Filed Pursuant to Rule 424(b)(5)
Registration Statement Nos. 333-75482
and 333-75482-01
Subject to completion
Preliminary Prospectus Supplement dated January 28, 2002
PROSPECTUS SUPPLEMENT
(To prospectus dated December 26, 2001)
10,000,000 Equity Units
(Initially Consisting of 10,000,000 Corporate Units)
[FPL Group Logo]
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FPL Group, Inc. is offering 10,000,000 Equity Units. The Equity Units
initially will consist of units referred to as Corporate Units, each with a
stated amount of $50. Each Corporate Unit will include a purchase contract
pursuant to which the holder will agree to purchase from FPL Group shares of its
common stock on February 16, 2005 equal to the settlement rate. If the
applicable market value of FPL Group common stock is equal to or greater than
the threshold appreciation price of $_______, the settlement rate will be
_________, which is equal to $50 divided by the threshold appreciation price. If
the applicable market value of FPL Group common stock is less than the threshold
appreciation price but greater than the reference price, the settlement rate
will be equal to $50 divided by the applicable market value. If the applicable
market value of FPL Group common stock is less than or equal to the reference
price, the settlement rate will be ______, which is equal to $50 divided by the
reference price. FPL Group will make quarterly contract adjustment payments at
the rate of ___% of the $50 stated amount per year, as described in this
prospectus supplement. Each Corporate Unit will also include $50 principal
amount of Series A Debentures due February 16, 2007 issued by FPL Group Capital
Inc, a wholly-owned subsidiary of FPL Group. FPL Group has agreed to absolutely,
irrevocably and unconditionally guarantee the payment of principal, interest and
premium, if any, on the FPL Group Capital debentures. The FPL Group Capital
debentures will initially bear interest at a rate of ___% per year. This rate is
expected to be reset on or after November 16, 2004. The FPL Group Capital
debentures will not trade separately from the Corporate Units unless and until
substitution is made, the Corporate Units are settled early or the FPL Group
Capital debentures are remarketed, all as described in this prospectus
supplement.
FPL Group intends to apply for listing of the Corporate Units on the New
York Stock Exchange, or NYSE. On January 28, 2002, the last reported sale price
of FPL Group's common stock on the NYSE was $55.55 per share.
INVESTING IN THE EQUITY UNITS INVOLVES RISKS THAT ARE DESCRIBED UNDER "RISK
FACTORS" BEGINNING ON PAGE S-16 OF THIS PROSPECTUS SUPPLEMENT.
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Per Corporate Unit Total
------------------ -----
Public offering price (1)................. $ $
Underwriting discount..................... $ $
Proceeds to FPL Group Capital
before expenses)........................ $ $
(1) Plus accrued interest and accumulated contract adjustment payments from
________, 2002, if settlement occurs after that date. The accrued interest
and accumulated contract adjustment payments must be paid by the purchasers
if settlement occurs after that date.
The underwriters may also purchase up to an additional 1,500,000 Corporate
Units at the public offering price less the underwriting discount within 30 days
of the date of this prospectus supplement in order to cover overallotments, if
any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement and the accompanying prospectus are truthful or complete.
Any representation to the contrary is a criminal offense.
The Corporate Units are expected to be delivered through the book-entry
only form through The Depository Trust Company on or about _______, 2002.
----------------
Joint Book-Running Managers
JPMORGAN LEHMAN BROTHERS
Senior Co-Managers
SALOMON SMITH BARNEY
BANC OF AMERICA SECURITIES LLC
WACHOVIA SECURITIES
Co-Managers
BARCLAYS CAPITAL
COMMERZBANK SECURITIES
MIZUHO INTERNATIONAL PLC
SCOTIA CAPITAL
TOKYO-MITSUBISHI INTERNATIONAL PLC
WESTDEUTSCHE LANDESBANK GIROZENTRALE
----------------
The date of this prospectus supplement is _______, 2002.
The information in this preliminary prospectus supplement is not complete and
may be changed. Neither this preliminary prospectus supplement nor the
accompanying prospectus is an offer to sell these securities and neither is
soliciting any offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.
TABLE OF CONTENTS
Prospectus Supplement
Page
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Prospectus Supplement Summary...............................................S-3
Risk Factors...............................................................S-16
Selected Consolidated Income Statement Data of FPL Group
and Subsidiaries.........................................................S-21
Consolidated Capitalization of FPL Group and Subsidiaries..................S-21
Common Stock Dividends and Price Range.....................................S-22
Use of Proceeds............................................................S-22
Accounting Treatment.......................................................S-22
Description of the Equity Units............................................S-23
Description of the Purchase Contracts......................................S-27
Other Provisions of the Purchase Contract Agreement
and the Pledge Agreement................................................S-40
Certain Terms of the FPL Group Capital Debentures..........................S-44
Material Federal Income Tax Consequences...................................S-50
ERISA Considerations.......................................................S-57
Underwriting...............................................................S-58
Prospectus
About this Prospectus..........................................................2
Where You Can Find More Information............................................2
Incorporation by Reference.....................................................2
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995 ...............................................3
FPL Group Capital..............................................................4
FPL Group......................................................................4
Use of Proceeds................................................................4
Consolidated Ratio of Earnings to Fixed Charges................................4
Description of Offered Debt Securities.........................................5
Description of the Guarantee..................................................15
Description of Common Stock...................................................17
Description of Stock Purchase Contracts and
Stock Purchase Units .......................................................20
Plan of Distribution..........................................................21
Experts.......................................................................21
Legal Opinions................................................................22
THE ACCOMPANYING PROSPECTUS IS PART OF A REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. YOU SHOULD RELY ONLY ON THE INFORMATION
INCORPORATED BY REFERENCE OR PROVIDED IN THIS PROSPECTUS SUPPLEMENT AND IN THE
ACCOMPANYING PROSPECTUS. NEITHER FPL GROUP NOR FPL GROUP CAPITAL HAS AUTHORIZED
ANYONE ELSE TO PROVIDE YOU WITH ADDITIONAL OR DIFFERENT INFORMATION. NEITHER FPL
GROUP NOR FPL GROUP CAPITAL IS MAKING AN OFFER OF THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS SUPPLEMENT OR IN THE ACCOMPANYING PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS, OR
THAT THE INFORMATION INCORPORATED BY REFERENCE IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE OF THE DOCUMENT INCORPORATED BY REFERENCE.
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PROSPECTUS SUPPLEMENT SUMMARY
You should read the following summary in conjunction with the more
detailed information incorporated by reference or provided in this prospectus
supplement or in the accompanying prospectus. This prospectus supplement and the
accompanying prospectus contain forward-looking statements (as that term is
defined in the Private Securities Litigation Reform Act of 1995).
Forward-looking statements should be read with the cautionary statements and
important factors included in the accompanying prospectus under the heading
"Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995."
FPL GROUP AND SUBSIDIARIES
FPL GROUP
FPL Group is a public utility holding company headquartered in Juno
Beach, Florida. FPL Group's principal subsidiary, Florida Power & Light Company
is a regulated utility engaged in the generation, transmission, distribution and
sale of electric energy. FPL Group Capital is a wholly-owned subsidiary of FPL
Group which owns and provides funding for FPL Group's unregulated operating
subsidiaries, the majority of which are engaged in independent power projects.
FPL Energy, LLC is a wholly-owned subsidiary of FPL Group Capital formed to
aggregate existing unregulated energy-related operations. FPL Energy's
participation in the U.S. domestic energy market includes ownership interests
in, and the development, construction, management and operation of, energy
projects with a net generating capacity of over 5,000 megawatts at year-end
2001. FPL FiberNet, LLC is also a wholly-owned subsidiary of FPL Group Capital
and is involved in the sale of wholesale fiber-optic network capacity. The
organizational structure of FPL Group and its principal subsidiaries is shown in
the following diagram.
[GRAPHIC OMITTED]
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FLORIDA POWER & LIGHT COMPANY
Florida Power & Light Company is FPL Group's largest operating
subsidiary, contributing approximately 88% of FPL Group's consolidated revenues
for 2001. Florida Power & Light Company supplies electric service throughout
most of the east and lower west coasts of Florida. During 2001, Florida Power &
Light Company served approximately 3.9 million customer accounts.
At December 31, 2001, about 93% of Florida Power & Light Company's
revenues came from residential customers and commercial customers--which include
small businesses. Only 3% of Florida Power & Light Company's total revenues came
from industrial customers.
FPL GROUP CAPITAL
FPL Group Capital holds the capital stock and provides funding for the
operating subsidiaries of FPL Group other than Florida Power & Light Company.
The business activities of those operating subsidiaries primarily consist of FPL
Energy's independent power projects as well as FPL FiberNet.
FPL ENERGY
FPL Energy was formed in 1998 to aggregate FPL Group's existing
unregulated energy-related operations. FPL Energy owns, develops, constructs,
manages and operates domestic electric-generating facilities. As of December 31,
2001, FPL Energy had ownership interests in operating independent power projects
with a net generating capacity of 5,063 megawatts. Generation capacity spans
various regions thereby reducing seasonal volatility on a portfolio basis. The
percentage of capacity by region is 36% Central, 28% Northeast, 20% Mid-Atlantic
and 16% West. Fuel sources for these projects are 46% natural gas, 28% wind, 15%
oil, 7% hydro and 4% other.
FPL FIBERNET
FPL FiberNet was formed in January 2000 to enhance the value of FPL
Group's fiber-optic network assets that were originally built to support Florida
Power & Light Company operations. In January 2000, Florida Power & Light
Company's existing fiber-optic lines were transferred to FPL FiberNet. FPL
FiberNet sells wholesale fiber-optic network capacity to Florida Power & Light
Company and other new and existing customers, primarily telephone, cable
television, internet and other telecommunications companies. At December 31,
2001, FPL FiberNet's network consisted of approximately 2,500 route miles of
fiber which interconnect major cities throughout Florida.
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THE OFFERING -- Q&A
WHAT ARE EQUITY UNITS?
The Equity Units consist of units referred to as Corporate Units and
Treasury Units. The Equity Units offered will initially consist of 10,000,000
Corporate Units (11,500,000 Corporate Units if the underwriters exercise their
overallotment option in full), each with a stated amount of $50. From each
Corporate Unit, the holder may create a Treasury Unit, as described below.
WHAT ARE THE COMPONENTS OF CORPORATE UNITS?
Each Corporate Unit will consist of a purchase contract and $50
principal amount of Series A Debentures issued by FPL Group Capital. In this
prospectus supplement, the Series A Debentures are referred to as the FPL Group
Capital debentures. FPL Group has agreed to absolutely, irrevocably and
unconditionally guarantee the payment of principal, interest and premium, if
any, on the FPL Group Capital debentures. The FPL Group Capital debenture that
is a component of each Corporate Unit will be owned by the holder of the
Corporate Unit, but it will be pledged to the collateral agent to secure the
holder's obligation to purchase FPL Group common stock under the related
purchase contract. If the FPL Group Capital debentures are successfully
remarketed or a tax event redemption occurs, in each case as described in this
prospectus supplement, the applicable ownership interest in the Treasury
portfolio of zero-coupon U.S. Treasury securities as further described herein
will replace the FPL Group Capital debentures as a component of each Corporate
Unit and will be pledged to the collateral agent to secure the holder's
obligations under the purchase contract. The FPL Group Capital debentures will
not trade separately from the Corporate Units unless and until Treasury
securities are substituted for FPL Group Capital debentures, the Corporate
Units' purchase contracts are settled early or the FPL Group Capital debentures
are remarketed.
WHAT IS A PURCHASE CONTRACT?
Each purchase contract underlying an Equity Unit obligates the holder
of the purchase contract to purchase, and obligates FPL Group to sell, on
February 16, 2005, for $50 in cash, a number of newly issued shares of FPL Group
common stock equal to the "settlement rate." The settlement rate will be
calculated, subject to adjustment as described under "Description of the
Purchase Contracts--Anti-Dilution Adjustments," as follows:
o if the applicable market value of FPL Group common stock is equal
to or greater than the threshold appreciation price, the
settlement rate will be _____;
o if the applicable market value of FPL Group common stock is less
than the threshold appreciation price but greater than the
reference price, the settlement rate will be equal to $50 divided
by the applicable market value; and
o if the applicable market value of FPL Group common stock is less
than or equal to the reference price, the settlement rate will be
_____.
"Applicable market value" means the average of the closing price per share of
FPL Group common stock on the 20 consecutive trading days ending on the third
trading day immediately preceding February 16, 2005. The "reference price" is
$______. The "threshold appreciation price" is $_____.
CAN I SETTLE A PURCHASE CONTRACT EARLY?
At the option of each holder, a purchase contract may be settled
early. If a purchase contract is settled early, _____ shares of FPL Group common
stock will be issued per purchase contract. In addition, if FPL Group is
involved in a merger in which at least 30% of the consideration for FPL Group's
common stock consists of cash or cash equivalents, then each holder of a
purchase contract will have the right to accelerate and settle such contract at
the settlement rate in effect immediately before the cash merger.
S-5
WHAT ARE TREASURY UNITS?
Treasury Units are Equity Units consisting of a purchase contract and
a 1/20, or 5%, undivided beneficial ownership interest in a Treasury security.
The Treasury security is a zero-coupon U.S. Treasury security with a principal
amount at maturity of $1,000 that matures on February 15, 2005. The interests in
the Treasury securities that are components of each Treasury Unit will be
pledged to the collateral agent to secure the holder's obligations under the
purchase contract.
HOW CAN I CREATE TREASURY UNITS FROM CORPORATE UNITS?
If a Treasury portfolio has not replaced FPL Group Capital debentures
as a component of the Corporate Units as the result of a successful remarketing
of FPL Group Capital debentures or a tax event redemption, each holder of
Corporate Units will have the right, at any time on or prior to the fifth
business day immediately preceding February 16, 2005 to substitute for the FPL
Group Capital debentures held by the collateral agent zero-coupon Treasury
securities (CUSIP No. 912820 BM8) that mature on February 15, 2005, in a total
principal amount at maturity equal to the aggregate principal amount of the FPL
Group Capital debentures for which substitution is being made. These
substitutions will create Treasury Units, and the applicable FPL Group Capital
debentures will be released to the holder. Because Treasury securities are
issued in integral multiples of $1,000, holders of Corporate Units may make
these substitutions only in integral multiples of 20 Corporate Units.
If a Treasury portfolio has replaced the FPL Group Capital debentures
as a component of the Corporate Units as the result of a successful remarketing
of the FPL Group Capital debentures or because a tax event redemption has
occurred, holders of Corporate Units may create Treasury Units by making
substitutions of Treasury securities for the applicable ownership interest in
the Treasury portfolio held by the collateral agent, at any time on or prior to
the second business day immediately preceding February 16, 2005 and only in
integral multiples of _________ Corporate Units. In such a case, holders would
also obtain the release of the appropriate applicable ownership interest in the
Treasury portfolio rather than a release of the FPL Group Capital debentures.
HOW CAN I RECREATE CORPORATE UNITS FROM TREASURY UNITS?
If a Treasury portfolio has not replaced the FPL Group Capital
debentures as a component of the Corporate Units as a result of a successful
remarketing of the FPL Group Capital debentures or a tax event redemption, each
holder of Treasury Units will have the right, at any time on or prior to the
fifth business day immediately preceding February 16, 2005, to substitute FPL
Group Capital debentures for any related Treasury securities held by the
collateral agent, in an aggregate principal amount equal to the aggregate
principal amount at maturity of the Treasury securities for which substitution
is being made. These substitutions will recreate Corporate Units, and the
Treasury securities will be released to the holder. Because Treasury securities
are issued in integral multiples of $1,000, holders of Treasury Units may make
these substitutions only in integral multiples of 20 Treasury Units.
If a Treasury portfolio has replaced the FPL Group Capital debentures
as a component of the Corporate Units as the result of a successful remarketing
of the FPL Group Capital debentures or because a tax event redemption has
occurred, holders of the Treasury Units may recreate Corporate Units by making
substitutions of the applicable ownership interest in the Treasury portfolio for
Treasury securities held by the collateral agent, at any time on or prior to the
second business day immediately preceding February 16, 2005 and only in integral
multiples of _________ Treasury Units. In such a case, holders would also obtain
the release of the Treasury securities for which substitution is being made.
WHAT PAYMENTS AM I ENTITLED TO AS A HOLDER OF CORPORATE UNITS?
Holders of Corporate Units will be entitled to receive aggregate cash
payments at the rate of ___% of the $50 stated amount per year, payable
quarterly in arrears. These cash distributions will consist of:
o interest on the FPL Group Capital debentures or cash distributions
on the applicable ownership interest of the Treasury portfolio, as
applicable, at the rate of ___% of $50 per year, and
S-6
o distributions of contract adjustment payments payable by FPL Group
at the rate of ___% of the stated amount per year, subject to FPL
Group's right to defer the payment of such contract adjustment
payments.
Each Corporate Unit has a stated amount of $50. FPL Group's obligations with
respect to contract adjustment payments will be subordinate and junior in right
of payment to its obligations under any of its senior indebtedness. In addition,
original issue discount, or OID, for United States federal income tax purposes
will accrue on each FPL Group Capital debenture. FPL Group Capital is not
entitled to defer interest payments on the FPL Group Capital debentures.
WHAT PAYMENTS AM I ENTITLED TO IF I CONVERT MY CORPORATE UNITS TO TREASURY
UNITS?
Holders who create Treasury Units will be entitled to receive
quarterly cash distributions of contract adjustment payments payable by FPL
Group at the rate of ___% of the stated amount per year, subject to FPL Group's
rights of deferral described herein. In addition, OID will accrue on each
related Treasury security. Each Treasury Unit has a stated amount of $50.
DOES FPL GROUP OR FPL GROUP CAPITAL HAVE THE OPTION TO DEFER CURRENT PAYMENTS?
FPL Group has the right to defer the payment of contract adjustment
payments until no later than February 16, 2005. Any deferred contract adjustment
payments would accrue additional contract adjustment payments at the rate of
___% per year (equal to the initial interest rate on the FPL Group Capital
debentures plus the rate of contract adjustment payments on the purchase
contracts) of the stated amount until paid, compounded quarterly, to but
excluding February 16, 2005. FPL Group Capital is not entitled to defer payments
of interest on the FPL Group Capital debentures. In the event FPL Group
exercises its option to defer the payment of contract adjustment payments, then
until the deferred contract adjustment payments have been paid, FPL Group will
not, with certain exceptions, declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of its capital stock.
WHAT ARE THE PAYMENT DATES FOR THE CORPORATE UNITS?
The payments described above in respect of the Corporate Units will be
payable quarterly in arrears on February 16, May 16, August 16 and November 16
of each year, commencing May 16, 2002. In the case of contract adjustment
payments, the payments will be payable to but excluding the earlier of February
16, 2005 or the most recent quarterly payment date on or before any early
settlement of the related purchase contracts. These contract adjustment payments
are subject to the deferral provisions described in this prospectus supplement.
Interest payments on the FPL Group Capital debentures are described below under
the questions and answers beginning with "What interest payments will I receive
on the FPL Group Capital debentures?"
WHAT IS REMARKETING?
The FPL Group Capital debentures of Corporate Unit holders will be
remarketed on the third business day immediately preceding November 16, 2004.
The remarketing agent will use its reasonable efforts to obtain a price for the
FPL Group Capital debentures of approximately 100.5% of the purchase price for
the Treasury portfolio. A portion of the proceeds from the remarketing equal to
the Treasury portfolio purchase price will be applied to purchase the Treasury
portfolio. The Treasury portfolio will be substituted for the FPL Group Capital
debentures and will be pledged to the collateral agent to secure the Corporate
Unit holders' obligations to purchase FPL Group common stock under the purchase
contracts. When paid at maturity, an amount of the Treasury portfolio equal to
the principal amount of the FPL Group Capital debentures will automatically be
applied to satisfy in full the Corporate Unit holders' obligations to purchase
FPL Group common stock under the related purchase contracts on the settlement
date.
In addition, the remarketing agent may deduct, as a remarketing fee,
an amount not exceeding 25 basis points (0.25%) of the Treasury portfolio
purchase price from any amount of the proceeds from the remarketing of the FPL
Group Capital debentures in excess of the Treasury portfolio purchase price. The
remarketing agent will then remit the remaining portion of the proceeds from the
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remarketing of the FPL Group Capital debentures, if any, for the benefit of the
holders.
If the remarketing of FPL Group Capital debentures on the third
business day immediately preceding November 16, 2004, fails because the
remarketing agent cannot obtain a price for the FPL Group Capital debentures of
at least 100% of the Treasury portfolio purchase price or a condition precedent
to the remarketing has not been satisfied, the FPL Group Capital debentures will
continue to be a component of Corporate Units and another remarketing will be
attempted on the third business day immediately preceding February 16, 2005, as
described below.
If there was a failed remarketing on the third business day preceding
November 16, 2004, the FPL Group Capital debentures that are components of
Corporate Units whose holders have failed to notify the purchase contract agent
on or prior to the fifth business day before February 16, 2005, of their
intention to pay cash in order to satisfy their obligations under the related
purchase contracts, will be remarketed on the third business day immediately
preceding February 16, 2005. In this remarketing, the remarketing agent will use
its reasonable efforts to obtain a price for the FPL Group Capital debentures of
approximately 100.5% of the aggregate principal amount of the FPL Group Capital
debentures. A portion of the proceeds from the remarketing equal to the
aggregate principal amount of the FPL Group Capital debentures will
automatically be applied to satisfy in full the Corporate Unit holders'
obligations to purchase FPL Group common stock under the related purchase
contracts on the settlement date.
The remarketing agent will deduct, as a remarketing fee, an amount not
exceeding 25 basis points (0.25%) of the aggregate principal amount of the
remarketed FPL Group Capital debentures from any amount of the proceeds from the
remarketing of the FPL Group Capital debentures in excess of the aggregate
principal amount of those remarketed FPL Group Capital debentures. The
remarketing agent will then remit the remaining portion of the proceeds from the
remarketing of those FPL Group Capital debentures, if any, for the benefit of
the holders.
If the remarketing of the FPL Group Capital debentures on the third
business day immediately preceding February 16, 2005, fails because the
remarketing agent cannot obtain a price of at least 100% of the total principal
amount of the FPL Group Capital debentures or a condition precedent to such
remarketing has not been satisfied, FPL Group will exercise its rights as a
secured party to dispose of the FPL Group Capital debentures that are included
in Corporate Units in accordance with applicable law and to satisfy in full,
from the proceeds of the disposition, the holders' obligations to purchase FPL
Group common stock under the related purchase contracts on the settlement date.
If the remarketing fails, holders of the FPL Group Capital debentures that are
not included in Corporate Units will have the option to put their FPL Group
Capital debentures to FPL Group Capital.
WHAT IS THE TREASURY PORTFOLIO?
The Treasury portfolio is a portfolio of zero-coupon U.S. Treasury
securities consisting of:
o interest or principal strips of U.S. Treasury securities
that mature on or prior to February 15, 2005, in an
aggregate amount equal to the principal amount of the FPL
Group Capital debentures included in the Corporate Units;
and
o with respect to the scheduled interest payment date that occurs on
February 16, 2005, interest or principal strips of U.S. Treasury
securities that mature on or prior to that interest payment date
in an aggregate amount equal to the aggregate interest payment
that would be due on that interest payment date on the principal
amount of the FPL Group Capital debentures that would have been
included in the Corporate Units assuming no remarketing and no
reset of the interest rate on the FPL Group Capital debentures.
For a description of the Treasury portfolio to be purchased in the context of a
tax event redemption, see "Certain Terms of the FPL Group Capital
Debentures--Tax Event Redemption."
S-8
IF I AM NOT A PARTY TO A PURCHASE CONTRACT, MAY I STILL PARTICIPATE IN A
REMARKETING OF MY FPL GROUP CAPITAL DEBENTURES?
Holders of FPL Group Capital debentures that are not components of
Corporate Units may elect, in the manner described in this prospectus
supplement, to have their FPL Group Capital debentures remarketed by the
remarketing agent.
BESIDES PARTICIPATING IN A REMARKETING, HOW MAY I SATISFY MY OBLIGATIONS UNDER
THE PURCHASE CONTRACTS?
Holders of Equity Units may satisfy their obligations, or their
obligations will be terminated, under the purchase contracts:
o by settling the purchase contracts with cash on the business
day prior to February 16, 2005, with prior notification to
the purchase contract agent;
o through early settlement by the earlier delivery of cash to the
purchase contract agent in the manner described in this prospectus
supplement; provided that at such time, if so required under the
U.S. federal securities laws, there is in effect a registration
statement covering any securities to be delivered in respect of
the purchase contracts being settled; or
o without any further action, upon the termination of the purchase
contracts as a result of a bankruptcy, insolvency or
reorganization of FPL Group.
If a holder does not participate in a remarketing and does not give
notice to the purchase contract agent that the holder intends to settle the
purchase contract with cash on the settlement date, FPL Group will exercise its
rights as a secured party in respect of the pledged FPL Group Capital
debentures, Treasury portfolio or Treasury securities, as the case may be, to
satisfy the holder's obligation to purchase FPL Group common stock.
If the holder of an Equity Unit settles a purchase contract early or
if the holder's purchase contract is terminated as a result of a bankruptcy,
insolvency or reorganization of FPL Group, such holder will have no right to
receive any accrued contract adjustment payments or deferred contract adjustment
payments.
WHAT INTEREST PAYMENTS WILL I RECEIVE ON THE FPL GROUP CAPITAL DEBENTURES?
Interest payments on the FPL Group Capital debentures will be payable
initially at the annual rate of ___% of the principal amount of $50 to, but
excluding, November 16, 2004, or February 16, 2005 if the interest rate is not
reset three business days prior to November 16, 2004. Following a reset of the
interest rate three business days prior to November 16, 2004 or three business
days prior to February 16, 2005, the FPL Group Capital debentures will bear
interest from November 16, 2004, or February 16, 2005, as applicable, at the
reset rate to, but excluding, February 16, 2007. If, as a result of a failed
remarketing three business days prior to February 16, 2005, the interest rate is
not reset, the FPL Capital debentures will continue to bear interest at the
initial interest rate.
For United States federal income tax purposes, OID will accrue on the
FPL Group Capital debentures.
WHAT ARE THE PAYMENT DATES ON THE FPL GROUP CAPITAL DEBENTURES?
Interest payments will be payable quarterly in arrears on each
February 16, May 16, August 16 and November 16, commencing May 16, 2002.
WHEN WILL THE INTEREST RATE ON THE FPL GROUP CAPITAL DEBENTURES BE RESET?
Unless a tax event redemption has occurred, the interest rate on the
FPL Group Capital debentures will be reset on the third business day immediately
preceding November 16, 2004, and such reset rate will become effective on
November 16, 2004. However, if the remarketing of the FPL Group Capital
debentures on the third business day immediately preceding November 16, 2004
results in a failed remarketing, the interest rate will not be reset on that
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date and instead will be reset on the third business day immediately preceding
February 16, 2005, and such reset rate will become effective on February 16,
2005. If the remarketing of the FPL Group Capital debentures on the third
business day immediately preceding February 16, 2005 also results in a failed
remarketing, the interest rate will not be reset.
WHAT IS THE RESET RATE?
In the case of a reset on the third business day immediately preceding
November 16, 2004, the reset rate will be the rate determined by the reset agent
as the rate the FPL Group Capital debentures should bear in order for the FPL
Group Capital debentures included in Corporate Units to have an approximate
aggregate market value on the reset date of 100.5% of the applicable Treasury
portfolio purchase price. In the case of a reset on the third business day
immediately preceding February 16, 2005, the reset rate will be the rate
determined by the reset agent as the rate the FPL Group Capital debentures
should bear in order for each FPL Group Capital debenture to have an approximate
market value on the reset date of 100.5% of the principal amount of that FPL
Group Capital debenture. Any reset rate may not exceed the maximum rate, if any,
permitted by applicable law.
WHEN ARE THE FPL GROUP CAPITAL DEBENTURES REDEEMABLE?
The FPL Group Capital debentures are redeemable at FPL Group Capital's
option, in whole but not in part, upon the occurrence and continuation of a tax
event under the circumstances described in this prospectus supplement. Following
any such redemption of the FPL Group Capital debentures, which is referred to as
a tax event redemption, prior to February 16, 2005, holders that own Corporate
Units will own the applicable ownership interest in the Treasury portfolio as a
component of their Corporate Units.
For a description of the Treasury portfolio to be purchased in the
context of a tax event redemption, see "Certain Terms of the FPL Group Capital
Debentures--Tax Event Redemption."
In addition, the FPL Group Capital debentures are mandatorily
redeemable by FPL Group Capital if FPL Group's guarantee of the FPL Group
Capital debentures ceases to be in full force or effect or upon the bankruptcy,
insolvency or reorganization of FPL Group under the circumstances described in
this prospectus supplement, unless Standard & Poor's Ratings Service (a Division
of the McGraw Hill Companies, Inc.) and Moody's Investors Service, Inc. (if the
FPL Group Capital debentures are then rated by those rating agencies, or, if the
FPL Group Capital debentures are not then rated by those rating agencies but are
then rated by one or more other nationally recognized rating agencies, then at
least one of those other nationally recognized rating agencies) shall have
reaffirmed in writing that, after giving effect to such event, the credit rating
on the FPL Group Capital debentures is "investment grade."
WHAT IS THE RANKING OF THE FPL GROUP CAPITAL DEBENTURES?
The FPL Group Capital debentures will rank equally and ratably with
all of FPL Group Capital's other unsecured and unsubordinated obligations. The
indenture under which the FPL Group Capital debentures will be issued does not
limit FPL Group Capital's ability to issue or incur other unsecured debt.
Because FPL Group Capital is a holding company that derives substantially all of
its income from its operating subsidiaries, the FPL Group Capital debentures
will be effectively subordinated to liabilities of, including debt and preferred
stock incurred or issued by, those subsidiaries. The indenture does not limit
the amount of debt or preferred stock which may be incurred or issued by FPL
Group Capital's subsidiaries. See "Description of Offered Debt Securities" in
the accompanying prospectus.
WHAT IS THE FPL GROUP GUARANTEE?
FPL Group has agreed to absolutely, irrevocably and unconditionally
guarantee the payment of principal, interest and premium, if any, on the FPL
Group Capital debentures. See "Description of the Guarantee" in the accompanying
prospectus.
S-10
The guarantee is an unsecured obligation of FPL Group and will rank
equally and ratably with all other unsecured and unsubordinated obligations of
FPL Group. There is no limit on the amount of other indebtedness, including
guarantees, that FPL Group may incur or issue. Because FPL Group is a holding
company that derives substantially all of its income from its operating
subsidiaries, the guarantee of FPL Group Capital debentures is effectively
subordinated to liabilities of, including debt and preferred stock incurred or
issued by, FPL Group's subsidiaries. Neither the indenture nor the Guarantee
Agreement places any limit on the amount of debt or preferred stock that FPL
Group's subsidiaries may incur or issue.
WILL THERE BE A LIMITATION ON LIENS?
FPL Group Capital may not grant a lien on the capital stock of any of
its majority-owned subsidiaries which shares of capital stock FPL Group Capital
now or hereafter directly owns to secure indebtedness of FPL Group Capital
without similarly securing the FPL Group Capital debentures, with certain
exceptions. The granting of liens by FPL Group Capital's subsidiaries is not
restricted in any way. See "Description of Offered Debt Securities--Limitation
on Liens" in the accompanying prospectus.
WHAT ARE THE PRINCIPAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES RELATED TO
THE CORPORATE UNITS, TREASURY UNITS AND FPL GROUP CAPITAL DEBENTURES?
FPL Group Capital intends to treat the FPL Group Capital debentures as
contingent payment debt instruments that are subject to the contingent payment
debt instrument rules for United States federal income tax purposes.
