preferred securities and common securities representing
undivided beneficial interests in the assets of the trust;
- investing the gross proceeds of the preferred securities and the common
securities, together the "TRUST SECURITIES," in junior subordinated
debentures; and
- engaging in only those other activities necessary or incidental to the
activities described in the previous two bullets.
All of the common securities will be directly or indirectly owned by
FleetBoston. The common securities of each trust will rank equally, and payments
will be made pro rata with the preferred securities of that trust, except that
upon an event of default under the declaration, the rights of the holders of the
common securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the preferred securities. FleetBoston will, directly or indirectly,
acquire common securities of each trust in an aggregate liquidation amount equal
to at least three percent of the total capital of each trust.
5
Each trust's business and affairs will be conducted by the trustees, the
"FLEET CAPITAL TRUSTEES," appointed by FleetBoston, as the direct or indirect
holder of all the common securities. The holder of the common securities will be
entitled to appoint, remove or replace any of, or increase or reduce the number
of, the Fleet Capital trustees of a trust. The duties and obligations of the
Fleet Capital trustees will be governed by the declaration of that Fleet Capital
trust. One or more of the Fleet Capital trustees for each trust will be persons
who are employees or officers of or affiliated with FleetBoston, the "REGULAR
TRUSTEES." One Fleet Capital trustee of each trust will be a financial
institution which will be unaffiliated with FleetBoston and which will act as
institutional trustee under the declaration and as indenture trustee for
purposes of the Trust Indenture Act of 1939, as amended, the "TRUST INDENTURE
ACT," pursuant to the terms set forth in a prospectus supplement. In addition,
unless the institutional trustee maintains a principal place of business in the
State of Delaware, and otherwise meets the requirements of applicable law, one
Fleet Capital trustee of each trust will have its principal place of business or
reside in the State of Delaware.
Each Fleet Capital trust has a term of approximately 55 years, but may
terminate earlier as provided in the applicable declaration.
FleetBoston will pay all fees and expenses related to the Fleet Capital
trusts and the offering of trust securities.
The office of the Delaware trustee for each trust in the State of Delaware,
and its principal place of business is, The Bank of New York (Delaware), White
Clay Center, Route 273, Newark, Delaware 19711. The principal place of business
of each trust will be c/o FleetBoston Financial Corporation, 100 Federal Street,
Boston, Massachusetts 02110, telephone number (617) 434-2200.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
FleetBoston's consolidated ratios of earnings to fixed charges were as
follows for the five most recent fiscal years and the nine months ended
September 30, 2001:
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------
2001 2000 1999 1998 1997 1996
----------------- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges:
Excluding Interest on Deposits... 2.00x 2.58x 2.23x 2.65x 3.01x 2.81x
Including Interest on Deposits... 1.45 1.75 1.54 1.63 1.70 1.59
-------------------------
For the purpose of computing the ratio of earnings to fixed charges,
"EARNINGS" consist of income before income taxes plus fixed charges, excluding
capitalized interest. "FIXED CHARGES" consist of interest on short-term debt and
long-term debt, including interest related to capitalized leases and capitalized
interest, and one-third of rent expense, which approximates the interest
component of that expense. In addition, where indicated, fixed charges include
interest on deposits.
6
USE OF PROCEEDS
Each trust will use the proceeds of the sale of the trust securities to
acquire junior subordinated debentures from FleetBoston. FleetBoston intends to
use the net proceeds from the sale of the junior subordinated debentures for
general corporate purposes unless otherwise indicated in the prospectus
supplement. FleetBoston's general corporate purposes may include extending
credit to, or funding investments in, its subsidiaries. The precise amounts and
the timing of FleetBoston's use of the net proceeds will depend upon its
subsidiaries' funding requirements and the availability of other funds. Until
FleetBoston uses the net proceeds for general corporate purposes, it will use
the net proceeds to reduce its short-term indebtedness or for temporary
investments. FleetBoston expects that it will, on a recurrent basis, engage in
additional financings as the need arises to finance its growth, through
acquisitions or otherwise, or to fund its subsidiaries.
REGULATION AND SUPERVISION
As a financial holding company, FleetBoston is subject to inspection,
examination and supervision by the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended by the Gramm-Leach-Bliley Act (the "GLB Act"),
which is discussed below under "-- The GLB Act." FleetBoston's banking
subsidiaries are subject to extensive supervision, examination and regulation by
various bank regulatory authorities and other governmental agencies in the
states and countries where FleetBoston and its subsidiaries operate. Because
FleetBoston is a holding company, its rights and the rights of its creditors,
including Fleet Capital, as the holder of the junior subordinated debentures, as
well as any other holders of the securities FleetBoston is offering under this
prospectus, to participate in the assets of any of its subsidiaries upon the
subsidiary's liquidation or reorganization will be subject to the prior claims
of the subsidiary's creditors except to the extent that FleetBoston may itself
be a creditor with recognized claims against the subsidiary. In addition,
dividends, loans and advances from certain of FleetBoston's banking subsidiaries
to FleetBoston and its non-banking subsidiaries are restricted by federal and
state statutes and regulations. In addition, there are various statutory and
regulatory limitations on the extent to which FleetBoston's banking subsidiaries
can finance or otherwise transfer funds to FleetBoston or to its nonbanking
subsidiaries, whether in the form of loans, extensions of credit, investments or
asset purchases. Those transfers by any subsidiary bank to FleetBoston or a
nonbanking subsidiary are limited in amount to 10% of the bank's capital and
surplus and, with respect to FleetBoston and all such nonbanking subsidiaries,
to an aggregate of 20% of each such bank's capital and surplus. Furthermore,
loans and extensions of credit are required to be secured in specified amounts
and are required to be on terms and conditions consistent with safe and sound
banking practices.