Accordingly, through November 16, 2004, and possibly thereafter, a holder of
Corporate Units or the FPL Group Capital debentures will be required to include
in gross income an amount in excess of the interest actually received in respect
of such FPL Group Capital debentures, regardless of the holder's usual method of
tax accounting, and will generally recognize ordinary income or loss, rather
than capital gain or loss, on the sale, exchange or other disposition of the FPL
Group Capital debentures or of the Corporate Units, to the extent such income is
allocable to FPL Group Capital debentures. A beneficial owner of Treasury Units
will be required to include in gross income any OID with respect to the Treasury
securities as it accrues on a constant yield to maturity basis. If the Treasury
portfolio has replaced the FPL Group Capital debentures as a component of
Corporate Units as a result of a successful remarketing of the FPL Group Capital
debentures, a beneficial owner of Corporate Units will be required to include in
gross income its allocable share of OID on the applicable Treasury portfolio as
it accrues on a constant yield to maturity basis. To the extent FPL Group is
required to file information returns with respect to contract adjustment
payments or deferred contract adjustment payments, it intends to report such
payments as taxable ordinary income to beneficial owners of Equity Units, but
holders may want to consult their tax advisors concerning possible alternative
characterizations. See "Material Federal Income Tax Consequences."
WHAT ARE THE RIGHTS AND PRIVILEGES OF THE FPL GROUP COMMON STOCK?
The shares of FPL Group common stock that you will be obligated to
purchase under the purchase contracts have one vote per share. For more
information, please see the discussion of FPL Group common stock and FPL Group's
shareholder rights plan in this prospectus supplement under the heading "Risk
Factors" and in the accompanying prospectus under the heading "Description of
Common Stock."
S-11
THE OFFERING -- EXPLANATORY DIAGRAMS
The following diagrams demonstrate some of the key features of the
purchase contracts, the FPL Group Capital debentures, the Corporate Units and
the Treasury Units, and the transformation of Corporate Units into Treasury
Units and separate FPL Group Capital debentures.
The following diagrams also assume that the FPL Group Capital
debentures are successfully remarketed, the interest rate on the FPL Group
Capital debentures is reset on the third business day immediately preceding
November 16, 2004, there is no early settlement and payment of contract
adjustment payments is not deferred. For clarity, the following diagrams also
use approximate maturity and other dates.
PURCHASE CONTRACT
Corporate Units and Treasury Units both include a purchase contract
under which the holder agrees to purchase shares of FPL Group common stock at
the end of three years. In addition, these purchase contracts include unsecured
contract adjustment payments as shown in the diagrams on the following pages.
[GRAPHIC OMITTED]
[GRAPHIC: (1) Chart showing the relationship between the value of shares
delivered at maturity of the purchase contract and the price of FPL Group common
stock, illustrating that the value of shares delivered at maturity will be
greatest if the price of FPL Group common stock at maturity exceeds the
threshold appreciation price, and least if the FPL Group common stock price at
maturity is less than or equal to the reference price; and (2) Chart showing
relationship between the percentage of shares delivered at maturity of the
purchase contract and the price of FPL Group common stock, illustrating that the
percentage of shares delivered at maturity will be the greatest if the price of
FPL Group common stock at maturity is less than or equal to the reference price,
and least if the FPL Group common stock price at maturity equals the threshold
appreciation price.]
-------------
(1) For each of the percentage categories shown, the percentage of shares to
be delivered upon settlement to a holder of Corporate Units or Treasury
Units is determined by dividing (a) the related number of shares to be
delivered, as indicated in the footnote for each category, by (b) an
amount equal to $50 divided by the reference price.
(2) If the applicable market value of FPL Group common stock is less than or
equal to $____, the reference price, the number of shares to be delivered
will be calculated by dividing $50 by $____. The "applicable market value"
means the average of the closing price per share of FPL Group common stock
on the 20 consecutive trading days ending on the third trading day
immediately preceding February 16, 2005.
(3) If the applicable market value of FPL Group common stock is between $___
and $___, the threshold appreciation price, the number of shares to be
delivered will be calculated by dividing $50 by the applicable market
value.
(4) If the applicable market value of FPL Group common stock is equal to or
greater than $___, the number of shares to be delivered
will be calculated by dividing $50 by $___.
(5) The "reference price" is $___.
(6) The "threshold appreciation price" is $___.
S-12
CORPORATE UNITS
Each Corporate Unit consists of two components as described below:
[GRAPHIC OMITTED]
[GRAPHIC: (1) Chart showing the two components of Corporate Units: a purchase
contract and an FPL Grouup Capital debenture, with the FPL Group Capital
debenture being replaced by an applicable Treasury portfolio on remarketing.]
o The holder owns the FPL Group Capital debentures but will pledge
them to the collateral agent to secure the holder's obligations
under the purchase contract.
o Following the remarketing of the FPL Group Capital debentures, the
applicable ownership interest in the Treasury portfolio will
replace the FPL Group Capital debentures as a component of the
Corporate Unit.
S-13
TREASURY UNITS
Each Treasury Unit consists of two components as described below:
[GRAPHIC OMITTED]
[GRAPHIC: Showing the two components of Treasury Units: a purchase contract and
a Treasury security.]
o The holder owns the Treasury securities but will pledge them to
the collateral agent to secure the holder's obligations under the
purchase contract.
FPL GROUP CAPITAL DEBENTURES
The FPL Group Capital debentures have the terms described below:
[GRAPHIC OMITTED]
[GRAPHIC: Chart showing the terms of the FPL Group Capital debentures, including
the interest rate, interest reset date and maturity date.]
S-14
TRANSFORMING CORPORATE UNITS INTO TREASURY UNITS AND FPL GROUP CAPITAL
DEBENTURES
o To create a Treasury Unit, the holder separates a Corporate Unit
into its components--the purchase contract and the FPL Group
Capital debenture--and then combines the purchase contract with
zero-coupon Treasury securities that mature the business day
immediately preceding the settlement date of the purchase
contract.
o The holder owns the Treasury securities but will pledge them to
FPL Group to secure the holder's obligations under the purchase
contract.
o The Treasury securities together with the purchase contract
constitute a Treasury Unit. The FPL Group Capital debenture, which
is no longer a component of the Corporate Unit, is tradeable as a
separate security.
[GRAPHIC OMITTED]
[GRAPHIC: Chart showing how to transform Corporate Units into Treasury Units and
FPL Group Capital debentures by substituting Treasury securities for FPL Group
Capital debentures.]
o Upon the transformation of a Corporate Unit into a Treasury Unit,
following a successful remarketing of FPL Group Capital debentures
or a tax event redemption the applicable ownership interest in a
Treasury portfolio, rather than the FPL Group Capital debenture,
will be released to the holder and will no longer trade as part of
an Equity Unit.
o The holder can also transform Treasury Units and FPL Group Capital
debentures into Corporate Units. Following that transformation,
the Treasury securities, which will no longer be components of the
Treasury Unit, will trade as separate securities.
o The transformation of Corporate Units into Treasury Units and FPL
Group Capital debentures, and the transformation of Treasury Units
and FPL Group Capital debentures into Corporate Units, requires
certain minimum amounts of securities, as more fully described in
this prospectus supplement.
S-15
RISK FACTORS
Before purchasing the Equity Units, investors should carefully
consider the following risk factors together with the other information
incorporated by reference or provided in this prospectus supplement or in the
accompanying prospectus in order to evaluate an investment in the Equity Units.
INVESTORS ASSUME THE RISK THAT THE MARKET VALUE OF FPL GROUP COMMON STOCK MAY
DECLINE.
Although holders of Equity Units will be the beneficial owners of the
related FPL Group Capital debentures, Treasury securities or Treasury portfolio,
as the case may be, they do have an obligation pursuant to the purchase contract
to buy FPL Group common stock. Unless holders pay cash to satisfy their
obligation under the purchase contract or the purchase contracts are terminated
due to a bankruptcy, insolvency or reorganization of FPL Group, either the
principal of the appropriate applicable ownership interest of the Treasury
portfolio when paid at maturity or the proceeds derived from the remarketing of
the FPL Group Capital debentures, in the case of Corporate Units, or the
principal of the related Treasury securities when paid at maturity, in the case
of Treasury Units, will automatically be used to purchase a specified number of
shares of FPL Group common stock on behalf of Equity Unit holders on February
16, 2005. The market value of the FPL Group common stock that Equity Unit
holders receive on that date may not equal or exceed the effective price per
share of $___ paid for the FPL Group common stock when they purchased the Equity
Units. If the applicable market value of the FPL Group common stock is less than
$___ per share on that date, the aggregate market value of the FPL Group common
stock issued pursuant to each purchase contract on that date will be less than
the effective price per share paid for the FPL Group common stock when Equity
Unit holders purchased the Equity Units. Accordingly, Equity Unit holders assume
the risk that the market value of the FPL Group common stock may decline and
that the decline could be substantial.
THE OPPORTUNITY FOR EQUITY APPRECIATION PROVIDED BY AN INVESTMENT IN THE EQUITY
UNITS IS LESS THAN THAT PROVIDED BY A DIRECT INVESTMENT IN FPL GROUP COMMON
STOCK.
The opportunity for equity appreciation afforded by investing in the
Equity Units is less than the opportunity for equity appreciation if an investor
invested directly in FPL Group common stock. This opportunity is less because
the market value of FPL Group common stock to be received pursuant to the
purchase contract on February 16, 2005 (assuming that the market value on that
date is the same as the applicable market value of FPL Group common stock) will
only exceed the effective price per share of $___ paid by investors for FPL
Group common stock when they purchased Equity Units if the applicable market
value of FPL Group common stock on that date exceeds the threshold appreciation
price (which represents an appreciation of approximately __% over $___) on that
date. This situation occurs because in this event, investors would receive on
that date only approximately ___% (the percentage equal to $___ divided by the
threshold appreciation price) of the shares of FPL Group common stock that an
investor would have received if the investor had made a direct investment in FPL
Group common stock on the date of this prospectus supplement.
THE TRADING PRICES FOR THE EQUITY UNITS WILL BE DIRECTLY AFFECTED BY THE TRADING
PRICES OF FPL GROUP COMMON STOCK.
The trading prices of Corporate Units and Treasury Units in the
secondary market will be directly affected by the trading prices of FPL Group
common stock, the general level of interest rates and FPL Group's credit
quality. It is impossible to predict whether the price of the FPL Group common
stock or interest rates will rise or fall. Trading prices of FPL Group common
stock will be influenced by FPL Group's operating results and prospects and by
economic, financial and other factors. In addition, general market conditions,
including the level of, and fluctuations in, the trading prices of stocks
generally, and sales by FPL Group of substantial amounts of its common stock in
the market after the offering of the Equity Units, or the perception that such
sales could occur, could affect the price of FPL Group's common stock.
Fluctuations in interest rates may give rise to arbitrage opportunities based
upon changes in the relative value of the FPL Group common stock underlying the
purchase contracts and of the other components of the Equity Units. Any such
arbitrage could, in turn, affect the trading prices of the Corporate Units,
Treasury Units, FPL Group Capital debentures and FPL Group common stock.
S-16
HOLDERS OF EQUITY UNITS WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT TO FPL
GROUP COMMON STOCK, BUT WILL BE SUBJECT TO ALL CHANGES MADE WITH RESPECT TO FPL
GROUP COMMON STOCK.
Holders of Equity Units will not be entitled to any rights with
respect to the FPL Group common stock (including, without limitation, voting
rights, rights to receive any dividends or other distributions on the FPL Group
common stock and any rights under FPL Group's shareholder rights plan), but will
be subject to all changes affecting the common stock. Holders of Equity Units
will only be entitled to rights on the FPL Group common stock if and when FPL
Group delivers shares of FPL Group common stock upon settlement of purchase
contracts on February 16, 2005 (and then, only with respect to the shares
actually delivered on or before such date), or as a result of early settlement
of a purchase contract, as the case may be, and the applicable record date, if
any, for the exercise of rights or the receipt of dividends or other
distributions occurs after that date. For example, in the event that an
amendment is proposed to FPL Group's Restated Articles of Incorporation or
bylaws requiring shareholder approval and the record date for determining the
shareholders of record entitled to vote on the amendment occurs prior to
delivery of the FPL Group common stock to holders of Equity Units, those holders
will not be entitled to vote on the amendment, although they will nevertheless
be subject to any changes in the powers, preferences or special rights of FPL
Group common stock.
FPL GROUP MAY ISSUE ADDITIONAL SHARES OF ITS COMMON STOCK AND THEREBY MATERIALLY
AND ADVERSELY AFFECT THE PRICE OF ITS COMMON STOCK.
The number of shares of FPL Group common stock that holders of Equity
Units are obligated to purchase on February 16, 2005 or as a result of early
settlement of a purchase contract, is subject to adjustment for certain events
arising from stock splits and combinations, stock dividends and certain other
actions by FPL Group that significantly modify its capital structure. FPL Group
will not adjust the number of shares of FPL Group common stock that the holders
are to receive on February 16, 2005 or as a result of early settlement of a
purchase contract, for other events, including offerings by FPL Group of its
common stock for cash or in connection with acquisitions. FPL Group is not
restricted from issuing additional shares of its common stock during the term of
the purchase contracts and has no obligation to consider the interests of
holders of Equity Units for any reason. If FPL Group issues additional shares of
its common stock, that issuance may materially and adversely affect the price of
FPL Group common stock and, because of the relationship of the number of shares
holders are to receive on February 16, 2005 to the price of FPL Group common
stock, such other events may adversely affect the trading price of Corporate
Units or Treasury Units.
THE SECONDARY MARKET FOR THE EQUITY UNITS MAY BE ILLIQUID.
It is not possible to predict how the Corporate Units, Treasury Units
or FPL Group Capital debentures will trade in the secondary market or whether
the secondary market will be liquid or illiquid. There is currently no secondary
market for these Corporate Units, Treasury Units or FPL Group Capital
debentures. FPL Group intends to apply for the listing of the Corporate Units on
the NYSE. Neither FPL Group nor FPL Group Capital has any obligation or current
intention to apply for any separate listing of the Treasury Units or FPL Group
Capital debentures. There can be no assurance as to the liquidity of any
secondary market that may develop for the Corporate Units, the Treasury Units or
the FPL Group Capital debentures, a holder's ability to sell these securities or
whether a trading market, if it develops, will continue. In addition, in the
event a holder were to substitute Treasury securities for FPL Group Capital
debentures or FPL Group Capital debentures for Treasury securities, thereby
converting Corporate Units to Treasury Units or Treasury Units to Corporate
Units, as the case may be, the liquidity of Corporate Units or Treasury Units
could be adversely affected. There can be no assurance that the Corporate Units
will not be delisted from the NYSE or that trading in the Corporate Units will
not be suspended as a result of the election by one or more holders to create
Treasury Units by substituting collateral, which could cause the number of
Corporate Units to fall below the requirement for listing securities on the NYSE
that at least 100,000 Corporate Units be outstanding at any time.
AN EQUITY UNIT HOLDER'S RIGHTS TO THE PLEDGED SECURITIES WILL BE SUBJECT TO FPL
GROUP'S SECURITY INTEREST.
Although holders of Equity Units will be the beneficial owners of the
related FPL Group Capital debentures, Treasury securities or Treasury portfolio,
as the case may be, those securities will be pledged to JPMorgan Chase Bank, as
the collateral agent, to secure the holders' obligations under the related
purchase contracts. Thus, the holders' rights to the pledged securities will be
subject to FPL Group's security interest. Additionally, notwithstanding the
automatic termination of the purchase contracts in the event that FPL Group
becomes the subject of a case under the U.S. Bankruptcy Code, the delivery of
the pledged securities to holders of Equity Units may be delayed by the
imposition of the automatic stay of Section 362 of the Bankruptcy Code.
S-17
FPL GROUP CAPITAL MAY REDEEM THE FPL GROUP CAPITAL DEBENTURES UPON THE
OCCURRENCE OF A TAX EVENT.
FPL Group Capital has the option to redeem the FPL Group Capital
debentures, upon at least 30 but not more than 60 days prior written notice, in
whole but not in part, if a tax event occurs and continues under the
circumstances described in this prospectus supplement under "Certain Terms of
the FPL Group Capital Debentures--Tax Event Redemption." If FPL Group Capital
exercises this option, it will redeem the FPL Group Capital debentures at the
redemption amount plus accrued and unpaid interest, if any. If FPL Group Capital
redeems the FPL Group Capital debentures, it will pay the redemption amount in
cash to the holders of the FPL Group Capital debentures. However, if the tax
event redemption occurs before November 16, 2004, or before February 16, 2005 if
the FPL Group Capital debentures are not successfully remarketed on the third
business day immediately preceding November 16, 2004, the redemption price
payable to holders of the Corporate Units in respect of FPL Group Capital
debentures that are included in Corporate Units will be distributed to the
collateral agent, who in turn will apply an amount equal to the redemption price
to purchase the Treasury portfolio on behalf of the holders, and will remit the
remainder of the redemption payment, if any, to the holders, and the Treasury
portfolio will be substituted for FPL Group Capital debentures that are
components of Corporate Units as collateral to secure the holders' obligations
under the purchase contracts related to the Corporate Units. Holders of FPL
Group Capital debentures that are not components of Corporate Units will receive
redemption payments directly. There can be no assurance as to the impact on the
market prices for the Corporate Units if the Treasury portfolio is substituted
as collateral in place of the FPL Group Capital debentures so redeemed. A tax
event redemption will be a taxable event to the holders of the FPL Group Capital
debentures.
FPL GROUP CAPITAL AND FPL GROUP ARE EACH HOLDING COMPANIES. THE INDENTURE DOES
NOT LIMIT THE AMOUNT OF DEBT OR PREFERRED STOCK THAT FPL GROUP CAPITAL, FPL
GROUP OR THEIR RESPECTIVE SUBSIDIARIES MAY ISSUE OR INCUR. THE CLAIMS OF
CREDITORS AND HOLDERS OF PREFERRED STOCK OF FPL GROUP CAPITAL'S SUBSIDIARIES ARE
EFFECTIVELY SENIOR TO CLAIMS OF HOLDERS OF FPL GROUP CAPITAL DEBENTURES. THE
CLAIMS OF CREDITORS AND HOLDERS OF PREFERRED STOCK OF FPL GROUP'S SUBSIDIARIES
ARE EFFECTIVELY SENIOR TO CLAIMS OF HOLDERS OF FPL GROUP CAPITAL DEBENTURES
UNDER FPL GROUP'S GUARANTEE THEREOF AND TO CLAIMS OF THE HOLDERS OF THE EQUITY
UNITS. IN ADDITION, CONTRACT ADJUSTMENT PAYMENTS WILL BE SUBORDINATED
OBLIGATIONS OF FPL GROUP.
The FPL Group Capital debentures will be issued as a new series of
unsecured debt securities under an indenture between FPL Group Capital and The
Bank of New York, as trustee, and will rank equally and ratably in right of
payment with all of FPL Group Capital's other unsecured and unsubordinated
obligations. FPL Group has agreed to absolutely, irrevocably and unconditionally
guarantee the payment of principal, interest and premium, if any, on the FPL
Group Capital debentures. The indenture does not limit FPL Group Capital's or
FPL Group's ability to issue or incur other unsecured debt. The guarantee does
not limit the amount of other indebtedness, including guarantees, that FPL Group
may incur or issue.
The indenture provides that FPL Group Capital may not grant a lien on
the capital stock of any of its majority-owned subsidiaries, which shares of
capital stock FPL Group Capital now or hereafter directly owns, to secure debt
obligations of FPL Group Capital without similarly securing the FPL Group
Capital debentures, with certain exceptions. However, the indenture does not
limit in any manner the ability of:
o FPL Group Capital to place liens on any of its assets other than
the capital stock of directly held, majority-owned subsidiaries,
o FPL Group Capital or FPL Group to cause the transfer of its assets
or those of its subsidiaries, including the capital stock covered
by the foregoing restrictions,
o FPL Group to place liens on any of its assets, or
o any of the direct or indirect subsidiaries of FPL Group Capital or
FPL Group (other than FPL Group Capital) to place liens on any of
their assets.
FPL Group and FPL Group Capital are each holding companies that derive
substantially all of their income from their respective subsidiaries.
Accordingly, the ability of FPL Group Capital to service its debt, including its
obligations under the FPL Group Capital debentures, and the ability of FPL Group
to service its debt, including its obligations under the guarantee of the FPL
Group Capital debentures, and other obligations are primarily dependent on the
earnings of their respective subsidiaries and the payment of those earnings to
FPL Group Capital and FPL Group, respectively, in the form of dividends, loans
S-18
or advances and through repayment of loans or advances from FPL Group Capital
and FPL Group, respectively. In addition, any payment of dividends, loans or
advances by those subsidiaries could be subject to statutory or contractual
restrictions. The subsidiaries of FPL Group Capital have no obligation to pay
any amounts due on the FPL Group Capital debentures, and the subsidiaries of FPL
Group have no obligation to pay any amounts due under FPL Group's guarantee of
the FPL Group Capital debentures.
The FPL Group Capital debentures and FPL Group's obligations under the
guarantee of FPL Group Capital debentures and with respect to the Equity Units
therefore will be effectively subordinated to existing and future liabilities,
including debt and preferred stock at the subsidiary level. Upon liquidation or
reorganization of a subsidiary of FPL Group Capital, the claims of that
subsidiary's creditors and preferred shareholders generally will be paid before
payments can be made to FPL Group Capital that could be applied to payments on
the FPL Group Capital debentures or FPL Group's obligations under the guarantee
of FPL Group Capital debentures and the Equity Units or to other creditors of
FPL Group Capital or FPL Group, respectively. In addition, FPL Group's
obligations with respect to contract adjustment payments will be subordinate and
junior in right of payment to its obligations under any of its senior
indebtedness.
FPL GROUP MAY DEFER CONTRACT ADJUSTMENT PAYMENTS.
FPL Group has the option to defer the payment of contract adjustment
payments on the purchase contracts forming a part of the Equity Units until
February 16, 2005. However, deferred contract adjustment payments will bear
interest at the rate of ___% per year (compounded quarterly) until paid. If the
purchase contracts are terminated due to FPL Group's bankruptcy, insolvency or
reorganization, the right to receive contract adjustment payments and deferred
contract adjustment payments, if any, will also terminate.
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE EQUITY UNITS ARE UNCLEAR.
No statutory, judicial or administrative authority directly addresses
the treatment of the Equity Units or instruments similar to the Equity Units for
United States federal income tax purposes. As a result, the United States
federal income tax consequences of the purchase, ownership and disposition of
Equity Units are not entirely clear. In addition, any gain on the disposition of
an FPL Group Capital debenture or a Corporate Unit to the extent such gain is
allocable to the FPL Group Capital debenture prior to the purchase contract
settlement date generally will be treated as ordinary interest income; thus, the
ability to offset such interest income with a loss, if any, on a purchase
contract may be limited. For additional tax-related risks, see "Prospectus
Supplement Summary--The Offering--Q & A" and "Material Federal Income Tax
Consequences" in this prospectus supplement.
BECAUSE THE FPL GROUP CAPITAL DEBENTURES WILL BE ISSUED WITH OID, HOLDERS OF
CORPORATE UNITS AND SEPARATE FPL GROUP CAPITAL DEBENTURES WILL HAVE TO INCLUDE
INTEREST IN THEIR TAXABLE INCOME BEFORE THEY RECEIVE CASH.
The FPL Group Capital debentures should be treated as contingent
payment debt instruments for United States federal income tax purposes.
Accordingly, the FPL Group Capital debentures will be treated as issued with
OID. OID will accrue from the issue date of the FPL Group Capital debentures and
will be included in the gross income of holders of Corporate Units and separate
FPL Group Capital debentures for United States federal income tax purposes
before the holders receive the cash payments to which the income is
attributable. See "Material Federal Income Tax Consequences--FPL Group Capital
Debentures--Original Issue Discount" in this prospectus supplement.
THE TRADING PRICE OF THE FPL GROUP CAPITAL DEBENTURES MAY NOT FULLY REFLECT THE
VALUE OF ACCRUED BUT UNPAID INTEREST.
The FPL Group Capital debentures may trade at prices that do not fully
reflect the value of accrued but unpaid interest. If holders dispose of their
FPL Group Capital debentures between record dates for interest payments, those
holders will be required to include in gross income the daily portions of OID
through the date of disposition as ordinary income, and to add this amount to
their adjusted tax basis in the FPL Group Capital debentures disposed of. To the
extent the selling price is less than a holder's adjusted tax basis (which will
include accruals of OID through the date of sale), the holder will recognize a
loss. Some or all of this loss may be capital in nature, and the deductibility
of capital losses for U.S. federal income tax purposes is subject to certain
limitations.
S-19
FPL GROUP'S ARTICLES OF INCORPORATION AND BY-LAW PROVISIONS, AND SEVERAL OTHER
FACTORS, COULD LIMIT ANOTHER PARTY'S ABILITY TO ACQUIRE FPL GROUP AND COULD
DEPRIVE A COMMON SHAREHOLDER OF THE OPPORTUNITY TO OBTAIN A TAKEOVER PREMIUM FOR
ITS SHARES OF FPL GROUP COMMON STOCK.
A number of provisions that are in FPL Group's articles of
incorporation and by-laws will make it difficult for another company to acquire
FPL Group and for a holder of FPL Group common stock to receive any related
takeover premium for its shares. See Description of Common Stock--Voting Rights
and Non-Cumulative Voting" and "Description of Common Stock--Preferred Share
Purchase Rights" in the accompanying prospectus.
S-20
SELECTED CONSOLIDATED INCOME STATEMENT DATA OF FPL GROUP AND SUBSIDIARIES
The following material, which is presented in this prospectus supplement solely
to furnish limited introductory information, is qualified in its entirety by,
and should be considered in conjunction with, the more detailed information
incorporated by reference or provided in this prospectus supplement or in the
accompanying prospectus.
(IN MILLIONS, EXCEPT EARNINGS PER SHARE)
TWELVE MONTHS ENDED DECEMBER 31,
----------------------------------------------------------------
2001 2000 1999
---------------------- --------------------- -----------------
(UNAUDITED)
Operating revenues............................ $8,475 $7,082 $6,438
Net income.................................... $ 781(a) $ 704(b) $ 697(c)
Weighted-average shares
outstanding (assuming dilution)............ 169 170 172
Earnings per share of common stock
(assuming dilution)........................ $ 4.62 $4.14 $ 4.07
(a) Includes merger-related costs which reduced net income and earnings per
share by $19 million and $.11, respectively and the positive effect associated
with applying Statement of Financial Accounting Standards No. 133 which
increased net income and earnings per share by $8 million and $.04,
respectively.
(b) Includes merger-related costs which reduced net income and earnings per
share by $41 million and $.24, respectively.
(c) Includes effects of a gain on sale of Adelphia Communications Corporation
stock which increased net income and earnings per share by $96 million and $.56,
respectively, an impairment loss on Maine assets which reduced net income and
earnings per share by $104 million and $.61, respectively, settlement of
litigation between Florida Power & Light Company and Florida Municipal Power
Agency which reduced net income and earnings per share by $42 million and $.25,
respectively and a gain on the redemption of a one-third ownership interest in a
cable limited partnership which increased net income and earnings per share by
$66 million and $.39, respectively.
CONSOLIDATED CAPITALIZATION OF FPL GROUP AND SUBSIDIARIES
(IN MILLIONS)
OUTSTANDING
AT ADJUSTED(A)
-------------------------------------
DECEMBER 31, 2001 AMOUNT PERCENT
----------------- -------------------- -------------
(UNAUDITED)
Common Shareholders' Equity .................. $ 6,015 $ %
Long-term debt (excluding current
maturities)................................. $ 4,858 $ %
Preferred stock of Florida
Power & Light Company without
sinking fund requirements.................. $ 226 $ %
------- ----------------- ---------------
Total Capitalization..................... $11,099 $ %
======= ================= ===============
(a) To give effect to the issuance of 10,000,000 Corporate Units (assuming the
underwriters do not exercise their overallotment option). The underwriters have
an option to purchase up to an additional 1,500,000 Corporate Units within 30
days of the date of this prospectus supplement in order to cover overallotments,
if any. Adjusted amounts do not reflect any possible future issuance and sale
from time to time by FPL Group or its subsidiaries of additional debt and equity
securities as needed.
S-21
COMMON STOCK DIVIDENDS AND PRICE RANGE
FPL Group and its predecessor, Florida Power & Light Company, have
paid dividends on the common stock each year since 1944. FPL Group's 224th
consecutive quarterly dividend on its common stock was paid on December 17, 2001
to holders of record on November 30, 2001 in the amount of $0.56 per share.
Purchasers of the Equity Units offered hereby will not be entitled to receive
any quarterly dividend with a record date prior to the applicable purchase
contract settlement date. It is generally the practice of FPL Group to pay
dividends quarterly on the 15th day of March, June, September and December. The
payment of dividends is within the sole discretion of the Board of Directors. As
a practical matter, the ability of FPL Group to pay dividends on its common
stock is dependent upon dividends paid to it by its subsidiaries, primarily
Florida Power & Light Company. See "Description of Common Stock" in the
accompanying prospectus. The high and low closing prices of FPL Group common
stock, as reported on the NYSE consolidated tape (NYSE ticker symbol: "FPL"),
and dividends paid per share, for the periods indicated, are presented below:
Price Range
--------------------------------------------- -------------------
Dividends
High Low Paid Per Share
------------------- ------------------ -------------------
2000
First Quarter $48.25 $36.38 $0.54
Second Quarter 50.81 41.81 0.54
Third Quarter 67.13 47.13 0.54
Fourth Quarter 73.00 59.38 0.54
2001
First Quarter $71.63 $54.81 $0.56
Second Quarter 63.15 54.55 0.56
Third Quarter 60.50 51.21 0.56
Fourth Quarter 57.28 52.16 0.56
2002
First Quarter (through $57.19 $55.25 --
January 28, 2002)
USE OF PROCEEDS
The information in this section adds to the information in the "Use of
Proceeds" section on page 4 of the accompanying prospectus. Please read these
two sections together.
FPL Group Capital will add the net proceeds from the sale of the
Corporate Units to its general funds. FPL Group Capital expects to use its
general funds to repay a portion of commercial paper issued to fund investments
by FPL Group Capital in independent power projects. As of January 25, 2002, FPL
Group Capital had an aggregate of $1.79 billion of commercial paper outstanding,
which had maturities of up to 103 days and which had annual interest rates
ranging from 1.85% to 2.53%. FPL Group Capital will temporarily invest in
short-term instruments any proceeds that are not immediately required for these
purposes.
ACCOUNTING TREATMENT
The net proceeds from the sale of the Equity Units will be allocated
between the purchase contract and the FPL Group Capital debentures on FPL
Group's financial statements. The present value of the Equity Units contract
adjustment payments will be initially charged to Common Shareholders' Equity,
with an offsetting credit to liabilities. Subsequent contract adjustment
payments are allocated between this liability account and interest expense based
on a constant rate calculation over the life of the transaction.
S-22
The Equity Unit purchase contracts are forward transactions in FPL
Group's common stock. Upon settlement of the purchase contract, FPL Group will
receive $50 on that purchase contract and will issue the requisite number of
shares of its common stock. The $50 that FPL Group receives will be credited to
Common Shareholders' Equity.
Before the issuance of FPL Group's common stock upon settlement of the
purchase contracts, the purchase contracts will be reflected in FPL Group's
diluted earnings per share calculations using the treasury stock method. Under
this method, the number of shares of FPL Group common stock used in calculating
diluted earnings per share is deemed to be increased by the excess, if any, of
the number of shares that would be issued upon settlement of the purchase
contracts less the number of shares that could be purchased by FPL Group in the
market, at the average market price during the period, using the proceeds
receivable upon settlement. Consequently, FPL Group anticipates that there will
be no dilutive effect on its earnings per share except during periods when the
average market price of its common stock is above $___.
DESCRIPTION OF THE EQUITY UNITS
The information in this section adds to the information in the
"Description of Stock Purchase Contracts and Stock Purchase Units" on page 20 of
the accompanying prospectus. Please read these two sections together.