In addition, there are regulatory limitations on the payment of dividends
directly or indirectly to FleetBoston from its banking subsidiaries. Under
applicable banking statutes, at September 30, 2001, FleetBoston's banking
subsidiaries could have declared additional dividends of approximately $786
million without prior regulatory approval. Federal and state regulatory agencies
also have the authority to limit further FleetBoston's banking subsidiaries'
payment of dividends based on other factors, such as the maintenance of adequate
capital for such subsidiary bank.
Under the policy of the Federal Reserve Board, FleetBoston is expected to
act as a source of financial strength to each subsidiary bank and to commit
resources to support such subsidiary bank in circumstances where it might not do
so absent such policy. In addition, any subordinated loans by FleetBoston to any
of its subsidiary banks would also be subordinate in right of payment to
depositors and obligations to other creditors of such subsidiary bank. Further,
the Crime Control Act of 1990
7
amended the federal bankruptcy laws to provide that, in the event of
FleetBoston's bankruptcy, any commitment by it to its regulators to maintain the
capital of a banking subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
For a discussion of the material elements of the regulatory framework
applicable to financial holding companies, bank holding companies and their
subsidiaries, and specific information relevant to FleetBoston, refer to
FleetBoston's Annual Report on Form 10-K for the year ended December 31, 2000
and any other subsequent reports filed by FleetBoston with the SEC, which are
incorporated by reference in this prospectus. This regulatory framework is
intended primarily for the protection of depositors and the deposit insurance
funds that insure deposits of banks, rather than for the protection of security
holders. A change in the statutes, regulations or regulatory policies applicable
to FleetBoston or its subsidiaries may have a material effect on its business.
THE GLB ACT
The GLB Act, enacted in 1999, eliminates many of the restrictions placed on
the activities of certain qualified bank holding companies. A bank holding
company that qualifies as a "financial holding company" can expand into a wide
variety of financial services, including securities activities, insurance, and
merchant banking without the prior approval of the Federal Reserve Board.
FleetBoston's election to become a "financial holding company," which was filed
with the Federal Reserve Board, became effective on March 13, 2000.
Banks are also authorized by the GLB Act to engage, through "financial
subsidiaries," in certain activities that are permissible for a financial
holding company and other activities that its applicable regulators deem to be
financial in nature or incidental to any such financial activity. The authority
of a bank to invest in a financial subsidiary is subject to a number of
conditions.
The GLB Act also contains a number of other provisions that will affect
FleetBoston's operations and the operations of all financial institutions. At
this time, FleetBoston does not believe that the GLB Act will have a material
adverse impact upon it or its subsidiaries' financial condition or results of
operations.
FUTURE LEGISLATION
Changes to the laws and regulations in the states and countries where
FleetBoston and its subsidiaries do business can affect the operating
environment of financial holding companies and their subsidiaries in substantial
and unpredictable ways. FleetBoston cannot accurately predict whether those
changes in laws and regulations will occur and, if those changes occur, the
ultimate effect that they would have upon it or its subsidiaries' financial
condition or results of operations.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
FleetBoston may issue junior subordinated debentures from time to time in
one or more series under a base indenture, between FleetBoston and The Bank of
New York, as trustee, the "DEBT TRUSTEE," as supplemented by a supplemental
indenture or a resolution of FleetBoston's board of directors or a special
committee appointed by the board of directors. The base indenture, as
supplemented by the supplemental indenture is called the "INDENTURE." The terms
of the junior subordinated debentures will include those stated in the indenture
and those made part of the indenture by reference to the Trust Indenture Act.
Set forth below is a description of the general terms of the junior
subordinated debentures in which the trusts will invest the proceeds from the
issuance and sale of the trust securities. The particular terms of the junior
subordinated debentures will be described in the prospectus supplement relating
to the particular preferred securities being offered. The following description
is not intended to be complete and is qualified by the indenture, the form of
which
8
is filed as an exhibit to the registration statement which contains this
prospectus, and by the Trust Indenture Act.
GENERAL
The junior subordinated debentures will be issued as unsecured debt of
FleetBoston. The junior subordinated debentures will be fully subordinated as
described in the accompanying prospectus supplement under "Subordination." The
indenture does not limit the aggregate principal amount of junior subordinated
debentures which may be issued and provides that the junior subordinated
debentures may be issued from time to time in one or more series.
The prospectus supplement relating to the particular junior subordinated
debentures being offered will describe the terms of those securities, which may
include:
- the designation of the junior subordinated debentures;
- the aggregate principal amount of the junior subordinated debentures;
- the percentage of their principal amount at which the junior subordinated
debentures will be issued;
- the date or dates on which the junior subordinated debentures will mature
and the right, if any, to shorten or extend the maturity date or dates;
- the rate or rates, if any, per annum, at which the junior subordinated
debentures will bear interest, or the method of determination of the
interest rate or rates;
- the date or dates from which interest will accrue and the interest
payment and record dates;
- the right, if any, to extend the interest payment periods and the
duration of that extension;
- provisions, if any, for a sinking purchase or other analogous fund;
- any provisions for redemption; and
- any other specific terms of the junior subordinated debentures.
If a prospectus supplement specifies that the junior subordinated
debentures will be denominated in a currency or currency unit other than United
States dollars, the prospectus supplement will also specify the denomination in
which the junior subordinated debentures will be issued and the coin or currency
in which the principal, premium, if any, and interest, if any, on the junior
subordinated debentures will be payable, which may be United States dollars
based upon the exchange rate for that other currency or currency unit existing
on or about the time a payment is due.
ADDITIONAL INTEREST
If, at any time a trust is required to pay any taxes, duties, assessments
or governmental charges of whatever nature, other than withholding taxes,
imposed by the United States, or any other taxing authority, then FleetBoston
will be required to pay additional interest on the junior subordinated
debentures. The amount of any additional interest will be an amount sufficient
so that the net amounts received and retained by the trust after paying any such
taxes, duties, assessments or other governmental charges will be not less than
the amounts that the trust would have received had no such taxes, duties,
assessments or other governmental charges been imposed. This means that the
trust will be in the same position it would have been in if it did not have to
pay those taxes, duties, assessments or other charges.
FORM, EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable prospectus supplement,
FleetBoston will issue the junior subordinated debentures in registered form
only, without coupons and in denominations of $1,000 and multiples of $1,000. No
service charge will be made for any transfer or exchange of the junior
subordinated debentures. However, FleetBoston or the debt trustee may require a
holder to pay an amount sufficient to cover any tax or other govern-
9
mental charge payable in connection with a transfer or exchange.
FleetBoston will pay or deliver principal and any premium and interest in
the manner, at the places and subject to the restrictions set forth in the
indenture and the prospectus supplement. However, at FleetBoston's option, it
may pay any interest by check mailed to the holders of registered junior
subordinated debentures at their registered addresses.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The indenture provides that FleetBoston may issue junior subordinated
debentures in global form. If any series of junior subordinated debentures is
issued in global form, the applicable prospectus supplement will describe the
circumstances, if any, under which beneficial owners of interests in any of
those global junior subordinated debentures may exchange their interest for
junior subordinated debentures of that series and of like tenor and principal
amount in any authorized form and denomination.
SUBORDINATION
The junior subordinated debentures will be subordinated and junior in right
of payment to certain other indebtedness of FleetBoston to the extent set forth
in the applicable prospectus supplement.
CERTAIN COVENANTS OF FLEETBOSTON
If junior subordinated debentures are issued to a trust or a trustee of a
trust in connection with the issuance of trust securities by a trust and:
- an event of default has occurred and is continuing;
- FleetBoston is in default relating to its payment of any obligations
under the guarantee; or
- FleetBoston has given notice of its election to defer payments of
interest on the junior subordinated debentures by extending the interest
payment period and that period, or any extension of that period, is
continuing;
then
- FleetBoston will not declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a
liquidation payment relating to, any of its capital stock or make any
guarantee payment with respect to it other than:
(1) repurchases, redemptions or other acquisitions of shares of
capital stock of FleetBoston in connection with any employee
benefit plans or any other contractual obligation of FleetBoston,
other than a contractual obligation ranking equally with or junior
to the junior subordinated debentures;
(2) as a result of an exchange or conversion of any class or series of
FleetBoston's capital stock for any other class or series of
FleetBoston's capital stock; or
(3) the purchase of fractional interests in shares of FleetBoston's
capital stock pursuant to the conversion or exchange provisions of
that FleetBoston capital stock or the security being converted or
exchanged; and
- FleetBoston will not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities issued by
FleetBoston which rank equally with or junior to the junior subordinated
debentures.
So long as the junior subordinated debentures remain outstanding, FleetBoston
will covenant to:
- directly or indirectly maintain 100 percent ownership of the common
securities of the trust, unless a permitted successor of FleetBoston
succeeds to its ownership of the common securities;
10
- use its reasonable efforts to cause the trust to
(1) remain a statutory business trust, except in connection with the
distribution of junior subordinated debentures to the holders of
trust securities in liquidation of the trust, the redemption of
all of the trust securities of the trust, or mergers,
consolidations or amalgamations, each as permitted by the
declaration which established the trust; and
(2) otherwise continue to be classified as a grantor trust for United
States federal income tax purposes; and
- use its reasonable efforts to cause each holder of trust securities to be
treated as owning an undivided beneficial interest in the junior
subordinated debentures.
LIMITATION ON MERGERS AND SALES OF ASSETS
The indenture provides that FleetBoston may not consolidate with, or merge
into, any other corporation or convey or transfer its properties and assets
substantially as an entirety unless:
- the successor entity is a corporation organized in the United States and
expressly assumes the obligations of FleetBoston under the indenture; and
- after giving effect to the transaction, no event of default and no event
which, after notice or lapse of time, or both, would become an event of
default, has occurred and is continuing under the indenture.
The covenants contained in the indenture would not necessarily afford
protection to holders of the junior subordinated debentures in the event of a
decline in credit quality resulting from takeovers, recapitalizations or similar
restructurings.
EVENTS OF DEFAULT, WAIVER AND NOTICE
The indenture provides that the following are events of default relating to
the junior subordinated debentures:
- default in the payment of the principal of, or premium, if any, on, any
junior subordinated debenture at its maturity;
- default for 30 days in the payment of any installment of interest on any
junior subordinated debenture;
- default for 90 days after written notice in the performance of any other
covenant in respect of the junior subordinated debenture;
- specified events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of FleetBoston or, with
certain exceptions, the trust; and
- any other event of default provided in the applicable resolution of the
board of directors or supplemental indenture under which the junior
subordinated debentures are issued.
If an indenture event of default occurs and is continuing, either the debt
trustee or the holders of not less than 25 percent in aggregate principal amount
of the junior subordinated debentures of that series then outstanding may
declare the principal of all junior subordinated debentures of that series to be
due and payable immediately.
The holders of a majority in aggregate outstanding principal amount of that
series of junior subordinated debentures may annul the declaration and waive the
default if the default has been cured and a sum sufficient to pay all matured
installments of interest and principal due other than by acceleration has been
deposited with the debt trustee. The majority holders may not waive a payment
default on the junior subordinated debentures which has become due solely by
acceleration.