This section briefly summarizes some of the terms of the Equity Units
and some of the provisions of the purchase contract agreement and the pledge
agreement. This summary does not contain a complete description of the Equity
Units. You should read this summary together with the purchase contract
agreement and the pledge agreement for a complete understanding of the
provisions that may be important to you and for the definitions of some terms
used in this summary. The form of purchase contract agreement and pledge
agreement are on file with the SEC and are incorporated by reference in this
prospectus supplement. In addition, the purchase contract agreement is subject
to the provisions of the Trust Indenture Act of 1939. You should read the Trust
Indenture Act of 1939 for a complete understanding of provisions that may be
important to you.
FPL Group will issue the Equity Units under the purchase contract
agreement between the purchase contract agent and FPL Group. The Equity Units
will consist of 10,000,000 Corporate Units (11,500,000 Corporate Units if the
underwriters exercise their overallotment option in full), each with a stated
amount of $50.
Each Corporate Unit will consist of a unit comprising:
(1) a purchase contract pursuant to which
o the holder will agree to purchase from FPL Group no
later than February 16, 2005, for $50, a number of
newly issued shares of FPL Group common stock equal to
the settlement rate described below under "Description
of the Purchase Contracts--Purchase of FPL Group Common
Stock," and
o FPL Group will make unsecured contract adjustment
payments to the holder at the rate of __% of the stated
amount per year, paid quarterly, and subject to FPL
Group's right to defer these payments; and
(2) either
(A) so long as no tax event redemption has occurred
o $50 principal amount of FPL Group Capital debentures, or
o following a successful remarketing of the FPL Group
Capital debentures on the third business day
immediately preceding November 16, 2004, the
applicable ownership interest in a portfolio of
zero-coupon U.S. Treasury securities maturing on or
prior to February 15, 2005, which is referred to as
the Treasury portfolio, or
S-23
(B) after a tax event redemption has occurred
o the applicable ownership interest in a portfolio
of zero-coupon U.S. Treasury securities as more
fully described under "Certain Terms of the FPL
Group Capital Debentures--Tax Event Redemption,"
which is referred to as the tax event Treasury
portfolio.
"Applicable ownership interest" means, with respect to the U.S.
Treasury securities in a Treasury portfolio contained in a Corporate Unit:
(1) for a Treasury portfolio,
o a 1/20, or 5%, undivided beneficial ownership interest in a
$1,000 principal or interest amount of a principal or
interest strip in a U.S. Treasury security included in the
Treasury portfolio that matures on or prior to February 15,
2005, and
o for the scheduled interest payment date on the FPL Group
Capital debentures that occurs on February 16, 2005, a ____%
undivided beneficial ownership interest in a $1,000
principal or interest amount of a principal or interest
strip in a U.S. Treasury security included in the Treasury
portfolio that matures on or prior to the relevant interest
payment date; and
(2) for a tax event Treasury portfolio,
o a 1/20, or 5%, undivided beneficial ownership interest in a
$1,000 principal or interest amount of a principal or
interest strip in a U.S. Treasury security included in the
Treasury portfolio that matures on or prior to February 15,
2005, and
o for each scheduled interest payment date on the FPL Group
Capital debentures that occurs after the tax event
redemption date, a ___% undivided beneficial ownership
interest in a $1,000 principal or interest amount of a
principal or interest strip in a U.S. Treasury security
maturing on or prior to that date.
For United States federal income tax purposes, the purchase price of
each Corporate Unit will be allocated between the related purchase contract and
the FPL Group Capital debenture in proportion to their respective fair market
values at the time of issuance. FPL Group expects that, at the time of issuance,
the fair market value of each FPL Group Capital debenture will be $50 and the
fair market value of each purchase contract will be $0. This position generally
will be binding on each beneficial owner of each Corporate Unit, but not on the
Internal Revenue Service, or IRS. See "Material Federal Income Tax
Consequences--Equity Units--Allocation of Purchase Price."
As long as an Equity Unit is in the form of a Corporate Unit, the FPL
Group Capital debentures or the appropriate applicable ownership interest in any
Treasury portfolio, as applicable, forming a part of the Corporate Unit will be
pledged to the collateral agent to secure the holder's obligation to purchase
FPL Group common stock under the related purchase contract.
CREATING TREASURY UNITS
If a Treasury portfolio has not replaced the FPL Group Capital
debentures as a component of the Corporate Units as the result of a successful
remarketing of FPL Group Capital debentures or a tax event redemption, each
holder of Corporate Units will have the right, at any time on or prior to the
fifth business day immediately preceding February 16, 2005 to substitute for the
related FPL Group Capital debentures held by the collateral agent zero-coupon
U.S. Treasury securities (CUSIP No. 912820 BM8) maturing on February 15, 2005,
which are referred to as Treasury securities, having a principal amount at
maturity equal to the aggregate principal amount of the FPL Group Capital
debentures for which substitution is being made. These substitutions will create
Treasury Units, and the FPL Group Capital debentures will be released to the
holder. Because Treasury securities are issued in integral multiples of $1,000,
holders of Corporate Units may make these substitutions only in integral
multiples of 20 Corporate Units.
If a Treasury portfolio has replaced the FPL Group Capital debentures
as a component of the Corporate Units as the result of a successful remarketing
of FPL Group Capital debentures or a tax event redemption, holders of Corporate
S-24
Units may create Treasury Units by making substitutions of Treasury securities
for the applicable ownership interest in the relevant Treasury portfolio, at any
time on or prior to the second business day immediately preceding February 16,
2005 and only in integral multiples of _________ Corporate Units. In such a
case, holders would also obtain the release of the appropriate applicable
ownership interest in the Treasury portfolio rather than a release of the FPL
Group Capital debentures.
Each Treasury Unit will consist of a unit with a stated amount of $50,
comprising:
(1) a purchase contract pursuant to which
o the holder will agree to purchase from FPL Group
no later than February 16, 2005, for $50, a number
of newly issued shares of FPL Group common stock
equal to the settlement rate described below under
"Description of the Purchase Contracts--Purchase
of FPL Group Common Stock," and
o FPL Group will make unsecured contract adjustment
payments to the holder at the rate of __% of the
stated amount per year, paid quarterly, and
subject to FPL Group's right to defer these
payments; and
(2) a 1/20, or 5%, undivided beneficial ownership interest in a
Treasury security having a principal amount at maturity of
$1,000.
For example, to create 20 Treasury Units if a Treasury portfolio has
not replaced FPL Group Capital debentures as a component of the Corporate Units,
the Corporate Unit holder will:
o deposit with the collateral agent a Treasury security having a
principal amount at maturity of $1,000; and
o transfer 20 Corporate Units to the purchase contract agent
accompanied by a notice stating that the holder has deposited the
required Treasury securities with the collateral agent and
requesting that the purchase contract agent instruct the
collateral agent to release to the holder the 20 FPL Group Capital
debentures relating to the 20 Corporate Units.
Upon that deposit and the receipt of an instruction from the purchase contract
agent, the collateral agent will release the related 20 FPL Group Capital
debentures from the pledge under the pledge agreement, free and clear of FPL
Group's security interest, to the purchase contract agent. The purchase contract
agent then will:
o cancel the 20 Corporate Units;
o transfer the related 20 FPL Group Capital debentures to the
holder; and
o deliver 20 Treasury Units to the holder.
The Treasury securities will be substituted for the FPL Group Capital
debentures and will be pledged to the collateral agent to secure the holder's
obligation to purchase FPL Group common stock under the related purchase
contracts. The related FPL Group Capital debentures released to the holder
thereafter will trade separately from the resulting Treasury Units. Contract
adjustment payments will be payable by FPL Group on these Treasury Units on each
payment date from the later of May 16, 2002 and the last payment date on which
contract adjustment payments were made on the related purchase contract (whether
as a component of the Treasury Unit or a Corporate Unit). In addition, OID will
accrue on the related Treasury securities. See "Material Federal Income Tax
Consequences--Treasury Securities--Original Issue Discount."
RECREATING CORPORATE UNITS
If a Treasury portfolio has not replaced the FPL Group Capital
debentures as a component of the Corporate Units as a result of a successful
remarketing of FPL Group Capital debentures or a tax event redemption, each
holder of Treasury Units will have the right, at any time on or prior to the
fifth business day immediately preceding February 16, 2005, to substitute FPL
S-25
Group Capital debentures for any related Treasury securities held by the
collateral agent, in an aggregate principal amount equal to the aggregate
principal amount at maturity of the Treasury securities for which substitution
is being made. These substitutions will recreate Corporate Units, and the
applicable Treasury securities will be released to the holder. Because Treasury
securities are issued in integral multiples of $1,000, holders of Treasury Units
may make these substitutions only in integral multiples of 20 Treasury Units.
If a Treasury portfolio has replaced the FPL Group Capital debentures
as a component of the Corporate Units as the result of a successful remarketing
of FPL Group Capital debentures or a tax event redemption, holders of the
Treasury Units may recreate Corporate Units by making substitutions of the
appropriate applicable ownership interest in the relevant Treasury portfolio for
the applicable Treasury securities, at any time on or prior to the second
business day immediately preceding February 16, 2005 and only in integral
multiples of _________ Treasury Units. In such a case, holders would also obtain
the release of the applicable Treasury securities for which substitution is
being made.
For example, to recreate 20 Corporate Units if a Treasury portfolio
has not replaced FPL Group Capital debentures as a component of the Corporate
Units, the Treasury Unit holder will:
o deposit with the collateral agent 20 FPL Group Capital debentures,
which FPL Group Capital debentures must have been purchased in the
open market at the holder's expense or held as a result of
creating Treasury Units; and
o transfer 20 Treasury Units to the purchase contract agent
accompanied by a notice stating that the holder has deposited 20
FPL Group Capital debentures with the collateral agent and
requesting that the purchase contract agent instruct the
collateral agent to release to the holder the Treasury securities
relating to those Treasury Units.
Upon that deposit and the receipt of an instruction from the purchase contract
agent, the collateral agent will release the related Treasury securities from
the pledge under the pledge agreement, free and clear of FPL Group's security
interest, to the purchase contract agent. The purchase contract agent will then:
o cancel the 20 Treasury Units;
o transfer the related Treasury securities to the holder; and
o deliver 20 Corporate Units to the holder.
The substituted FPL Group Capital debentures will be pledged to the
collateral agent to secure the holder's obligation to purchase FPL Group common
stock under the related purchase contracts.
Holders that elect to substitute pledged securities, thereby creating
Treasury Units or recreating Corporate Units, will be responsible for any fees
or expenses payable in connection with the substitution.
CURRENT PAYMENTS
Holders of Corporate Units will be entitled to receive aggregate cash
payments at the rate of __% of the $50 stated amount per year, payable quarterly
in arrears. The quarterly payments on the Corporate Units will consist of:
o interest on the related FPL Group Capital debentures payable by
FPL Group Capital or cash distributions on the applicable
ownership interest of the Treasury portfolio, as applicable, at
the rate of __% of the stated amount per year, and
o distributions of quarterly contract adjustment payments payable by
FPL Group at the rate of __% of the stated amount per year,
subject to FPL Group's right to defer the payment of such contract
adjustment payments.
In addition, OID for United States federal income tax purposes will accrue on
the related FPL Group Capital debentures.
S-26
Holders who create Treasury Units will be entitled to receive
quarterly cash distributions of contract adjustment payments payable by FPL
Group at the rate of __% of the stated amount per year, subject to FPL Group's
right to defer the payments of such contract adjustment payments. Each Treasury
Unit will have a stated amount of $50. Although holders of Treasury Units will
not receive any interest payments on the Treasury securities pledged in
connection with the creation of the Treasury Units, they will be required to
accrue OID on these Treasury securities.
FPL Group's obligations with respect to the contract adjustment
payments will be subordinate and junior in right of payment to its obligations
under any of its senior indebtedness. "Senior indebtedness" with respect to the
contract adjustment payments means indebtedness of any kind of FPL Group
provided the instrument under which such indebtedness is incurred does not
expressly provide otherwise. The FPL Group Capital debentures will be senior
unsecured obligations of FPL Group Capital and will rank equally in right of
payment with all of FPL Group Capital's other unsecured and unsubordinated debt
obligations. See "Description of Offered Debt Securities" in the accompanying
prospectus. FPL Group's obligations under its guarantee of FPL Group Capital
debentures will be senior unsecured obligations of FPL Group and will rank
equally in right of payment with all of FPL Group's other unsecured and
unsubordinated debt obligations. See "Description of the Guarantee" in the
accompanying prospectus.
VOTING AND CERTAIN OTHER RIGHTS
Holders of purchase contracts forming part of the Corporate Units or
Treasury Units, in their capacities as such holders, will have no rights with
respect to the FPL Group common stock (including, without limitation, voting
rights, rights to receive any dividends or other distributions on the FPL Group
common stock and any rights under FPL Group's shareholder rights plan).
LISTING OF THE SECURITIES
FPL Group intends to apply for the listing of the Corporate Units on
the NYSE. Unless and until substitution has been made as described in
"--Creating Treasury Units" or "--Recreating Corporate Units," neither the FPL
Group Capital debentures nor the Treasury portfolio component of a Corporate
Unit nor the Treasury securities component of a Treasury Unit will trade
separately from Corporate Units or Treasury Units. The FPL Group Capital
debentures or the Treasury portfolio component will trade as a unit with the
purchase contract component of the Corporate Units, and the Treasury securities
component will trade as a unit with the purchase contract component of the
Treasury Units. FPL Group has no obligation or current intention to apply for
listing of the Treasury Units or FPL Group Capital debentures.
FPL Group's common stock is listed on the NYSE and trades under the
symbol "FPL." FPL Group will apply for the listing of the shares of FPL Group's
common stock issuable upon settlement of each purchase contract.
MISCELLANEOUS
FPL Group, its subsidiaries or its affiliates may from time to time,
to the extent permitted by law, purchase any of the Corporate Units, Treasury
Units or FPL Group Capital debentures which are then outstanding by tender, in
the open market or by private agreement.
DESCRIPTION OF THE PURCHASE CONTRACTS
This section briefly summarizes some of the terms of the purchase
contract agreement, purchase contracts, pledge agreement, remarketing agreement
and the officer's certificate establishing the terms of the FPL Group Capital
debentures and some of the provisions of the Purchase Contract Agreement and
uses some terms that are not defined in this prospectus supplement or the
accompanying prospectus but that are defined in the Purchase Contract Agreement.
This summary does not contain a complete description of the purchase contracts.
You should read this summary together with the Purchase Contract Agreement and
the officer's certificate and other documents establishing the purchase
contracts for a complete understanding of the provisions that may be important
to you and for the definitions of some terms used in this summary. The forms of
purchase contract agreement, purchase contracts, pledge agreement, remarketing
agreement and officer's certificate establishing the terms of the FPL Group
Capital debentures are on file with the SEC and are incorporated by reference in
this prospectus supplement.
S-27
PURCHASE OF FPL GROUP COMMON STOCK
Each purchase contract underlying an Equity Unit will obligate the
holder of the purchase contract to purchase, and obligates FPL Group to sell, on
February 16, 2005, for $50 in cash, a number of newly issued shares of FPL Group
common stock equal to the "settlement rate." The settlement rate for each
purchase of FPL Group common stock under a purchase contract will be calculated,
subject to adjustment under the circumstances described in "--Anti-Dilution
Adjustments," as follows:
o if the applicable market value of FPL Group common stock is equal
to or greater than the threshold appreciation price of $___,
which is approximately ___% above the reference price of $___,
the settlement rate will be ________, which is equal to $50
divided by the threshold appreciation price. Accordingly, if the
market price for FPL Group common stock increases, between the
date of this prospectus supplement and the period during which
the applicable market value is measured, to an amount that is
higher than the threshold appreciation price, the aggregate
market value of the shares of FPL Group common stock issued upon
settlement of the purchase contract will be higher than $50,
assuming that the market price of FPL Group common stock on the
date of settlement is the same as the applicable market value of
FPL Group common stock. If the market price is the same as the
threshold appreciation price, the aggregate market value of those
shares of FPL Group common stock will be equal to $50, assuming
that the market price of the FPL Group common stock on the date
of settlement is the same as the applicable market value of FPL
Group common stock;
o if the applicable market value of FPL Group common stock is less
than the threshold appreciation price but greater than the
reference price, the settlement rate will be equal to $50 divided
by the applicable market value. Accordingly, if the market price
for FPL Group common stock increases between the date of this
prospectus supplement and the period during which the applicable
market value is measured, but the market price is less than the
threshold appreciation price, the aggregate market value of the
shares of FPL Group common stock issued upon settlement of the
purchase contract will be equal to $50, assuming that the market
price of FPL Group common stock on the date of settlement is the
same as the applicable market value of FPL Group common stock; and
o if the applicable market value of FPL Group common stock is less
than or equal to the reference price, the settlement rate will be
____, which is equal to $50 divided by the reference price.
Accordingly, if the market price for FPL Group common stock
decreases between the date of this prospectus supplement and the
period during which the applicable market value is measured, the
aggregate market value of the shares of FPL Group common stock
issued upon settlement of the purchase contract will be less than
$50, assuming that the market price of FPL Group common stock on
the date of settlement is the same as the applicable market value
of FPL Group common stock. If the market price stays the same,
the aggregate market value of those shares of FPL Group common
stock will be equal to the stated amount, assuming that the
market price of the FPL Group common stock on the date of
settlement is the same as the applicable market value of FPL
Group common stock.
"Applicable market value" means the average of the closing price per
share of FPL Group common stock on the 20 consecutive trading days ending on the
third trading day immediately preceding February 16, 2005.
"Closing price" of FPL Group common stock on any date of determination
means the closing sale price (or, if no closing price is reported, the last
reported sale price) of FPL Group common stock on the NYSE on that date or, if
FPL Group common stock is not listed for trading on the NYSE on any such date,
as reported in the composite transactions for the principal United States
national or regional securities exchange on which FPL Group common stock is so
listed. If FPL Group common stock is not so listed on a United States national
or regional securities exchange, the closing price means the last sale price of
FPL Group common stock as reported by the Nasdaq Stock Market or, if FPL Group
common stock is not so reported, the last quoted bid price for FPL Group common
stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization. If the bid price is not available, the closing
price means the market value of FPL Group common stock on the date of
determination as determined by a nationally recognized independent investment
banking firm retained by FPL Group for this purpose.
A "trading day" means a day on which FPL Group common stock is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and has traded
at least once on the national or regional securities exchange or association or
S-28
over-the-counter market that is the primary market for the trading of FPL Group
common stock.
FPL Group will not issue any fractional shares of its common stock
pursuant to the purchase contracts. In lieu of fractional shares otherwise
issuable (calculated on an aggregate basis) in respect of the purchase contracts
being settled on the settlement date by a holder of Corporate Units or Treasury
Units, the holder will be entitled to receive an amount of cash equal to the
fraction of a share multiplied by the applicable market value.
On the business day immediately preceding February 16, 2005, unless:
o a holder of Corporate Units or Treasury Units has settled the
related purchase contracts through the early delivery of cash to
the purchase contract agent in the manner described under "--Early
Settlement by Delivering Cash" or under "--Early Settlement upon
Cash Merger;"
o a holder of Corporate Units or Treasury Units has settled the
related purchase contracts with cash on the business day
immediately preceding February 16, 2005, pursuant to prior notice
given in the manner described under "--Notice to Settle with
Cash;"
o a holder of Corporate Units has had the FPL Group Capital
debentures related to the holder's purchase contracts successfully
remarketed on the third business day immediately preceding
November 16, 2004 or the third business day immediately preceding
February 16, 2005 in the manner described herein; or
o an event described under "--Termination of Purchase Contracts"
below has occurred,
then
o in the case of Corporate Units, unless the Treasury portfolio has
replaced the FPL Group Capital debentures as a component of the
Corporate Units as the result of a successful remarketing of the
FPL Group Capital debentures on the third business day immediately
preceding November 16, 2004, or there has been a successful
remarketing of the FPL Group Capital debentures on the third
business day immediately preceding February 16, 2005 or because a
tax event redemption has occurred, FPL Group will exercise its
rights as a secured party to dispose of the FPL Group Capital
debentures in accordance with applicable law; and
o in the case of Treasury Units or, in the event that the Treasury
portfolio has replaced the FPL Group Capital debentures as a
component of the Corporate Units as the result of a successful
remarketing of the FPL Group Capital debentures or a tax event
redemption, in the case of Corporate Units, the principal amount
of the related Treasury securities, or the appropriate applicable
ownership interest in the Treasury portfolio, as applicable, when
paid at maturity, will automatically be applied to satisfy in full
the holder's obligation to purchase FPL Group common stock under
the related purchase contracts.
The FPL Group common stock will then be issued and delivered to the
holder or the holder's designee, upon presentation and surrender of the
certificate evidencing the Equity Units and payment by the holder of any
transfer or similar taxes payable in connection with the issuance of the FPL
Group common stock to any person other than the holder.
Each holder of Corporate Units or Treasury Units, by acceptance of
these securities, will be deemed to have:
o irrevocably agreed to be bound by the terms and provisions of the
related purchase contracts and the pledge agreement and to have
agreed to perform such holder's obligations thereunder for so long
as the holder remains a holder of the Equity Units; and
o duly appointed the purchase contract agent as the holder's
attorney-in-fact to enter into and perform the related purchase
contracts and pledge agreement on behalf of and in the name of the
holder.
S-29
In addition, each holder and beneficial owner of Corporate Units or Treasury
Units, by acceptance of this interest, will be deemed to have agreed to treat:
o itself as the owner of the related FPL Group Capital debentures,
the appropriate applicable ownership interest of the Treasury
portfolio or the Treasury securities, as the case may be; and
o the FPL Group Capital debentures as indebtedness for all United
States federal, state and local income, and franchise tax
purposes.
So long as the Equity Units are held through DTC, the beneficial
owners will have rights and obligations with respect to the Equity Units
equivalent to those of a holder except exercisable only through DTC or its
Participants. See "--Book-Entry Only System."
HOLDERS' OBLIGATIONS AND DEFAULTS
In addition to the purchase price paid for the Equity Units, holders
are obligated under each purchase contract to purchase for $50 in cash FPL Group
common stock not later than February 16, 2005. In addition, each holder of a
Corporate Unit (unless the FPL Group Capital debentures are successfully
remarketed on the third business day immediately preceding November 16, 2004, or
a tax event redemption has occurred) is obligated to notify the purchase
contract agent of its intention to pay such amounts in cash not later than 5:00
p.m., New York City time, on the fifth business day immediately preceding
February 16, 2005, unless such holder has already paid such amount. Each holder
of a Treasury Unit (or Corporate Unit, if the FPL Group Capital debentures are
successfully remarketed on the third business day immediately preceding November
16, 2004, or a tax event redemption has occurred) is obligated to notify the
purchase contract agent of its intention to pay such amounts in cash not later
than 5:00 p.m., New York City time, on the second business day immediately
preceding February 16, 2005, unless such holder has already paid such amount. So
long as the Equity Units are held by the depositary, such payments must be made
and such notices must be given by the beneficial owners through the procedures
of the depositary.
Failure to make such payments or give such notices will constitute a
default under the related purchase contract and will entitle the collateral
agent or FPL Group, without further recourse to the holder or beneficial owner
in respect of its related purchase obligations under the purchase contract to
foreclose on the corresponding pledged FPL Group Capital debentures, Treasury
securities or applicable ownership interest in a Treasury portfolio. If the
holder or beneficial owner of a Corporate Unit (unless the FPL Group Capital
debentures are successfully remarketed on the third business day immediately
preceding November 16, 2004, or a tax event redemption has occurred) fails to
give a required notice with respect to the purchase contract, the collateral
agent or FPL Group expects to offer and sell the corresponding pledged FPL Group
Capital debenture in the immediately following remarketing or at a subsequent
public sale at which FPL Group may bid its claim or private sale to one or more
underwriters and apply the proceeds to purchase the corresponding FPL Group
common stock. If the holder or beneficial owner of a Corporate Unit (unless the
FPL Group Capital debentures are successfully remarketed on the third business
day immediately preceding November 16, 2004, or a tax event redemption has
occurred) gives the appropriate notice but fails to make the corresponding
payment on time, then the collateral agent or FPL Group expects to offer and
sell the corresponding pledged FPL Group Capital debenture at a public sale at
which FPL Group may bid its claim or private sale to one or more underwriter and
apply the proceeds to purchase the corresponding FPL Group common stock. If the
holder or beneficial owner of a Treasury Unit (or a Corporate Unit, if the FPL
Group Capital debentures are successfully remarketed on the third business day
immediately preceding November 16, 2004, or a tax event redemption has occurred)
fails to give a required notice or make a required payment, the collateral agent
or FPL Group expects to apply the proceeds of the pledged Treasury securities or
applicable ownership interest in a Treasury portfolio to purchase the
corresponding FPL Group common stock. So long as the Equity Units are held by
the depositary, FPL Group expects that notice of such remarketing or public or
private sale will be given to the beneficial owners through the procedures of
the depositary.
REMARKETING
Pursuant to the remarketing agreement and subject to the terms of the
supplemental remarketing agreement among the remarketing agent, the purchase
contract agent, FPL Group and FPL Group Capital, unless a tax event redemption
has occurred, the FPL Group Capital debentures of Corporate Unit holders will be
remarketed on the third business day immediately preceding November 16, 2004.
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The remarketing agent will use its reasonable efforts to remarket the
FPL Group Capital debentures at a price of approximately 100.5% of the aggregate
applicable Treasury portfolio purchase price described below. A portion of the
proceeds from the remarketing equal to the applicable Treasury portfolio
purchase price will be applied to purchase the applicable Treasury portfolio.
The Treasury portfolio to be purchased in connection with the remarketing of the
FPL Group Capital debentures on November 16, 2004 will consist of:
o interest or principal strips of U.S. Treasury securities that
mature on or prior to February 15, 2005, in an aggregate amount
equal to the principal amount of the FPL Group Capital debentures
included in Corporate Units; and
o with respect to the scheduled interest payment date on the FPL
Group Capital debentures that occurs on February 16, 2005,
interest or principal strips of U.S. Treasury securities that
mature on or prior to that interest payment date in an aggregate
amount equal to the aggregate interest payment that would be due
on that interest payment date on the principal amount of the FPL
Group Capital debentures that would have been included in
Corporate Units assuming no remarketing and that the interest rate
on the FPL Group Capital debentures was not reset as described in
"Certain Terms of the FPL Group Capital Debentures--Market Rate
Reset."
The applicable Treasury portfolio will be substituted for the FPL
Group Capital debentures and will be pledged to the collateral agent to secure
the Corporate Unit holders' obligation to purchase FPL Group common stock under
the purchase contracts.
In addition, the remarketing agent may deduct, as a remarketing fee,
an amount not exceeding 25 basis points (0.25%) of the applicable Treasury
portfolio purchase price from any amount of the proceeds from the remarketing of
the FPL Group Capital debentures in excess of the applicable Treasury portfolio
purchase price. The remarketing agent will then remit the remaining portion of
the proceeds from the remarketing of the FPL Group Capital debentures, if any,
for the benefit of the holders. Corporate Unit holders whose FPL Group Capital
debentures are remarketed will not otherwise be responsible for the payment of
any remarketing fee in connection with the remarketing.
As used in this context, "Treasury portfolio purchase price" means the
lowest aggregate price quoted by a primary U.S. government securities dealer in
The City of New York to the quotation agent on the third business day
immediately preceding November 16, 2004, for the purchase of the applicable
Treasury portfolio described above for settlement on November 16, 2004.
"Quotation agent" means J.P. Morgan Securities Inc. or its successor
or any other primary U.S. government securities dealer in The City of New York
selected by FPL Group and FPL Group Capital.
If (1) despite using its reasonable efforts, the remarketing agent
cannot remarket the FPL Group Capital debentures, other than to FPL Group
Capital, at a price of at least 100% of the applicable Treasury portfolio
purchase price, or (2) the remarketing has not occurred because a condition
precedent to the remarketing has not been satisfied, in each case resulting in a
failed remarketing, the FPL Group Capital debentures will continue to be a
component of Corporate Units and another remarketing will be attempted as
described below.
If the remarketing of the FPL Group Capital debentures on the third
business day immediately preceding November 16, 2004 has resulted in a failed
remarketing, and unless a tax event redemption has occurred, the FPL Group
Capital debentures of Corporate Unit holders who have failed to notify the
purchase contract agent on or prior to the fifth business day immediately
preceding February 16, 2005 of their intention to settle the related purchase
contracts with separate cash will be remarketed on the third business day
immediately preceding February 16, 2005.
In each case, the remarketing agent will then use its reasonable
efforts to remarket the FPL Group Capital debentures at a price of approximately
100.5% of the aggregate principal amount of the FPL Group Capital debentures. A
portion of the proceeds from each remarketing equal to the aggregate principal
amount of the FPL Group Capital debentures will automatically be applied to
satisfy in full the Corporate Unit holders' obligations to purchase FPL Group
common stock under the related purchase contracts on the settlement date.
In addition, the remarketing agent will deduct, as a remarketing fee,
an amount not exceeding 25 basis points (0.25%) of the aggregate principal
amount of the remarketed FPL Group Capital debentures from any amount of the
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proceeds from the remarketing of the FPL Group Capital debentures in excess of
the aggregate principal amount of those remarketed FPL Group Capital debentures.
The remarketing agent will then remit the remaining portion of the proceeds from
the remarketing of those FPL Group Capital debentures, if any, for the benefit
of the holders. Corporate Unit holders whose FPL Group Capital debentures are
remarketed will not otherwise be responsible for the payment of any remarketing
fee in connection with the remarketing.
If (1) despite using its reasonable efforts, the remarketing agent
cannot remarket the FPL Group Capital debentures, other than to FPL Group
Capital, at a price of at least 100% of the aggregate principal amount of the
FPL Group Capital debentures, or (2) the remarketing has not occurred because a
condition precedent to the remarketing has not been satisfied, in each case
resulting in a failed remarketing, FPL Group will exercise its rights as a
secured party to dispose of the FPL Group Capital debentures in accordance with
applicable law and to satisfy in full each holder's obligation to purchase FPL
Group common stock under the related purchase contracts on the settlement date.
FPL Group Capital will cause a notice of any failed remarketing of FPL
Group Capital debentures to be published on the business day immediately
preceding November 16, 2004 or February 16, 2005, as applicable, by publication
in a daily newspaper in the English language of general circulation in The City
of New York, which is expected to be The Wall Street Journal. In addition, FPL
Group Capital will request, not later than seven nor more than 15 calendar days
prior to the reset announcement date prior to each remarketing date, that the
depositary notify its participants holding FPL Group Capital debentures,
Corporate Units and Treasury Units of the remarketing, including, in the case of
a second failed remarketing for the FPL Group Capital debentures, the procedures
that must be followed if a holder of FPL Group Capital debentures trading
separately from the Corporate Units wishes to exercise its right to put such FPL
Group Capital debentures to FPL Group Capital as described in this prospectus
supplement. It is currently anticipated that J.P. Morgan Securities Inc. will be
the remarketing agent.
EARLY SETTLEMENT BY DELIVERING CASH
At any time prior to the fifth business day immediately preceding
February 16, 2005, in the case of Corporate Units, or at any time prior to the
second business day immediately preceding February 16, 2005, in the case of
Treasury Units, a holder of Equity Units may settle the related purchase
contracts in their entirety provided that at such time, if so required under the
U.S. federal securities laws, there is in effect a registration statement
covering the shares of Common Stock to be delivered in respect of the purchase
contracts being settled, by presenting and surrendering the related Equity Units
certificate at the office of the purchase contract agent with the form of
"Election to Settle Early" on the reverse side of such certificate completed and
executed as indicated, accompanied by payment to FPL Group in immediately
available funds of an amount equal to:
(1) in the case of Corporate Units,
o $50 multiplied by the number of purchase contracts
being settled, if settled on or prior to the fifth
business day immediately preceding February 16,
2005, plus
o if the delivery is made with respect to any
purchase contract during the period from the
close of business on any record date next
preceding any payment date to the opening of
business on such payment date, an amount equal to
the contract adjustment payments payable on the
payment date with respect to the purchase
contract; provided that no payment is required if
FPL Group has elected to defer the contract
adjustment payments which would otherwise be
payable on the payment date, or
(2) in the case of Treasury Units,
o $50 multiplied by the number of purchase contracts
being settled, if settled on or prior to the
second business day immediately preceding February
16, 2005, plus
o if the delivery is made with respect to any
purchase contract during the period from the
close of business on any record date next
preceding any payment date to the opening of
business on such payment date, an amount equal to
the contract adjustment payments payable on the
payment date with respect to the purchase
contract; provided that no payment is required if
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FPL Group has elected to defer the contract
adjustment payments which would otherwise be
payable on the payment date.