The holders of a majority in principal amount of the junior subordinated
debentures of any series affected will have the right to direct
11
the time, method and place of conducting any proceeding for any remedy available
to the debt trustee under the indenture, so long as the holders of the junior
subordinated debentures have offered to the debt trustee indemnity satisfactory
to it against expenses and liabilities.
The indenture requires the annual filing by FleetBoston with the debt
trustee of a certificate as to the absence of certain defaults under the
indenture.
The debt trustee may withhold notice of any event of default from the
holders of the junior subordinated debentures, except in the payment of
principal, interest or premium, if the trustee considers it in the interest of
those holders to do so.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
Under circumstances discussed more fully in the prospectus supplement
involving the dissolution of a trust, provided that any required regulatory
approval is obtained, junior subordinated debentures will be distributed to the
holders of the trust securities in liquidation of that trust. See "Description
of the Preferred Securities -- Distribution of the Junior Subordinated
Debentures" in the accompanying prospectus supplement.
If the junior subordinated debentures are distributed to the holders of the
preferred securities, FleetBoston will use its best efforts to have the junior
subordinated debentures listed on the NYSE or on such other national securities
exchange or similar organization on which the preferred securities are then
listed or quoted.
MODIFICATION OF THE INDENTURE
Modifications and amendments to the indenture may be made by FleetBoston
and the debt trustee with the consent of the holders of a majority in principal
amount of the junior subordinated debentures at the time outstanding. However,
no such modification or amendment may, without the consent of the holder of each
junior subordinated debenture affected:
- modify the payment terms of the junior subordinated debentures;
- reduce the percentage of holders of junior subordinated debentures
necessary to modify or amend the indenture or waive compliance by
FleetBoston with any covenant or past default; or
- otherwise materially adversely affect the interests of the holders of any
series of junior subordinated debentures.
If the junior subordinated debentures are held by a trust or a trustee of a
trust, the supplemental indenture will not be effective until the holders of a
majority in liquidation preference of trust securities of that trust have
consented to the supplemental indenture.
If the consent of the holder of each outstanding junior subordinated
debenture is required, the supplemental indenture will not be effective until
each holder of the trust securities of that trust has consented to the
supplemental indenture.
DEFEASANCE AND DISCHARGE
The indenture provides that FleetBoston, at its option:
(a) will be discharged from all obligations in respect of the junior
subordinated debentures of a series, except for obligations to register
the transfer or exchange of junior subordinated debentures, replace
stolen, lost or mutilated junior subordinated debentures, maintain
paying agencies and hold moneys for payment in trust; or
(b) need not comply with specified restrictive covenants of the indenture;
in each case if FleetBoston deposits, in trust, money or U.S. government
obligations in an amount sufficient to pay all the principal of, and interest
and premium, if any, on, the junior subordinated debentures when those payments
are due.
12
To exercise any such option, FleetBoston is required to deliver an opinion
of counsel that:
- the deposit and related defeasance would not cause the holders of the
junior subordinated debentures of that series to recognize income, gain
or loss for U.S. federal income tax purposes and, in the case of a
discharge pursuant to clause (a) above, the opinion will be accompanied
by a private letter ruling to that effect received by FleetBoston from
the United States Internal Revenue Service or a revenue ruling pertaining
to a comparable form of transaction to that effect published by the
United States Internal Revenue Service; and
- if listed on any national securities exchange, the junior subordinated
debentures would not be delisted from that exchange as a result of the
exercise of the defeasance option.
GOVERNING LAW
The indenture and the junior subordinated debentures will be governed by,
and construed in accordance with, the internal laws of the State of New York.
THE DEBT TRUSTEE
FleetBoston or its affiliates maintain certain accounts and other banking
relationships with the debt trustee and its affiliates in the ordinary course of
business.
The occurrence of any default under either of the indenture or the senior
or subordinated indentures between FleetBoston and the debt trustee relating to
FleetBoston's senior and subordinated debt securities which may also be issued
under the registration statement could create a conflicting interest for the
trustee under the Trust Indenture Act. If that default has not been cured or
waived within 90 days after the trustee has acquired a conflicting interest, the
trustee would generally be required by the Trust Indenture Act to eliminate the
conflicting interest or resign as trustee with respect to the debt securities
issued under the senior indenture or the subordinated indenture or with respect
to the junior subordinated debentures issued under the indenture. If the trustee
resigns, FleetBoston is required to promptly appoint a successor trustee with
respect to the affected securities.
The Trust Indenture Act also imposes certain limitations on the right of
the trustee, as a creditor of FleetBoston, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any cash
claim or otherwise. The trustee will be permitted to engage in other
transactions with FleetBoston, provided that if it acquires a conflicting
interest within the meaning of section 310 of the Trust Indenture Act, it must
generally either eliminate that conflict or resign.
DESCRIPTION OF THE PREFERRED SECURITIES
Each trust may issue, from time to time, only one series of preferred
securities having terms described in the accompanying prospectus supplement.
Each series of preferred securities will be issued pursuant to the terms of an
amended and restated declaration of trust, a "DECLARATION." Each declaration
will be qualified as an indenture under the Trust Indenture Act. The Bank of New
York will act as trustee under the declaration for purposes of compliance with
the provisions of the Trust Indenture Act.
The preferred securities will have those terms, including distribution,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as will be set forth in the
declaration or made part of the declaration by the Trust Indenture Act and which
will mirror the terms of the junior subordinated debentures held by the trust
and described in the accompanying prospectus supplement. Those terms may
include:
- the distinctive designation of the preferred securities;
- the number of preferred securities issuable by the trust;
13
- the annual distribution rate, or method of determining that rate, for
preferred securities and the date or dates upon which those distributions
will be payable;
- whether distributions on preferred securities will be cumulative, and, if
so, the date or dates or method of determining the date or dates from
which distributions on preferred securities will be cumulative;
- the amount or amounts which will be paid out of the assets of the trust
to the holders of preferred securities upon voluntary or involuntary
dissolution, winding-up or termination of the trust;
- the obligation, if any, of the trust to purchase or redeem preferred
securities issued by the trust and the price or prices at which, the
period or periods within which, and the terms and conditions upon which,
preferred securities issued by the trust will be purchased or redeemed,
in whole or in part, pursuant to that obligation;
- the voting rights, if any, of holders of preferred securities in addition
to those required by law or described in this prospectus supplement,
including the number of votes per preferred security and any requirement
for the approval by the holders of preferred securities, or of preferred
securities issued by one or more other trusts, or of both, as a condition
to specified action or amendments to the declaration of the trust;
- the terms and conditions, if any, upon which the junior subordinated
debentures owned by the trust may be distributed to holders of preferred
securities;
- if applicable, any securities exchange upon which the preferred
securities will be listed; and
- any other relevant rights, preferences, privileges, limitations or
restrictions of preferred securities not inconsistent with the
declaration or with applicable law.
All preferred securities will be guaranteed by FleetBoston to the extent
set forth below under "Description of the Preferred Securities Guarantees."
Certain United States federal income tax considerations applicable to any
offering of preferred securities will be described in the prospectus supplement
relating to the offering.
VOTING RIGHTS
Except as described in this prospectus, under the Delaware Business Trust
Act, the Trust Indenture Act, under "Description of the Preferred Securities
Guarantees -- Modification of the Preferred Securities Guarantees; Assignment"
in this prospectus, and under any prospectus supplement relating to the issuance
of a series of preferred securities, and as otherwise required by law and the
declarations, the holders of the preferred securities will have no voting
rights.
The holders of a majority in aggregate liquidation amount of the preferred
securities have the right to direct any proceeding for any remedy available to
the institutional trustee so long as the institutional trustee receives the tax
opinion discussed below. The holders also have the right to direct the
institutional trustee under the declaration to:
(1) direct any proceeding for any remedy available to the debt trustee, or
exercising any trust or power conferred on the debt trustee;
(2) waive any past indenture event of default that is waivable under the
indenture;
(3) exercise any right to rescind or annul an acceleration of the maturity
of the junior subordinated debentures; or
(4) consent to any amendment, modification or termination where that
consent is required.
If there is an event of default on the preferred securities, and that
default is a result of a payment default under the junior subordinated
debentures, the holders of the preferred securities may also sue FleetBoston
directly, a
14
"DIRECT ACTION," to enforce payment of the principal of or interest on the
junior subordinated debentures having a principal amount equal to the aggregate
liquidation amount of the preferred securities of the holder on or after the due
date specified in the junior subordinated debentures.
Where a consent or action under the indenture would require the consent or
act of holders of more than a majority in principal amount of the junior
subordinated debentures, or a "SUPER MAJORITY," then only a super majority may
direct the institutional trustee to give that consent or take that action. Where
a consent or action under the indenture would require the consent or act of
individual holders of the junior subordinated debentures, then only those
individual holders may direct the institutional trustee to give that consent or
take that action. If the institutional trustee fails to enforce its rights under
the junior subordinated debentures, any record holder of preferred securities
may directly sue FleetBoston to enforce the institutional trustee's rights under
the junior subordinated debentures. The record holder does not have to sue the
institutional trustee or any other person or entity before enforcing his or her
rights.
The institutional trustee is required to notify all holders of the
preferred securities of any notice of default received from the indenture
trustee. The notice is required to state that the event of default also
constitutes a declaration event of default. Except for directing the time,
method and place of conducting a proceeding for a remedy available to the
institutional trustee, the institutional trustee will not take any of the
actions described in clauses (1), (2), (3) or (4) above unless the institutional
trustee receives an opinion of a nationally recognized independent tax counsel.
The opinion must state that, as a result of that action, the trust will not fail
to be classified as a grantor trust for United States federal income tax
purposes.
If the consent of the institutional trustee is required under the indenture
for any amendment, modification or termination of the indenture, the
institutional trustee is required to request the written direction of the
holders of the trust securities. In that case, the institutional trustee will
vote as directed by a majority in liquidation amount of the trust securities
voting together as a single class. Where any amendment, modification or
termination under the indenture would require the consent of a super majority or
an individual holder, however, the institutional trustee may only give that
consent at the direction of the holders of the same super majority of the
holders of the trust securities or that individual holder, as applicable. The
institutional trustee is not required to take any such action in accordance with
the directions of the holders of the trust securities unless the institutional
trustee has obtained a tax opinion to the effect described above.
A waiver of an indenture event of default by the institutional trustee at
the direction of the holders of the preferred securities will constitute a
waiver of the corresponding declaration event of default.
Holders of the preferred securities may give any required approval or
direction at a separate meeting of holders of preferred securities convened for
that purpose, at a meeting of all of the holders of trust securities or by
written consent. The regular trustees will mail to each holder of record of
preferred securities a notice of any meeting at which those holders are entitled
to vote, or of any matter upon which action by written consent of those holders
is to be taken. Each such notice will include a statement setting forth the
following information:
- the date of the meeting or the date by which the action is to be taken;
- a description of any resolution proposed for adoption at the meeting on
which those holders are entitled to vote or of the matter upon which
written consent is sought; and
- instructions for the delivery of proxies or consents.
No vote or consent of the holders of preferred securities will be required
for a trust to redeem and cancel preferred securities or
15
distribute junior subordinated debentures in accordance with the declaration.
Despite the fact that holders of preferred securities are entitled to vote
or consent under the circumstances described above, any of the preferred
securities that are owned at the time by FleetBoston or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, FleetBoston, will not be entitled to vote or consent. Instead,
these preferred securities will be treated as if they were not outstanding.