Holders of Corporate Units may settle early only in integral multiples
of 20 Corporate Units. If a Treasury portfolio has replaced the FPL Group
Capital debentures as a component of Corporate Units as a result of a successful
remarketing of the FPL Group Capital debentures or a tax event redemption,
holders of the Corporate Units may settle early only in integral multiples of
_________ Corporate Units. Holders of Treasury Units may settle early only in
integral multiples of 20 Treasury Units.
So long as the Equity Units are evidenced by one or more global
security certificates deposited with the depositary, procedures for early
settlement will also be governed by standing arrangements between the depositary
and the purchase contract agent.
Upon early settlement of the purchase contracts related to any
Corporate Units or Treasury Units:
o the holder will receive _______ newly issued shares of FPL Group
common stock per Corporate Unit or Treasury Unit, regardless of
the market price of the FPL Group common stock on the date of
early settlement, subject to adjustment under the circumstances
described in "--Anti-Dilution Adjustments" below, accompanied by
this prospectus supplement, as amended or supplemented;
o the FPL Group Capital debentures, the appropriate applicable
ownership interest in the Treasury portfolio or the Treasury
securities, as the case may be, related to the Corporate Units or
Treasury Units will be transferred to the holder free and clear of
FPL Group's security interest;
o the holder's right to receive any deferred contract adjustment
payments on the purchase contracts being settled will be
forfeited;
o the holder's right to receive future contract adjustment payments
will terminate; and
o no adjustment will be made to or for the holder on account of any
deferred contract adjustment payments or any amounts accrued in
respect of contract adjustment payments.
FPL Group will not issue any fractional shares of its common stock in
connection with early settlement of any purchase contracts. In lieu of
fractional shares otherwise issuable (calculated on an aggregate basis) in
respect of the purchase contracts being early settled on any date by a holder of
Corporate Units or Treasury Units, the holder will be entitled to receive an
amount of cash equal to the fraction of a share multiplied by $______, the
threshold appreciation price.
If the purchase contract agent receives an Equity Unit certificate,
accompanied by the completed and executed "Election to Settle Early" and
required immediately available funds, from a holder of Equity Units by 5:00
p.m., New York City time, on a business day, that day will be considered the
settlement date for those Equity Units. If the purchase contract agent receives
the necessary documentation after 5:00 p.m., New York City time, on a business
day or at any time on a day that is not a business day, the next business day
will be considered the settlement date for those Equity Units.
Upon early settlement of purchase contracts in the manner described
above, presentation and surrender of the Equity Unit certificate evidencing the
related Corporate Units or Treasury Units and payment of any transfer or similar
taxes payable by the holder in connection with the issuance of the related FPL
Group common stock to any person other than the holder of the Corporate Units or
Treasury Units, FPL Group will cause the shares of its common stock being
purchased to be issued, and the related FPL Group Capital debentures, the
appropriate applicable ownership interest in the Treasury portfolio or the
Treasury securities, as the case may be, securing the purchase contracts to be
released from the pledge under the pledge agreement described in "--Pledged
Securities and Pledge Agreement" and transferred, within three business days
following the settlement date, to the purchasing holder or the holder's
designee.
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EARLY SETTLEMENT UPON CASH MERGER
Prior to February 16, 2005, if FPL Group is involved in a merger in
which at least 30% of the consideration for FPL Group common stock consists of
cash or cash equivalents, which is referred to as a "cash merger," then on or
after the effective date of the cash merger each holder of Equity Units will
have the right to accelerate and settle the related purchase contract at the
settlement rate in effect immediately prior to the effective date of the cash
merger provided that the settlement date is no later than the fifth business day
immediately preceding February 16, 2005 and at such time, if so required under
the U.S. federal securities laws, there is in effect a registration statement
covering the shares of Common Stock to be delivered in respect of the purchase
contracts being settled. This right is referred to as the "merger early
settlement right."
FPL Group will provide each holder with a notice of the completion of
a cash merger within five business days of the cash merger. The notice will
specify the early settlement date, which shall be a date specified by FPL Group
that is between 20 and 30 business days after the date of the notice but which
may not be later than the fifth business day immediately preceding February 16,
2005. The notice will also set forth, among other things, the formula for
determining the applicable settlement rate and the amount of the securities and
other property receivable by the holder upon settlement. To exercise the merger
early settlement right, a holder must present and surrender at the office of the
purchase contract agent, not later than 5:00 p.m., New York City time, on the
third business day before the early settlement date, the related certificate
evidencing Equity Units, accompanied by payment to FPL Group in immediately
available funds of the amount set forth above under "--Early Settlement by
Delivering Cash."
Holders of Corporate Units may settle early only in integral multiples
of 20 Corporate Units. If a Treasury portfolio has replaced the FPL Group
Capital debentures as a component of Corporate Units as a result of a successful
remarketing of the FPL Group Capital debentures or a tax event redemption,
holders of the Corporate Units may settle early only in integral multiples of
_________ Corporate Units. Holders of Treasury Units may settle early only in
integral multiples of 20 Treasury Units.
So long as the Equity Units are evidenced by one or more global
security certificates deposited with the depositary, procedures for early
settlement upon a cash merger will also be governed by standing arrangements
between the depositary and the purchase contract agent.
If a holder exercises the merger early settlement right, FPL Group
will deliver to the holder on the early settlement date the kind and amount of
securities or other property that the holder would have been entitled to receive
if the holder had settled the purchase contract immediately before the cash
merger at the settlement rate in effect at such time, determined using the
average of the closing price per share of FPL Group common stock on the 20
consecutive trading days ending on the third trading date immediately preceding
the effective date of the cash merger. A holder will also receive the FPL Group
Capital debentures, applicable ownership interest in the Treasury portfolio or
Treasury securities, as the case may be, related to the Equity Units, free and
clear of FPL Group's security interest. A holder's receipt of the applicable
ownership interest in the Treasury portfolio will be subject to the purchase
contract agent's disposition of the subject securities for cash and the payment
of cash to the holder to the extent that the holder would otherwise have been
entitled to receive less than $1,000 principal amount at maturity of any
security.
If a holder does not elect to exercise the merger early settlement
right, the holder's Equity Units will remain outstanding and subject to normal
settlement on February 16, 2005, subject to any earlier termination or exercise
of early settlement rights.
NOTICE TO SETTLE WITH CASH
Unless the Treasury portfolio has replaced the FPL Group Capital
debentures as a component of Corporate Units as a result of a successful
remarketing of the FPL Group Capital debentures or a tax event redemption, a
holder of Corporate Units may settle the related purchase contract with separate
cash prior to 11:00 a.m., New York City time, on the business day immediately
preceding February 16, 2005. A holder of a Corporate Unit (of which the FPL
Group Capital debentures remain a component) that wishes to settle the related
purchase contract with separate cash must notify the purchase contract agent by
presenting and surrendering the Corporate Units Certificate at the office of the
purchase contract agent with the form of "Notice to Settle by Separate Cash" on
the reverse side of such certificate completed and executed as indicated not
later than 5:00 p.m., New York City time, on the fifth business day immediately
preceding February 16, 2005. A holder of a Treasury Unit or a Corporate Unit (of
which the FPL Group Capital debentures are no longer a component) that wishes to
S-34
settle the related purchase contract with separate cash must notify the purchase
contract agent by presenting and surrendering the Corporate Units Certificate
evidencing the Corporate Units or the Treasury Units Certificate representing
the Treasury Unit, as the case may be, at the office of the purchase contract
agent with the form of "Notice to Settle by Separate Cash" on the reverse side
of such certificate completed and executed as indicated by 5:00 p.m., New York
City time, on the second business day immediately preceding February 16, 2005.
If a holder who has given notice of its intention to settle the purchase
contract with separate cash fails to deliver the cash to the collateral agent
prior to 11:00 a.m., New York City time, on the business day immediately
preceding February 16, 2005, FPL Group will exercise its rights as a secured
party to dispose of, in accordance with applicable law, the related pledged FPL
Group Capital debentures, Treasury securities or applicable ownership interest
in a Treasury portfolio, as the case may be, to satisfy in full, from the
disposition of the FPL Group Capital debentures, Treasury securities or
applicable ownership interest in a Treasury portfolio, as the case may be, the
holder's obligation to purchase FPL Group common stock under the related
purchase contracts.
CONTRACT ADJUSTMENT PAYMENTS
Contract adjustment payments in respect of Corporate Units and
Treasury Units will be fixed at the rate of __% of $50 per purchase contract per
year. Contract adjustment payments payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. Contract adjustment
payments will accrue from __________, 2002 and will be payable quarterly in
arrears on February 16, May 16, August 16 and November 16 of each year,
commencing May 16, 2002.
Contract adjustment payments will be payable to the holders of
purchase contracts as they appear on the books and records of the purchase
contract agent on the relevant record dates, which, as long as the Equity Units
remain in book-entry only form, will be one business day prior to the relevant
payment date. These distributions will be paid through the purchase contract
agent, who will hold amounts received in respect of the contract adjustment
payments for the benefit of the holders of the purchase contracts relating to
the Equity Units. Subject to any applicable laws and regulations, each such
payment will be made as described under "--Book-Entry Only System." In the event
that the Equity Units do not continue to remain in book-entry only form, FPL
Group shall have the right to select relevant record dates, which shall be at
least one business day but not more than 60 business days prior to the relevant
payment dates, and to make payments by check mailed to the address of the holder
as of the relevant record date.
If any date on which contract adjustment payments are to be made on
the purchase contracts related to the Equity Units is not a business day, then
payment of the contract adjustment payments payable on that date will be made on
the next succeeding day which is a business day, and no interest or payment will
be paid in respect of the delay. However, if that business day is in the next
succeeding calendar year, that payment will be made on the immediately preceding
business day, in each case with the same force and effect as if made on that
scheduled payment date. A "business day" means any day other than a Saturday,
Sunday or any other day on which banking institutions and trust companies in The
City of New York are permitted or required by any applicable law to close.
FPL Group's obligations with respect to contract adjustment payments
will be subordinate and junior in right of payment to its obligations under any
of its senior indebtedness. Upon any payment or distribution of assets of FPL
Group to its creditors upon any dissolution, winding up, liquidation or
reorganization, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other similar proceedings, the holders of all senior
indebtedness shall first be entitled to receive payment in full of all amounts
due or to become due thereon, or payment of such amounts shall have been
provided for, before the holders of the Equity Units shall be entitled to
receive any contract adjustment payments with respect to any Equity Unit.
By reason of this subordination, in those events, holders of FPL
Group's senior indebtedness may receive more, ratably, and holders of the Equity
Units may receive less, ratably, than FPL Group's other creditors. Because FPL
Group is a holding company, contract adjustment payments on the Equity Units are
effectively subordinated to all indebtedness and other liabilities, including
trade payables and preferred stock, at the subsidiary level.
In addition, no payment of contract adjustment payments with respect
to any Equity Units may be made if:
o any payment default on any senior indebtedness has occurred and is
continuing beyond any applicable grace period; or
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o any default other than a payment default with respect to senior
indebtedness occurs and is continuing that permits the
acceleration of the maturity thereof and the purchase contract
agent receives a written notice of such default from FPL Group or
the holders of such senior indebtedness.
OPTION TO DEFER CONTRACT ADJUSTMENT PAYMENTS
FPL Group may, at its option and upon prior written notice to the
holders of the Equity Units and the purchase contract agent, defer the payment
of contract adjustment payments on the related purchase contracts forming a part
of the Equity Units until no later than February 16, 2005. However, deferred
contract adjustment payments would accrue additional contract adjustment
payments at the rate of ___% per year of the stated amount until paid,
compounded quarterly, which is equal to the rate of total distributions on the
Corporate Units (compounding on each succeeding payment date), until paid. If
the purchase contracts are terminated (upon the occurrence of certain events of
bankruptcy, insolvency or reorganization with respect to FPL Group), the right
to receive contract adjustment payments and deferred contract adjustment
payments will also terminate.
In the event that FPL Group elects to defer the payment of contract
adjustment payments on the purchase contracts until February 16, 2005, each
holder of Equity Units will receive on that date in respect of the deferred
contract adjustment payments, in lieu of a cash payment, a number of shares of
FPL Group common stock equal to (a) the aggregate amount of deferred contract
adjustment payments payable to the holder divided by (b) the applicable market
value.
FPL Group will not issue any fractional shares of its common stock
with respect to the payment of deferred contract adjustment payments on February
16, 2005. In lieu of fractional shares otherwise issuable (calculated on an
aggregate basis) with respect to such payment of deferred contract adjustment
payments, the holder will be entitled to receive an amount of cash equal to the
fraction of a share multiplied by the applicable market value described under
"--Purchase of FPL Group Common Stock."
In the event that FPL Group exercises its option to defer the payment
of contract adjustment payments, then, until the deferred contract adjustment
payments have been paid, FPL Group will not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock or make guarantee
payments with respect to the foregoing other than:
o purchases, redemptions or acquisitions of shares of FPL Group
capital stock in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of
employees, officers, directors or agents or a stock purchase or
dividend reinvestment plan, or the satisfaction by FPL Group of
its obligations pursuant to any contract or security outstanding
on the date of such event;
o as a result of a reclassification of FPL Group's capital stock or
the exchange or conversion of one class or series of its capital
stock for another class or series of the capital stock;
o the purchase of fractional interests in shares of FPL Group
capital stock pursuant to the conversion or exchange provisions of
the capital stock or the security being converted or exchanged;
o dividends or distributions in FPL Group capital stock (or rights
to acquire capital stock), or repurchases, redemptions or
acquisitions of capital stock in connection with the issuance or
exchange of capital stock (or securities convertible into or
exchangeable for shares of FPL Group capital stock); or
o redemptions, exchanges or repurchases of any rights outstanding
under a shareholder rights plan or the declaration or payment
thereunder of a dividend or distribution of or with respect to
rights in the future.
FPL Group's subsidiaries will not be restricted from making any similar payments
on their capital stock if FPL Group exercises its option to defer payment of any
contract adjustment payments.
S-36
ANTI-DILUTION ADJUSTMENTS
In order to maintain a holder's relative investment in FPL Group's
common stock upon the occurrence of certain events, the formula for determining
the settlement rate will be subject to adjustment, without duplication, upon the
occurrence of those events, including:
(a) the payment of dividends and other distributions of FPL Group
common stock on such common stock;
(b) the issuance to all holders of FPL Group common stock of rights,
warrants or options (other than pursuant to any dividend
reinvestment or share purchase plans) entitling them, for a
period of up to 45 days, to subscribe for or purchase such common
stock at less than the current market price thereof;
(c) subdivisions, splits and combinations of FPL Group common stock;
(d) distributions to all holders of FPL Group common stock of
evidences of FPL Group's indebtedness, shares of capital stock,
securities, cash or property (excluding any dividend or
distribution covered by clause (a) or (b) above and any dividend
or distribution paid exclusively in cash);
(e) distributions (other than regular quarterly cash dividends)
consisting exclusively of cash to all holders of FPL Group common
stock in an aggregate amount that, together with (1) other
all-cash distributions (other than regular quarterly cash
dividends) made within the preceding 12 months and (2) any cash
and the fair market value, as of the expiration of the tender or
exchange offer referred to below, of consideration payable in
respect of any tender or exchange offer (other than consideration
payable in respect of any odd-lot tender offer) by FPL Group or
any of its subsidiaries for such common stock concluded within
the preceding 12 months, exceeds 15% of FPL Group's aggregate
market capitalization (aggregate market capitalization being the
product of the current market price of FPL Group's common stock
multiplied by the number of shares of such common stock then
outstanding) on the date of the distribution; and
(f) the successful completion of a tender or exchange offer made by
FPL Group or any of its subsidiaries for FPL Group common stock
which involves an aggregate consideration that, together with (1)
any cash and the fair market value of other consideration payable
in respect of any tender or exchange offer (other than
consideration payable in respect of any odd-lot tender offer) by
FPL Group or any of its subsidiaries for such common stock
concluded within the preceding 12 months and (2) the aggregate
amount of any all-cash distributions (other than regular
quarterly cash dividends) to all holders of FPL Group common
stock made within the preceding 12 months, exceeds 15% of FPL
Group's aggregate market capitalization on the expiration of the
tender or exchange offer.
The "current market price" on any day means the average of the closing
price per share of FPL Group common stock for the five consecutive trading days
selected by FPL Group commencing not more than 30 trading days before, and
ending not later than, the earlier of the day in question and the day before the
"ex date" with respect to the issuance or distribution requiring the
computation. For purposes of this paragraph, the term "ex date," when used with
respect to any issuance or distribution, shall mean the first date on which FPL
Group common stock trades regular way on the applicable exchange or in the
applicable market without the right to receive the issuance or distribution.
In the case of certain reclassifications, consolidations, mergers,
sales or transfers of assets or other transactions pursuant to which FPL Group
common stock is converted into the right to receive other securities, cash or
property, each purchase contract then outstanding would, without the consent of
the holders of the related Corporate Units or Treasury Units, as the case may
be, become a contract to purchase only the kind and amount of securities, cash
and other property receivable upon such reorganization event (except as
otherwise specifically provided, without any interest thereon and without any
right to dividends or distributions thereon which have a record date that is
prior to the purchase contract settlement date) which would have been received
by the holder of the related Corporate Units or Treasury Units immediately prior
to the date of consummation of such transaction if such holder had then settled
such purchase contract.
If at any time FPL Group makes a distribution of property to its
shareholders which would be taxable to those shareholders as a dividend for
United States federal income tax purposes (e.g., distributions out of FPL
Group's current or accumulated earnings and profits or evidences of indebtedness
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or assets, but generally not stock dividends or rights to subscribe for capital
stock) and, pursuant to the settlement rate adjustment provisions of the
purchase contract agreement, the settlement rate is increased, this increase may
give rise to a taxable dividend to holders of Equity Units. See "Material
Federal Income Tax Consequences--Purchase Contracts--Adjustment to Settlement
Rate."
In addition, FPL Group may make increases in the settlement rate to
avoid or diminish any income tax to holders of its capital stock resulting from
any dividend or distribution of capital stock (or rights to acquire capital
stock) or from any event treated as such for income tax purposes or for any
other reasons.
Adjustments to the settlement rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the settlement rate shall be required
unless the adjustment would require an increase or decrease of at least one
percent in the settlement rate. However, any adjustments which are not required
to be made because they would have required an increase or decrease of less than
one percent shall be carried forward and taken into account in any subsequent
adjustment.
FPL Group will be required, within ten business days following the
adjustment of the settlement rate, to provide written notice to the purchase
contract agent of the occurrence of the adjustment and a statement in reasonable
detail setting forth the method by which the adjustment to the settlement rate
was determined and setting forth the revised settlement rate.
Each adjustment to the settlement rate will result in a corresponding
adjustment to the number of shares of FPL Group common stock issuable upon early
settlement of a purchase contract.
If an adjustment is made to the settlement rate as a result of an
event described in paragraphs (a) through (f) above, an adjustment will also be
made to the applicable market value solely to determine which of the three
clauses in the definition of settlement rate will be applicable on each purchase
contract settlement date.
TERMINATION OF PURCHASE CONTRACTS
The purchase contracts, and FPL Group's rights and obligations and the
rights and obligations of the holders of the Equity Units under the purchase
contracts, including the right and obligation to purchase FPL Group common stock
and the right to receive accumulated contract adjustment payments or deferred
contract adjustment payments, will immediately and automatically terminate upon
the occurrence of certain events of bankruptcy, insolvency or reorganization
with respect to FPL Group. Upon any termination, the collateral agent will
release the related FPL Group Capital debentures, the appropriate applicable
ownership interest in the Treasury portfolio or the Treasury securities, as the
case may be, held by it to the purchase contract agent for distribution to the
holders, subject, in the case of the Treasury portfolio or the Treasury
securities, to the purchase contract agent's disposition of the subject
securities for cash, and the payment of this cash to the holders, to the extent
that the holders would otherwise have been entitled to receive less than $1,000
principal amount at maturity of any such security. Upon any termination,
however, the release and distribution may be subject to a delay. In the event
that FPL Group becomes the subject of a case under the U.S. Bankruptcy Code, the
delay may occur as a result of the imposition of the automatic stay under the
Bankruptcy Code and continue until the automatic stay has been lifted.
PLEDGED SECURITIES AND PLEDGE AGREEMENT
Pledged securities will be pledged to the collateral agent, for the
benefit of FPL Group, pursuant to the pledge agreement to secure the obligations
of holders of Equity Units to purchase FPL Group common stock under the related
purchase contracts. The rights of holders of Equity Units to the related pledged
securities will be subject to FPL Group's security interest created by the
pledge agreement.
No holder of Corporate Units or Treasury Units will be permitted to
withdraw the pledged securities related to the Corporate Units or Treasury Units
from the pledge arrangement except:
o to substitute Treasury securities for the related FPL Group
Capital debentures or the appropriate applicable ownership
interest in the Treasury portfolio, as the case may be, as
provided for under "Description of the Equity Units--Creating
Treasury Units;"
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o to substitute FPL Group Capital debentures or the appropriate
applicable ownership interest in the Treasury portfolio, as the
case may be, for the related Treasury securities, as provided for
under "Description of the Equity Units--Recreating Corporate
Units;" or
o upon the termination or early settlement of the related purchase
contracts.
Subject to the security interest and the terms of the purchase
contract agreement and the pledge agreement, each holder of Corporate Units will
be entitled through the purchase contract agent and the collateral agent to all
of the proportional rights and preferences of the related FPL Group Capital
debentures that are components of Corporate Units, including distribution,
voting, redemption, repayment and liquidation rights. Each holder of Treasury
Units and each holder of Corporate Units, if a Treasury portfolio has replaced
any FPL Group Capital debentures as a component of Corporate Units as a result
of a successful remarketing of FPL Group Capital debentures or a tax event
redemption, will retain beneficial ownership of the related Treasury securities
or the appropriate applicable ownership interest of a Treasury portfolio, as
applicable, pledged in respect of the related purchase contracts. FPL Group will
have no interest in the pledged securities other than its security interest.
Except as described in "Other Provisions of the Purchase Contract
Agreement and the Pledge Agreement--General," the collateral agent will, upon
receipt, if any, of payments on the pledged securities, distribute the payments
to the purchase contract agent, which will in turn distribute those payments to
the persons in whose names the related Corporate Units or Treasury Units are
registered at the close of business on the record date immediately preceding the
date of payment.
BOOK-ENTRY ONLY SYSTEM
The Depository Trust Company, which we refer to along with its
successors in this capacity as the depositary, will act as securities depositary
for the Equity Units. The Equity Units will be issued only as fully-registered
securities registered in the name of Cede & Co., the depositary's nominee. One
or more fully-registered global security certificates, representing the total
aggregate number of Equity Units, will be issued and will be deposited with the
depositary and will bear a legend regarding the restrictions on exchanges and
registration of transfer referred to below.
The laws of some jurisdictions may require that some purchasers of
securities take physical delivery of securities in certificated form. These laws
may impair the ability to transfer beneficial interests in the Equity Units so
long as the Equity Units are represented by global security certificates.
The depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, 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 pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. The depositary holds securities that its
participants deposit with the depositary. The depositary also facilitates the
settlement among participants of securities transactions, including transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. The depositary is owned by a number of its direct
participants and by the NYSE, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the depositary's
system is also available to others, including securities brokers and dealers,
banks and trust companies that clear transactions through or maintain a direct
or indirect custodial relationship with a direct participant either directly or
indirectly. The rules applicable to the depositary and its participants are on
file with the SEC.
Although the depositary has agreed to the foregoing procedures in
order to facilitate transfers of interests in the global security certificates
among participants, the depositary is under no obligation to perform or continue
to perform these procedures and these procedures may be discontinued at any
time. Neither FPL Group nor FPL Group Capital will have any responsibility for
the performance by the depositary or its direct participants or indirect
participants under the rules and procedures governing the depositary.
In the event that the depositary notifies FPL Group that the
depositary is unwilling or unable to continue as a depositary for the global
security certificates and no successor depositary has been appointed within 90
days after this notice occurred and is continuing, certificates for the Equity
Units will be printed and delivered in exchange for beneficial interests in the
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global security certificates. FPL Group may also decide to discontinue use of
the system of book-entry transfers through the depositary (or successor
depositary). In that event, Equity Units certificates will be printed and
delivered.
As long as the depositary or its nominee is the registered owner of
the global security certificates, the depositary or the nominee, as the case may
be, will be considered the sole owner and holder of the global security
certificates and all Equity Units represented by these certificates for all
purposes under the Equity Units and the purchase contract agreement. Except in
the limited circumstances referred to above, owners of beneficial interests in
global security certificates will not be entitled to have such global security
certificates or the Equity Units represented by the global security certificates
registered in their names, will not receive or be entitled to receive physical
delivery of Equity Unit certificates in exchange for beneficial interests in
global security certificates and will not be considered to be owners or holders
of the global security certificates or any Equity Units represented by these
certificates for any purpose under the Equity Units or the purchase contract
agreement.
All payments on the Equity Units represented by the global security
certificates and all transfers and deliveries of related FPL Group Capital
debentures, Treasury portfolios, Treasury securities and FPL Group common stock
will be made to the depositary or its nominee, as the case may be, as the holder
of the securities.
Ownership of beneficial interests in the global security certificates
will be limited to participants or persons that may hold beneficial interests
through institutions that have accounts with the depositary or its nominee.
Ownership of beneficial interests in global security certificates will be shown
only on, and the transfer of those ownership interests will be effected only
through, records maintained by the depositary or its nominee, with respect to
participants' interests, or any participant, with respect to interests of
persons held by the participant on their behalf. Procedures for settlement of
purchase contracts on February 16, 2005 or upon early settlement will be
governed by arrangements among the depositary, participants and persons that may
hold beneficial interests through participants designed to permit settlement
without the physical movement of certificates. Payments, transfers, deliveries,
exchanges and other matters relating to beneficial interests in global security
certificates may be subject to various policies and procedures adopted by the
depositary from time to time. Neither FPL Group, FPL Group Capital nor any of
their agents, nor the purchase contract agent nor any of its agents will have
any responsibility or liability for any aspect of the depositary's or any
participant's records relating to, or for payments made on account of,
beneficial interests in global security certificates, or for maintaining,
supervising or reviewing any of the depositary's records or any participant's
records relating to these beneficial ownership interests.
The information in this section concerning the depositary and its
book-entry only system has been obtained from sources that FPL Group and FPL
Group Capital believe to be reliable, but FPL Group and FPL Group Capital do not
take responsibility for the accuracy of this information.
OTHER PROVISIONS OF THE PURCHASE CONTRACT
AGREEMENT AND THE PLEDGE AGREEMENT
Material provisions of the purchase contract agreement and the pledge
agreement are summarized below. Forms of these documents were filed with the
SEC, and you should read these documents for provisions that may be important to
you.
GENERAL
Except as described in "Description of the Purchase
Contracts--Book-Entry Only System," distributions on the Equity Units will be
payable, purchase contracts will be settled (and documents related to the Equity
Units and purchase contracts will be delivered), and transfers of the Equity
Units will be registrable, at the office of the purchase contract agent in the
The City of New York. In addition, if the Equity Units do not remain in
book-entry only form, payment of distributions on the Equity Units may be made,
at FPL Group's option, by check mailed to the address of the holder entitled to
payment or by wire transfer to an account appropriately designated by the holder
entitled to payment.
Shares of FPL Group common stock will be delivered on February 16,
2005 (or earlier upon early settlement), or, if the purchase contracts have
terminated, the related pledged securities will be delivered potentially after a
delay as a result of the imposition of the automatic stay under the Bankruptcy
Code (see "Description of the Purchase Contracts--Termination of Purchase
Contracts"), at the office of the purchase contract agent upon presentation and
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surrender of the related Equity Unit certificate.
If a holder of outstanding Corporate Units or Treasury Units fails to
present and surrender the Equity Unit certificate evidencing the Corporate Units
or Treasury Units to the purchase contract agent on or before February 16, 2005
(or earlier upon early settlement), the shares of FPL Group common stock
issuable in settlement of the related purchase contract will be registered in
the name of the purchase contract agent. The shares, together with any
distributions thereon, will be held by the purchase contract agent as agent for
the benefit of the holder until the Equity Unit certificate is presented and
surrendered or the holder provides satisfactory evidence that the certificate
has been destroyed, lost or stolen, together with any indemnity that may be
required by the purchase contract agent and FPL Group.
If the purchase contracts have terminated prior to February 16, 2005,
the related pledged securities have been transferred to the purchase contract
agent for distribution to the holders, and a holder fails to present and
surrender the Equity Unit certificate evidencing the holder's Corporate Units or
Treasury Units to the purchase contract agent, the related pledged securities
delivered to the purchase contract agent and payments on the pledged securities
will be held by the purchase contract agent as agent for the benefit of the
holder until the Equity Unit certificate is presented or the holder provides the
evidence and indemnity described above.
The purchase contract agent will have no obligation to invest or to
pay interest on any amounts held by the purchase contract agent pending
distribution, as described above.
No service charge will be made for any registration of transfer or
exchange of the Equity Units, except for any tax or other governmental charge
that may be imposed in connection with a transfer or exchange.
MODIFICATION
The purchase contract agreement and the pledge agreement will contain
provisions permitting FPL Group and the purchase contract agent, and in the case
of the pledge agreement, the collateral agent, to modify the purchase contract
agreement or the pledge agreement without the consent of the holders for any of
the following purposes:
o to evidence the succession of another person to FPL Group's
obligations;
o to add to the covenants for the benefit of holders or to surrender
any right or power of FPL Group under those agreements;
o to evidence and provide for the acceptance of appointment of a
successor purchase contract agent or a successor collateral agent,
custodial agent or securities intermediary;
o to make provision with respect to the rights of holders pursuant
to adjustments in the settlement rate due to consolidations,
mergers or other reorganization events; or
o to cure any ambiguity, to correct or supplement any provisions
that may be inconsistent, or to make any other provisions with
respect to such matters or questions, provided that such action
shall not materially adversely affect the interest of the holders.
The purchase contract agreement and the pledge agreement will contain
provisions permitting FPL Group and the purchase contract agent, and in the case
of the pledge agreement, the collateral agent, with the consent of the holders
of not less than a majority of the purchase contracts at the time outstanding,
to modify the terms of the purchase contracts, the purchase contract agreement
and the pledge agreement. However, no such modification may, without the consent
of the holder of each outstanding purchase contract affected by the
modification:
o change any payment date;
o change the amount or type of pledged securities related to the
purchase contract;
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o impair the right of the holder of any pledged securities to
receive distributions on the pledged securities or otherwise
adversely affect the holder's rights in or to the pledged
securities;
o change the place or currency of payment or reduce any contract
adjustment payments or deferred contract adjustment payments;
o impair the right to institute suit for the enforcement of the
purchase contract, any contract adjustment payments or any
deferred contract adjustment payments;
o reduce the number of shares of FPL Group common stock or the
amount of any other property purchasable under the purchase
contract, increase the price to purchase FPL Group common stock or
any other property upon settlement of the purchase contract,
change the purchase contract settlement date or the right to early
settlement or otherwise adversely affect the holder's rights under
the purchase contract; or
o reduce the above-stated percentage of outstanding purchase
contracts the consent of the holders of which is required for the
modification or amendment of the provisions of the purchase
contracts, the purchase contract agreement or the pledge
agreement.
If any amendment or proposal referred to above would adversely affect
only the Corporate Units or the Treasury Units, then only the affected class of
holders will be entitled to vote on the amendment or proposal and the amendment
or proposal will not be effective except with the consent of the holders of not
less than a majority of the affected class or all of the holders of the affected
class, as applicable.