Holders of the preferred securities generally will have no rights to
appoint or remove the regular trustees. Instead, the trustees may be appointed,
removed or replaced solely by FleetBoston as the indirect or direct holder of
all of the common securities.
COMMON SECURITIES
In connection with the issuance of preferred securities, each trust will
issue one series of common securities having the terms including distributions,
redemption, voting, liquidation rights or such restrictions as will be set forth
in the prospectus supplement. Except for voting rights, the terms of the common
securities will be substantially identical to the terms of the preferred
securities. The common securities will rank equally, and payments will be made
on the common securities pro rata, with the preferred securities, except that,
upon an event of default, the rights of the holders of the common securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the preferred
securities. Except in limited circumstances, the common securities of a trust
carry the right to vote to appoint, remove or replace any of the trustees of
that trust. All of the common securities of each trust will be directly or
indirectly owned by FleetBoston.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the preferred
securities guarantees which will be executed and delivered by FleetBoston for
the benefit of the holders from time to time of preferred securities. Each
preferred securities guarantee will be qualified as an indenture under the Trust
Indenture Act. The Bank of New York will act as the guarantee trustee for
purposes of the Trust Indenture Act. The terms of each preferred securities
guarantee will be those set forth in the preferred securities guarantee and
those made part of the preferred securities guarantee by the Trust Indenture
Act. The summary of the material terms of the preferred securities guarantees is
not intended to be complete and is qualified in all respects by the provisions
of the form of preferred securities guarantee which is filed as an exhibit to
the registration statement which contains this prospectus, and the Trust
Indenture Act. Each preferred securities guarantee will be held by the guarantee
trustee for the benefit of the holders of the preferred securities of the
applicable trust.
GENERAL
Pursuant to and to the extent set forth in the preferred securities
guarantee, FleetBoston will irrevocably and unconditionally agree to pay in full
to the holders of the preferred securities, except to the extent paid by the
trust, as and when due, regardless of any defense, right of set-off or
counterclaim which the trust may have or assert, the following payments, which
are referred to as "GUARANTEE PAYMENTS," without duplication:
- any accumulated and unpaid distributions that are required to be paid on
the preferred securities, to the extent the trust has funds available for
distributions;
- the redemption price, plus all accrued and unpaid distributions, to the
extent the trust has funds available for redemptions, relating to any
preferred securities called for redemption by the trust; and
- upon a voluntary or involuntary dissolution, winding-up or termination of
the
16
trust, other than in connection with the distribution of junior
subordinated debentures to the holders of preferred securities or the
redemption of all of the preferred securities, the lesser of:
- the aggregate of the liquidation amount and all accumulated and unpaid
distributions on the preferred securities to the date of payment; or
- the amount of assets of the trust remaining for distribution to holders
of the preferred securities in liquidation of the trust.
The redemption price and liquidation amount will be fixed at the time the
preferred securities are issued.
FleetBoston's obligation to make a guarantee payment may be satisfied by
direct payment of the required amounts by FleetBoston to the holders of
preferred securities or by causing the trust to pay those amounts to those
holders.
The preferred securities guarantees will not apply to any payment of
distributions except to the extent a trust will have funds available for those
payments. If FleetBoston does not make interest payments on the junior
subordinated debentures purchased by a trust, the trust will not pay
distributions on the preferred securities and will not have funds available for
those payments.
The preferred securities guarantees, when taken together with FleetBoston's
obligations under the junior subordinated debentures, the indentures and the
declarations, including its obligations to pay costs, expenses, debts and
liabilities of the trusts, other than those relating to trust securities, will
provide a full and unconditional guarantee on a subordinated basis by
FleetBoston of payments due on the preferred securities.
FleetBoston has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the trusts with respect to the common securities to
the same extent as the preferred securities guarantees, except that upon an
event of default under the indenture, holders of preferred securities will have
priority over holders of common securities with respect to distributions and
payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF FLEETBOSTON
In each preferred securities guarantee, FleetBoston will covenant that, so
long as any preferred securities remain outstanding, if any event occurs that
would constitute an event of default under the preferred securities guarantee or
the indenture of the trust, or if FleetBoston has exercised its option to defer
interest payments on the junior subordinated debentures by extending the
interest payment period and that period or extension of that period is
continuing, then:
- FleetBoston will not declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a
liquidation payment relating to, any of its capital stock or make any
guarantee payment with respect thereto other than:
(1) repurchases, redemptions or other acquisitions of shares of
capital stock of FleetBoston in connection with any employee
benefit plans or any other contractual obligation of FleetBoston,
other than a contractual obligation ranking equally with or junior
to the junior subordinated debentures;
(2) as a result of an exchange or conversion of any class or series of
FleetBoston's capital stock for any other class or series of
FleetBoston's capital stock; or
(3) the purchase of fractional interests in shares of FleetBoston's
capital stock pursuant to the conversion or exchange provisions of
that FleetBoston capital stock or the security being converted or
exchanged; and
17
- FleetBoston will not make any payment of interest, principal or premium,
if any, on, or repay, repurchase or redeem any debt securities issued by
FleetBoston which rank equally with or junior to the junior subordinated
debentures.
MODIFICATION OF THE PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
The preferred securities guarantee may be amended only with the prior
approval of the holders of not less than a majority in aggregate liquidation
amount of the outstanding preferred securities. No vote will be required,
however, for any changes that do not adversely affect the rights of holders of
preferred securities. All guarantees and agreements contained in the preferred
securities guarantee will bind the successors, assignees, receivers, trustees
and representatives of FleetBoston and will be for the benefit of the holders of
the preferred securities then outstanding.