NO CONSENT TO ASSUMPTION
Each holder of Corporate Units or Treasury Units, by acceptance of
these securities, will under the terms of the purchase contract agreement and
the Corporate Units or Treasury Units, as applicable, be deemed expressly to
have withheld any consent to the assumption (i.e., affirmance) of the related
purchase contracts by FPL Group or its trustee if FPL Group becomes the subject
of a case under the Bankruptcy Code.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
FPL Group will covenant in the purchase contract agreement that it
will not merge or consolidate with or into any other entity or sell, assign,
transfer, lease or convey all or substantially all of its properties and assets
to any person or entity, unless:
o FPL Group is the continuing entity or the successor entity is an
entity organized and existing under the laws of any domestic
jurisdiction and expressly assumes FPL Group's obligations under
the purchase contracts, the purchase contract agreement, the
pledge agreement and the remarketing agreement; and
o FPL Group or the successor entity is not, immediately after the
merger, consolidation, sale, assignment, transfer, lease or
conveyance, in default of its payment obligations under the
purchase contracts, the purchase contract agreement, the pledge
agreement, or the remarketing agreement or in material default in
the performance of any of its other obligations under these
agreements.
TITLE
FPL Group, FPL Group Capital, the purchase contract agent, the
collateral agent and any agent of FPL Group, FPL Group Capital, the purchase
contract agent or the collateral agent may treat the registered owner of an
Equity Unit as the absolute owner of that Equity Unit for the purpose of making
payment and settling the related purchase contracts and for all other purposes
regardless of any notice to the contrary.
REPLACEMENT OF EQUITY UNIT CERTIFICATES
In the event that physical certificates have been issued, any
mutilated Equity Unit certificate will be replaced by FPL Group at the expense
of the holder upon surrender of the certificate to the purchase contract agent.
Equity Units certificates that have been destroyed, lost or stolen will be
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replaced by FPL Group at the expense of the holder upon delivery to FPL Group
and the purchase contract agent of evidence of the destruction, loss or theft
satisfactory to FPL Group and the purchase contract agent. In the case of a
destroyed, lost or stolen Equity Unit certificate, an indemnity satisfactory to
FPL Group and the purchase contract agent may be required at the expense of the
holder of the Equity Units evidenced by the certificate before a replacement
will be issued.
Notwithstanding the foregoing, FPL Group will not be obligated to
issue any certificates for Corporate Units or Treasury Units on or after the
business day immediately preceding February 16, 2005 (or after early settlement)
or after the purchase contracts have terminated. The purchase contract agreement
will provide that, in lieu of the delivery of a replacement Equity Unit
certificate following February 16, 2005, the purchase contract agent, upon
delivery of the evidence and indemnity described above, will deliver the FPL
Group common stock issuable pursuant to the purchase contracts included in the
Corporate Units or Treasury Units evidenced by the certificate, or, if the
purchase contracts have terminated prior to February 16, 2005, transfer the
pledged securities included in the Corporate Units or Treasury Units evidenced
by the certificate.
DEFAULTS UNDER THE PURCHASE CONTRACT AGREEMENT
Within 90 days after the occurrence of any default by FPL Group in any
of its obligations under the purchase contract agreement of which a responsible
officer of the purchase contract agent (as defined in the purchase contract
agreement) has actual knowledge, the purchase contract agent will give notice of
such default to the holders of the Equity Units unless such default has been
cured or waived. Except for a default in any payment obligation under the
purchase contract agreement, the purchase contract agent will be protected in
withholding such notice if and so long as a responsible officer of the purchase
contract agent in good faith determines that the withholding of such notice is
in the interests of the holders of the Equity Units.
The purchase contract agent is not required to enforce any of the
provisions of the purchase contract agreement against FPL Group. Each holder of
Equity Units shall have the right to institute suit for the enforcement of any
payment of contract adjustment payments then due and payable and the right to
purchase FPL Group common stock as provided in such holder's purchase contracts
and generally exercise any other rights and remedies provided by law.
The holders of a majority of the outstanding purchase contracts voting
as one class may waive any past default by FPL Group and its consequences,
except a default (a) in any payment on any Equity Unit or (b) in respect of a
provision of the purchase contract agreement which cannot be modified or amended
without the consent of the holder of each outstanding Equity Unit affected.
The Trust Indenture Act of 1939 requires FPL Group to provide annually
to the purchase contract agent a certificate of one of its principal officers as
to FPL Group's compliance with all conditions and covenants in the purchase
contract agreement.
GOVERNING LAW
The purchase contract agreement, the pledge agreement and the purchase
contracts will be governed by, and interpreted in accordance with, the laws of
the State of New York without regard to New York's conflict of laws principles,
except to the extent that the laws of any other jurisdiction is mandatorily
applicable.
INFORMATION CONCERNING THE PURCHASE CONTRACT AGENT
The Bank of New York will be the purchase contract agent. The purchase
contract agent will act as the agent for the holders of Corporate Units and
Treasury Units from time to time. The purchase contract agreement will not
obligate the purchase contract agent to exercise any discretionary actions in
connection with a default under the terms of the Corporate Units and Treasury
Units or the purchase contract agreement.
The purchase contract agreement will contain provisions limiting the
liability of the purchase contract agent. The purchase contract agreement will
contain provisions under which the purchase contract agent may resign or be
replaced. This resignation or replacement would be effective upon the
appointment of a successor.
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The Bank of New York also acts, and may act, as trustee under various
indentures, trusts and guarantees of FPL Group and its affiliates, including as
indenture trustee, security registrar and paying agent under the Indenture and
guarantee trustee under the Guarantee Agreement. FPL Group and its affiliates
maintain various banking and trust relationships with The Bank of New York.
INFORMATION CONCERNING THE COLLATERAL AGENT
JPMorgan Chase Bank will be the collateral agent. The collateral agent
will act solely as FPL Group's agent and will not assume any obligation or
relationship of agency or trust for or with any of the holders of the Corporate
Units and Treasury Units except for the obligations owed by a pledgee of
property to the owner of the property under the pledge agreement and applicable
law.
The pledge agreement will contain provisions limiting the liability of
the collateral agent. The pledge agreement will contain provisions under which
the collateral agent may resign or be replaced. This resignation or replacement
would be effective upon the appointment of a successor.
FPL Group and its affiliates maintain various banking and trust
relationships with JPMorgan Chase Bank.
MISCELLANEOUS
The purchase contract agreement will provide that FPL Group will pay
all fees and expenses related to the offering of the Equity Units, the retention
of the collateral agent and the enforcement by the purchase contract agent of
the rights of the holders of the Equity Units.
However, holders who elect to substitute the related pledged
securities, thereby creating Treasury Units or recreating Corporate Units, will
be responsible for any fees or expenses payable in connection with the
substitution, as well as any commissions, fees or other expenses incurred in
acquiring the pledged securities to be substituted, and FPL Group will not be
responsible for any of those fees or expenses.
CERTAIN TERMS OF THE FPL GROUP CAPITAL DEBENTURES
The information in this section adds to the information in the
"Description of Offered Debt Securities" section beginning on page 5 of the
accompanying prospectus. Please read these two sections together.
GENERAL
FPL Group Capital will issue the FPL Group Capital debentures under
the indenture dated as of June 1, 1999, between FPL Group Capital and The Bank
of New York, as indenture trustee. An officer's certificate will supplement the
indenture and establish the specific terms of the FPL Group Capital debentures.
In addition to acting as purchase contract agent, The Bank of New York acts as
indenture trustee, security registrar and paying agent under the indenture and
as guarantee trustee under the Guarantee Agreement. Under the indenture, FPL
Group Capital may issue an unlimited amount of additional debt securities. The
indenture provides that FPL Group Capital may not grant a lien on the capital
stock of any of its majority-owned subsidiaries which shares of capital stock
FPL Group Capital now or hereafter directly owns to secure indebtedness of FPL
Group Capital without similarly securing the FPL Group Capital debentures, with
certain exceptions. However, the indenture does not limit the aggregate amount
of indebtedness FPL Group Capital or its subsidiaries may issue or incur nor
does it limit the ability of FPL Group Capital's subsidiaries to grant a lien on
any of their assets, including the capital stock of their respective
subsidiaries. FPL Group Capital is a holding company that derives substantially
all of its income from its operating subsidiaries. The FPL Group Capital
debentures therefore will be effectively subordinated to all indebtedness and
other liabilities, including trade payables and preferred stock, at the
subsidiary level.
The FPL Group Capital debentures will not be subject to a sinking fund
provision. Unless an earlier tax event redemption has occurred, the entire
principal amount of the FPL Group Capital debentures will mature and become due
and payable, together with any accrued and unpaid interest, on February 16,
2007. Except for a tax event redemption, the FPL Group Capital debentures will
not be redeemable by FPL Group Capital. See "--Tax Event Redemption."
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FPL Group Capital debentures forming a part of the Corporate Units
will be issued in certificated form, will be in denominations of $50 and
integral multiples of $50, without coupons, and may be transferred or exchanged,
without service charge but upon payment of any taxes or other governmental
charges payable in connection with the transfer or exchange, at the office
described below. Payments on FPL Group Capital debentures issued as a global
security will be made to the depositary, a successor depositary or, in the event
that no depositary is used, to a paying agent for the FPL Group Capital
debentures. Principal and interest with respect to certificated FPL Group
Capital debentures will be payable, the transfer of the FPL Group Capital
debentures will be registrable and FPL Group Capital debentures will be
exchangeable for FPL Group Capital debentures of a like aggregate principal
amount in denominations of $50 and integral multiples of $50, at the office or
agency maintained by FPL Group Capital for this purpose in the The City of New
York. However, at FPL Group Capital's option, payment of interest may be made by
check mailed to the address of the holder entitled to payment or by wire
transfer to an account appropriately designated by the holder entitled to
payment.
The indenture trustee will initially be the security registrar and the
paying agent for the FPL Group Capital debentures. All transactions with respect
to the FPL Group Capital debentures, including registration, transfer and
exchange of the FPL Group Capital debentures, will be handled by the security
registrar at an office in The City of New York designated by FPL Group Capital.
FPL Group Capital has initially designated the corporate trust office of the
indenture trustee as that office. In addition, holders of the FPL Group Capital
debentures should address any notices to FPL Group Capital regarding the FPL
Group Capital debentures to that office. FPL Group Capital will notify holders
of the FPL Group Capital debentures of any change in the location of that
office.
The indenture does not contain provisions that afford holders of the
FPL Group Capital debentures protection in the event of a highly leveraged
transaction or other similar transaction involving FPL Group that may adversely
affect the holders.
INTEREST AND PAYMENT
Each FPL Group Capital debenture shall bear interest initially at the
rate of ___% per year, from the original issue date. Interest will be payable
quarterly in arrears on February 16, May 16, August 16 and November 16 of each
year, each an "interest payment date," commencing May 16, 2002, to the person in
whose name the FPL Group Capital debenture is registered at the close of
business on the first day of the month in which the interest payment date falls.
In addition, OID for United States federal income tax purposes will accrue on
the FPL Group Capital debentures.
The applicable interest rate on the FPL Group Capital debentures will
be reset on the third business day immediately preceding November 16, 2004 (and
will be effective on February 16, 2004), to the reset rate described below under
"--Market Rate Reset," unless the remarketing of the FPL Group Capital
debentures on that date fails. If a remarketing of the FPL Group Capital
debentures on that date fails, the interest rate on the FPL Group Capital
debentures will not be reset at that time. However, in these circumstances, the
interest rate on the FPL Group Capital debentures outstanding on and after
November 16, 2004 will be reset on the third business day immediately preceding
February 16, 2005 (and will be effective on February 16, 2005), to the reset
rate described below. If, as a result of a failed remarketing three business
days prior to February 16, 2005, the interest rate is not reset, the FPL Capital
debentures will continue to bear interest at the initial interest rate.
The amount of interest payable for any period will be computed on the
basis of a 360-day year consisting of twelve 30-day months. The amount of
interest payable for any period shorter than a full quarterly period for which
interest is computed will be computed on the basis of the actual number of days
elapsed in the 90-day period. In the event that any date on which interest is
payable on the FPL Group Capital debentures is not a business day, then payment
of the interest payable on that date will be made on the next succeeding day
which is a business day, and no interest or payment will be paid in respect of
the delay. However, if that business day is in the next succeeding calendar
year, that payment will be made on the immediately preceding business day, in
each case with the same force and effect as if made on the scheduled payment
date.
MARKET RATE RESET
The reset rate on the FPL Group Capital debentures will be equal to
the sum of the reset spread and the yield on the applicable benchmark Treasury
in effect on the third business day immediately preceding November 16, 2004 or
February 16, 2005, as the case may be, and will be determined by the reset
agent. In the case of a reset on the third business day immediately preceding
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November 16, 2004 (which would be effective on November 16, 2004), the reset
rate will be the rate determined by the reset agent as the rate the FPL Group
Capital debentures should bear in order for the FPL Group Capital debentures
included in Corporate Units to have an approximate aggregate market value on the
reset date of 100.5% of the Treasury portfolio purchase price described under
"Description of the Purchase Contracts--Remarketing." In the case of a reset on
the third business day immediately preceding February 16, 2005 (which would be
effective on February 16, 2005), the reset rate will be the rate determined by
the reset agent as the rate the FPL Group Capital debentures should bear in
order for each FPL Group Capital debenture to have an approximate market value
on the reset date of 100.5% of the principal amount of the FPL Group Capital
debentures. If, as a result of a failed remarketing three business days prior to
February 16, 2005, the interest rate is not reset, the FPL Capital debentures
will continue to bear interest at the initial interest rate. The reset rate may
not exceed the maximum rate, if any, permitted by applicable law.
The "applicable benchmark Treasury" means direct obligations of the
United States, as agreed upon by FPL Group Capital and the reset agent (which
may be obligations traded on a when-issued basis only), having a maturity
comparable to the remaining term to maturity of FPL Group Capital debentures,
which will be two years or two and one-quarter years, as applicable. The yield
for the applicable benchmark Treasury will be the bid side yield displayed at
10:00 a.m., New York City time, on the third business day immediately preceding
November 16, 2004 or February 16, 2005, as applicable, in the Telerate system
(or if the Telerate system is no longer available on that date or, in the
opinion of the reset agent (after consultation with FPL Group Capital), no
longer an appropriate system from which to obtain the yield, such other
nationally recognized quotation system as, in the opinion of the reset agent
(after consultation with FPL Group Capital), is appropriate). If this yield is
not so displayed, the yield for the applicable benchmark Treasury will be, as
calculated by the reset agent, the yield to maturity for the applicable
benchmark Treasury, expressed as a bond equivalent on the basis of a year of 365
or 366 days, as applicable, and applied on a daily basis, and computed by taking
the arithmetic mean of the secondary market bid yields, as of 10:30 a.m., New
York City time, on the third business day immediately preceding November 16,
2004 or February 16, 2005, of three leading United States government securities
dealers selected by the reset agent (after consultation with FPL Group Capital)
(which may include the reset agent or an affiliate thereof). It is currently
anticipated that J.P. Morgan Securities Inc. will be the reset agent.
On the seventh business day immediately preceding November 16, 2004 or
February 16, 2005, as applicable, the applicable benchmark Treasury to be used
to determine the reset rate will be selected, and the reset spread to be added
to the yield on the applicable benchmark Treasury will be established by the
reset agent, and the reset spread and the applicable benchmark Treasury will be
announced by FPL Group Capital (the "reset announcement date"). FPL Group
Capital will cause a notice of the reset spread and the applicable benchmark
Treasury to be published on the business day following the reset announcement
date by publication in a daily newspaper in the English language of general
circulation in The City of New York, which is expected to be The Wall Street
Journal. FPL Group Capital will request, not later than seven nor more than 15
calendar days prior to the reset announcement date, that the depositary notify
its participants holding FPL Group Capital debentures, Corporate Units or
Treasury Units of the reset announcement date and of the procedures that must be
followed if any owner of Equity Units wishes to settle the related purchase
contract with cash on the business day immediately preceding February 16, 2005.
OPTIONAL REMARKETING
On or prior to the fifth business day immediately preceding the
applicable remarketing date but no earlier than the payment date immediately
preceding that remarketing date, holders of FPL Capital Group debentures that
are not components of Corporate Units may elect to have their FPL Group Capital
debentures remarketed in the same manner as FPL Group Capital debentures that
are components of Corporate Units by delivering their FPL Group Capital
debentures, along with a notice of this election to the collateral agent. The
collateral agent will hold the FPL Group Capital debentures in an account
separate from the collateral account in which the pledged securities will be
held. Holders of FPL Group Capital debentures electing to have those FPL Group
Capital debentures remarketed will also have the right to withdraw the election
on or prior to the fifth business day immediately preceding the applicable
remarketing date.
PUT OPTION FOLLOWING FAILED REMARKETINGS
If the remarketing of the FPL Group Capital debentures on the third
business day immediately preceding February 16, 2005 has resulted in a failed
remarketing, holders of FPL Group Capital debentures following February 16, 2005
will have the right to put the FPL Group Capital debentures to FPL Group Capital
on March 30, 2005, upon at least three business days' prior notice, at a price
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equal to 100% of the principal amount, plus accrued and unpaid interest, if any.
EVENTS OF DEFAULT
In addition to the events of default relating to any series of debt
securities issued under the Indenture, as set forth under the "Description of
Offered Debt Securities--Events of Default" section on page 10 of the
accompanying prospectus, each of the following events will be an event of
default under the Indenture with respect to the Debentures:
(1) FPL Group consolidates with or merges into any other entity or
conveys, transfers or leases substantially all of its properties
and assets to any entity, unless
(a) the entity formed by such consolidation or into which FPL
Group is merged, or the entity to which FPL Group conveys,
transfers or leases substantially all of its properties and
assets is an entity organized and existing under the laws of
the United States of America, any State thereof or the
District of Columbia, and expressly assumes the obligations
of FPL Group under the Guarantee Agreement; and
(b) immediately after giving effect to such transaction, no
event of default under the Indenture and no event that,
after notice or lapse of time or both, would become an event
of default under the Indenture, shall have occurred and be
continuing; or
(2) FPL Group Capital fails to redeem any of the FPL Group
Capital debentures that it is required to redeem as
described under "Certain Terms of the FPL Group Capital
Debentures--Mandatory Redemption" below.
MANDATORY REDEMPTION
The following constitute "Guarantor Events" with respect to the FPL
Group Capital debentures:
o the Guarantee Agreement, dated as of June 1, 1999, between FPL
Group, as guarantor, and The Bank of New York, as guarantee
trustee, ceases to be in full force and effect;
o a court issues a decree ordering or acknowledging the bankruptcy
or insolvency of FPL Group, or appointing a custodian, receiver or
other similar official for FPL Group, or ordering the winding up
or liquidation of its affairs, and the decree remains in effect
for 90 days; or
o FPL Group seeks or consents to relief under federal or state
bankruptcy or insolvency laws, or to the appointment of a
custodian, receiver or other similar official for FPL Group, or
makes an assignment for the benefit of its creditors, or admits in
writing that it is bankrupt or insolvent.
If a Guarantor Event occurs and is continuing, FPL Group Capital will
redeem all of the outstanding FPL Group Capital debentures within 60 days after
the occurrence of the Guarantor Event at a mandatory redemption price described
below unless, within 30 days after the occurrence of the Guarantor Event,
Standard & Poor's Ratings Service (a Division of the McGraw Hill Companies,
Inc.) and Moody's Investors Service, Inc. (if the FPL Group Capital debentures
are then rated by those rating agencies, or, if the FPL Group Capital debentures
are not then rated by those rating agencies but are then rated by one or more
other nationally recognized rating agencies, then at least one of those other
nationally recognized rating agencies) shall have reaffirmed in writing that,
after giving effect to such Guarantor Event, the credit rating on the FPL Group
Capital debentures is investment grade (i.e. in one of the four highest
categories, without regard to subcategories within such rating categories, of
such rating agency).
If a Guarantor Event occurs and FPL Group Capital is not required to
redeem the FPL Group Capital debentures as described above, FPL Group Capital
will provide to the indenture trustee and the holders of the FPL Group Capital
debentures annual and quarterly reports containing the information that FPL
Group Capital would be required to file with the SEC under Section 13 or Section
15(d) of the Securities Exchange Act of 1934 if it were subject to the reporting
requirements of those Sections. If FPL Group Capital is, at that time, subject
to the reporting requirements of those Sections, the filing of annual and
quarterly reports with the SEC pursuant to those Sections will satisfy this
requirement.
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If FPL Group Capital is required to redeem all of the outstanding FPL
Group Capital debentures following a Guarantor Event:
o prior to February 16, 2005, if the purchase contracts have been
previously or concurrently terminated as described in "Description
of the Purchase Contracts--Termination of Purchase Contracts," the
mandatory redemption price will be equal to the principal amount
of each FPL Group Capital debenture plus accrued and unpaid
interest to the date of redemption;
o prior to February 16, 2005, if the purchase contracts have not
been so previously or concurrently terminated, the mandatory
redemption price will be equal to, for each FPL Group Capital
debenture, the redemption amount described below under "--Tax
Event Redemption" plus accrued and unpaid interest, if any, to the
date of redemption; or
o on or after February 16, 2005, the mandatory redemption price will
be equal to the principal amount of each FPL Group Capital
debenture, plus accrued and unpaid interest to the date of
redemption.
TAX EVENT REDEMPTION
If a tax event occurs and is continuing, FPL Group Capital may, at its
option, redeem the FPL Group Capital debentures in whole but not in part at any
time at a price, which is referred to as the redemption price, equal to, for
each FPL Group Capital debenture, the redemption amount described below plus
accrued and unpaid interest, if any, to the date of redemption. Installments of
interest on FPL Group Capital debentures which are due and payable on or prior
to a redemption date will be payable to the holders of the FPL Group Capital
debentures registered as such at the close of business on the relevant record
dates. If, following the occurrence of a tax event, FPL Group Capital exercises
its option to redeem the FPL Group Capital debentures, the proceeds of the
redemption will be payable in cash to the holders of the FPL Group Capital
debentures. If the tax event redemption occurs prior to November 16, 2004, or if
the FPL Group Capital debentures are not successfully remarketed on the third
business day immediately preceding November 16, 2004, prior to February 16,
2005, the redemption price for the FPL Group Capital debentures forming a part
of the Corporate Units at the time of the tax event redemption will be
distributed to the collateral agent, who in turn will purchase the applicable
Treasury portfolio described below on behalf of the holders of Corporate Units
and remit the remainder of the redemption price, if any, to the purchase
contract agent for payment to the holders. The applicable Treasury portfolio
will be substituted for FPL Group Capital debentures and will be pledged to the
collateral agent to secure the Corporate Unit holders' obligations to purchase
FPL Group common stock under the purchase contracts.
"Tax event" means the receipt by FPL Group Capital of an opinion of
nationally recognized independent tax counsel experienced in such matters (which
may be Thelen Reid & Priest LLP) to the effect that there is more than an
insubstantial risk that interest payable by FPL Group Capital on the FPL Group
Capital debentures would not be deductible, in whole or in part, by FPL Group
Capital for United States federal income tax purposes as a result of any
amendment to, change in, or announced proposed change in, the laws, or any
regulations thereunder, of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, any amendment to or
change in an interpretation or application of any such laws or regulations by
any legislative body, court, governmental agency or regulatory authority or any
interpretation or pronouncement that provides for a position with respect to any
such laws or regulations that differs from the generally accepted position on
the date of this prospectus supplement, which amendment, change or proposed
change is effective or which interpretation or pronouncement is announced on or
after the date of this prospectus supplement.
"Redemption amount" means
o in the case of a tax event redemption occurring prior to November
16, 2004, or prior to February 16, 2005 if the remarketing of the
FPL Group Capital debentures on the third business day immediately
preceding November 16, 2004 resulted in a failed remarketing, for
each FPL Group Capital debenture, the product of the principal
amount of that FPL Group Capital debenture and a fraction whose
numerator is the applicable Treasury portfolio purchase price and
whose denominator is the aggregate principal amount of the FPL
Group Capital debentures included in Corporate Units, and
o in the case of a tax event redemption occurring on or after
November 16, 2004, or February 16, 2005 if the remarketing of the
FPL Group Capital debentures on the third business day immediately
preceding November 16, 2004 resulted in a failed remarketing, for
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each FPL Group Capital debenture, the product of the principal
amount of the FPL Group Capital debenture and a fraction whose
numerator is the applicable Treasury portfolio purchase price and
whose denominator is the aggregate principal amount of the FPL
Group Capital debentures outstanding on the tax event redemption
date.
Depending on the amount of the Treasury portfolio purchase price, the
redemption amount could be less than or greater than the principal amount of the
FPL Group Capital debentures.
As used in this context, "Treasury portfolio purchase price" means the
lowest aggregate price quoted by a primary U.S. government securities dealer in
The City of New York to the quotation agent on the third business day
immediately preceding the tax event redemption date for the purchase of the tax
event Treasury portfolio for settlement on the tax event redemption date.
The Treasury portfolio to be purchased in connection with a tax event
redemption, or tax event Treasury portfolio, will consist of:
(1) if the tax event redemption occurs prior to November 16,
2004, or if the FPL Group Capital debentures are not
successfully remarketed on the third business day
immediately preceding November 16, 2004, prior to February
16, 2005:
o interest or principal strips of U.S. Treasury
securities that mature on or prior to February 15,
2005 in an aggregate amount equal to the principal
amount of the FPL Group Capital debentures
included in the Corporate Units, and
o with respect to each scheduled interest payment
date on the FPL Group Capital debentures that
occurs after the tax event redemption and on or
before February 16, 2005, interest or principal
strips of U.S. Treasury securities that mature on
or prior to that interest payment date in an
aggregate amount equal to the aggregate interest
payment that would be due on the aggregate
principal amount of the FPL Group Capital
debentures on that date if the interest rate of
the FPL Group Capital debentures was not reset on
the reset date; or
(2) if the tax event redemption occurs on or after November 16,
2004, or, if the FPL Group Capital debentures are not
successfully remarketed on the third business day
immediately preceding February 16, 2005, on or after
February 16, 2005:
o interest or principal strips of U.S. Treasury
securities that mature on or prior to February 15,
2007 in an aggregate amount equal to the principal
amount of the FPL Group Capital debentures
outstanding, and
o with respect to each scheduled interest payment
date on the FPL Group Capital debentures that
occurs after the tax event redemption and on or
before February 16, 2007, interest or principal
strips of U.S. Treasury securities that mature on
the business day prior to that interest payment
date in an aggregate amount equal to the aggregate
interest payment that would be due on the
aggregate principal amount of the FPL Group
Capital debentures outstanding included in the
Corporate Units, as applicable, on that date if
the interest rate of the FPL Group Capital
debentures was not reset on the reset date.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each registered holder of FPL Group
Capital debentures to be redeemed at its registered address. Unless FPL Group
Capital defaults in payment of the redemption price, on and after the redemption
date interest shall cease to accrue on the FPL Group Capital debentures. In the
event any FPL Group Capital debentures are called for redemption, neither FPL
Group Capital nor the indenture trustee will be required to register the
transfer of or exchange the FPL Group Capital debentures to be redeemed.
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BOOK-ENTRY AND SETTLEMENT
FPL Group Capital debentures which are released from the pledge
following substitution or settlement of the purchase contracts will be issued in
the form of one or more global certificates, which are referred to as global
securities, registered in the name of the depositary or its nominee. Except
under the limited circumstances described below or except upon recreation of
Corporate Units, FPL Group Capital debentures represented by the global
securities will not be exchangeable for, and will not otherwise be issuable as,
FPL Group Capital debentures in certificated 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 may require that some purchasers of
securities take physical delivery of the securities in certificated form. These
laws may impair the ability to transfer beneficial interests in such a global
security.
Except as provided below, owners of beneficial interests in such a
global security will not be entitled to receive physical delivery of FPL Group
Capital debentures in certificated form and will not be considered the holders
(as defined in the indenture) thereof for any purpose under the indenture, and
no global security representing FPL Group Capital debentures shall be
exchangeable, except for another global security of like denomination and tenor
to be registered in the name of the depositary or its nominee or a successor
depositary or its nominee. Accordingly, each beneficial owner must rely on the
procedures of the depositary or if such person is not a participant, on the
procedures of the participant through which such person owns its interest to
exercise any rights of a holder under the indenture.
In the event that
o the depositary notifies FPL Group Capital that it is unwilling or
unable to continue as a depositary for the global security
certificates and no successor depositary has been appointed within
90 days after this notice,
o the depositary at any time ceases to be a clearing agency
registered under the Securities Exchange Act of 1934 at which time
the depositary is required to be so registered to act as the
depositary and no successor depositary has been appointed within
90 days after FPL Group Capital learns that the depositary has
ceased to be so registered, or
o FPL Group Capital determines in its sole discretion that it will
no longer have FPL Group Capital debentures represented by global
securities or permit any the global security certificates to be
exchangeable,
certificates for the FPL Group Capital debentures will be printed and delivered
in exchange for beneficial interests in the global security certificates. Any
global note that is exchangeable pursuant to the preceding sentence shall be
exchangeable for FPL Group Capital debenture certificates registered in the
names directed by the depositary. FPL Group Capital expects that these
instructions will be based upon directions received by the depositary from its
participants with respect to ownership of beneficial interests in the global
security certificates.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal
income tax consequences of the purchase, ownership and disposition of the Equity
Units, FPL Group Capital debentures and FPL Group common stock acquired under a
purchase contract. Unless otherwise stated, this summary deals only with Equity
Units, FPL Group Capital debentures and FPL Group common stock held as capital
assets (generally, assets held for investment) by holders that are U.S. persons
(defined below) that purchase Equity Units upon original issuance. The tax
treatment of a holder may vary depending on the holder's particular situation.
This summary does not address all of the tax consequences that may be relevant
to holders that may be subject to special tax treatment such as, for example,
banks, insurance companies, broker dealers, tax-exempt organizations, foreign
taxpayers, regulated investment companies, persons holding Equity Units, FPL
Group Capital debentures, or shares of FPL Group common stock as part of a
straddle, hedge, conversion transaction or other integrated investment and
persons whose functional currency is not the U.S. dollar. In addition, this
summary does not address any aspects of state, local, or foreign tax laws. This
summary is based on the United States federal income tax laws, regulations,
rulings and decisions in effect as of the date hereof, which are subject to
change or differing interpretations, possibly on a retroactive basis. HOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO
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THEM OF PURCHASING, OWNING, AND DISPOSING OF THE EQUITY UNITS OR FPL GROUP
CAPITAL DEBENTURES OR FPL GROUP COMMON STOCK, INCLUDING THE APPLICATION AND
EFFECT OF UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
No statutory, administrative or judicial authority directly addresses
the treatment of Equity Units or instruments similar to Equity Units for United
States federal income tax purposes. As a result, no assurance can be given that
the IRS will agree with the tax consequences described herein.
For purposes of this summary, the term "U.S. person" means
o an individual who is a citizen or resident of the United States,
o a corporation or partnership created or organized in or under the
laws of the United States or any state thereof or the District of
Columbia,
o an estate the income of which is subject to United States federal
income taxation regardless of its source, or
o a trust 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
has in effect a valid election to be treated as a domestic trust
for United States federal income tax purposes.
EQUITY UNITS
Allocation of Purchase Price. A holder's acquisition of an Equity Unit
will be treated as an acquisition of a unit consisting of two components, the
FPL Group Capital debenture and the related purchase contract. The purchase
price of each Equity Unit will be allocated between the components in proportion
to their respective fair market values at the time of purchase. The allocation
will establish a holder's initial tax basis in the FPL Group Capital debentures
and the purchase contract. FPL Group Capital will report the fair market value
of the FPL Group Capital debenture as $50 and FPL Group will report the fair
market value of each purchase contract as $0. This position will be binding upon
holders (but not on the IRS) unless holders explicitly disclose a contrary
position on a statement attached to their timely filed United States federal
income tax returns for the taxable year in which an Equity Unit is acquired.
Thus, absent such disclosure, holders should allocate the purchase price for an
Equity Unit in accordance with the foregoing. The remainder of this discussion
assumes that this allocation of purchase price will be respected for United
States federal income tax purposes.
Ownership of FPL Group Capital Debentures or Treasury Securities.
Holders will be treated as owning the FPL Group Capital debentures or Treasury
securities constituting a part of the Corporate Units or Treasury Units,
respectively, for United States federal income tax purposes. FPL Group, FPL
Group Capital and, by virtue of their acquisition of Equity Units, holders agree
to treat the FPL Group Capital debentures or Treasury securities constituting a
part of the Equity Units as owned by holders for United States federal income
tax purposes, and the remainder of this summary assumes such treatment. The
United States federal income tax consequences of owning the FPL Group Capital
debentures or Treasury securities are discussed below (see "-- FPL Group Capital
Debentures," "--Treasury Securities" and "--Remarketing, Tax Event Redemption
and Mandatory Redemption of FPL Group Capital Debentures").
Sales, Exchanges or Other Taxable Dispositions of Equity Units. If
holders sell, exchange or otherwise dispose of an Equity Unit in a taxable
disposition (a "disposition"), they will be treated as having sold, exchanged or
disposed of each of the purchase contract and the FPL Group Capital debenture,
the applicable ownership interest in the Treasury portfolio or the Treasury
securities that constitute such Equity Unit, and the proceeds realized on such
disposition will be allocated between the purchase contract and the FPL Group
Capital debenture, the applicable ownership interest in the Treasury portfolio
or the Treasury securities in proportion to their respective fair market values.
As a result, as to the purchase contract and the FPL Group Capital debenture,
the applicable ownership interest in the Treasury portfolio or the Treasury
securities, holders generally will recognize gain or loss equal to the
difference between the portion of the proceeds received by holders that is
allocable to the purchase contract and the FPL Group Capital debenture, the
applicable ownership interest in the Treasury portfolio or Treasury securities,
as the case may be, and their adjusted tax basis in the purchase contract and
the FPL Group Capital debenture, the applicable ownership interest in the
Treasury portfolio or the Treasury securities, as the case may be, except to the
extent holders are treated as receiving an amount with respect to accrued
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contract adjustment payments or deferred contract adjustment payments on the
purchase contract, which may be treated as ordinary income, in each case to the
extent not previously included in income. In the case of the purchase contract,
the applicable ownership interest in the Treasury portfolio and Treasury
securities, such gain or loss will generally be capital gain or loss, and such
gain or loss generally will be long-term capital gain or loss if holders held
the Equity Units for more than one year immediately prior to such disposition.
Long-term capital gains of individuals are eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitations. The
rules governing the determination of the character of gain or loss on the
disposition of the FPL Group Capital debentures are summarized under "--FPL
Group Capital Debentures--Sales, Exchanges or Other Taxable Dispositions of FPL
Group Capital Debentures."
If the disposition of an Equity Unit occurs when the purchase contract
has a negative value, holders should be considered to have received additional
consideration for the FPL Group Capital debenture, the applicable ownership
interest in the Treasury portfolio or Treasury securities, as the case may be,
in an amount equal to such negative value and to have paid such amount to be
released from their obligation under the purchase contract. Because, as
discussed below, any gain on the disposition of an FPL Group Capital debenture
prior to the purchase contract settlement date generally will be treated as
ordinary interest income for United States federal income tax purposes, the
ability to offset such interest income with a loss on the purchase contract may
be limited. Holders should consult their tax advisors regarding a disposition of
an Equity Unit at a time when the purchase contract has a negative value.
In determining gain or loss, contract adjustment payments or deferred
contract adjustment payments that have been received by holders, but have not
previously been included in their income, should either reduce their adjusted
tax basis in the purchase contract or result in an increase in the amount
realized on the disposition of the purchase contract. Any contract adjustment
payments or deferred contract adjustment payments previously included in
holders' income, but not received by the holders should increase their adjusted
tax basis in the purchase contract (see "--Purchase Contracts--Contract
Adjustment Payments and Deferred Contract Adjustment Payments" below).
FPL GROUP CAPITAL DEBENTURES
The discussion in this section will apply to holders if they hold FPL
Group Capital debentures or Corporate Units that include FPL Group Capital
debentures.
Classification of the FPL Group Capital Debentures. In connection with
the issuance of the FPL Group Capital debentures, Thelen Reid & Priest LLP, FPL
Group's and FPL Group Capital's special counsel, will deliver an opinion that,
under current law, and based on certain representations, facts and assumptions
set forth in such opinion, the FPL Group Capital debentures will be classified
as indebtedness for United States federal income tax purposes. FPL Group and FPL
Group Capital and, by virtue of their acquisition of Corporate Units, holders
agree to treat the FPL Group Capital debentures as indebtedness of FPL Group
Capital for United States federal income tax purposes.
Original Issue Discount. Because of the manner in which the interest
rate on the FPL Group Capital debentures is to be reset, the FPL Group Capital
debentures should be classified as contingent payment debt instruments subject
to the "noncontingent bond method" for accruing original issue discount, as set
forth in the applicable Treasury Regulations. FPL Group Capital intends to treat
the FPL Group Capital debentures in that manner, and the remainder of this
discussion assumes that the FPL Group Capital debentures will be so treated for
United States federal income tax purposes. As discussed more fully below, the
effects of applying such method will be:
o to require holders, regardless of their usual method of tax
accounting, to use an accrual method with respect to the interest
income on FPL Group Capital debentures;
o for all accrual periods through November 16, 2004, and possibly
for accrual periods thereafter, to require holders to accrue
interest income in excess of interest payments actually received;
and
o generally to result in ordinary, rather than capital, treatment of
any gain or loss on the sale, exchange or other disposition of the
FPL Group Capital debentures.
See "--Sales, Exchanges or Other Taxable Dispositions of FPL Group Capital
Debentures."
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Holders will be required to accrue original issue discount, or OID, on
a constant yield to maturity basis based on the "comparable yield" of the FPL
Group Capital debentures. The comparable yield of the FPL Group Capital
debentures will generally be the rate at which FPL Group Capital would issue a
fixed rate debt instrument with terms and conditions similar to the FPL Group
Capital debentures (which rate will exceed the current interest payments on the
FPL Group Capital debentures). FPL Group Capital has determined that, for the
FPL Group Capital debentures, the comparable yield is ____% and the projected
payments are $____ on May 16, 2002, $____ for each subsequent quarter.. FPL
Group Capital has also determined that the projected payment for the FPL Group
Capital debentures, per $50 of principal amount, at the maturity date is $______
(which includes the stated principal amount of the FPL Group Capital debentures
as well as the final projected interest payment). The amount of OID on an FPL
Group Capital debenture for each accrual period is determined by multiplying the
comparable yield of the FPL Group Capital debenture (adjusted for the length of
the accrual period) by the FPL Group Capital debenture's adjusted issue price at
the beginning of the accrual period. Based on the allocation of the purchase
price of each unit described above, the adjusted issue price of each FPL Group
Capital debenture, per $50 of principal amount, at the beginning of the first
accrual period will be $50, and the adjusted issue price of each FPL Group
Capital debenture at the beginning of each subsequent accrual period will be
equal to $50, increased by any OID previously accrued by holders on such FPL
Group Capital debenture and decreased by the amount of projected payments on
such FPL Group Capital debenture through such date. The amount of OID so
determined will then be allocated on a ratable basis to each day in the accrual
period that holders hold the FPL Group Capital debenture.
If, after the date on which the interest rate on the FPL Group Capital
debentures is reset, the remaining amounts of principal and interest payable on
the FPL Group Capital debentures differ from the payments set forth on the
applicable projected payment schedule, negative or positive adjustments
reflecting such difference should generally be taken into account by holders as
adjustments to interest income in a reasonable manner over the period to which
they relate.
Holders are generally bound by the comparable yield and projected
payment schedule provided by FPL Group Capital unless it is unreasonable. If
holders decide to use their own comparable yield and projected payment schedule,
they must explicitly disclose this fact and the reason that they have used their
own comparable yield and projected payment schedule. In general, this disclosure
must be made on a statement attached to holders' timely filed United States
federal income tax returns for the taxable year that includes the date of their
acquisition of the FPL Group Capital debentures.
The foregoing comparable yield and projected payment schedule is
supplied by FPL Group Capital solely for computing income under the
noncontingent bond method for United States federal income tax purposes and do
not constitute projections or representations as to the amounts that holders
will actually receive as a result of owning FPL Group Capital debentures or
Corporate Units.
Adjustment to Tax Basis in FPL Group Capital Debentures. A holder's
tax basis in an FPL Group Capital debenture will be increased by the amount of
OID included in income with respect to the FPL Group Capital debenture and
decreased by the amount of projected payments with respect to the FPL Group
Capital debenture through the computation date.
Sales, Exchanges or Other Taxable Dispositions of FPL Group Capital
Debentures. Holders will recognize gain or loss on a disposition of FPL Group
Capital debentures (including a redemption for cash or the remarketing thereof)
in an amount equal to the difference between the amount realized by holders on
the disposition of the FPL Group Capital debentures and their adjusted tax basis
in the FPL Group Capital debentures. Selling expenses incurred by holders,
including the remarketing fee, will reduce the amount of gain or increase the
amount of loss recognized by holders upon a disposition of FPL Group Capital
debentures. Gain recognized on the disposition of an FPL Group Capital debenture
prior to the purchase contract settlement date will be treated as ordinary
interest income. Loss recognized on the disposition of an FPL Group Capital
debenture prior to the purchase contract settlement date will be treated as
ordinary loss to the extent of holders' prior inclusions of OID on the FPL Group
Capital debenture. Any loss in excess of such amount will be treated as a
capital loss. In general, gain recognized on the disposition of an FPL Group
Capital debenture on or after the purchase contract settlement date will be
ordinary interest income to the extent attributable to the excess, if any, of
the total remaining principal and interest payments due on the FPL Group Capital
debenture over the total remaining payments set forth on the projected payment
schedule for the FPL Group Capital debenture. Any gain recognized in excess of
such amount and any loss recognized on such a disposition will generally be
S-53
treated as a capital gain or loss. Long-term capital gains of individuals are
eligible for reduced rates of taxation. The deductibility of capital losses is
subject to limitations.
TREASURY SECURITIES
The discussion in this section will apply to holders who hold Treasury
Units or Treasury securities.
Original Issue Discount. If holders hold Treasury Units, they will be
required to treat their ownership interest in the Treasury securities included
in a Treasury Unit as an interest in a bond that was originally issued on the
date they acquired the Treasury securities. Any such Treasury securities that
are owned or treated as owned by holders will have OID equal to the excess of
the amount payable at maturity of such Treasury securities over the purchase
price thereof. Holders will be required to include such OID in income on a
constant yield to maturity basis over the period between the purchase date of
the Treasury securities and the maturity date of the Treasury securities,
regardless of their regular method of tax accounting and in advance of the
receipt of cash attributable to such OID. A holder's adjusted tax basis in the
Treasury securities will be increased by the amounts of such OID included in
such holder's gross income.
Sales, Exchanges or Other Taxable Dispositions of Treasury Securities.
As discussed below, in the event that holders obtain the release of Treasury
securities by delivering FPL Group Capital debentures to the collateral agent,
holders generally will not recognize gain or loss upon such substitution.
Holders will recognize gain or loss on a subsequent disposition of the Treasury
securities in an amount equal to the difference between the amount realized by
holders on such disposition and their adjusted tax basis in the Treasury
securities. Such gain or loss generally will be capital gain or loss and
generally will be long-term capital gain or loss if holders held such Treasury
securities for more than one year immediately prior to such disposition.
Long-term capital gains of individuals are eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitations.
PURCHASE CONTRACTS
Contract Adjustment Payments and Deferred Contract Adjustment
Payments. There is no direct authority addressing the treatment, under current
law, of the contract adjustment payments or deferred contract adjustment
payments, and such treatment is, therefore, unclear. Contract adjustment
payments and deferred contract adjustment payments may constitute taxable
ordinary income to holders when received or accrued, in accordance with their
regular method of tax accounting. To the extent FPL Group is required to file
information returns with respect to contract adjustment payments or deferred
contract adjustment payments, it intends to report such payments as taxable
ordinary income to holders. Holders should consult their tax advisors concerning
the treatment of contract adjustment payments and deferred contract adjustment
payments, including the possibility that any contract adjustment payment or
deferred contract adjustment payment may be treated as a loan, purchase price
adjustment, rebate or payment analogous to an option premium, rather than being
includible in income on a current basis.
The treatment of contract adjustment payments and deferred contract
adjustment payments could affect a holder's adjusted tax basis in a purchase
contract or FPL Group common stock received under a purchase contract or the
amount realized by a holder upon the sale or disposition of an Equity Unit or
the termination of a purchase contract. In particular, any contract adjustment
payments or deferred contract adjustment payments that have been:
o included in holders' income, but not paid to them, should
increase their adjusted tax basis in the purchase contract;
and
o paid to holders, but not included in their income, should
either reduce their adjusted tax basis in the purchase
contract or result in an increase in the amount realized on
the disposition of the purchase contract.
See "--Acquisition of FPL Group Common Stock Under a Purchase Contract,"
"--Equity Units--Sales, Exchanges or Other Taxable Dispositions of Equity Units"
and "--Termination of Purchase Contract."
Acquisition of FPL Group Common Stock Under a Purchase Contract.
Holders generally will not recognize gain or loss on the purchase of FPL Group
common stock under a purchase contract, including upon early settlement, except
with respect to any cash paid in lieu of a fractional share of FPL Group common
stock. Holders' aggregate initial tax basis in the FPL Group common stock
received under a purchase contract should generally equal the purchase price
paid for such common stock, plus the properly allocable portion of their
adjusted tax basis (if any) in the purchase contract, less the portion of such
S-54
purchase price and adjusted tax basis allocable to the fractional share. The
holding period for FPL Group common stock received under a purchase contract
will commence on the day following the acquisition of such common stock.
Ownership of FPL Group Common Stock Acquired Under the Purchase
Contract. Any distribution on FPL Group common stock paid by FPL Group out of
its current or accumulated earnings and profits (as determined for United States
federal income tax purposes) will constitute a dividend and will be includible
in income by holders when received. Any such dividend will be eligible for the
dividends received deduction if the holder is an otherwise qualifying corporate
holder that meets the holding period and other requirements for the dividends
received deduction.
Upon a disposition of FPL Group common stock, holders generally will
recognize capital gain or loss equal to the difference between the amount
realized and their adjusted tax basis in the FPL Group common stock. Such
capital gain or loss generally will be long-term capital gain or loss if they
held such common stock for more than one year immediately prior to such
disposition. Long-term capital gains of individuals are eligible for reduced
rates of taxation. The deductibility of capital losses is subject to
limitations.
Early Settlement of Purchase Contract. Holders will not recognize gain
or loss on the receipt of their proportionate share of FPL Group Capital
debentures or Treasury securities or the applicable ownership interest in the
Treasury portfolio upon early settlement of a purchase contract, and holders
will have the same adjusted tax basis in such FPL Group Capital debentures,
Treasury securities or the applicable ownership interest in the Treasury
portfolio as before such early settlement.
Termination of Purchase Contract. If a purchase contract terminates,
holders will recognize gain or loss equal to the difference between the amount
realized (if any) upon such termination and their adjusted tax basis (if any) in
the purchase contract at the time of such termination. Such gain or loss
generally will be capital gain or loss and generally will be long-term capital
gain or loss if holders held such purchase contract for more than one year
immediately prior to such termination. Long-term capital gains of individuals
are eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitations. A holder will not recognize gain or loss on the
receipt of the holder's proportionate share of the FPL Group Capital debentures
or Treasury securities or applicable ownership interest in the Treasury
portfolio upon termination of the purchase contract and will have the same
adjusted tax basis in the FPL Group Capital debentures, Treasury securities or
applicable ownership interest in the Treasury portfolio as before such
distribution.
Adjustment to Settlement Rate. A holder may be treated as receiving a
constructive dividend distribution from FPL Group if:
o the settlement rate is adjusted and as a result of such adjustment
the proportionate interest of holders of Equity Units in FPL
Group's assets or earnings and profits is increased; and
o the adjustment is not made pursuant to a bona fide,
reasonable anti-dilution formula.
An adjustment in the settlement rate would not be considered made pursuant to
such a formula if the adjustment were made to compensate a holder for certain
taxable distributions with respect to the FPL Group common stock. Thus, under
certain circumstances, an increase in the settlement rate might give rise to a
taxable dividend to holders even though holders would not receive any cash
related thereto.
SUBSTITUTION OF TREASURY SECURITIES TO CREATE OR RECREATE TREASURY UNITS
Holders of Corporate Units that deliver Treasury securities to the
collateral agent in substitution for FPL Group Capital debentures or the
applicable ownership interest in the Treasury portfolio will not recognize gain
or loss upon their delivery of such Treasury securities or their receipt of the
FPL Group Capital debentures or the applicable ownership interest in the
Treasury portfolio. Holders will continue to take into account items of income
or deduction otherwise includible or deductible, respectively, by holders with
respect to such Treasury securities and the FPL Group Capital debentures or the
applicable ownership interest in the Treasury portfolio, and their adjusted tax
bases in the Treasury securities, the FPL Group Capital debentures or the
applicable ownership interest in the Treasury portfolio and the purchase
contract will not be affected by such delivery and release.
S-55
SUBSTITUTION OF FPL GROUP CAPITAL DEBENTURES TO RECREATE CORPORATE UNITS
Holders of Treasury Units that deliver FPL Group Capital debentures to
the collateral agent in substitution for Treasury securities will not recognize
gain or loss upon their delivery of such FPL Group Capital debentures or their
receipt of the Treasury securities. Holders will continue to take into account
items of income or deduction otherwise includible or deductible, respectively,
by holders with respect to such Treasury securities and FPL Group Capital
debentures, and their adjusted tax bases in the Treasury securities, the FPL
Group Capital debentures and the purchase contract will not be affected by such
delivery and release.
REMARKETING, TAX EVENT REDEMPTION AND MANDATORY REDEMPTION OF FPL GROUP CAPITAL
DEBENTURES
A remarketing, a tax event redemption or a mandatory redemption will
be a taxable event for holders of FPL Group Capital debentures, which will be
subject to tax in the manner described above under "-- FPL Group Capital
Debentures--Sales, Exchanges or Other Taxable Dispositions of FPL Group Capital
Debentures."
Ownership of Treasury Portfolio. In the event of a remarketing of the
FPL Group Capital debentures on the third business day immediately preceding
November 16, 2004 or a tax event redemption prior to the purchase contract
settlement date, FPL Group Capital and, by virtue of their acquisition of
Corporate Units, holders agree to treat the applicable ownership interest in the
Treasury portfolio constituting a part of their Corporate Units as owned by
holders for United States federal income tax purposes. In such a case, holders
will be required to include in income any amount earned on such pro rata portion
of the Treasury portfolio for United States federal income tax purposes. The
remainder of this summary assumes that holders of Corporate Units will be
treated as the owners of the applicable ownership interest in the Treasury
portfolio constituting a part of such Corporate Units for United States federal
income tax purposes.
Interest Income and Original Issue Discount. The Treasury portfolio
will consist of stripped U.S. Treasury securities. Following a remarketing of
the FPL Group Capital debentures on the third business day immediately preceding
November 16, 2004 or a tax event redemption prior to purchase contract
settlement date, holders will be required to treat their pro rata portion of
each U.S. Treasury security in the Treasury portfolio as a bond that was
originally issued on the date the collateral agent acquired the relevant U.S.
Treasury securities and that has OID equal to their pro rata portion of the
excess of the amounts payable on such U.S. Treasury securities over the value of
the U.S. Treasury securities at the time the collateral agent acquires them on
behalf of holders of Corporate Units. Holders will be required to include such
OID (other than OID on short-term U.S. Treasury securities as defined below) in
income for United States federal income tax purposes as it accrues on a constant
yield to maturity basis, regardless of their regular method of tax accounting.
To the extent that a payment from the Treasury portfolio made in respect of a
scheduled interest payment on a remarketed or redeemed FPL Group Capital
debenture exceeds the amount of such OID, such payment will be treated as a
return of a holder's investment in the Treasury portfolio and will not be
considered current income for United States federal income tax purposes.
In the case of any U.S. Treasury security with a maturity of one year
or less from the date of its issue (a "short-term U.S. Treasury Security"),
holders will generally be required to include OID in income as it accrues only
if they are accrual basis taxpayers. If holders are accrual basis taxpayers,
they will generally accrue such OID on a straight-line basis, unless they make
an election to accrue such OID on a constant yield to maturity basis.
Tax Basis of the Applicable Ownership Interest in a Treasury
Portfolio. The initial tax basis of holders in their applicable ownership
interest in a Treasury portfolio will equal their pro rata portion of the amount
paid by the collateral agent for the Treasury portfolio. A holder's adjusted tax
basis in the applicable ownership interest in the Treasury portfolio will be
increased by the amount of OID included in income with respect thereto and
decreased by the amount of cash received in respect of the Treasury portfolio.
Sales, Exchanges or Other Dispositions of the Applicable Ownership
Interest in the Treasury Portfolio. Holders that obtain the release of the
applicable ownership interest in the Treasury portfolio and subsequently dispose
of such interest will recognize gain or loss on such disposition in an amount
equal to the difference between the amount realized upon such disposition and
such holders' adjusted tax basis in the applicable ownership interest in the
Treasury portfolio.
S-56
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Unless holders are exempt recipients, such as corporations, interest,
OID, contract adjustment payments or deferred contract adjustment payments, and
dividends received on, and proceeds received from the sale of, Equity Units, FPL
Group Capital debentures, purchase contracts, Treasury securities, the
applicable ownership interests in a Treasury portfolio, or FPL Group common
stock, as the case may be, may be subject to information reporting and may also
be subject to United States federal backup withholding tax if holders fail to
supply accurate taxpayer identification numbers or otherwise fail to comply with
applicable United States information reporting or certification requirements.
The backup withholding rate for 2002 and 2003 is 30%; for 2004 and 2005 is 29%;
and for 2006 and thereafter is 28%.
Any amounts withheld under the backup withholding rules will be
allowed as a credit against holders' United States federal income tax liability
provided the required information is furnished to the IRS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the United States Internal Revenue Code of 1986, as amended (the
"Code"), impose certain restrictions on:
o employee benefit plans (as defined in Section 3(3) of ERISA)
other than governmental plans (as defined in Section 3(32)
of ERISA);
o plans described in Section 4975(e)(1) of the Code, including
individual retirement accounts or Keogh plans;
o any entities whose underlying assets include plan assets
pursuant to 29 C.F.R. Section 2510.3-101 by reason of a
plan's investment in such entities (each a "Plan"); and
o persons who have certain specified relationships to such
Plans ("Parties in Interest" under ERISA and "Disqualified
Persons" under the Code).
Plans may purchase Corporate Units subject to the investing
fiduciary's determination that the investment satisfies ERISA's fiduciary
standards and other requirements under ERISA or the Code applicable to
investments by Plans. Accordingly, among other factors, the investing fiduciary
should consider whether:
o the investment would satisfy the prudence and diversification
requirements of ERISA;
o would be consistent with the documents and instruments governing
the Plan;
o such investment is made solely in the interest of participants and
beneficiaries of the Plan;
o the acquisition and holding of Corporate Units does not result in
a non-exempt "prohibited transaction" under Section 406 of ERISA
or Section 4975 of the Code; and
o such investment does not violate ERISA's prohibition on improper
delegation of control over or responsibility for Plan assets.
If FPL Group Capital or FPL Group were a Party in Interest or
Disqualified Person with respect to a Plan (or becomes a Party in Interest or
Disqualified Person in connection with this transaction), such Plan's
acquisition or holding of the Corporate Units could be deemed to constitute a
transaction prohibited under Title I of ERISA or Section 4975 of the Code (e.g.,
the extension of credit between a Plan and a Party in Interest or Disqualified
Person), unless such Corporate Units are acquired and are held pursuant to and
in accordance with an applicable exemption. In this regard, the U.S. Department
of Labor ("DOL") has issued prohibited transaction class exemptions ("PTCEs")
that may apply to the acquisition and holding of Corporate Units. These class
exemptions are PTCE 84-14 (respecting transactions determined by independent
qualified professional asset managers), PTCE 90-1 (respecting insurance company
separate accounts), PTCE 91-38 (respecting bank collective investment funds),
PTCE 95-60 (respecting insurance company general accounts) and PTCE 96-23
S-57
(respecting transactions determined by in-house asset managers). There can be no
assurance, however, that all of the conditions of any such exemption will be
satisfied.
By its purchase of the Corporate Units (or an interest therein), each
purchaser of the Corporate Units will be deemed to have represented and agreed
that either:
o it is not purchasing the Corporate Units with the assets of any
Plan; or
o one or more exemptions apply such that the use of such assets will
not constitute a non-exempt prohibited transaction under ERISA or
the Code.
Additionally, each purchaser of the Corporate Units (or an interest therein)
will be deemed to have directed the remarketing agent to take such actions as
set forth in this prospectus supplement. Any Plan fiduciary that proposes to
cause a Plan to purchase the Corporate Units should consult with its counsel
with respect to the potential applicability of ERISA and the Code to such
investment and whether any exemption would be applicable and determine on its
own whether all conditions of such exemption or exemptions have been satisfied.
SPECIAL CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
Based on the reasoning of the United States Supreme Court in John
Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S. 86 (1993), an
insurance company's general account may be deemed to include assets of the Plans
investing in the general account (e.g., through the purchase of an annuity
contract), and the insurance company might be treated as a Party in Interest
with respect to a Plan by virtue of such investment. Any investor that is an
insurance company using the assets of an insurance company general account
should note that the Small Business Job Protection Act of 1996 added new Section
401(c) of ERISA relating to the status of the assets of insurance company
general accounts under ERISA and Section 4975 of the Code. Pursuant to Section
401(c), the DOL issued final regulations effective January 5, 2000 (the "General
Account Regulations") with respect to insurance policies issued on or before
December 31, 1998, that are supported by an insurer's general account. As a
result of the General Account Regulations, assets of an insurance company
general account will not be treated as "plan assets" for purposes of the
fiduciary responsibility provisions of ERISA and Section 4975 of the Code to the
extent such assets relate to contracts issued to employee benefit plans on or
before December 31, 1998 and the insurer satisfies various conditions. The plan
asset status of insurance company separate accounts is unaffected by new Section
401(c) of ERISA, and separate account assets continue to be treated as the plan
assets of any such plan invested in a separate account.
UNDERWRITING
The information in this section adds to the information in the "Plan
of Distribution" section on page 21 of the accompanying prospectus. Please read
these two sections together.
FPL Group is selling the Corporate Units to the underwriters named in
the table below pursuant to an underwriting agreement dated the date of this
prospectus supplement. FPL Group has agreed to sell to each of the underwriters,
and each of the underwriters has severally agreed to purchase, the number of
Corporate Units set forth opposite that underwriter's name in the table below:
S-58
NUMBER OF
UNDERWRITER CORPORATE UNITS
----------- ---------------
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Salomon Smith Barney Inc.
Banc of America Securities LLC
Wachovia Securities
Barclays Bank PLC
Commerzbank Capital Markets Corp.
Mizuho International plc
Scotia Capital (USA) Inc.
Tokyo-Mitsubishi International plc (a)
Westdeutsche Landesbank Girozentrale (Dusseldorf)
---------------
Total...................................... 10,000,000
===============
--------------
(a) Any sales to United States investors by Tokyo-Mitsubishi International
plc will be made in accordance with the applicable laws and
regulations of the United States.
Under the terms and conditions of the underwriting agreement, the
underwriters must buy all of the Corporate Units if they buy any of them. The
underwriting agreement provides that the obligations of the underwriters
pursuant thereto are subject to certain conditions. In the event of a default by
an underwriter, 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. The underwriters
will sell the Corporate Units to the public when and if the underwriters buy the
Corporate Units from FPL Group.
The expenses in connection with the offer and sale of the Corporate
Units, other than underwriting discounts, are estimated at $750,000. This
estimate includes expenses relating to printing, rating agency fees, trustees'
fees and legal fees, among other expenses.
FPL Group and FPL Group Capital have agreed to indemnify the
underwriters against, or contribute to payments the underwriters may be required
to make in respect of, certain liabilities, including liabilities under the
Securities Act of 1933.
COMMISSIONS AND DISCOUNTS
The Corporate Units sold by the underwriters to the public will
initially be offered at the public offering price set forth on the cover of this
prospectus supplement. Any Corporate Units sold by the underwriters to
securities dealers may be sold at a discount from the public offering price of
up to $__ per Corporate Unit. Any such securities dealers may resell any
Corporate Units purchased from the underwriters to certain other brokers or
dealers at a discount from the public offering price of up to $__ per Corporate
Unit. If all of the Corporate Units are not sold at the initial public offering
price, the underwriters may change the offering price and other selling terms.
The following table shows the per unit and total public offering
price, underwriting discount to be paid to the underwriters and proceeds before
expenses to FPL Group Capital. The information is presented assuming either no
exercise or full exercise by the underwriters of the overallotment option.
S-59
Per
Corporate Without Exercise With Exercise
Unit of Option of Option
Public offering price.......... $ $ $
Underwriting discount.......... $ $ $
Proceeds, before expenses,
to FPL Group Capital......... $ $ $
OVERALLOTMENT
FPL Group has granted an option to the underwriters to purchase up to
an additional 1,500,000 Corporate Units at the public offering price less the
underwriting discount. The underwriters may exercise this option from time to
time for 30 days from the date of this prospectus supplement solely to cover any
overallotments. If the underwriters exercise this option, each will be
obligated, subject to conditions contained in the underwriting agreement, to
purchase approximately the same percentage of additional Corporate Units as the
number set forth next to the underwriter's name in the preceding table bears to
the total number of Corporate Units set forth next to the names of all
underwriters in the preceding table.
NO SALE OF SIMILAR SECURITIES
FPL Group has agreed, for a period of 90 days after the date of this
prospectus supplement, to not, without the prior written consent of J.P. Morgan
Securities Inc. and Lehman Brothers Inc., the representatives of the
underwriters, directly or indirectly, sell, offer to sell, grant any option for
the sale of, or otherwise dispose of, or enter into any agreement to sell, any
Corporate Units, purchase contracts or FPL Group common stock, or any securities
of FPL Group similar to the Corporate Units, purchase contracts or FPL Group
common stock or any security convertible into or exchangeable or exercisable for
Corporate Units, purchase contracts or its common stock other than shares of its
common stock or options for shares of its common stock issued pursuant to or
sold in connection with any employee or director benefit or compensation,
dividend reinvestment, stock option or other incentive and stock purchase plans
or shareholder rights plan of FPL Group and its subsidiaries and other than
shares issuable in connection with the Treasury Units or Corporate Units to be
created or recreated upon substitution of pledged securities, or shares of its
common stock issuable upon settlement of the Corporate Units or Treasury Units
or other similar securities issued by FPL Group.
NEW YORK STOCK EXCHANGE LISTING
FPL Group intends to apply for listing of the Corporate Units on the
NYSE. Neither FPL Group nor FPL Group Capital has any obligation or current
intention to apply for any separate listing of the Treasury Units or the FPL
Group Capital debentures. FPL Group has been advised by the underwriters that
they intend to make a market in the Corporate Units. The underwriters are not
obligated to do so and may discontinue their market making at any time without
notice. There can be no assurance that an active trading market will develop for
the Corporate Units or that the Corporate Units will trade at or above the
initial public offering price in the public market subsequent to the offering.
REMARKETING
This prospectus supplement, as amended or supplemented, may be used by
the remarketing agent for remarketing of the FPL Group Capital debentures at
such time as is necessary or upon early settlement of the purchase contracts.
PRICE STABILIZATION AND SHORT POSITIONS
Until the distribution of the Corporate Units offered hereby is
completed, SEC rules may limit the underwriters and selling group members from
bidding for or purchasing the Corporate Units or shares of FPL Group common
stock. However, the underwriters may engage in transactions that stabilize the
price of the Corporate Units or FPL Group common stock, such as bids or
purchases that peg, fix or maintain the price of the Corporate Units or FPL
Group common stock.