TERMINATION
Each preferred securities guarantee will terminate upon full payment of the
redemption price of all preferred securities, upon distribution of the junior
subordinated debentures to the holders of the trust securities or upon full
payment of the amounts payable in accordance with the declaration upon
liquidation of that trust. Each preferred securities guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of preferred securities must restore payment of any sums paid under the
preferred securities or the preferred securities guarantee.
EVENTS OF DEFAULT
An event of default under a preferred securities guarantee will occur upon
the failure of FleetBoston to perform any of its payment or other obligations
under the preferred securities guarantee.
The holders of a majority in liquidation amount of the preferred securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the guarantee trustee in respect of the preferred
securities guarantee or to direct the exercise of any trust or power conferred
upon the guarantee trustee under the preferred securities guarantee. Any holder
of preferred securities may institute a legal proceeding directly against
FleetBoston to enforce the guarantee trustee's rights and the obligations of
FleetBoston under the preferred securities guarantee, without first instituting
a legal proceeding against the relevant trust, the guarantee trustee or any
other person or entity.
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The preferred securities guarantees will constitute unsecured obligations
of FleetBoston and will rank
- subordinate and junior in right of payment to all other liabilities of
FleetBoston, except those made equal or subordinate by their terms;
- equally with the most senior preferred or preference stock now or
hereafter issued by FleetBoston and with any guarantee now or hereafter
entered into by FleetBoston in respect of any preferred or preference
stock of any affiliate of FleetBoston; and
- senior to FleetBoston common stock.
The terms of the preferred securities provide that each holder of preferred
securities by acceptance of those securities agrees to the subordination
provisions and other terms of the preferred securities guarantee.
The preferred securities guarantees will constitute a guarantee of payment
and not of collection. This means that the guaranteed party may sue the
guarantor to enforce its rights under the guarantee without suing any other
person or entity.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
Prior to the occurrence of a default relating to a preferred securities
guarantee, the guarantee trustee undertakes to perform only those duties as are
specifically set forth in the
18
preferred securities guarantee. After default, the guarantee trustee will
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Provided that the foregoing requirements have
been met, the guarantee trustee is under no obligation to exercise any of the
powers vested in it by a preferred securities guarantee at the request of any
holder of preferred securities, unless offered indemnity satisfactory to it
against the costs, expenses and liabilities which might be incurred thereby.
FleetBoston or its affiliates maintain certain accounts and other banking
relationships with the guarantee trustee and its affiliates in the ordinary
course of business.
GOVERNING LAW
The preferred securities guarantees will be governed by and construed in
accordance with the internal laws of the State of New York.
EFFECT OF OBLIGATIONS UNDER THE JUNIOR SUBORDINATED
DEBENTURES AND THE PREFERRED SECURITIES GUARANTEES
As set forth in the declaration, the sole purpose of the trusts are to
issue the trust securities and to invest the proceeds from that issuance and
sale in the junior subordinated debentures.
As long as payments of interest and other payments are made when due on the
junior subordinated debentures, those payments will be sufficient to cover the
distributions and payments due on the trust securities. This is due to the
following factors:
- the aggregate principal amount of junior subordinated debentures will be
equal to the sum of the aggregate stated liquidation amount of the trust
securities;
- the interest rate and the interest and other payment dates on the junior
subordinated debentures will match the distribution rate and distribution
and other payment dates for the trust securities;
- under the indenture, FleetBoston will pay, and the trusts will not be
obligated to pay, directly or indirectly, all costs, expenses, debts and
obligations of the trusts, other than those relating to the trust
securities; and
- the declaration further provides that the FleetBoston trustees may not
cause or permit the trusts to engage in any activity that is not
consistent with the purposes of the trusts.
Payments of distributions, to the extent there are available funds, and
other payments due on the preferred securities, to the extent there are
available funds, are guaranteed by FleetBoston to the extent described in this
prospectus. If FleetBoston does not make interest payments on the junior
subordinated debentures, the trust will not have sufficient funds to pay
distributions on the preferred securities. Each preferred securities guarantee
is a subordinated guarantee in relation to the preferred securities. The
preferred securities guarantee does not apply to any payment of distributions
unless the trust has sufficient funds for the payment of those distributions.
See "Description of the Preferred Securities Guarantees."
The preferred securities guarantees cover the payment of distributions and
other payments on the preferred securities only if and to the extent that
FleetBoston has made a payment of interest or principal or other payments on the
junior subordinated debentures. The preferred securities guarantees, when taken
together with FleetBoston's obligations under the junior subordinated debentures
and the indenture and its obligations under the declaration, will provide a full
and unconditional guarantee of distributions, redemption payments and
liquidation payments on the preferred securities.
If FleetBoston fails to make interest or other payments on the junior
subordinated
19
debentures when due, taking account of any extension period, the declaration
allows the holders of the preferred securities to direct the institutional
trustee to enforce its rights under the junior subordinated debentures. If the
institutional trustee fails to enforce these rights, any holder of preferred
securities may directly sue FleetBoston to enforce these rights without first
suing the institutional trustee or any other person or entity. See "Description
of the Preferred Securities -- Book Entry Only Issuance -- The Depository Trust
Company" and "-- Voting Rights" in the accompanying prospectus supplement.
A holder of preferred securities may institute a direct action if a
declaration event of default has occurred and is continuing and that event is
attributable to the failure of FleetBoston to pay interest or principal on the
junior subordinated debentures on the date the interest or principal is
otherwise payable. A direct action may be brought without first (1) directing
the institutional trustee to enforce the terms of the junior subordinated
debentures or (2) suing FleetBoston to enforce the institutional trustee's
rights under the junior subordinated debentures. In connection with that direct
action, FleetBoston will be subrogated to the rights of the holder of preferred
securities under the declaration to the extent of any payment made by
FleetBoston to that holder of preferred securities. Consequently, FleetBoston
will be entitled to payment of amounts that a holder of preferred securities
receives in respect of an unpaid distribution to the extent that the holder
receives or has already received full payment relating to that unpaid
distribution from a trust.