S-60
In connection with the offering, the underwriters may make short sales
of the Corporate Units. Short sales involve the sale by the underwriters, at the
time of the offering, of a greater number of Corporate Units than they are
required to purchase in the offering. Covered short sales are sales made in an
amount not greater than the overallotment option. The underwriters may close out
any covered short position by either exercising the overallotment option or
purchasing Corporate Units in the open market. In determining the source of
Corporate Units to close out the covered short position, the representatives of
the underwriters will consider, among other things, the price of Corporate Units
available for purchase in the open market as compared to the price at which they
may purchase the Corporate Units through the overallotment option. Naked short
sales are sales in excess of the overallotment option. The representatives must
close out any naked short position by purchasing Corporate Units in the open
market. A naked short position is more likely to be created if the
representatives are concerned that there may be downward pressure on the price
of the Corporate Units or FPL Group common stock in the open market after
pricing that could adversely affect investors who purchase in the offering.
Similar to other purchase transactions, purchases by the underwriters to cover
syndicate short positions may have the effect of raising or maintaining the
market price of the Corporate Units and FPL Group common stock or preventing or
retarding a decline in the market price of the Corporate Units and FPL Group
common stock. As a result, the prices of the Corporate Units and FPL Group
common stock may be higher than they would otherwise be in the absence of these
transactions.
Neither FPL Group nor any of the underwriters make 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 Corporate Units or FPL
Group common stock. In addition, neither FPL Group nor any of the underwriters
make any representation that the representatives will engage in these
transactions or that these transactions, once commenced, will not be
discontinued without notice.
OTHER RELATIONSHIPS
Certain of the underwriters and their affiliates engage in
transactions with, and perform services for, FPL Group, its subsidiaries and its
affiliates in the ordinary course of business and have engaged, and may in the
future engage, in commercial banking and investment banking transactions with
FPL Group, its subsidiaries and its affiliates.
MISCELLANEOUS
First Union Securities, Inc. is an indirect, wholly-owned subsidiary
of Wachovia Corporation. Wachovia Corporation conducts its investment banking,
institutional, and capital markets businesses through its various bank,
broker-dealer and non-bank subsidiaries (including First Union Securities, Inc.)
under the trade name of Wachovia Securities. Any references to Wachovia
Securities in this prospectus supplement, however, do not include Wachovia
Securities, Inc., member NASD/SIPC, a separate broker-dealer subsidiary of
Wachovia Corporation and an affiliate of First Union Securities, Inc., which may
or may not be participating as a selling group member in the distribution of
these securities.
S-61
PROSPECTUS
$2,000,000,000
AGGREGATE AMOUNT
--------------------------
FPL GROUP CAPITAL INC
DEBT SECURITIES
THE DEBT SECURITIES WILL BE ABSOLUTELY, IRREVOCABLY AND
UNCONDITIONALLY GUARANTEED BY
FPL GROUP, INC.
--------------------------
FPL GROUP, INC.
COMMON STOCK WITH ATTACHED PREFERRED SHARE PURCHASE RIGHTS
STOCK PURCHASE CONTRACTS
AND
STOCK PURCHASE UNITS
---------------------------------------------------
FPL Group, Inc. and FPL Group Capital Inc may offer from time to time
up to an aggregate of $2,000,000,000 of their securities. FPL Group and FPL
Group Capital will provide specific terms of the securities, including the
offering prices, in supplements to this prospectus. The supplements may also
add, update or change information contained in this prospectus. You should read
this prospectus and any supplements carefully before you invest.
FPL Group's common stock is listed on the New York Stock Exchange and
trades under the symbol "FPL."
FPL Group and FPL Group Capital may offer these securities directly or
through underwriters, agents or dealers. The supplements to this prospectus will
describe the terms of any particular plan of distribution, including any
underwriting arrangements. The "Plan of Distribution" section on page 21 of this
prospectus also provides more information on this topic.
Both FPL Group's and FPL Group Capital's principal executive offices
are located at 700 Universe Boulevard, Juno Beach, Florida 33408, telephone
number (561) 694-4000, and their mailing address is P.O. Box 14000, Juno Beach,
Florida 33408-0420.
---------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
December 26, 2001
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that FPL Group and
FPL Group Capital have filed with the Securities and Exchange Commission ("SEC")
using a "shelf" registration process. Under this shelf registration process, FPL
Group and FPL Group Capital may sell the securities or combinations of the
securities described in this prospectus in one or more offerings up to a total
dollar amount of $2,000,000,000. This prospectus provides you with a general
description of the securities that FPL Group and/or FPL Group Capital may offer.
Each time FPL Group and/or FPL Group Capital sells securities, FPL Group and/or
FPL Group Capital 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
additional information described under the heading "Where You Can Find More
Information."
For more detailed information about the securities, you can read the
exhibits to the registration statement. Those exhibits have been either filed
with the registration statement or incorporated by reference to earlier SEC
filings listed in the registration statement.
WHERE YOU CAN FIND MORE INFORMATION
FPL Group files annual, quarterly and other reports and other
information with the SEC. You can read and copy any information filed by FPL
Group with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can obtain additional information about the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
In addition, the SEC maintains an Internet site (http://www.sec.gov)
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, including FPL Group.
FPL Group also maintains an Internet site (http://www.fplgroup.com).
FPL Group Capital does not file reports or other information with the
SEC. FPL Group includes summarized financial information relating to FPL Group
Capital in some of its reports filed with the SEC. FPL Group does not intend to
include any separate financial information with respect to FPL Group Capital in
its consolidated financial statements because FPL Group and FPL Group Capital
have determined that this information is not material to the holders of FPL
Group Capital's debt securities.
INCORPORATION BY REFERENCE
The SEC allows FPL Group Capital and FPL Group to "incorporate by
reference" the information that FPL Group files with the SEC, which means that
FPL Group Capital and FPL Group may, in this prospectus, disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus. Information
that FPL Group files in the future with the SEC will automatically update and
supersede this information. FPL Group Capital and FPL Group are incorporating by
reference the documents listed below and any future filings FPL Group makes with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, until FPL Group and/or FPL Group Capital sell all of these securities:
(1) FPL Group's Annual Report on Form 10-K for the year ended December 31,
2000, as amended by Form 10-K/A filed with the SEC on April 9, 2001;
(2) FPL Group's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2001, June 30, 2001 and September 30, 2001; and
(3) FPL Group's Current Reports on Form 8-K filed with the SEC on
March 19, 2001, April 2, 2001, May 18, 2001 and June 13, 2001.
You may request a copy of these documents, at no cost to you, by
writing or calling Robert J. Reger, Jr., Esq., Thelen Reid & Priest LLP, 40 West
57th Street, New York, New York, 10019, (212) 603-2000.
2
SAFE HARBOR STATEMENT UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, FPL Group and FPL Group Capital are
hereby filing cautionary statements identifying important factors that could
cause FPL Group's and FPL Group Capital's actual results to differ materially
from those projected in forward-looking statements (as that term is defined in
the Private Securities Litigation Reform Act of 1995) made by or on behalf of
FPL Group or FPL Group Capital that are made in this prospectus or any
supplement to this prospectus, in presentations, in response to questions or
otherwise. Any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as
"will likely result", "are expected to", "will continue", "is anticipated",
"estimated", "projection" or "outlook") are not statements of historical facts
and may be forward-looking. Forward-looking statements involve estimates,
assumptions and uncertainties. Accordingly, any of those statements are
qualified in their entirety by reference to, and are accompanied by, the
following important factors that could cause FPL Group's or FPL Group Capital's
actual results to differ materially from those contained in forward-looking
statements made by or on behalf of FPL Group or FPL Group Capital.
Any forward-looking statement speaks only as of the date on which that
statement is made, and neither FPL Group nor FPL Group Capital undertakes any
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which that statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, and it
is not possible for management to predict all of those factors, nor can it
assess the impact of each of those factors on the business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statement.
Some important factors that could cause actual results or outcomes to
differ materially from those discussed in the forward-looking statements include
changes in laws or regulations, including the Public Utility Regulatory Policies
Act of 1978 and the Public Utility Holding Company Act of 1935, and changing
governmental policies and regulatory actions, including those of the Federal
Energy Regulatory Commission, the Florida Public Service Commission and the U.S.
Nuclear Regulatory Commission, with respect to:
(1) allowed rates of return, including but not limited to, return on
common equity and equity ratio limits,
(2) industry and rate structure,
(3) operation of nuclear power facilities,
(4) acquisition, disposal, depreciation and amortization of assets and
facilities,
(5) operation and construction of plant facilities,
(6) recovery of fuel and purchased power costs,
(7) decommissioning costs, and
(8) present or prospective wholesale and retail competition, including,
but not limited to, retail wheeling and transmission costs.
The business and profitability of FPL Group and FPL Group Capital are
also influenced by economic and geographic factors including:
(1) political and economic risks,
(2) changes in and compliance with environmental and safety laws and
policies,
(3) weather conditions, including natural disasters such as hurricanes,
3
(4) population growth rates and demographic patterns,
(5) competition for retail and wholesale customers,
(6) availability, pricing and transportation of fuel and other energy
commodities,
(7) market demand for energy,
(8) changes in tax rates or policies or in rates of inflation or in
accounting standards,
(9) unanticipated delays or changes in costs for capital projects,
(10) unanticipated changes in operating expenses and capital expenditures,
(11) capital market conditions,
(12) competition for new energy development opportunities, and
(13) legal and administrative proceedings, whether civil, such as
environmental, or criminal, and settlements.
All of these factors are difficult to predict, contain uncertainties
that may materially affect actual results, and are beyond the control of FPL
Group and FPL Group Capital.
FPL GROUP CAPITAL
FPL Group Capital was incorporated in 1985 as a Florida corporation
and is a wholly-owned subsidiary of FPL Group. FPL Group Capital holds the
capital stock of, and provides funding for, FPL Group's operating subsidiaries
other than Florida Power & Light Company. These operating subsidiaries' business
activities primarily consist of independent power projects.
FPL GROUP
FPL Group is a holding company incorporated in 1984 as a Florida
corporation. FPL Group's principal subsidiary, Florida Power & Light Company, is
engaged in the generation, transmission, distribution and sale of electric
energy. Other operations are conducted through FPL Group Capital.
USE OF PROCEEDS
Unless otherwise stated in a prospectus supplement, FPL Group Capital
and FPL Group will each add the net proceeds from the sale of these securities
to its respective general funds. FPL Group uses its general funds for corporate
purposes, including to provide funds for its subsidiaries. FPL Group Capital
uses its general funds for corporate purposes, including to repay short-term
borrowings and to redeem or repurchase outstanding long-term debt obligations.
FPL Group Capital and FPL Group will each temporarily invest any proceeds that
it does not need to use immediately in short-term instruments.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table shows FPL Group's consolidated ratio of earnings
to fixed charges for each of its last five fiscal years:
Years Ended December 31,
---------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
4.30 5.26 3.88 4.09 4.20
4
FPL Group's consolidated ratio of earnings to fixed charges for the
nine months ended September 30, 2001 was 4.10.
DESCRIPTION OF OFFERED DEBT SECURITIES
GENERAL. FPL Group Capital will issue its debt securities, in one or
more series, under an Indenture, dated as of June 1, 1999, between FPL Group
Capital and The Bank of New York, as Trustee. This Indenture, as it may be
amended and supplemented from time to time, is referred to in this prospectus as
the "Indenture." The Bank of New York, as Trustee under the Indenture, is
referred to in this prospectus as the "Indenture Trustee." These debt securities
are referred to in this prospectus as the "Offered Debt Securities."
The Indenture provides for the issuance of debentures, notes or other
debt by FPL Group Capital in an unlimited amount from time to time. The Offered
Debt Securities and all other debentures, notes or other debt of FPL Group
Capital issued under the Indenture are collectively referred to in this
prospectus as the "Debt Securities."
This section briefly summarizes some of the terms of the Offered Debt
Securities and some of the provisions of the Indenture. This summary does not
contain a complete description of the Offered Debt Securities. You should read
this summary together with the Indenture and the officer's certificates or other
documents establishing the Offered Debt Securities for a complete understanding
of the provisions that may be important to you and for the definitions of some
terms used in this summary. The Indenture, the form of officer's certificate
that may be used to establish a series of Offered Debt Securities and a form of
Offered Debt Securities are on file with the SEC and are incorporated by
reference in this prospectus. In addition, the Indenture is subject to the
provisions of the Trust Indenture Act of 1939. You should read the Trust
Indenture Act of 1939 for a complete understanding of provisions that may be
important to you.
Each series of Offered Debt Securities will have different terms. FPL
Group Capital will include some or all of the following information about a
specific series of Offered Debt Securities in the prospectus supplement(s)
relating to those Offered Debt Securities:
(1) the title of those Offered Debt Securities,
(2) any limit upon the aggregate principal amount of those Offered Debt
Securities,
(3) the date(s) on which FPL Group Capital will pay the principal of those
Offered Debt Securities,
(4) the rate(s) of interest on those Offered Debt Securities, or how the
rate(s) of interest will be determined, the date(s) from which
interest will accrue, the dates on which FPL Group Capital will pay
interest and the record date for any interest payable on any interest
payment date,
(5) the person to whom FPL Group Capital will pay interest on those
Offered Debt Securities on any interest payment date, if other than
the person in whose name those Offered Debt Securities are registered
at the close of business on the record date for that interest payment,
(6) the place(s) at which or methods by which FPL Group Capital will make
payments on those Offered Debt Securities and the place(s) at which or
methods by which the registered owners of those Offered Debt
Securities may transfer or exchange those Offered Debt Securities and
serve notices and demands to or upon FPL Group Capital,
(7) the security registrar and any paying agent or agents for those
Offered Debt Securities,
(8) any date(s) on which, the price(s) at which and the terms and
conditions upon which FPL Group Capital may, at its option, redeem
those Offered Debt Securities, in whole or in part, and any
restrictions on those redemptions,
5
(9) any sinking fund or other provisions or options held by the registered
owners of those Offered Debt Securities that would obligate FPL Group
Capital to repurchase or redeem those Offered Debt Securities,
(10) the denominations in which FPL Group Capital may issue those Offered
Debt Securities, if other than denominations of $1,000 and any
integral multiple of $1,000,
(11) the currency or currencies in which FPL Group Capital may pay the
principal of or premium, if any, or interest on those Offered Debt
Securities (if other than in U.S. dollars),
(12) if FPL Group Capital or a registered owner may elect to pay, or
receive, principal of or premium, if any, or interest on those Offered
Debt Securities in a currency other than that in which those Offered
Debt Securities are stated to be payable, the terms and conditions
upon which that election may be made,
(13) if FPL Group Capital will, or may, pay the principal of or premium, if
any, or interest on those Offered Debt Securities in securities or
other property, the type and amount of those securities or other
property and the terms and conditions upon which FPL Group Capital or
a registered owner may elect to pay or receive those payments,
(14) if the amount payable in respect of principal of or premium, if any,
or interest on those Offered Debt Securities may be determined by
reference to an index or other fact or event ascertainable outside of
the Indenture, the manner in which those amounts will be determined,
(15) the portion of the principal amount of those Offered Debt Securities
that FPL Group Capital will pay upon declaration of acceleration of
the maturity of those Offered Debt Securities, if other than the
entire principal amount of those Offered Debt Securities,
(16) any events of default with respect to those Offered Debt Securities
and any covenants of FPL Group Capital for the benefit of the
registered owners of those Offered Debt Securities, other than those
specified in the Indenture,
(17) the terms, if any, pursuant to which those Offered Debt Securities may
be converted into or exchanged for shares of capital stock or other
securities of FPL Group Capital or any other entity,
(18) a definition of "Eligible Obligations" under the Indenture with
respect to those Offered Debt Securities denominated in a currency
other than U.S. dollars, and any other provisions for the
reinstatement of FPL Group Capital's indebtedness in respect of those
Offered Debt Securities after their satisfaction and discharge,
(19) if FPL Group Capital will issue those Offered Debt Securities in
global form, necessary information relating to the issuance of those
Offered Debt Securities in global form,
(20) if FPL Group Capital will issue those Offered Debt Securities as
bearer securities, necessary information relating to the issuance of
those Offered Debt Securities as bearer securities,
(21) any limits on the rights of the registered owners of those Offered
Debt Securities to transfer or exchange those Offered Debt Securities
or to register their transfer, and any related service charges,
(22) any exceptions to the provisions governing payments due on legal
holidays or any variations in the definition of business day with
respect to those Offered Debt Securities,
(23) other than the Guarantee described under "Description of the
Guarantee" below, any collateral security, assurance, or guarantee for
those Offered Debt Securities, and
6
(24) any other terms of those Offered Debt Securities that are not
inconsistent with the provisions of the Indenture (Indenture,
Section 301).
FPL Group Capital may sell Offered Debt Securities at a discount below
their principal amount. Some of the important United States Federal income tax
considerations applicable to Offered Debt Securities sold at a discount below
their principal amount may be discussed in the related prospectus supplement. In
addition, some of the important United States Federal income tax or other
considerations applicable to any Offered Debt Securities that are denominated in
a currency other than U.S. dollars may be discussed in the related prospectus
supplement.
Except as otherwise stated in the related prospectus supplement, the
covenants in the Indenture would not give registered owners of Offered Debt
Securities protection in the event of a highly-leveraged transaction involving
FPL Group Capital.
SECURITY AND RANKING. The Offered Debt Securities will be unsecured
obligations of FPL Group Capital. The Indenture does not limit FPL Group
Capital's ability to provide security with respect to other Debt Securities. All
Debt Securities issued under the Indenture will rank equally and ratably with
all other Debt Securities issued under the Indenture, except to the extent that
FPL Group Capital elects to provide security with respect to any Debt Security
without providing that security to all outstanding Debt Securities as allowed
under the Indenture. The Indenture does not limit FPL Group Capital's ability to
issue other unsecured debt.
FPL Group Capital is a holding company that derives substantially all
of its income from its operating subsidiaries. The Debt Securities therefore
will be effectively subordinated to debt and preferred stock issued by those
subsidiaries. The Indenture does not limit the amount of debt which may be
incurred and preferred stock issuable by FPL Group Capital's subsidiaries.
PAYMENT AND PAYING AGENTS. Except as stated in the related prospectus
supplement, on each interest payment date FPL Group Capital will pay interest on
each Offered Debt Security to the person in whose name that Offered Debt
Security is registered as of the close of business on the record date relating
to that interest payment date. However, on the date that the Offered Debt
Securities mature, FPL Group Capital will pay the interest to the person to whom
it pays the principal. Also, if FPL Group Capital has defaulted in the payment
of interest on any Offered Debt Security, it may pay that defaulted interest to
the registered owner of that Offered Debt Security:
(1) as of the close of business on a date that the Indenture Trustee
selects, which may not be more than 15 days or less than 10 days
before the date that FPL Group Capital proposes to pay the defaulted
interest, or
(2) in any other lawful manner that does not violate the requirements of
any securities exchange on which that Offered Debt Security is listed
and that the Indenture Trustee believes is acceptable (Indenture,
Section 307).
Unless otherwise stated in the related prospectus supplement, the
principal, premium, if any, and interest on the Offered Debt Securities at
maturity will be payable when such Offered Debt Securities are presented at the
main corporate trust office of The Bank of New York, as paying agent, in The
City of New York. FPL Group Capital may change the place of payment on the
Offered Debt Securities, appoint one or more additional paying agents, including
itself, and remove any paying agent (Indenture, Section 602).
TRANSFER AND EXCHANGE. Unless otherwise stated in the related
prospectus supplement, Offered Debt Securities may be transferred or exchanged
at the main corporate trust office of The Bank of New York, as security
registrar, in The City of New York. FPL Group Capital may change the place for
transfer and exchange of the Offered Debt Securities and may designate one or
more additional places for that transfer and exchange.
Except as otherwise stated in the related prospectus supplement, there
will be no service charge for any transfer or exchange of the Offered Debt
Securities. However, FPL Group Capital may require payment of any tax or other
governmental charge in connection with any transfer or exchange of the Offered
Debt Securities.
7
FPL Group Capital will not be required to transfer or exchange any
Offered Debt Security selected for redemption. Also, FPL Group Capital will not
be required to transfer or exchange any Offered Debt Security during a period of
15 days before selection of Offered Debt Securities to be redeemed (Indenture,
Section 305).
DEFEASANCE. FPL Group Capital may, at any time, elect to have all of
its obligations discharged with respect to all or a portion of any Debt
Securities. To do so, FPL Group Capital must irrevocably deposit with the
Indenture Trustee or any paying agent, in trust:
(1) money in an amount that will be sufficient to pay all or that portion
of the principal, premium, if any, and interest due and to become due
on those Debt Securities, on or prior to their maturity, or
(2) in the case of a deposit made prior to the maturity of that series of
Debt Securities,
(a) direct obligations of, or obligations unconditionally guaranteed
by, the United States and entitled to the benefit of its full
faith and credit that do not contain provisions permitting their
redemption or other prepayment at the option of their issuer, and
(b) certificates, depositary receipts or other instruments that
evidence a direct ownership interest in those obligations or in
any specific interest or principal payments due in respect of
those obligations that do not contain provisions permitting their
redemption or other prepayment at the option of their issuer, the
principal of and the interest on which, when due, without any
regard to reinvestment of that principal or interest, will
provide money that, together with any money deposited with or
held by the Indenture Trustee, will be sufficient to pay all or
that portion of the principal, premium, if any, and interest due
and to become due on those Debt Securities, on or prior to their
maturity, or
(3) a combination of (1) and (2) that will be sufficient to pay all or
that portion of the principal, premium, if any, and interest due and
to become due on those Debt Securities, on or prior to their maturity
(Indenture, Section 701).
LIMITATION ON LIENS. So long as any Debt Securities remain
outstanding, FPL Group Capital will not secure any indebtedness with a lien on
any shares of the capital stock of any of its majority-owned subsidiaries, which
shares of capital stock FPL Group Capital now or hereafter directly owns, unless
FPL Group Capital equally secures all Debt Securities. However, this restriction
does not apply to or prevent:
(1) any lien on capital stock created at the time FPL Group Capital
acquires that capital stock, or within 270 days after that time, to
secure all or a portion of the purchase price for that capital stock,
(2) any lien on capital stock existing at the time FPL Group Capital
acquires that capital stock (whether or not FPL Group Capital assumes
the obligations secured by the lien and whether or not the lien was
created in contemplation of the acquisition),
(3) any extensions, renewals or replacements of the liens described in (1)
and (2) above, or of any indebtedness secured by those liens;
provided, that,
(a) the principal amount of indebtedness secured by those liens
immediately after the extension, renewal or replacement may not
exceed the principal amount of indebtedness secured by those
liens immediately before the extension, renewal or replacement,
and
(b) the extension, renewal or replacement lien is limited to no more
than the same proportion of all shares of capital stock as were
covered by the lien that was extended, renewed or replaced, or
(4) any lien arising in connection with court proceedings; provided, that,
either
8
(a) the execution or enforcement of that lien is effectively stayed
within 30 days after entry of the corresponding judgment (or the
corresponding judgment has been discharged within that 30 day
period) and the claims secured by that lien are being contested
in good faith by appropriate proceedings,
(b) the payment of that lien is covered in full by insurance and the
insurance company has not denied or contested coverage, or
(c) so long as that lien is adequately bonded, any appropriate legal
proceedings that have been duly initiated for the review of the
corresponding judgement, decree or order have not been fully
terminated or the periods within which those proceedings may be
initiated have not expired.
Liens on any shares of the capital stock of any of FPL Group Capital's
majority-owned subsidiaries, which shares of capital stock FPL Group Capital now
or hereafter directly owns, other than liens described in (1) through (4) above,
are referred to in this prospectus as "Restricted Liens." The foregoing
limitation does not apply to the extent that FPL Group Capital creates any
Restricted Liens to secure indebtedness that, together with all other
indebtedness of FPL Group Capital secured by Restricted Liens, does not at the
time exceed 5% of FPL Group Capital's Consolidated Capitalization (Indenture,
Section 608).
For this purpose, "Consolidated Capitalization" means the sum of:
(1) Consolidated Shareholders' Equity;
(2) Consolidated Indebtedness for borrowed money (exclusive of any amounts
which are due and payable within one year); and, without duplication
(3) any preference or preferred stock of FPL Group Capital or any
Consolidated Subsidiary which is subject to mandatory redemption or
sinking fund provisions.
The term "Consolidated Shareholders' Equity" as used above means the
total assets of FPL Group Capital and its Consolidated Subsidiaries less all
liabilities of FPL Group Capital and its Consolidated Subsidiaries. As used in
this definition, the term "liabilities" means all obligations which would, in
accordance with generally accepted accounting principles, be classified on a
balance sheet as liabilities, including without limitation:
(1) indebtedness secured by property of FPL Group Capital or any of its
Consolidated Subsidiaries whether or not FPL Group Capital or such
Consolidated Subsidiary is liable for the payment thereof unless, in
the case that FPL Group Capital or such Consolidated Subsidiary is not
so liable, such property has not been included among the assets of FPL
Group Capital or such Consolidated Subsidiary on such balance sheet,
(2) deferred liabilities, and
(3) indebtedness of FPL Group Capital or any of its Consolidated
Subsidiaries that is expressly subordinated in right and priority of
payment to other liabilities of FPL Group Capital or such Consolidated
Subsidiary.
As used in this definition, "liabilities" includes preference or preferred stock
of FPL Group Capital or any Consolidated Subsidiary only to the extent of any
such preference or preferred stock that is subject to mandatory redemption or
sinking fund provisions.
The term "Consolidated Indebtedness" means total indebtedness as shown
on the consolidated balance sheet of FPL Group Capital and its Consolidated
Subsidiaries.
The term "Consolidated Subsidiary," means at any date any direct or
indirect majority-owned subsidiary whose financial statements would be
consolidated with those of FPL Group Capital in FPL Group Capital's
9
consolidated financial statements as of such date in accordance with generally
accepted accounting principles (Indenture, Section 608).
The foregoing limitation does not limit in any manner the ability of:
(1) FPL Group Capital to place liens on any of its assets other than the
capital stock of directly held, majority-owned subsidiaries,
(2) FPL Group Capital or FPL Group to cause the transfer of its assets or
those of its subsidiaries, including the capital stock covered by the
foregoing restrictions,
(3) FPL Group to place liens on any of its assets, or
(4) any of the direct or indirect subsidiaries of FPL Group Capital or FPL
Group (other than FPL Group Capital) to place liens on any of their
assets.
CONSOLIDATION, MERGER, AND SALE OF ASSETS. Under the Indenture, FPL
Group Capital may not consolidate with or merge into any other entity or convey,
transfer or lease its properties and assets substantially as an entirety to any
entity, unless:
(1) the entity formed by that consolidation, or the entity into which FPL
Group Capital is merged, or the entity that acquires or leases FPL
Group Capital's property and assets, is an entity organized and
existing under the laws of the United States, any State or the
District of Columbia and that entity expressly assumes FPL Group
Capital's obligations on all Debt Securities and under the Indenture,
(2) immediately after giving effect to the transaction, no event of
default under the Indenture and no event that, after notice or lapse
of time or both, would become an event of default under the Indenture
exists, and
(3) FPL Group Capital delivers an officer's certificate and an opinion of
counsel to the Indenture Trustee, as provided in the Indenture
(Indenture, Section 1101).
The Indenture does not restrict FPL Group Capital in a merger in which
FPL Group Capital is the surviving entity.
EVENTS OF DEFAULT. Each of the following is an event of default under
the Indenture with respect to the Debt Securities of any series:
(1) failure to pay interest on the Debt Securities of that series within
30 days after it is due,
(2) failure to pay principal or premium, if any, on the Debt Securities of
that series when it is due,
(3) failure to comply with any other covenant in the Indenture, other than
a covenant that does not relate to that series of Debt Securities,
that continues for 90 days after FPL Group Capital receives written
notice from the Indenture Trustee or FPL Group Capital and the
Indenture Trustee receive written notice from the registered owners of
at least 33% in principal amount of the Debt Securities of that
series,
(4) certain events of bankruptcy, insolvency or reorganization of FPL
Group Capital, and
(5) any other event of default specified with respect to the Debt
Securities of that series (Indenture, Section 801).
An event of default with respect to the Debt Securities of a
particular series will not necessarily constitute an event of default with
respect to Debt Securities of any other series issued under the Indenture.
10
REMEDIES. If an event of default applicable to the Debt Securities of
one or more series, but not applicable to all outstanding Debt Securities,
exists, then either the Indenture Trustee or the registered owners of at least
33% in aggregate principal amount of the Debt Securities of each of those series
may declare the principal of and interest on all the Debt Securities of that
series to be due and payable immediately. However, under the Indenture, some
Debt Securities may provide for a specified amount less than their entire
principal amount to be due and payable upon that declaration. These Debt
Securities are defined as "Discount Securities" in the Indenture.
If the event of default is applicable to all outstanding Debt
Securities, then only the Indenture Trustee or the registered owners of at least
33% in aggregate principal amount of all outstanding Debt Securities of all
series, voting as one class, and not the registered owners of any one series,
may make a declaration of acceleration. However, the event of default giving
rise to the declaration relating to any series of Debt Securities will be
automatically waived, and that declaration and its consequences will be
automatically rescinded and annulled, if, at any time after that declaration and
before a judgment or decree for payment of the money due has been obtained:
(1) FPL Group Capital deposits with the Indenture Trustee a sum sufficient
to pay:
(a) all overdue interest on all Debt Securities of that series,
(b) the principal of and any premium on any Debt Securities of that
series that have become due for reasons other than that
declaration, and interest that is then due,
(c) interest on overdue interest for that series, and
(d) all amounts due to the Indenture Trustee under the Indenture, and
(2) any other event of default with respect to the Debt Securities of that
series has been cured or waived as provided in the Indenture
(Indenture, Section 802).
Other than its obligations and duties in case of an event of default
under the Indenture, the Indenture Trustee is not obligated to exercise any of
its rights or powers under the Indenture at the request or direction of any of
the registered owners, unless those registered owners offer reasonable indemnity
to the Indenture Trustee (Indenture, Section 903). If they provide this
reasonable indemnity, the registered owners of a majority in principal amount of
any series of Debt Securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred on the Indenture Trustee,
with respect to the Debt Securities of that series. However, if an event of
default under the Indenture relates to more than one series of Debt Securities,
only the registered owners of a majority in aggregate principal amount of all
affected series of Debt Securities, considered as one class, will have the right
to make that direction. Also, the direction must not violate any law or the
Indenture, and may not expose the Indenture Trustee to personal liability in
circumstances where its indemnity would not, in the Indenture Trustee's sole
discretion, be adequate (Indenture, Section 812).
No registered owner of Debt Securities of any series will have any
right to institute any proceeding under the Indenture, or any remedy under the
Indenture, unless:
(1) that registered owner has previously given to the Indenture Trustee
written notice of a continuing event of default with respect to the
Debt Securities of that series,
(2) the registered owners of a majority in aggregate principal amount of
the outstanding Debt Securities of all series in respect of which an
event of default under the Indenture exists, considered as one class,
have made written request to the Indenture Trustee, and have offered
reasonable indemnity to the Indenture Trustee to institute that
proceeding in its own name as trustee, and
(3) the Indenture Trustee has failed to institute any proceeding, and has
not received from the registered owners of a majority in aggregate
principal amount of the outstanding Debt Securities of all series in
respect of which an event of default under the Indenture exists,
considered as one class, a direction
11
inconsistent with that request, within 60 days after that notice,
request and offer (Indenture, Section 807).
However, these limitations do not apply to a suit instituted by a registered
owner of a Debt Security for the enforcement of payment of the principal of or
any premium or interest on that Debt Security on or after the applicable due
date specified in that Debt Security (Indenture, Section 808).
FPL Group Capital is required to deliver to the Indenture Trustee an
annual statement as to its compliance with all conditions and covenants under
the Indenture (Indenture, Section 606).