FleetBoston acknowledges that the guarantee trustee will enforce the
preferred securities guarantees on behalf of the holders of the preferred
securities. If FleetBoston fails to make payments under the preferred securities
guarantees, the preferred securities guarantees allow the holders of the
preferred securities to direct the guarantee trustee to enforce its rights
thereunder. If the guarantee trustee fails to enforce the preferred securities
guarantees, any holder of preferred securities may directly sue FleetBoston to
enforce the guarantee trustee's rights under the preferred securities
guarantees. The holder need not first sue the trust, the guarantee trustee, or
any other person or entity. A holder of preferred securities may also directly
sue FleetBoston to enforce the holder's right to receive payment under the
preferred securities guarantees. The holder need not first (1) direct the
guarantee trustee to enforce the terms of the preferred securities guarantee or
(2) sue the trust or any other person or entity.
FleetBoston and the trusts believe that the above mechanisms and
obligations, taken together, are equivalent to a full and unconditional
guarantee by FleetBoston of payments due on the preferred securities. See
"Description of the Preferred Securities Guarantees -- General."
PLAN OF DISTRIBUTION
FleetBoston may sell the junior subordinated debentures and any trust may
sell preferred securities:
- directly to purchasers;
- through agents, which may include Robertson Stephens Inc., Fleet
Securities, Inc. or other affiliates; or
- through underwriters or dealers, which may include Robertson Stephens,
Fleet Securities or other affiliates.
Offers or sales of those securities may include secondary market
transactions by affiliates of FleetBoston.
Offers to purchase preferred securities may be solicited directly by
FleetBoston and/or any trust, as the case may be, or by agents designated by
FleetBoston and/or any trust, as the case may be, from time to time. Any such
agent, who may be deemed to be an underwriter as that term is defined in the
Securities Act of 1933, involved in the offer or sale of the preferred
securities in respect of which this
20
prospectus is delivered will be named, and any commissions payable by
FleetBoston to that agent will be set forth, in the prospectus supplement.
Unless otherwise indicated in the prospectus supplement, any such agency will be
acting on a best efforts basis for the period of its appointment which is
ordinarily five business days or less. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for FleetBoston
in the ordinary course of business.
If an underwriter or underwriters are utilized in the sale, FleetBoston
will execute an underwriting agreement with those underwriters at the time of
sale to them and the names of the underwriters and the terms of the transaction
will be set forth in the prospectus supplement, which will be used by the
underwriters to make releases of the preferred securities in respect of which
this prospectus is delivered to the public.
If a dealer is utilized in the sale of the preferred securities in respect
of which this prospectus is delivered, FleetBoston and/or any trust, as the case
may be, will sell those preferred securities to the dealer, as principal. The
dealer may then resell those preferred securities to the public at varying
prices to be determined by that dealer at the time of resale. The name of the
dealer and the terms of the transaction will be set forth in the prospectus
supplement. Agents, underwriters, and dealers may be entitled under the relevant
agreements to indemnification by FleetBoston and/or any trust, as the case may
be, against certain liabilities, including liabilities under the Securities Act
of 1933.
Any underwriting compensation paid by us to the underwriters in connection
with an offering of securities, and any discounts, concessions or commissions
allowed by the underwriters to participating dealers, will be described in an
accompanying prospectus supplement. Any such compensation will not exceed 8% of
the initial public offering price.
The participation of Robertson Stephens and/or Fleet Securities in the
offer and sale of the preferred securities will comply with the requirements of
Rules 2720 and 2810 of the Conduct Rules of the National Association of
Securities Dealers, Inc. In accordance with Rules 2720 and 2810, no member of
the NASD participating in an underwriting will be permitted to confirm sales to
accounts over which it exercises discretionary authority without prior specific
written approval of the customer.
Underwriters, agents or their controlling persons may engage in
transactions with and perform services for FleetBoston in the ordinary course of
business.
Certain of the underwriters may use this prospectus and the accompanying
prospectus supplement for offers and sales related to market-making transactions
in the securities. These underwriters may act as principal or agent in these
transactions, and the sales will be made at prices related to prevailing market
prices at the time of sale.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the preferred
securities will be passed upon on behalf of each of the trusts by Richards,
Layton & Finger, P.A., One Rodney Square, Wilmington, Delaware 19899, special
Delaware counsel to the trusts. The validity of the junior subordinated
debentures and the preferred securities guarantee and certain matters relating
thereto will be passed upon for FleetBoston and certain United States federal
income taxation matters will be passed upon for FleetBoston and the trusts by
Edwards & Angell, LLP, 101 Federal Street, Boston, Massachusetts 02110-1800.
Unless otherwise specified in the applicable prospectus supplement, Sidley
Austin Brown & Wood LLP, 875 Third Avenue, New York, New York 10022, will pass
upon certain matters for the underwriters.
21
EXPERTS
FleetBoston's consolidated financial statements incorporated in this
prospectus by reference to FleetBoston's Current Report on Form 8-K dated May 4,
2001, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
22
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
20,000,000 PREFERRED SECURITIES
FLEET CAPITAL TRUST VIII
% PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED BY
[FLEETBOSTON FINANCIAL LOGO]
------------
PROSPECTUS SUPPLEMENT
MARCH , 2002
------------
SALOMON SMITH BARNEY
FLEET SECURITIES, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY
PRUDENTIAL SECURITIES
UBS WARBURG
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------