MODIFICATION AND WAIVER. Without the consent of any registered owner
of Debt Securities, FPL Group Capital and the Indenture Trustee may amend or
supplement the Indenture for any of the following purposes:
(1) to provide for the assumption by any permitted successor to FPL Group
Capital of FPL Group Capital's obligations under the Indenture and the
Debt Securities in the case of a merger or consolidation or a
conveyance, transfer or lease of its assets,
(2) to add covenants of FPL Group Capital or to surrender any right or
power conferred upon FPL Group Capital by the Indenture,
(3) to add any additional events of default,
(4) to change, eliminate or add any provision of the Indenture, provided
that if that change, elimination or addition will materially adversely
affect the interests of the registered owners of Debt Securities of
any series or tranche, that change, elimination or addition will
become effective with respect to that series or tranche only
(a) when the consent of the registered owners of Debt Securities of
that series or tranche has been obtained, or
(b) when no Debt Securities of that series or tranche remain
outstanding under the Indenture,
(5) to provide security for all but not a part of the Debt Securities,
(6) to establish the form or terms of Debt Securities of any other series
or tranche,
(7) to provide for the authentication and delivery of bearer securities
and the related coupons and for other matters relating to those bearer
securities,
(8) to accept the appointment of a successor Indenture Trustee with
respect to the Debt Securities of one or more series and to change any
of the provisions of the Indenture as necessary to provide for the
administration of the trusts under the Indenture by more than one
trustee,
(9) to add procedures to permit the use of a non-certificated system of
registration for the Debt Securities of all or any series or tranche,
(10) to change any place where
(a) the principal of and premium, if any, and interest on all or any
series or tranche of Debt Securities are payable,
(b) all or any series or tranche of Debt Securities may be
transferred or exchanged, and
(c) notices and demands to or upon FPL Group Capital in respect of
Debt Securities and the Indenture may be served, or
12
(11) to cure any ambiguity or inconsistency or to add or change any other
provisions with respect to matters and questions arising under the
Indenture, provided those changes or additions may not materially
adversely affect the interests of the registered owners of Debt
Securities of any series or tranche (Indenture, Section 1201).
The registered owners of a majority in aggregate principal amount of
the Debt Securities of all series then outstanding may waive compliance by FPL
Group Capital with certain restrictive provisions of the Indenture (Indenture,
Section 607). The registered owners of a majority in principal amount of the
outstanding Debt Securities of any series may waive any past default under the
Indenture with respect to that series, except a default in the payment of
principal, premium, if any, or interest and a default with respect to certain
restrictive covenants or provisions of the Indenture that cannot be modified or
amended without the consent of the registered owner of each outstanding Debt
Security of that series affected (Indenture, Section 813).
In addition to any amendments described above, if the Trust Indenture
Act of 1939 is amended after the date of the Indenture in a way that requires
changes to the Indenture or in a way that permits changes to, or the elimination
of, provisions that were previously required by the Trust Indenture Act of 1939,
the Indenture will be deemed to be amended to conform to that amendment of the
Trust Indenture Act of 1939 or to make those changes, additions or eliminations.
FPL Group Capital and the Indenture Trustee may, without the consent of any
registered owners, enter into supplemental indentures to make that amendment
(Indenture, Section 1201).
Except for any amendments described above, the consent of the
registered owners of a majority in aggregate principal amount of the Debt
Securities of all series then outstanding, considered as one class, is required
for all other modifications to the Indenture. However, if less than all of the
series of Debt Securities outstanding are directly affected by a proposed
supplemental indenture, then the consent only of the registered owners of a
majority in aggregate principal amount of outstanding Debt Securities of all
directly affected series, considered as one class, is required. But, if FPL
Group Capital issues any series of Debt Securities in more than one tranche and
if the proposed supplemental indenture directly affects the rights of the
registered owners of Debt Securities of less than all of those tranches, then
the consent only of the registered owners of a majority in aggregate principal
amount of the outstanding Debt Securities of all directly affected tranches,
considered as one class, will be required. However, none of those amendments or
modifications may:
(1) change the dates on which the principal of or interest on a Debt
Security is due without the consent of the registered owner of that
Debt Security,
(2) reduce any Debt Security's principal amount or rate of interest (or
the amount of any installment of that interest) or change the method
of calculating that rate without the consent of the registered owner
of that Debt Security,
(3) reduce any premium payable upon the redemption of a Debt Security
without the consent of the registered owner of that Debt Security,
(4) change the currency (or other property) in which a Debt Security is
payable without the consent of the registered owner of that Debt
Security,
(5) impair the right to sue to enforce payments on any Debt Security on or
after the date that it states that the payment is due (or, in the case
of redemption, on or after the redemption date) without the consent of
the registered owner of that Debt Security,
(6) reduce the percentage in principal amount of the outstanding Debt
Security of any series or tranche whose owners must consent to an
amendment, supplement or waiver without the consent of the registered
owner of each outstanding Debt Security of that series or tranche,
(7) reduce the requirements for quorum or voting of any series or tranche
without the consent of the registered owner of each outstanding Debt
Security of that series or tranche, or
13
(8) modify certain of the provisions of the Indenture relating to
supplemental indentures, waivers of certain covenants and waivers of
past defaults with respect to the Debt Securities of any series or
tranche, without the consent of the registered owner of each
outstanding Debt Security affected by the modification.
A supplemental indenture that changes or eliminates any provision of
the Indenture that has expressly been included only for the benefit of one or
more particular series or tranches of Debt Securities, or that modifies the
rights of the registered owners of Debt Securities of that series or tranche
with respect to that provision, will not affect the rights under the Indenture
of the registered owners of the Debt Securities of any other series or tranche
(Indenture, Section 1202).
The Indenture provides that, in order to determine whether the
registered owners of the required principal amount of the outstanding Debt
Securities have given any request, demand, authorization, direction, notice,
consent or waiver under the Indenture, or whether a quorum is present at the
meeting of the registered owners of Debt Securities, Debt Securities owned by
FPL Group Capital or any other obligor upon the Debt Securities or any affiliate
of FPL Group Capital or of that other obligor (unless FPL Group Capital, that
affiliate or that obligor owns all Debt Securities outstanding under the
Indenture, determined without regard to this provision) will be disregarded and
deemed not to be outstanding.
If FPL Group Capital solicits any action under the Indenture from
registered owners of Debt Securities, FPL Group Capital may, at its option, by
signing a written request to the Indenture Trustee, fix in advance a record date
for determining the registered owners of Debt Securities entitled to take that
action. However, FPL Group Capital will not be obligated to do this. If FPL
Group Capital does do this, that action may be taken before or after that record
date, but only the registered owners of record at the close of business on that
record date will be deemed to be registered owners of Debt Securities for the
purposes of determining whether registered owners of the required proportion of
the outstanding Debt Securities have authorized that action. For these purposes,
the outstanding Debt Securities will be computed as of the record date. Any
action of a registered owner of any Debt Security under the Indenture will bind
every future registered owner of that Debt Security, or any Debt Security
replacing that Debt Security, with respect to anything that the Indenture
Trustee or FPL Group Capital do, fail to do, or allow to be done in reliance on
that action, whether or not that action is noted upon that Debt Security
(Indenture, Section 104).
RESIGNATION OF INDENTURE TRUSTEE. The Indenture Trustee may resign at
any time with respect to any series of Debt Securities by giving written notice
of its resignation to FPL Group Capital. Also, the registered owners of a
majority in principal amount of the outstanding Debt Securities of one or more
series of Debt Securities may remove the Indenture Trustee any time with respect
to the Debt Securities of that series, by delivering an instrument evidencing
this action to the Indenture Trustee and FPL Group Capital. The resignation or
removal of the Indenture Trustee and the appointment of a successor trustee will
not become effective until a successor trustee accepts its appointment.
Except with respect to an Indenture Trustee appointed by the
registered owners of Debt Securities, the Indenture Trustee will be deemed to
have resigned and the successor will be deemed to have been appointed as trustee
in accordance with the Indenture if:
(1) no event of default under the Indenture or event that, after notice or
lapse of time, or both, would become an event of default under the
Indenture exists, and
(2) FPL Group Capital has delivered to the Indenture Trustee a resolution
of its Board of Directors appointing a successor trustee and that
successor trustee has accepted that appointment in accordance with the
terms of the Indenture (Indenture, Section 910).
NOTICES. Notices to registered owners of Debt Securities will be sent
by mail to the addresses of those registered owners as they appear in the
security register for those Debt Securities (Indenture, Section 106).
TITLE. FPL Group Capital, the Indenture Trustee, and any agent of FPL
Group Capital or the Indenture Trustee, may treat the person in whose name a
Debt Security is registered as the absolute owner of that Debt
14
Security, whether or not that Debt Security is overdue, for the purpose of
making payments and for all other purposes, regardless of any notice to the
contrary (Indenture, Section 308).
GOVERNING LAW. The Indenture and the Debt Securities will be governed
by, and interpreted in accordance with, the laws of the State of New York,
without regard to New York's conflict of law principles, except to the extent
that the law of any other jurisdiction is mandatorily applicable.
REGARDING THE INDENTURE TRUSTEE. In addition to acting as Indenture
Trustee, The Bank of New York acts as security registrar and paying agent under
the Indenture, as Guarantee Trustee under the Guarantee Agreement described
under "Description of the Guarantee" below and would act as purchase contract
agent under a purchase contract agreement described under "Description of Stock
Purchase Contracts and Stock Purchase Units" below. FPL Group Capital also
maintains various banking and trust relationships with The Bank of New York.
DESCRIPTION OF THE GUARANTEE
GENERAL. This section briefly summarizes some of the provisions of the
Guarantee Agreement, dated as of June 1, 1999, between FPL Group and The Bank of
New York, as Guarantee Trustee. The Guarantee Agreement was executed for the
benefit of the Indenture Trustee, which holds the Guarantee Agreement for the
benefit of registered owners of the Debt Securities covered by the Guarantee
Agreement. This summary does not contain a complete description of the Guarantee
Agreement. You should read this summary together with the Guarantee Agreement
for a complete understanding of the provisions that may be important to you. The
Guarantee Agreement is on file with the SEC and is incorporated by reference in
this prospectus. In addition, the Guarantee Agreement is qualified as an
indenture under the Trust Indenture Act of 1939 and is therefore subject to the
provisions of the Trust Indenture Act of 1939. You should read the Trust
Indenture Act of 1939 for a complete understanding of provisions that may be
important to you.
Under the Guarantee Agreement, FPL Group absolutely, irrevocably and
unconditionally guarantees the prompt and full payment, when due and payable
(including upon acceleration or redemption), of the principal, interest and
premium, if any, on the Debt Securities that are covered by the Guarantee
Agreement to the registered owners of those Debt Securities, according to the
terms of those Debt Securities and the Indenture. Pursuant to the Guarantee
Agreement, all of the Debt Securities are covered by the Guarantee Agreement
except Debt Securities that by their terms are expressly not entitled to the
benefit of the Guarantee Agreement. All of the Offered Debt Securities will be
covered by the Guarantee Agreement. This guarantee is referred to in this
prospectus as the "Guarantee." FPL Group is only required to make these payments
if FPL Group Capital fails to pay or provide for punctual payment of any of
those amounts on or before the expiration of any applicable grace periods
(Guarantee Agreement, Section 5.01). In the Guarantee Agreement, FPL Group has
waived its right to require the Guarantee Trustee, the Indenture Trustee or the
registered owners of Debt Securities covered by the Guarantee Agreement to
exhaust their remedies against FPL Group Capital prior to bringing suit against
FPL Group (Guarantee Agreement, Section 5.06).
The Guarantee is a guarantee of payment when due (i.e., the guaranteed
party may institute a legal proceeding directly against FPL Group to enforce its
rights under the Guarantee Agreement without first instituting a legal
proceeding against any other person or entity). The Guarantee is not a guarantee
of collection (Guarantee Agreement, Section 5.01).
SECURITY AND RANKING. The Guarantee is an unsecured obligation of FPL
Group, and will rank equally and ratably with all other unsecured and
unsubordinated indebtedness of FPL Group. There is no limit on the amount of
other indebtedness, including guarantees, that FPL Group may incur or issue.
FPL Group is a holding company that derives substantially all of its
income from its operating subsidiaries. Therefore, the Guarantee is effectively
subordinated to debt and preferred stock incurred or issued by FPL Group's
subsidiaries. Neither the Indenture nor the Guarantee Agreement places any limit
on the amount of debt or preferred stock that FPL Group's subsidiaries may incur
or issue.
15
EVENTS OF DEFAULT. An event of default under the Guarantee Agreement
will occur upon the failure of FPL Group to perform any of its payment
obligations under the Guarantee Agreement (Guarantee Agreement, Section 1.01).
The registered owners of a majority of the aggregate principal amount of the
outstanding Debt Securities covered by the Guarantee Agreement have the right
to:
(1) direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee with respect to the
Guarantee Agreement, or
(2) direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee Agreement. (Guarantee Agreement,
Section 3.01).
The Guarantee Trustee must give notice of any event of default under
the Guarantee Agreement known to the Guarantee Trustee to the registered owners
of Debt Securities covered by the Guarantee Agreement within 90 days after the
occurrence of that event of default, in the manner and to the extent provided in
subsection (c) of Section 313 of the Trust Indenture Act of 1939, unless such
event of default has been cured or waived prior to the giving of such notice
(Guarantee Agreement, Section 2.07).
The Guarantee Trustee, the Indenture Trustee and the registered owners
of Debt Securities covered by the Guarantee Agreement have all of the rights and
remedies available under applicable law and may sue to enforce the terms of the
Guarantee Agreement and to recover damages for the breach of the Guarantee
Agreement. The remedies of each of the Guarantee Trustee, the Indenture Trustee
and the registered owners of Debt Securities covered by the Guarantee Agreement,
to the extent permitted by law, are cumulative and in addition to any other
remedy now or hereafter existing at law or in equity. At the option of any of
the Guarantee Trustee, the Indenture Trustee or the registered owners of Debt
Securities covered by the Guarantee Agreement, that person or entity may join
FPL Group in any lawsuit commenced by that person or entity against FPL Group
Capital with respect to any obligations under the Guarantee Agreement. Also,
that person or entity may recover against FPL Group in that lawsuit, or in any
independent lawsuit against FPL Group, without first asserting, prosecuting or
exhausting any remedy or claim against FPL Group Capital (Guarantee Agreement,
Section 5.06).
FPL Group is required to deliver to the Guarantee Trustee an annual
statement as to its compliance with all conditions under the Guarantee Agreement
(Guarantee Agreement, Section 2.04).
MODIFICATION. FPL Group and the Guarantee Trustee may, without the
consent of any registered owner of Debt Securities covered by the Guarantee
Agreement, agree to any changes to the Guarantee Agreement that do not
materially adversely affect the rights of registered owners. The Guarantee
Agreement also may be amended with the prior approval of the registered owners
of a majority in aggregate principal amount of all outstanding Debt Securities
covered by the Guarantee Agreement. However, the right of any registered owner
of Debt Securities covered by the Guarantee Agreement to receive payment under
the Guarantee Agreement on the due date of the Debt Securities held by that
registered owner, or to institute suit for the enforcement of that payment on or
after that due date, may not be impaired or affected without the consent of that
registered owner (Guarantee Agreement, Section 6.01).
REGARDING THE GUARANTEE TRUSTEE. In addition to acting as Guarantee
Trustee, The Bank of New York acts as Indenture Trustee under the Indenture and
would act as purchase contract agent under a purchase contract agreement. FPL
Group and its subsidiaries also maintain various banking and trust relationships
with The Bank of New York.
TERMINATION OF THE GUARANTEE AGREEMENT. The Guarantee Agreement will
terminate and be of no further force and effect upon full payment of all Debt
Securities covered by the Guarantee Agreement (Guarantee Agreement, Section
5.05).
GOVERNING LAW. The Guarantee Agreement will be governed by and
construed in accordance with the laws of the State of New York, without regard
to conflict of laws principles thereunder, except to the extent that the law of
any other jurisdiction is mandatorily applicable (Guarantee Agreement,
Section 5.07).
16
DESCRIPTION OF COMMON STOCK
GENERAL. The following statements describing FPL Group's common stock
are not intended to be a complete description. They are qualified in their
entirety by reference to FPL Group's Restated Articles of Incorporation
("Charter") and its bylaws, and where applicable, to the Restated Articles of
Incorporation of Florida Power & Light Company, and to the Mortgage and Deed of
Trust, dated as of January 1, 1944, between Florida Power & Light Company and
Bankers Trust Company, as Trustee, as amended and supplemented (the "Mortgage").
Reference is also made to the laws of the State of Florida.
FPL Group's authorized capital stock consists of 300,000,000 shares of
common stock, $.01 par value, and 100,000,000 shares of serial preferred stock,
$.01 par value. As of the date of this prospectus, 175,854,346 shares of common
stock were issued and outstanding and no shares of serial preferred stock were
issued and outstanding. See "Description of Common Stock--Preferred Share
Purchase Rights." The common stock has no preemptive, subscription or conversion
rights, and there are no redemption or sinking fund provisions applicable
thereto. The outstanding shares of common stock are, and when issued the shares
offered hereby will be, fully paid and nonassessable.
All outstanding common stock is listed on the NYSE and trades under
the symbol "FPL". The registrar and transfer agent for the common stock is
Equiserve Trust Company, N.A.
DIVIDEND RIGHTS. Each share of common stock is entitled to participate
equally with respect to dividends declared on the common stock out of funds
legally available for the payment thereof.
The Charter of FPL Group does not limit the dividends that can be paid
on the common stock. However, as a practical matter, the ability of FPL Group to
pay dividends on its common stock is dependent upon dividends paid to it by its
subsidiaries, primarily Florida Power & Light Company. Florida Power & Light
Company's ability to pay dividends is limited by restrictions contained in
Florida Power & Light Company's Restated Articles of Incorporation and in the
Mortgage. However, these restrictions do not currently limit Florida Power &
Light Company's ability to pay dividends to FPL Group.
VOTING RIGHTS AND NON-CUMULATIVE VOTING. In general, the holders of
common stock are entitled to one vote per share for the election of directors
and for other corporate purposes. The Charter:
(1) permits the shareholders to remove a director only for cause and only
by the affirmative vote of 75% in voting power of the outstanding
shares of common stock and other outstanding voting stock, voting as a
class;
(2) provides that a vacancy on the Board of Directors may be filled only
by the remaining directors;
(3) permits shareholders to take action only at an annual meeting, or a
special meeting duly called by certain officers, the Board of
Directors or the holders of a majority in voting power of the
outstanding shares of voting stock entitled to vote on the matter;
(4) requires the affirmative vote of 75% in voting power of the
outstanding shares of voting stock to approve certain Business
Combinations with an Interested Shareholder (as defined below) or its
affiliate, unless approved by a majority of the Continuing Directors
(as defined below) or, in certain cases, unless certain minimum price
and procedural requirements are met; and
(5) requires the affirmative vote of 75% in voting power of the
outstanding shares of voting stock to amend the by-laws or to amend
certain provisions of the Charter including those provisions discussed
in (1) through (4) above.
Such provisions may have significant effects on the ability of the shareholders
to change the composition of an incumbent Board of Directors or to benefit from
certain transactions which are opposed by an incumbent Board of Directors.
17
The term "Interested Shareholder" is defined in the Charter to include
a security holder who owns 10% or more in voting power of the outstanding shares
of voting stock, and the term "Continuing Director" is defined in the Charter to
include any director who is not an affiliate of an Interested Shareholder. The
above provisions dealing with Business Combinations involving FPL Group and an
Interested Shareholder may discriminate against a security holder who becomes an
Interested Shareholder by reason of the beneficial ownership of such amount of
common or other voting stock. The term "Business Combination" is defined in the
Charter to include:
(1) any merger or consolidation of FPL Group or any direct or indirect
majority-owned subsidiary with (a) an Interested Shareholder or
(b) any other corporation which is, or after such merger or
consolidation would be, an affiliate of an Interested Shareholder;
(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition in one transaction or a series of transactions to or with
any Interested Shareholder or any affiliate of an Interested
Shareholder of assets of FPL Group or any direct or indirect
majority-owned subsidiary having an aggregate fair market value of
$10,000,000 or more;
(3) the issuance or transfer by FPL Group or any direct or indirect
majority-owned subsidiary in one transaction or a series of
transactions of any securities of FPL Group or any subsidiary to any
Interested Shareholder or any affiliate of any Interested Shareholder
in exchange for cash, securities or other property, or a combination
thereof, having an aggregate fair market value of $10,000,000 or more;
(4) the adoption of any plan or proposal for the liquidation or
dissolution of FPL Group proposed by or on behalf of an Interested
Shareholder or an affiliate of an Interested Shareholder; or
(5) any reclassification of securities, including any reverse stock split,
or recapitalization, of FPL Group, or any merger or consolidation of
FPL Group with any of its direct or indirect majority-owned
subsidiaries or any other transaction which has the direct or indirect
effect of increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of FPL Group or any
direct or indirect wholly-owned subsidiary which is directly or
indirectly owned by any Interested Shareholder or any affiliate of any
Interested Shareholder.
The holders of common stock do not have cumulative voting rights, and
therefore the holders of more than 50% of a quorum (majority) of the outstanding
shares of common stock can elect all of FPL Group's directors. Unless otherwise
provided in the Charter or the by-laws or in accordance with applicable law, the
affirmative vote of a majority of the total number of shares represented at a
meeting and entitled to vote is required for shareholder action on a matter.
Voting rights for the election of directors or otherwise, if any, for any series
of the serial preferred stock, will be established by the Board of Directors
when such series is issued.
LIQUIDATION RIGHTS. After satisfaction of creditors and payments due
the holders of serial preferred stock, if any, the holders of common stock are
entitled to share ratably in the distribution of all remaining assets.
PREFERRED SHARE PURCHASE RIGHTS. The following statements describing
FPL Group's preferred share purchase rights (each, a "Right") are not intended
to be a complete description. They are qualified in their entirety by reference
to the form of Rights Agreement, dated as of July 1, 1996, between FPL Group and
Equiserve Trust Company, N.A., as successor Rights Agent, as amended by an
Amendment to Rights Agreement, dated as of July 30, 2000, each as filed with the
SEC.
On June 17, 1996, FPL Group's Board of Directors declared a dividend
of one Right for each outstanding share of common stock. Thereafter, until the
Distribution Date (as defined below), FPL Group will issue one Right with each
newly issued share of common stock. Each Right (prior to the expiration or
redemption of the Rights) will entitle the holder thereof to purchase from FPL
Group one-hundredth of a share of FPL Group's Series A Junior Participating
Preferred Stock, $.0l par value (Junior Preferred Shares), at an exercise price
of $120 per Right (Purchase Price), subject to adjustment. Until the
Distribution Date, the Rights are represented by the common
18
stock certificates, and are not exercisable or transferable apart from the
common stock. The Distribution Date is the earlier to occur of:
(1) the tenth day after the public announcement that a person or group has
acquired beneficial ownership of 10% or more of the common stock or
(2) the tenth business day after a person commences, or announces an
intention to commence, a tender or exchange offer, the consummation of
which would result in the beneficial ownership by a person or group of
10% or more of the common stock. At any time before a person or group
becomes a 10% holder, the Board of Directors may extend the 10-day
period.
Separate certificates evidencing the Rights will be mailed to holders of the
common stock as of the close of business on the Distribution Date. The Rights
are exercisable at any time after the Distribution Date, unless earlier
redeemed, or exchanged, and could then begin trading separately from the common
stock. The Rights do not have any voting rights and are not entitled to
dividends.
If a person or group becomes a 10% holder, each Right not owned by the
10% holder would become exercisable for the number of shares of common stock
which, at that time, would have a market value of two times the exercise price
of the Right. In the event that FPL Group is acquired in a merger or other
business combination transaction, or 50% or more of FPL Group's assets or
earning power are sold or otherwise transferred, after a person or group has
become a 10% holder, each Right will entitle its holder to purchase, at the
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction would have a market
value of two times the exercise price of the Right.
The Rights are redeemable by FPL Group's Board of Directors in whole,
but not in part, at $.01 per Right at any time prior to the time that a person
or group acquires beneficial ownership of 10% or more of the outstanding common
stock. The Rights will expire on June 30, 2006 (unless the expiration date is
extended or the Rights are earlier redeemed or exchanged as described below).
The Purchase Price, and the number of Junior Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution
(1) in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Junior Preferred Shares,
(2) as a result of the grant to holders of Junior Preferred Shares of
certain rights or warrants to subscribe for or purchase Junior
Preferred Shares at a price, or securities convertible into Junior
Preferred Shares with a conversion price, at less than the current
market price of Junior Preferred Shares or
(3) as a result of the distribution to holders of Junior Preferred Shares
of evidences of indebtedness or assets (excluding regular periodic
cash dividends or dividends payable in Junior Preferred Shares) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in the
Purchase Price. The number of Rights and the number of Junior Preferred Shares
purchasable upon exercise of each Right are also subject to adjustment in the
event of a stock split, subdivision, consolidation, combination or common stock
dividend on the common stock prior to the Distribution Date.
The Board of Directors of FPL Group may exchange the Rights at an
exchange ratio of one share of common stock per Right at any time that is
(1) after the acquisition by a person or group of affiliated or associated
persons of beneficial ownership of 10% or more of the outstanding
common stock; and
(2) before the acquisition by a person or group of 50% or more of the
outstanding common stock.
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The Rights have anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire FPL Group
without conditioning the offer on the redemption of the Rights or on the
acquisition of a certain number of Rights. The Rights beneficially owned by that
person or group may become null and void. The Rights should not interfere with
any merger or other business combination approved by the Board of Directors of
FPL Group, since the Rights may be redeemed by FPL Group at $.01 per Right prior
to the time that a person or group has acquired beneficial ownership of 10% or
more of the common stock.
The Junior Preferred Shares purchasable upon exercise of the Rights
will be entitled to cumulative quarterly dividends in preference to the common
stock at a rate per share equal to the greater of $10 and 100 times the dividend
declared on the common stock for such quarter. In the event of any merger,
consolidation or other transaction in which the shares of common stock are
exchanged, each Junior Preferred Share will be entitled to receive 100 times the
amount and type of consideration received per share of common stock. In the
event of a liquidation of FPL Group, the holders of Junior Preferred Shares will
be entitled to receive in preference to the common stock the greater of $100 per
share and 100 times the payment made per share of common stock. FPL Group has
the right to issue other serial preferred stock ranking prior to the Junior
Preferred Shares with respect to dividend and liquidation preferences. The
Junior Preferred Shares will be redeemable after June 30, 2006, at FPL Group's
option, in whole or in part, at a redemption price per share equal to the
greater of
(1) the per share Purchase Price and
(2) the then current market price of a Junior Preferred Share.
Each Junior Preferred Share will have 100 votes on all matters submitted to a
vote of the shareholders of FPL Group, voting together with the common stock.
The rights of the Junior Preferred Shares as to dividends, liquidation,
redemption and voting, and in the event of mergers and consolidations, are
protected by customary anti-dilution provisions. Because of the nature of the
dividend, liquidation, redemption and voting rights of the Junior Preferred
Shares, the value of the interest in a Junior Preferred Share purchasable upon
the exercise of each Right should approximate the value of one share of common
stock.
The Board of Directors of FPL Group may amend the Rights Agreement and
the Rights, without the consent of the holders of the Rights. However, any
amendment adopted after a person or group becomes a 10% holder may not adversely
affect the interests of holders of Rights.
DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
FPL Group may issue stock purchase contracts, including contracts that
obligate holders to purchase from FPL Group, and FPL Group to sell to these
holders, a specified number of shares of common stock at a future date or dates.
FPL Group Capital may also be a party to the stock purchase contracts. The
consideration per share of common stock may be fixed at the time the stock
purchase contracts are issued or may be determined by reference to a specific
formula set forth in the stock purchase contracts. The stock purchase contracts
may be issued separately or as a part of stock purchase units consisting of a
stock purchase contract and either Debt Securities or debt obligations of third
parties, including U.S. Treasury securities, that are pledged to secure the
holders' obligations to purchase the common stock under the stock purchase
contracts. The stock purchase contracts may require FPL Group and/or FPL Group
Capital to make periodic payments to the holders of some or all of the stock
purchase units or vice versa, and such payments may be unsecured or prefunded on
some basis. The stock purchase contracts may require holders to secure their
obligations under these stock purchase contracts in a specified manner.
A prospectus supplement will describe the terms of any stock purchase
contracts or stock purchase units being offered. The description in the
prospectus supplement will not necessarily be complete, and reference will be
made to the stock purchase contracts. Some of the important United States
Federal income tax considerations applicable to the stock purchase units and
stock purchase contracts will be discussed in the related prospectus supplement.
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PLAN OF DISTRIBUTION
FPL Group and FPL Group Capital may sell the securities offered
pursuant to this prospectus ("Offered Securities"):
(1) through underwriters or dealers,
(2) through agents, or
(3) directly to one or more purchasers.
THROUGH UNDERWRITERS OR DEALERS. If FPL Group or FPL Group Capital
uses underwriters in the sale of the Offered Securities, the underwriters will
acquire the Offered Securities for their own account. The underwriters may
resell the Offered Securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The underwriters may sell the Offered Securities directly
or through underwriting syndicates represented by managing underwriters. Unless
otherwise stated in the prospectus supplement relating to the Offered
Securities, the obligations of the underwriters to purchase those Offered
Securities will be subject to certain conditions, and the underwriters will be
obligated to purchase all of those Offered Securities if they purchase any of
them. If FPL Group or FPL Group Capital uses a dealer in the sale, FPL Group or
FPL Group Capital will sell the Offered Securities to the dealer as principal.
The dealer may then resell those Offered Securities at varying prices determined
at the time of resale.
Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
THROUGH AGENTS. FPL Group or FPL Group Capital may designate one or
more agents to sell the Offered Securities. Unless otherwise stated in a
prospectus supplement, the agents will agree to use their best efforts to
solicit purchases for the period of their appointment.
DIRECTLY. FPL Group or FPL Group Capital may sell the Offered
Securities directly to one or more purchasers. In this case, no underwriters,
dealers or agents would be involved.
GENERAL INFORMATION. A prospectus supplement will state the name of
any underwriter, dealer or agent and the amount of any compensation,
underwriting discounts or concessions paid, allowed or reallowed to them. A
prospectus supplement will also state the proceeds to FPL Group or FPL Group
Capital from the sale of the Offered Securities, any initial public offering
price and other terms of the offering of those Offered Securities.
FPL Group and FPL Group Capital may authorize underwriters, dealers or
agents to solicit offers by certain institutions to purchase the Offered
Securities from FPL Group and FPL Group Capital at the public offering price and
on the terms described in the related prospectus supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future.
FPL Group and FPL Group Capital may have agreements to indemnify
underwriters, dealers and agents against certain civil liabilities, including
liabilities under the Securities Act of 1933.
EXPERTS
The consolidated financial statements incorporated by reference in
this prospectus from FPL Group's Annual Report on Form 10-K, as amended, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated by reference herein, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
Legal conclusions and opinions specifically attributed to counsel in
the documents incorporated by reference in this prospectus have been reviewed by
Steel Hector & Davis LLP, West Palm Beach, Florida, counsel to FPL Group and FPL
Group Capital, and are set forth on the authority of that firm as experts.
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LEGAL OPINIONS
Steel Hector & Davis LLP, West Palm Beach, Florida and Thelen Reid &
Priest LLP, New York, New York, co-counsel to FPL Group and FPL Group Capital,
will pass upon the legality of the Offered Securities for FPL Group Capital and
FPL Group. Pillsbury Winthrop LLP, New York, New York, will pass upon the
legality of the Offered Securities for any underwriter, dealer or agent. Thelen
Reid & Priest LLP and Pillsbury Winthrop LLP may rely as to all matters of
Florida law upon the opinion of Steel Hector & Davis LLP. Steel Hector & Davis
LLP may rely as to all matters of New York law upon the opinion of Thelen Reid &
Priest LLP.
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YOU SHOULD RELY ONLY ON THE INFORMATiON CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. NEITHER FPL GROUP
CAPITAL NOR FPL GROUP HAS AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. NEITHER FPL GROUP CAPITAL NOR FPL GROUP IS MAKING AN OFFER OF THESE
OFFERED SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE
DOCUMENTS.